In its May 11, 2004 decision in Wicken v. Harssar, the Divisional Court has clarified s. 267.5(9) of the Insurance Act.
That section of the Act deals with the effect of the deductibles on costs. It provides that “In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party’s entitlement to costs shall be made without regard to the effect of paragraph 3 of subsection (7) on the amount of damages, if any, awarded for non-pecuniary loss.”
The court held that despite this wording, the deductibles is to be applied for the purpose of determining whether the award is higher or lower than an offer to settle (which, of course, potentially bears on entitlement to costs).
In this action, the plaintiff was a cyclist injured in a motor vehicle accident. At trial, the jury assessed the damages at $20,000 before the deductible. With interest, the net recovery was $9,966.67. This is less than the Small Claims Court limit of $10,000 and the defence argued that the plaintiff should recover no costs because of having sued in the Superior Court. The defendant also sought to rely on a pre-trial offer to settle that it had made.
The trial judge had held that the defendant’s offer was not sufficiently clear to be relied upon and the Divisional Court agreed with this. The trial judge also held that, for purposes of evaluating whether the action had been brought in the right court, s. 267.5(9) precluded consideration of the $15,000 deductible and the Divisional Court also agreed with this.
But the trial judge had also concluded that, in considering offers to settle, s. 267.5(9) required that for a defendant’s Rule 49 offer to have costs consequences, it “must provide for a settlement payment to a plaintiff that is at least $15,000 greater than the plaintiff’s post-reduction recovery”. The Divisional Court did not agree with this finding. In rejecting the decision of the trial judge on this issue, the court observed:
[48] If the reasoning of Stinson J. were to apply, the context and purpose of both statutory provisions would be undermined. In our view, a most unfair situation would be created that does not accord with practical reality.
[49] Defendants would be required to augment all offers to settle by the amount of the statutory deductible in order to trigger costs consequences under Rule 49.10. This arbitrary benefit to plaintiffs would not be offset by any corresponding duty on plaintiffs to modify their offer to settle. This may encourage plaintiffs to litigate, rather than curtailing litigation for the smaller cases.
[50] This interpretation would send very mixed messages to those with modest claims. The objective of culling the modest cases less than $15,000.00 from the system would be compromised. Given the importance of offers to settle in the litigation process, much uncertainty would be created which in the final analysis would be counter-productive.
So, for purposes of Rule 49 offers to settle, the deductible will be taken into account for the purpose of calculating whether the result at trial is better or worse than the offer.
But for the purpose of determining whether a plaintiff should have sued in Small Claims Court or under Simplified Procedure, the deductible will not be considered.