When It Comes to “Reasonableness” in Costs, Look Around to See Where You Are

Posted on March 26, 2009 by Stephen Cavanagh

This post relates to a decision that dates back to last December. We only recently became aware of it. Unfortunately, the case does not appear on CanLII, so we are unable to provide a link to the reasons. However, a PDF is attached.

Barkley v. Vogel was a personal injury action that was tried before Mr. Justice James E. McNamara and a jury. The trial was held in Brockville. Defence counsel was from Ottawa and the plaintiff’s lawyer was from Toronto. After the jury had rendered its decision, McNamara J. had to decide the issue of the plaintiff’s costs.

The plaintiff’s lawyer had had less than ten years’ experience for most of the time for which partial indemnity costs were applicable. (Substantial indemnity costs were awarded for the period after the plaintiff’s settlement offer.) For the partial indemnity period, counsel for the plaintiff sought an hourly rate of $225.00.

Justice McNamara remarked that since partial indemnity represents about 60% of full indemnity, “that translates into an hourly rate of $375.00”.

His Honour felt that such a rate was much too high for a case being heard in Brockville. He made the following comments about the appropriate principle to be followed by the court:

In fixing an appropriate rate, at the end of the day, quantum must be guided by the overriding principle of reasonableness, that is, the reasonable expectation of both parties. The Plaintiffs have brought their action in Brockville, which is part of this court’s east region. While I share the view of Plaintiffs’ counsel that the Plaintiffs were entitled to retain any lawyer of their choice, principles of fairness would dictate that the parties would expect that things like hourly rates would bear some resemblance to what would be considered reasonable in the area where the case was tried.

Applying those principles to the costs demands of Toronto counsel, His Honour said that “by no stretch would [the requested rate] have been either fair or reasonable in this region over the relevant time frame”.

Justice McNamara’s decision in Barkley has already been followed on this point by Madam Justice Heidi Polowin in Young v. RBC Dominion Securities.

Ottawa lawyers will want to keep Justice McNamara’s decision in their briefcases (and hope that lawyers in Cornwall, Belleville, Pembroke, Peterborough etc. aren’t doing the same thing!)

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Lawyer Swearing Affidavit Can’t Be “Informed” by “the File”

Posted on March 26, 2009 by Stephen Cavanagh

In Kailayapillai v. Azzam, Mr. Justice Theodore Matlow has addressed a very frequently recurring practice point: the proper form of lawyers’ affidavits on information and belief, where the source of the information is not another human being but rather, “the file”. His Honour adjourned this motion, to be brought back on further and better evidence.

This was a motion by an insurer to recover $65,000 that it had paid out under its uninsured motorist coverage. The insurer had settled with the injured plaintiff and was seeking reimbursement from the uninsured motorist. (The insurer might want to look first at the recent Court of Appeal decision in  Lockhard v. Quiroz before bringing the motion back on for hearing.) The motion was supported by an affidavit sworn by a partner at the law firm representing the insurer. That lawyer had evidently had little direct involvement in the handling of the file.

Justice Matlow declined to decide the motion on its merits because he was dissatisfied with the evidence that had been placed before him, viz., the lawyer’s affidavit.

He noted, first of all, that the deponent swore to having “knowledge of the matters hereinafter deposed”, but did not swear that she had “personal knowledge” of them.

But his more serious concern was with repeated statements by the deponent, that “I am advised by file review and do verily believe…” various matters that were signfiicant for a decision on the motion. Justice Matlow condemned the formulation that had been used in the affidavit:

In my view, it is improper for a deponent to offer evidence based on a review of someone else’s file and then to claim that she was “advised by the file” and truly believes the contents in order to allow her to rest her evidence on rule 39.01 (4). That rule requires that the advice be from a person whose reliability and credibility can be assessed. The reliability and credibility of a file, even if it were able to “advise’, without more, could not be.

…

As with all motions, it is not proper for a lawyer to take a file from somewhere in her office, read parts of it and then set out facts gleamed from the file as if those facts were based on her “knowledge”. Nor is it proper to for a lawyer in such circumstances to represent that she had some dialogue with the file and that the file “advised” her of its contents to enable her to invoke and rely on rule 39.01 (4).

 In our experience, this sort of thing happens very frequently. (And we do not profess absolute purity on this score ourselves, although we will certainly try to do better in the future!)

Justice Matlow makes the valid point, that when “the file” is the source of the information, there is ultimately no witness before the court whose credibility can be tested.

Posted in Evidence, Practice and Procedure | Comments Off on Lawyer Swearing Affidavit Can’t Be “Informed” by “the File”

What Information Must Be Provided at Discovery, Regarding Surveillance?

Posted on March 26, 2009 by Stephen Cavanagh

Mr. Justice John Cavarzan has provided some clarification about a small point that not-infrequently comes up in personal injury litigation: what questions must the defendant answer about surveillance that has been undertaken on the plaintiff?

The case is Marchese v. Knowles. In a nutshell, this the information that Cavarzan J. said must be given:

  • the names and addresses of the investigators who did the surveillance;
  • dates, times and precise locations of the surveillance;
  • particulars of the observations made; and
  • particulars contained in log notes, if any.

His Honour then went on to deal with documents that need not be produced and questions that need not be answered:

  • The engagement letter sent to “the surveillance people”, need not be produced. Justice Cavarzan noted that this document would be privileged and that surveillance investigators testify as ordinary witnesses, not as experts. Accordingly, a letter engaging their services is not a “finding” within the meaning of Rule 31.06(3);
  • How often the insurer had engaged “these people” to undertake surveillance in the past is an irrelevant question and need not be answered.
  • No resumes of the investigators need be provided, except to the extent that the resumes contain the names and addresses of the investigators, which information must be given.
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Duty to Defend Determined, Not by Plaintiff’s Pleading, but by Defendant’s

Posted on March 18, 2009 by Stephen Cavanagh

Addendum: This case is of doubtful authority following the Court of Appeal’s decision in Meadows v. Meloche Monnex Insurance Brokers Inc., 2010 ONCA 394, released June 2, 2010.

Glassford v. TD Home and Auto Insurance Company is an example of a peculiar strain of “duty to defend” case in insurance law. Here, the allegations made against the plaintiff in the statement of claim were clearly excluded by the defendant’s insurance policy, such that no duty to defend would have been owed. However, Mr. Justice David Brown looked beyond the statement of claim to the statement of defence and found in that pleading allegations that, in his view, gave rise to such a duty.

This was an application by the defendant in the underlying lawsuit, for a declaration that his insurer, TD Home and Auto Insurance Company, was required to defend him in the lawsuit. The plaintiff and defendant in that action were neighbours. The plaintiff alleged, in the statement of claim, that the defendant had attacked and beaten him and he sought damages for his injuries.

In his statement of defence, the defendant in the underlying action alleged that it had been the plaintiff who had attacked him and that he had struck the plaintiff in self-defence, using only reasonable force.

The defendant had home insurance with TD. Its policy excluded coverage for “bodily injury or property damage caused by any intentional or criminal act or failure to act by:

a) any person insured by this policy;

b) any other person at the direction of any person insured by this policy.”

TD took the position that the claim in the underlying suit was for intentional assault and that coverage was excluded, with the result that it owed no duty to defend. The insured (the defendant in the underlying action) then brought this application to have the “duty to defend” issue determined.

Justice Brown began by applying the traditional “pleadings rule”: “If the pleadings allege facts which, if true, would require the insurer to indemnify the insured for the claim, then the insurer is obliged to provide a defence, even though the actual facts may differ from the allegations pleaded.” He was of the view that the underlying claim was one for damages caused by an assault. He then turned to the question of what effect the defendant’s pleading of self-defence had on the issue of coverage.

His Honour then considered a number of authorities before concluding that it was permissible for him to look beyond the statement of claim in order to evaluate the duty to defend. (Here, the defendant in the underlying action had filed a statement of defence and also submitted in evidence a handwritten statement that, according to Justice Brown, tracked the allegations in his defence.)

Since the defendant had “squarely” pleaded that he had acted in self-defence, Justice Brown held that TD owed a duty to defend. His Honour went further and ruled that the insured was entitled to counsel of his own choosing because of the potential adversity of interest that existed between the insured and the insurer in the defence of the underlying action.

This result seems wrong to us, although there is no doubt that a number of other judges have come to the same conclusion in similar cases. Justice Brown addressed what seems to us to be the fundamental problem with the reasoning, in the following passage:

Before turning to the specific pleadings in the present case, I wish to comment on a statement made by the court in Wlasichuk. There the court suggested that if the insured’s pleading of justifiable self-defence were accepted, then no duty to indemnify would arise, there being no loss, and therefore no duty to defend would arise. This strikes me as conflating the issues of the duty to defend and the obligation to indemnify. Where a policy, such as the present one, provides that the insurer will defend the insured “even if the claim is groundless, false or fraudulent”, it should not be open to argue that the possible success of the defence of justifiable self-defence would vitiate any duty to defend: see Thorne, para. 28.

In a case such as this one, there are two possible outcomes. Either the plaintiff will succeed in showing that he was assaulted, in which case there will be no insurance coverage for the defendant (because of the intentional act exclusion), or the defendant will establish that he acted in self-defence. In the event of the latter, the plaintiff’s action will be dismissed and again, the insurance policy will not respond. There is no possible outcome in which the duty to indemnify will be engaged.

While it is true, as Justice Brown says, that the TD policy (like most liability insurance policies) extends coverage ” even if the claim is groundless, false or fraudulent”, the portion of the insuring agreement that was quoted by His Honour omitted some important words: “If a claim is made against you for which you are insured under COVERAGE E, we will defend you, even if the claim is groundless, false or fraudulent.” [Emphasis added] So, it is not all claims to which the words, “groundless, false or fraudulent” apply, only those that are within the policy coverage. And the caselaw, going back to Bacon v. McBride, is very clear as to which claims trigger the duty to defend: “If the claim alleges a state of facts which, if proven, would fall within the coverage of the policy the insurer is obliged to defend the suit regardless of the truth or falsity of such allegations.”

Therefore, it is, we think, specious to rely on the “groundless, false or fraudulent” provision to find that there is coverage for a claim that cannot possibly engage the duty to indemnify. What must be determined is whether, on the pleadings, there is some possible outcome that would fall within coverage. The Supreme Court of Canada made this clear in 2000, in Non-Marine Underwriters, Lloyd’s of London v. Scalera: “For there to be a duty to defend, there must be the possibility of a duty  to indemnify.”

The issue of whether the “pleadings rule” allows a court to consider a statement of defence as well as a statement of claim, is hazy (in Ontario, at least). In A.R.G. Construction Corp. v. Allstate, Mr. Justice Lee Ferrier of the Superior Court said, “Thus, in determining the issue, the court considers only the pleadings and the contract of insurance. Throughout the jurisprudence, ‘pleadings’ means the allegations in the statement of claim.” There is no doubt that in other jurisdictions, courts have been quite willing to do what Justice Brown did here and consider the statement of defence as well as the statement of claim. However, it strikes us that the theoretical underpinning of that approach is rather suspect, given that the whole point of the exercise is to compare the policy language with the possible outcomes to which the statement of claim gives rise. (The statement of defence could presumably only narrow the range of those outcomes, so it is difficult to see why it should be relevant.)

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Threshold Decision Underlines Dichotomy Within Ontario Insurance Act

Posted on March 17, 2009 by Stephen Cavanagh

The Ontario legislature has chosen to confer upon judges (alone) the right to decide whether or not a plaintiff in an MVA action meets the statutory “threshold”, making him or her eligible to receive an award of non-pecuniary general damages. But the jury, if there is one, has the power to decide what damages, if any, that plaintiff will receive. This “separation of powers” obviously has the potential to produce disagreements and O’Brien v. Charbonneau is a very good example.

The plaintiff suffered soft tissue injuries in a car accident in 2000. At trial, the jury was asked the following question: “Are you satisfied the accident caused by the Defendant’s negligence materially contributed to the final condition of Connie Lyn O’Brien?” The answer it gave was, “No”.

The trial judge, Justice Robbie Gordon, had charged the jury that “answering this question would involve a two-step analysis. First, the jury had to determine what Mrs. O’Brien’s final condition is, and secondly, it had to determine if the Defendant’s negligence materially contributed to this condition.” His Honour interpreted the jury’s negative answer to mean that either the plaintiff was no longer suffering from “a condition” or that if she was, that “condition” had not been materially contributed to by the action.

The jury also made no award for future income loss, leading Justice Gordon to infer that it did not consider the plaintiff’s injuries to be permanent.

However, the jury did award general damages of $32,500. It is not clear from the reasons, just how that award could be reconciled with the answer given to the question above.

After the jury had rendered its verdict, Justice Gordon had to decide a threshold motion, brought by the defence.

His Honour reviewed the medical and non-medical evidence given at trial. He also said that he had “specifically considered the implied findings of the jury”. However, he ruled that the plaintiff had suffered a serious and permanent impairment of an important bodily function caused by a continuing injury, physical in nature.

His Honour obviously recognized that it was difficult (impossible?) to reconcile his view of the case with that of the jury. He said: “I recognize that my findings may well be inconsistent with findings made by the jury at trial. That is not to say that the jury was without grounds to make the findings they did. As I indicated earlier in my reasons, the jury had to have found either that the Plaintiff was no longer suffering from any condition or that any condition she was suffering from was unrelated to the accident. No doubt there exists evidence upon which either or both of those findings could be made. In this instance, to the extent that my finding is inconsistent with theirs, I happen to be of the view that the evidence leads to a different conclusion.”

As we have observed before, this kind of result just doesn’t make sense. By dividing the duties of the judge and jury as it has done, the legislature has invited such an outcome, in which each is entitled to evaluate the case in its own way and neither decision is subordinate to the other. How are the parties supposed to treat this decision (both aspects of it) seriously?

Posted in Auto (Tort), Insurance News, Juries, Threshold | Comments Off on Threshold Decision Underlines Dichotomy Within Ontario Insurance Act

Plaintiff’s Facebook Pages Not A “Fishing Expedition” by Defence, Judge Rules

Posted on February 26, 2009 by Stephen Cavanagh

In Leduc v. Roman, Mr. Justice David M. Brown allowed in part an appeal from an order of Master Dash, dealing with the Facebook page of a plaintiff in a personal injury action. The Master had refused the defence motion, that the plaintiff be required to produce all information on his (private) Facebook website. But Brown J. ruled that the defence should be afforded an opportunity to cross-examine the plaintiff on his affidavit of documents, to inquire about the content of the Facebook profile. This sort of motion is undoubtedly going to become much more common, in a variety of contexts, so Justice Brown’s ruling is instructive.

The plaintiff had been injured in an MVA and, in his lawsuit, claimed damages for, among other things, reduced enjoyment of life. Counsel for the defendant examined him for discovery but asked no questions about the plaintiff’s Facebook profile, not knowing that the plaintiff had one. However, in a subsequent medical examination, the plaintiff told the examining psychiatrist, that he (the plaintiff) did not have friends in the area but “had a lot on Facebook”. That information was incorporated into the doctor’s report of his examination.

The publicly-accessible part of the plaintiff’s Facebook profile contained only a photograph and the plaintiff’s name. The balance of the profile could only be viewed by persons to whom the plaintiff had granted access (his “Facebook friends”).

With that information, counsel for the defence brought a motion before Master Dash, asking for (i) the interim preservation of all information contained on [the plaintiff’s] Facebook profile, (ii) production of all information on the Facebook profile, and, (iii) the production of a sworn supplementary affidavit of documents.

On a preliminary ruling, the Master did order that the plaintiff copy and preserve every page from his Facebook profile until the hearing of the main motion. The plaintiff agreed to produce a supplementary affidavit of documents.

The Master refused to order the plaintiff to produce the pages from his Facebook profile that were not publicly accessible. He characterized the motion as a “fishing expedition” and focused on the fact that the defendant was unable to adduce any evidence as to what might be found on the site.

However, the Master did find that photographs or other information posted on the site, that showed the plaintiff’s activities or his “other enjoyment of life”, should be listed in the supplementary affidavit of documents that he had agreed to deliver. The Master was quite satisfied that the pages on the site constituted “documents” and that they lay within the plaintiff’s control.

The Master also appeared to place weight on the fact that no questions had been asked about the plaintiff’s Facebook profile when he was examined for discovery: “[t]he Defendant had an opportunity to ask at discovery whether the Plaintiff had photos – either a hard album or electronically that are demonstrative of his lifestyle but I have no evidence such questions were asked.”

So, the Master thought that an adequate foundation had not been laid for an order that the pages of the site be produced to the defence.

According to Justice Brown, “Master Dash was not prepared to follow the principle articulated by Rady J. in Murphy v. Preger that one could infer from the nature of the Facebook service the likely existence of photographs on the plaintiff’s private profile. Master Dash characterized as ‘speculation’ the drawing of any inferences from a ‘typical’ Facebook profile about what content likely would be found on a specific Facebook profile. Master Dash also distinguished the Murphy decision on the basis that in that case the plaintiff had posted photographs on her public Facebook profile, had given the defence photographs as part of her productions, and evidence existed that 366 people had access to her site.”

However, Justice Brown came to a different conclusion. He thought that Facebook, by its very nature, is a vehicle by which people make available to others information about themselves, “what they like, what they do, and where they go, in varying degrees of detail”. He did not think that the defence had been on a “fishing expedition”, saying, “[i]t is reasonable to infer that his social networking site likely contains some content relevant to the issue of how Mr. Leduc [the plaintiff] has been able to lead his life since the accident.”

In the result, Justice Brown granted leave to the defendant to cross-examine the plaintiff on his supplementary affidavit of documents, about the nature of the content that the plaintiff had posted on his Facebook site.

The case is interesting in a couple of respects. Most obviously, it deals with the relatively recent phenomenon of how social networking websites are to be treated for purposes of discovery.

But more fundamentally, both Master Dash and Justice Brown seem to have taken it as a given that photographs of the plaintiff in a personal injury action are documents within the plaintiff’s control and that any such photographs that are demonstrative of the plaintiff’s lifestyle (assuming that that is an issue in the litigation) should be disclosed in the affidavit of documents. That would be true whether the photographs are printed or electronic and whether they are posted on the internet or exist only on a personal hard drive.

Justice Brown then went further, saying that where few or no documents are disclosed by a Facebook user, the defendant should have leave to cross-examine the plaintiff on the affidavit.

It appears to us that at a minimum, the decision would enable a defendant to insist on a further and better affidavit of documents if it learns that the plaintiff has photographs of himself or herself or has a Facebook site that have not been referred to in the original affidavit of documents. It will probably now become standard practice to ask for the inclusion of such documents in the plaintiff’s affidavit.

Posted in Discovery, Insurance News | Comments Off on Plaintiff’s Facebook Pages Not A “Fishing Expedition” by Defence, Judge Rules

Judge Says Bill 198 Meant to “Tighten Up” IA Threshold

Posted on January 16, 2009 by Stephen Cavanagh

Sherman v. Guckelsberger was released on December 29, but Ontario auto insurers can be forgiven for thinking that it was meant to have arrived four days earlier.

In this case, Madam Justice Jane A. Milanetti had to decide whether or not a plaintiff’s claim satisfied the “threshold” contained in s. 267.5(5) of the Insurance Act, as clarified by O. Reg. 461/96 (“Court Proceedings For Automobile Accidents That Occur On Or After November 1, 1996”). (The current version of the threshold is often referred to as “Bill 198”.)

The threshold itself has not changed but 2003 amendments to O.Reg. 461/96 created a number of requirements that are supposed to be met in order for an injury to satisfy the threshold. Justice Milanetti held that the plaintiff in this case did not meet the threshold and in doing so, she expressed the view that legislature had meant to “tighten up” the present (Bill 198) version of the threshold from the former (Bill 59) one.

To date, the only analysis of the Bill 198 version of the threshold was that undertaken last year by Madam Justice Joanne Morrisette in Nissan v. McNamee. (We are aware of one other case in which Mr. Justice Hugh R. McLean followed the reasoning of Justice Morrisette. That was a jury case and we have not seen Justice McLean’s reasons on the threshold motion, but we understand that the case is under appeal to the Court of Appeal.) Speaking of Justice Morrisette’s decision in Nissan, Justice Milanetti said: “She concludes, in my view, that the Bill 198 legislative changes do little to change the Bill 59 legislation that predated it. Respectfully, I have a different view of the changes and their ramifications.” Her Honour added, “It is my view, that if the legislators saw fit to amend the legislation yet again-increasing the deductible for claims under $100,000 and making it so much more specific, they did so with a view to tightening it up from the former version“.

In this case, Justice Milanetti held that the plaintiff’s soft tissue injuries did not satisfy the criteria in O.Reg. 461/96. Of the three requirements of “permanence”, “seriousness” and “importance”, she was most troubled by the lack of evidence to establish the last one: “importance”.

In Sherman, liability had been admitted for the 2004 rear-end collision in which the plaintiff was injured. Thus, the only issues were threshold and the quantum of damages. The plaintiff had various soft tissue complaints: headache, neck, shoulder and back pain and some tingling in her fingers.

The plaintiff worked in the office of a family doctor. After being off work for one week after the accident, the plaintiff returned to work on a part-time basis for two weeks and then resumed full-time employment. (For her, that meant four days a week, as her employer did not work on Wednesdays.) In addition, she held a second job, doing bookkeeping out of her home. About two and a half years after the accident, the plaintiff reduced her work hours by about eight hours per week. Still, her income for the years after the accident was higher than it had been before the accident.

Justice Milanetti summarized in detail the evidence of the lay witnesses, who described the plaintiff’s limitation in function both at home and at work. She also reviewed the testimony of a number of a number of medical expert witnesses.

The plaintiff’s main expert diagnosed the plaintiff as suffering from a WAD [“Whiplash Associated Disorder”] level III injury. Other examiners assessed her at a WAD II level.

Justice Milanetti criticized the plaintiff’s own family physician for having become “an advocate for Ms. Sherman [and whose] testimony lacked objectivity and was ultimately less helpful to me than it might otherwise have been”.

At the end of the medical evidence, Justice Milanetti was left to conclude that the plaintiff’s decision to reduce her hours of work had been taken “virtually unilaterally” and that this step had not been recommended to her by any of her treating or assessing doctors.

Counsel for the plaintiffs had conceded that the only way in which the plaintiff could meet the Bill 198 threshold was on the basis of diminished work capacity. She had maintained a relatively high level of function in her day to day life, such that she would admittedly not meet the threshold under the “daily life activities” criteria.

In her analysis of the various threshold requirements now found in O.Reg. 461/96, Justice Milanetti noted that the evidentiary criteria are mandatory. She held that the evidence in this case did not measure up. For instance, there was no evidence of “reasonable accommodations to allow [the plaintiff] to continue her employment”. Justice Milanetti said that “I have difficulty accepting that Ms. Sherman has suffered a substantial interference in her ability to continue her usual employment despite reasonable accommodation efforts.”

But it was the “seriousness” requirement that caused Her Honour the greatest concern. She noted that the plaintiff had been able to continue a relatively active lifestyle and even though counsel for the plaintiff asked the court not to penalize his client for her work ethic, but Her Honour was left to wonder “what function of Ms. Sherman is impaired…she did not tell me of anything she could not do in her work. Rather, I was presented with general description of ongoing pain symptoms the [sic] effectively wore her down.” This, said Her Honour, was at odds with the mandatory requirements of the legislation, that at least one physician explain “the specific function impaired” and “the importance of that function to person”. Such evidence was lacking here and Her Honour’s decision indicates that the omission can be fatal to a threshold claim.

Finally, Justice Milanetti also held that the plaintiff had not satisfied the “permanence” part of the threshold requirements, as amplified by O.Reg. 461/96. She noted that all of these requirements must be satisfied. Even if the plaintiff’s symptoms could be considered “continuous”, she had failed to satisfy other aspects of the regulation (such as participation in recommended treatment).

Thus, even though the trial judge said of that plaintiff that “she is not a fraud. I, in fact, quite liked both she [sic] and her husband”, the plaintiff’s action was dismissed.

The decision strongly suggests that the Bill 198 version of the threshold is substantially higher than Bill 59, contrary to the decision of Morrisette J. last year.

It will be interesting to see the direction taken by future decisions.

Posted in Auto, Threshold | Comments Off on Judge Says Bill 198 Meant to “Tighten Up” IA Threshold

C.A. Confirms that If Principal Claim Prescribed, So Are FLA Claims

Posted on November 28, 2008 by Stephen Cavanagh

In a very brief decision, the Court of Appeal today said, in Godoy v. 475920 Ontario Ltd., that “if the principal claim is statute-barred the derivative claim under the Family Law Act is also barred”. Here, the principal claim was subject to the limitation period under s. 38(3) of the Trustee Act: two years from the date of death. The discoverability principle does not apply to that limitation period. Claims under the Family Law Act, being derivative of the cause of action of the person injured or killed, stand in no better position, even though in another case (say, one involving personal injury rather than death), the discoverability principle might postpone the commencement of the limitation period.

The fact that no claim had actually been advanced on behalf of the deceased was held to make no difference.

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

Posted on November 28, 2008 by Stephen Cavanagh

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.

Posted in Auto, Costs, Insurance News, Threshold | Comments Off on Can Defendants Ever Make Effective Rule 49 Offers in MVA Cases?

Not “Quantum of Solace” But “Quantum of Claims”

Posted on November 27, 2008 by Stephen Cavanagh

In McCook v. Subramaniam, Master Ronald Dash considered whether to permit a plaintiff to add as a defendant his own auto insurer, under its underinsured motorist endorsement. The insurer resisted the motion on the basis that the plaintiff had not sued within the limitation period.

Ultimately, the Master allowed the addition of the insurer, but allowed it to plead a limitation defence. In his reasons, the Master highlighted a significant trap for the unwary. He noted that the limitation period is twelve months from the date on which the plaintiff knew or ought to have known, not that his or her damages would exceed the actual liability limits of the tortfeasor’s policy but from the date on which he or she knew or ought to have known that the “quantum of claims” would exceed the statutory minimum limits of $200,000.

In our view though, the caselaw has not adequately explained just what is meant by the peculiar phrase, “quantum of claims”. In his reasons, Master Dash applied an earlier interpretation of the phrase by Master Graham. However, it seems to us that the meaning remains unclear.

Here, the car accident happened on June 23, 2003. The plaintiff’s car was rear-ended. He sued the negligent motorist on June 22, 2005, one day before the expiry of the two year limitation period.

Almost two years after that, on May 9, 2007, the plaintiff moved to add as a defendant his own insurer, Aviva Insurance Company of Canada, which had endorsed his auto policy with underinsured coverage.

The limitation period for an action against the underinsured insurer is a contractual one, contained in the endorsement itself. Section 17 of the endorsement provides as follows:

Every action or proceeding against the insurer for recovery under this endorsement shall be commenced within 12 months of the date that the eligible claimant or his or her representative knew or ought to have known that the quantum of claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred, but this requirement is not a bar to an action which is commenced within 2 years of the date of the accident. [Emphasis added]

In this case, the original statement of claim sought damages of $1 million for the injured plaintiff and $200,000 for the FLA claimants. The pleading contained an allegation that the plaintiff’s injuries were “serious and permanent”. Hence, on the motion to add Aviva, counsel for the insurer argued that the plaintiff must have known at the time of issuance of the statement of claim, that “the quantum of claims” exceeded the minimum limits for motor vehicle liability insurance ($200,000 in Ontario).

As Master Dash noted, the limitation period does not speak of the quantum of damages. Rather, the endorsement uses the rather odd formulation, “quantum of claims”. What does that mean? Does the phrase refer to the numerals that follow the dollar signs in the statement of claim’s prayer for relief? If so, then the fact that the statement of claim in this case claimed damages of some $1.2 million would seem to have conclusively established that the “quantum of claims” exceeded the statutory minimum limits.

But the Master held that the amount of the claims in the statement of claim is not conclusive. He referred to an earlier decision of his colleague, Master Graham, in Sherman v. Constitution Insurance Co. of Canada. There, Master Graham said, “[t]he word “claims” can only mean what is claimed as opposed to what is recovered. Therefore, the ‘quantum of claims’ must mean the amount presented to the court when seeking the court’s assessment of damages.”

Master Graham, in Sherman, also referred to the Court of Appeal’s 1996 decision in Caruso v. Guarantee Co. of North America, where Mr. Justice Finlayson described the phrase, “quantum of claims” as “ambiguous”. (Master Dash also referred to Caruso in McCook.)

In the decision appealed from in Caruso, Justice John Jenkins had concluded that the time did not begin to run under s. 17 until the damages had been assessed at trial. As an alternative ground for rejecting the insurer’s limitation defence, Justice Jenkins had relied upon the absence of evidence presented by the insurer. The Court of Appeal noted that other cases, one from Ontario (Wimbush v. Progressive Casualty Insurance Company (1995), 17 C.C.L.I. 69 (Ont. Ct. (Gen. Div.))) and one from Alberta (Wawanesa v. Shoemaker (1994), 16 Alta. L.R. (3d) 210 (C.A.)) had also held that the time under s. 17 only begins to run once the plaintiff’s damages have been assessed at trial.

Master Graham went on, in Sherman, to indicate that “the amount presented to the court when seeking the court’s assessment of damages” was not necessarily the amount claimed in the statement of claim. So, what is it then? At what point does the plaintiff “present” an “amount” to the court “when seeking an assessment of damages”? The Sherman decision, it seems to us, leaves this question unanswered.

Master Dash applied the Sherman interpretation of “quantum of claims”, saying that “what is relevant is not what is recovered, such as after trial, but what the plaintiffs could present to the court when seeking the court’s assessment of damages”. Like Master Graham, Master Dash did not think that the prayer for relief was conclusive in establishing what the plaintiff believed to be the “quantum of claims”. He said that “the quantum of claim as pleaded in the statement of claim is a relevant factor and some evidence of the plaintiff’s view at that time as to the quantum of his claim….I believe that the better view is that the quantum pleaded is not determinative of the issue, but may provide some evidence of the plaintiffs’ knowledge or assessment of the quantum of his claim. It is a factor but only one factor and, depending on other supporting evidence, may in some cases be a significant factor. The amount inserted in the prayer for relief may bear no reasonable relationship to the plaintiffs’ real assessment of their claim, but it is to be considered in light of the available evidence.”

We think the caselaw does still allow “quantum of claims” to be interpreted as denoting an assessment after trial. But leaving that possible approach aside, Master Dash’s comments, quoted in the preceding paragraph, suggest that the relevant question is, what is the plaintiffs’ “real assessment of their claim”? Such an approach seems, in turn, to imply a subjective test. What evidence would satisfy such a test? Perhaps solicitor-client correspondence would become producible, to show what the plaintiffs actually thought their claim was worth and when they came to that conclusion.

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