Can Defendants Ever Make Effective Rule 49 Offers in MVA Cases?

We are indebted to Mark (“Billy Idol”) Charron of Williams McEnery for alerting us to the recent decision in Peterson v. Phillips. This is another case that deals with the relationship between offers to settle in MVA claims and the $30,000 deductible imposed by the Insurance Act.

The ruling was made by Mr. Justice Douglas Gray, who had tried the case with a jury. This was quite an uncomplicated claim: liability had been admitted and only non-pecuniary general damages were sought. The plaintiff was an 81-year old woman.

Following a five-day trial, counsel argued the issue of whether or not the plaintiff’s injuries met the Bill 198 threshold (as expanded upon in Regulation 461/96). The lawyers had just about completed their submissions when the jury returned with its verdict: non-pecuniary damages of $10,000 (gross of the deductible). After applying the $30,000 deductible, the plaintiff ended up with an award of zero.

Two questions then arose. First, should the judge proceed to rule on the issue of threshold?

The second question had to do with costs. The defence had offered to settle for $30,000 gross (which, after the deductible, was an offer of zero). What effect should that offer have on the disposition of costs?

With respect to the first question, Justice Gray ruled that there was no need for him to decide the issue of threshold because that issue had been rendered moot by the jury’s verdict. However, it seems to us that Justice Gray was in error. If the case were appealed and the Court of Appeal were to increase the damages to, say, $50,000, the threshold issue would become quite significant. In fact, there is an Ottawa case on appeal to the Court of Appeal right now, in which the jury found no liability on the basis of inevitable accident. However, the trial judge went ahead and ruled on the threshold issue so the record in the Court of Appeal will be complete.

On the second question, Justice Gray decided to award no costs. He cited the Court of Appeal’s decision in Rider v. Dydyk and then went on to say this:

[I]t seems to me that to a large extent the positions of both parties display a high degree of artificiality. The defendant made an offer to settle for zero dollars, dressed up as an offer of $30,000, subject to a deductible of $30,000. The plaintiff obtained an award of $10,000 which, because of the deductible, results in a judgment for zero dollars. Thus, an offer for zero dollars has resulted in a trial, which has then resulted in a judgment for zero dollars….The Court cannot be blinded by the somewhat artificial characterizations of both the offer to settle and the result of the trial.  In reality, an offer to settle for zero dollars was made and rejected, a trial was held, and the result is a judgment for zero dollars.  The fairest disposition, in my view, is that each party bear her own costs.

This criticism seems a little harsh to us. To the extent that there is “artificiality” in an offer of $30,000, it is because of the way that the auto insurance part of the Insurance Act is structured, with a $30,000 deductible for claims having a value of $100,000 or less. Here, the defendant’s solicitor assessed the case with perfect accuracy, so we don’t really see why she should be faulted for the offer she made, nor why costs should not follow the event.

We have not undertaken a scientific study, but our impression, based on anecdotal evidence, is that insurers and their lawyers have pretty much given up on the idea of making Rule 49 offers to settle in MVA cases. The combined effect of Rider, Dennie v. Hamilton, and Ksiazek v. Newport Leasing is that it is virtually impossible for an insurer to make a settlement offer that will ever trigger favourable costs consequences. Outright dismissal of a plaintiff’s action does not engage Rule 49, so the costs outcome in such cases is a separate issue that has been dealt with in such decisions as Dunstan v. Flying J and Davies v. The Corporation of the Municipality of Clarington. But in true Rule 49 situations, it seems that MVA defendants really can’t bring themselves within the Rule unless they are prepared to offer far more than the amount at which they have assessed the claim. The decision in Peterson certainly does nothing to dispel such cynicism.

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