For the past 15 years in Ontario, Mary Carter Agreements (MCA’s) have been used infrequently but effectively in complex litigation as a risk management tool. For the plaintiff, they represent an opportunity to insure against an unfavourable result at trial through an alliance with a ‘settling defendant’ who participates in the trial in hope of reducing the amount that he has contributed to the settlement. For the settling defendant, the agreement caps exposure in damages (often a significant consideration where policy limits are at risk) and provides an opportunity to reduce the ultimate payout in the litigation by co-operating with the plaintiff against a non-settling or recalcitrant defendant.
In fact, MCA’s are not very different from the hedge contracts which many Canadian businesses use to manage the risk of their commercial enterprise.
In addition to managing risk, MCA’s have a proven track record of promoting global settlement of cases by realigning the forces at play in the litigation through the creation of an alliance between the plaintiff and one defendant.
Read paper: Mary Carter – Friend or Foe? by Craig Brown