Another peek inside the insurance larder -- and more attempts to block Quebec court authority

One of the tantalizingly unavailable aspects of tobacco litigation are details about the insurance policies held by the companies and who will benefit from any insurance payouts.

Only rarely have we been given access to the private insurance policies that may - or may not - factor into the compensation that will be available to injured smokers (or government health plans).

2012: Kansa winding up in Montreal

Six years ago, a box of nominally public documents related to the bankruptcy of Kansa insurance sat in the office of Quebec Superior Court Justice Jean-Yves Lalonde. Among them were papers related to a fight about whether the company would owe Imperial Tobacco any support for its legal fees. Juicy facts about the legal costs of the suits facing the company emerged for one day -- but were forcibly suppressed within 24 hours.

2015: Reliance winding up in Toronto

A few years later the bankruptcy of another insurance company which had issued policies to tobacco companies was being wound up in court. This time there was a  dispute over whether or not a settlement reached with Imperial Tobacco and Rothmans, Benson and Hedges could be supported by the court. (It wasn't). These proceedings revealed that more than 30 insurance companies had issued liability coverage to Canadian tobacco companies.

2015-2017: The relics of Kansa and Northumberland 

The next peek at the potential of insurance companies to cover litigation-related costs has resulted from the current proceedings for the three tobacco companies under the Companies' Creditor Arrangement Act (CCAA).

One of the few alterations made to this spring's order by Ontario Courts to suspend any and all legal developments related tobacco lawsuits was to allow a settlement between lawyers representing Quebec smokers and Kansa to be submitted for court approval.

The request was made by the Quebec plaintiff lawyers, and their affidavit explained that Quebec law required that the settlement be approved by a Quebec Court within 90 days of the appeal court judgment (i.e. by the end of May). (p. 103, Tina Silverstein affidavit).

The change was "uncontested", and was arranged without much information being made public. A few more details slipped out yesterday on the web-site managed by Imperial Tobacco's CCAA Monitor, i.e.

• a motion from the Quebec lawyers to Justice Riordan
• a letter of complaint by Imperial Tobacco to Justice Riordan and also to Justice McEwen.

From these new filings we now know that in the 1980s, Kansa had insured ITL and RBH with annual policies for coverage that ranged from $1 million to $10 million. Northumberland had insured Imperial Tobacco for 3 years in the 1980s, with coverage under $10 million. Both companies went bankrupt - Northumberland in 1985 and Kansa in 1994. Decades later their affairs have not yet been put to rest.

Those responsible for distributing the remaining assets of these insurance companies don't seem eager to recognize claims by either tobacco defendants or those to whom damages are owed. But in the case of Kansa and Northumberland, there seems to have been a decision to settle rather than fight.

• Kansa paid an undisclosed amount to Imperial Tobacco and Rothmans, Benson and Hedges in 2015, after Riordan's judgment was issued. 
• Kansa reached a settlement with the Class Action lawyers in 2017 for an undisclosed amount (said to be larger than that paid to the tobacco companies).  The terms of the settlement were that the money would be paid irrespective of any appeal decision.
• settled with Kansa before 2016 (for an undisclosed sum).
• in 2017, Northumberland reached a settlement with both Imperial Tobacco and the Class Action Lawyers. The amount is undisclosed and the company received an amount "not greater" than that provided for their injured clients.

2019: Jurisdiction over the hanging threads

The motion filed with Justice Riordan earlier this week explains that the settlement between the Class Action and Kansa received approval of the judge managing the bankruptcy case (Justice Lalonde) in 2017, but now must be submitted for approval by the judge managing the class action (Justice Riordan).

This seems to be where things get tricky. Justice McEwen authorized the class action team to get authorization for the settlement from Justice Riordan. But, by my reading of article 590 of Quebec's Code of Civil Procedure (referred to in their motion), they must first inform class members of the settlement and how they intend for the money to be distributed.

The proposal that is being put to Justice Riordan is that the money from the insurance settlements NOT be distributed to smokers OR to lawyers. Instead they are proposing that it be used to fund outreach to class members and to reimburse the Fonds d'Aide aux actions collectives, the government agency which loans money to support class actions that are in the public interest.

But hey! Didn't Justice McEwen block all decisions related to distribution of any class action monies? 

This seems to be the view of Imperial Tobacco and RBH. Both companies have given notice that they think seeking the authority of Justice Riordan for the use of the settlement funds goes too far. They have indicated that  they will ask Justice McEwen to "address these issues" during the hearing at the end of the week.

One set of rules says distribution must be considered. The other says it can't.

The Chinese have an expression for such inherent conflicts. Maodun - sword-shield - the impasse between an impenetrable shield and an unbeatable sword.