Court Says Plaintiff in AB Claim Can’t Add Insurer’s Lawyers as Defendants

Posted on November 23, 2006 by Stephen Cavanagh

Representing insurance companies is getting more hazardous all the time. In Succar v. Wawanesa Mutual Insurance Company, the plaintiff had sued Wawanesa for statutory accident benefits arising out of an MVA that occurred on January 1, 1994. Wawanesa had stopped benefits in 2004, precipitating this action.

Counsel for the plaintiff moved for leave to amend the statement of claim, to add certain adjusters as defendants. She also asked that the court grant leave to add as a defendant the law firm of Bell Temple. That firm had acted as counsel for Wawanesa throughout the lawsuit. Against both sets of proposed defendants, the plaintiff wanted to allege bad faith, negligence and procurement of breach of contract.

Superior Court Justice Colin McKinnon heard the motion for leave to amend. He permitted the addition of the individual adjusters as defendants, ruling that it was not clear that the adjusters could not be held liable to the plaintiff: “Where the law in a particular area can be described as ‘muddy’, the court will not strike that part of the pleading, nor hold that the claim or defence must fail.”

However, His Honour refused leave to add Bell Temple. In our view, it would have been quite startling had his decision been otherwise.

The allegations that the plaintiff sought to make against the law firm were that it had acted as adjusters, “thereby fulfilling an ‘adjustment mandate’ and acted in concert with their client Wawanesa and its employees”. Specific instances of this were the firm’s having arranged independent medical examinations, retained investigators to conduct surveillance and set up a residual earning capacity assessment of the plaintiff. Counsel for the plaintiff argued that Bell Temple had not just given legal advice, it had made “recommendations”.

Justice McKinnon was not persuaded. He refused to add Bell Temple as a defendant. He said: “It is argued that it is not at the instance of the plaintiff whereby a retainer can be defined between a solicitor and his or her own client.  I agree.”

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No Right of Subrogation Under Builder’s Risk Policy

Posted on November 22, 2006 by Stephen Cavanagh

ADDENDUM

This decision has been appealed. The notice of appeal was served on November 28, 2006. So, it appears that the Court of Appeal will be re-visiting the issue of waiver of subrogation in a builder’s risk context. The appeal will likely be heard in the first half of 2007. Our original post follows.

In Maple Reinders Construction Ltd. v. D.B. Mechanical Ltd., Madam Justice Cheryl Robertson granted summary judgment, dismissing the action. Our office acted for the successful moving party, D.B. Mechanical Ltd. Unfortunately, the reasons have not yet been posted on the CANLII site. We will post a link if and when there is one.

This was a subrogated action by Maple Reinders’ insurer, which had paid a substantial flood claim arinsing out of renovations being done at the Royal Military College in Kingston, in 2003 and 2004. Maple Reinders was the general contractor on the project. The defendant, D.B. Mechanical Ltd., was a subcontractor.

In both the prime contract (between Maple Reinders and the Department of National Defence) and in the subcontract with D.B. Mechanical, Maple Reinders had covenanted to take out builder’s risk property insurance coverage. D.B. Mechanical was obliged under the subcontract to obtain liability insurance. Both parties had gotten the insurance they had agreed to.

Although the builder’s risk coverage did not include an express waiver of subrogation, Justice Robertson accepted the defence argument, that D.B. Mechanical’s covenant to obtain property insurance amounted to an assumption of risk and resulted in a waiver of subrogation against D.B. Mechanical.

 

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Auto Insurer Not Entitled to Reimbursement from Insured for Settlement with Plaintiff Without Insured’s Consent or Judgment Against Plaintiff

Posted on November 22, 2006 by Stephen Cavanagh

REVISION

We have now obtained the unreported reasons of Mr. Justice Paul Lalonde, the motions judge, whose decision was reversed by the Court of Appeal. Those reasons shed quite a bit of light on what transpired in this case. Accordingly, we have revised our original post. The new version follows.

In Lockhard v. Quiroz, the Court of Appeal dealt with an auto insurer’s “absolute liability” under s. 258 of the Insurance Act. This is an issue that frequently arises but is sometimes misunderstood.

The accident giving rise to the claim took place on Highway 401. The driver, Quiroz, was operating a vehicle owned by the plaintiff Lockhard. He had only a G1 licence. Apparently, neither he nor Lockhard realized that as the holder of a G1 licence, Quiroz was only permitted to drive on a 400-series highway if accompanied by a driving instructor licensed in Ontario.

Lockhard was injured in the accident and she sued Quiroz for property damage and personal injuries.

Her auto insurer was CAA. It took the position that Quiroz had breached the policy (presumably CAA was relying on statutory condition 4). It had itself added to the lawsuit as a third party under s. 258(14) of the Insurance Act. That section allows an insurer to participate in an action against its insured even though coverage may be disputed.

CAA settled directly with Lockhard her claims for property damage and personal injury. The amount of the settlement was $275,000. CAA took this step because of the “absolute liability” that it faced under s. 258(4) of the Insurance Act. That section says:

The right of a person who is entitled under subsection (1) to have insurance money applied upon the person’s judgment or claim is not prejudiced by,

(a) an assignment, waiver, surrender, cancellation or discharge of the contract, or of any interest therein or of the proceeds thereof, made by the insured after the happening of the event giving rise to a claim under the contract;

(b) any act or default of the insured before or after that event in contravention of this Part or of the terms of the contract; or

(c) any contravention of the Criminal Code (Canada) or a statute of any province or territory of Canada or of any state or the District of Columbia of the United States of America by the owner or driver of the automobile, and nothing mentioned in clause (a), (b) or (c) is available to the insurer as a defence in an action brought under subsection (1).

Subsection (1) of section 258 allows a person with a claim against an insured to sue the insurer directly, in certain circumstances. The wording of subsection 258(1) is reproduced in the Court of Appeal’s reasons in Lockhard.

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C.A. Says Son In Mother’s “Control” Is Not Within Her “Care”, For SABS Purposes

Posted on November 10, 2006 by Stephen Cavanagh

In Oxford Mutual Insurance Company v. Co-operators General Insurance Company, released today, the Court of Appeal had to decide whether a claimant was “principally dependent” on his mother at the time of being injured in a motor vehicle accident. If he was, his mother’s insurer would be liable to pay statutory accident benefits. Otherwise, the insurer of the car in which he was a passenger at the time of his accident would have been responsible to pay the benefits.

(To be more precise, the Court was hearing an appeal on the “dependency” issue from a decision of Madam Justice Elizabeth Stewart, who had allowed an appeal from a ruling of arbitrator Guy Jones.)

Shortly before the 2002 MVA, the 22-year old claimant had been charged with assaulting his girlfriend. He had been released on bail, with his mother agreeing to act as a surety, to ensure that he did not contact the girlfriend. The terms of the order required the claimant to live with his mother, obey her rules, honour a curfew, etc. The claimant was otherwise largely independent, since he worked nights and did not see much of his mother.

Arbitrator Jones had concluded that the claimant was not principally dependent on his mother for care. Justice Stewart came to the opposite conclusion. She felt that the surety order meant that the mother was acting as a “constructive jailer” for the claimant and that this indicated that he was principally dependent on her for care.

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Discovery Evidence Can’t Be Read In If Rule in Browne v. Dunn Not Complied With

Posted on November 10, 2006 by Stephen Cavanagh

Mr. Justice Bruce Glass of the Superior Court has made a ruling that will interest trial lawyers (and few others). Morrison v. Greig was a personal injury action. At trial, defence counsel elected not to cross-examine the plaintiff while the latter was in the witness box (or “on the stand”, as they say in the United States). At the conclusion of the evidence, defence counsel sought to read in evidence given by the plaintiff on his examination for discovery.

The plaintiff’s solicitor objected that this procedure would violate the rule in Browne v. Dunn and should not be permitted. The rule in Browne v. Dunn is perhaps not widely-known; many trial lawyers discover it for the first time the hard way, by being faced with an objection at trial and having no idea what the other lawyer is talking about.

The case (Browne v. Dunn) is a rather venerable one, decided by the House of Lords in 1893. In his speech, Lord Herschell said, “My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box [there’s that phrase again], to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.”

So, if you intend to try to impeach the credibility of a witness with other evidence, the rule in Browne v. Dunn requires that you confront the witness with the impeaching evidence in the course of cross-examination.

In Morrison, Justice Glass concluded that the rule had not been followed and he refused to allow the discovery evidence to be read in.

Counsel for the defence argued that he was seeking to read in the discovery answers only as admissions against interest. This would undoubtedly have been a legitimate objective. However, counsel for the plaintiff contended that the effect of reading in the discovery testimony would be to challenge the plaintiff’s credibility without affording him an opportunity to respond to or explain his answers. The plaintiff’s solicitor pointed out that section 20 of the Evidence Act requires that if it is sought to contradict a witness by a prior statement given by him or her, he or she must first have his or her attention called to the contradictory parts.

Justice Glass agreed with the plaintiff’s position and refused to permit the evidence to be introduced.

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Late Notice of U.S. Trademark Infringement Claim Means No Insurance Coverage for Related Claim in Canada

Posted on November 7, 2006 by Stephen Cavanagh

Mr. Justice Roydon J. Kealey of the Superior Court has granted summary judgment, dismissing the plaintiff’s action in Ideal Roofing Company v. Royal & SunAlliance Insurance Company. Our office acted for Royal, the successful moving party. The basis of the decision was Ideal’s failure to provide prompt notice to Royal of a trademark infringement claim that had been made against it by a U.S. company called “TAMKO”. While Ideal had not notified Royal of a U.S. action against it in 1999, it did advise the insurer shortly after a second action was brought in Canada in 2000. Royal denied coverage for both claims, contending that the American and Canadian actions were related and that it had been prejudiced by Ideal’s failure to advise Royal of the claim in 1999. Justice Kealey held that Royal was justified in rejecting the claim.

In 1999, Ideal was marketing its roofing products in Canada and, in a small way, in the United States. It was using the word “Heritage” in its marketing. TAMKO wrote to Ideal, notifying it that TAMKO had trademarked the word “Heritage” in both Canada and the United States. It took the position that Ideal was infringing these trademarks and demanded that Ideal cease its use of “Heritage” in both countries.

Ideal and TAMKO negotiated during the summer of 1999. Ideal made successive offers to phase out its use of the “Heritage” products, first over a period of two years, then one year, then six months. TAMKO steadfastly insisted that Ideal cease its infringing use immediately.

TAMKO then sued Ideal in the United States, in August of 1999. By May, 2000, the case had proceeded to judgment, which was in favour of TAMKO. Damages, costs and fines were assessed against Ideal. The company had not told its insurer, Royal, anything about the “cease and desist” letters or about the U.S. litigation. According to Ideal, the lawsuit in the United States cost it more than U.S. $1 million.

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C.A. Upholds Punitive Damages Award Against Impaired Driver

Posted on November 6, 2006 by Stephen Cavanagh

In a decision that will be of great interest to the insurance and personal injury bar, the Court of Appeal today released its reasons in McIntyre v. Grigg et al.  In this case, the plaintiff was a pedestrian who suffered a fractured femur, a head injury and other injuries when struck by a car driven by Andrew Grigg, a member of the Hamilton Tiger-Cats, in a 1996 accident. Mr. Grigg had been drinking at a campus bar at McMaster University. Afterwards, he was found to have had a blood alcohol reading two to three times more than the legal limit.

Punitive Damages 

The majority of the panel (Chief Justice Roy McMurty and Justice Janet Weiler), the Court upheld an award of punitive damages against the driver, Grigg. The punitive damages award made at trial by the jury was $100,000. The Court of Appeal reduced it to $20,000. In doing so, the majority acknowledged that:

This is a novel case. The parties were unable to produce any Canadian case law in which punitive damages were awarded as a result of injuries sustained in a motor vehicle accident caused by an impaired driver nor were they able to produce any appellate authority that prohibited such damages in this context.

The majority rejected various defence arguments:

  • that to qualify for punitive damages, the plaintiff would have to show that the defendant’s conduct was specifically directed at the plaintiff;
  • that the defendant driver had already been punished, as he had been convicted of careless driving and fined $500 ;
  • that the driver’s conduct did not satisfy the test of being “high-handed, malicous or oppressive”.

However, it did accept the defence submission, that an award of $100,000 for punitive damages did not meet the “rationality test”, in that it would not be proportionate to the defendant’s misconduct. Accordingly, the award was reduced to $20,000.

Mr. Justice Robert Blair, who concurred with the majority on most issues, dissented on the disposition of the punitive damages issue. He felt that “punitive damages do not serve a rational purpose in the circumstances of this case, and, generally, in cases of this particular nature”. He pointed to the wording of the standard Ontario auto policy and observed that punitive damages appears to be within the coverage, with the result that no deterrent or punitive effect is achieved. This is because the misbehaving driver would not be the one paying the damages. Instead as Justice Blair said, “all automobile-owning members of society will effectively be ‘punished’ for the conduct of Mr. Grigg and comparable drivers.”

Justice Blair also warned that once the door has been opened to punitive damages in drunk driving cases, such awards, which he described as “a complete windfall for the plaintiff”, might become more commonplace.

Aggravated Damages

The court unanimously struck down the jury’s award of aggravated damages, in the amount of $100,000. It held that such damages are intended to compensate the plaintiff “when the reprehensible or outrageous nature of the defendant’s conduct causes a loss of dignity, humilitation, additional psychological injury, or harm to the plaintiff’s feelings”. They are not to be awarded separately from general non-pecuniary damages but in fact, are part of the latter head of damages.

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Chronic Pain Plaintiff with “Questionable” Credibility “Just Barely” Meets Threshold

Posted on November 5, 2006 by Stephen Cavanagh

ADDENDUM

Since our original post about this case, we were advised by Doug Smith, counsel for the defence, about some additional and pertinent facts. His comment appears at the end of this post but, in a nutshell, he told us that at the opening of trial, counsel for the plaintiff obtained an order adding the Police Services Board as a defendant. Apparently, Justice Harris ruled that the Board was not a protected defendant. That circumstance explains why His Honour did not apply the Insurance Act deductible and why the award included an amount for health care benefits.

Mr. Smith also told us that the trial judge was nevertheless asked to rule on the threshold issue in any event of his decision, given the possibility of an appeal.

We think that the case is still of interest, because of the threshold ruling in the face of what seems to have been very strong evidence from the defence, and on the possible application of a mitigation argument to the FLA claims.

In light of this information, the original post has been revised. We encourage readers of this blawg who know of any information that sheds light on the decision, to submit a comment to that effect. The beauty of having these commentaries online is that they can be updated and corrected, where necessary!

The revised original post follows:

In Ksiazek et al. v. Newport Leasing Limited, Superior Court Justice Raymond Harris did a methodical analysis of a chronic pain claim arising out of a 1998 motor vehicle accident. Despite his dissatisfaction with the plaintiff’s case, on a number of fronts, His Honour found that the plaintiff had “just barely” met the Bill 59 threshold under s. 267.5 of the Insurance Act. He assessed her general non-pecuniary damages at $60,000 but then reduced those damages and the pre-trial income loss damages ($72,800) by 25% on account of the plaintiff’s failure to mitigate.

This case was an assessment of damages, liability for the accident having been admittted. The total award was $131,100. However, the assessment of damages raises some questions, which are discussed in this post.

The plaintiff was a young woman who, nine months before the accident, had quit school to work as a waitress. In the accident, she fractured two fingers and her sternum, but these injuries had largely resolved by the time of trial. Her main complaints were of post-traumatic stress syndrome, mild traumatic brain injury, neck and low back pain and “a major depressive disorder resulting from the above injuries”.

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Firm Retained to Defend Insured Can’t Then Act for Insurer as Statutory Third Party

Posted on November 2, 2006 by Stephen Cavanagh

In a brief decision, Master Dash addressed an issue that often arises, in one way or another, in insurance litigation. Although the expression does not appear in the reasons, the issue in this case arose out of what is often termed, “the tripartite relationship”. This phrase refers to the relationship between insurer, insured and defence counsel retained by the insurer, on behalf of the insured.

In Ho v. Vo, Kingsway Insurance had retained Beard Winter to defend its insured, Vo, in an action arising out of a motor vehicle accident. Vo had not responded to various letters sent by the law firm and had not attended to be examined for discovery. Accordingly, Beard Winter sought an order removing it as solicitors of record for Vo. Although Master Dash said that “there is no convincing evidence [Vo] has received those letters”, he was satisfied that Beard Winter was entitled to be removed as solicitors of record for Vo.

However, the law firm also sought an order, under s. 258(14) of the Insurance Act, adding Kingsway Insurance as a statutory third party. That section provides that “where an insurer denies liability under a contract evidenced by a motor vehicle liability policy, it shall, upon application to the court, be made a third party in any action to which the insured is a party and in which a claim is made against the insured by any party to the action in which it is or might be asserted that indemnity is provided by the contract, whether or not the insured enters an appearance or defence in the action”.

Master Dash was satisfied that Vo’s failure to co-operate entitled Kingsway to have itself added as a statutory third party. The problem, in the Master’s mind, was that “the solicitor for Mr. Vo, has given a coverage opinion in paragraph 10 of his affidavit where he states that he believes that Vo’s non-cooperation is a breach of the insurance policy”.

Because Beard Winter had entered a defence on behalf of Vo, even though the evidence indicated that no one at the firm had ever spoken with him, the Master felt that the law firm could not then act against the interests of Vo:

It is clear that Mr. Aucoin had 2 clients: Mr. Vo and Kingsway. By now representing Kingsway as a statutory third party they are putting their client Vo in jeopardy, not only for a judgment in favour of the plaintiffs for any judgment in excess of the $200,000 statutory minimum, but also repayment to Kingsway of the $200,000. Clearly BW have a conflict of interest. Even if they received no confidential information from Mr. Vo, and it appears that they have never spoken to him, they cannot act against the interests of their former client in the same matter in which they represented him. The court should not condone such conflict by allowing BW to bring the motion on behalf of Kingsway. 

Accordingly, the Master dismissed the motion to add Kingsway as a statutory third party, without prejudice to Kingsway’s right to move again, with lawyers other than Beard Winter.

We cannot disagree with the principle underlying the Master’s decision: by acting as defence counsel, the law firm had two clients, the insured and insurer, and could not then act for one against the interests of the other. Further, we also agree that by expressing an opinion on coverage, that the insured had breached the policy, the law firm placed itself in a conflict. However, we are not so sure that a conflict would arise automatically where a law firm has defended the insured and then seeks to represent the insurer as a statutory third party.

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Another Threshold Ruling Driven by Jury’s Findings

Posted on October 27, 2006 by Stephen Cavanagh

In a post yesterday, we commented on a recent decision, Bisier v. Thorimbert,  in which a Superior Court judge granted a defence threshold motion at the trial of a personal injury action, after the jury had awarded nothing for general or FLA damages.

In a second case, another Superior Court judge has followed a similar approach in allowing a threshold motion. In Dennie v. Hamilton, Mr. Justice William Whalen was trying a chronic pain claim with a jury. The action had arisen from a 1999 motor vehicle accident. The plaintiff had been diagnosed as having suffered a soft-tissue injury that left her with some mild restriction of movement.

The defence contended that the plaintiff’s organic symptoms had substantially resolved within about six months and that her ongoing problems were of a psycho-social nature, not caused by the accident. (The plaintiff was a single mother who worked as a store clerk. As is commonly seen in chronic pain cases, the evidence disclosed that she had experienced a number of setbacks in her life, ranging from a broken marriage, illnesses of other family members and resulting depression on the part of the plaintiff.)

There was surveillance shown at trial, which depicted the plaintiff carrying on her daily activities with no apparent impediment.

The trial took two weeks. Upon its conclusion, the jury awarded general damages of $20,000 (gross of the Insurance Act deductible, which was then $15,000) and a further $20,000 for future housekeeping expenses.

As was done in Bisier v. Thorimbert, the trial judge who had to rule on whether the plaintiff’s injuries surpassed the Insurance Act threshold, relied heavily on the jury’s decision:

[28]   Again, it seems clear the jury concluded that the plaintiff suffered an organic soft tissue injury as a result of the accident, but not a permanent one.  If the plaintiff experienced chronic pain, the jury decided that it was not caused by the accident.  Given the way the contest was framed by the parties, I conclude that the jury found as a fact that the plaintiff’s physical injury from the accident had healed substantially by the end of 6 months to a year, and that any complaints thereafter were emotionally or psychologically based.  There was ample evidence upon which to base such a conclusion. I will respect the jury’s fact-finding role and their conclusions when the result seems so clear.

Justice Whalen went on to set out his own conclusions from the evidence. He considered the surveillance, the absence of evidence of atrophy of the arm alleged to have been affected, the subjectivity of the plaintiff’s complaints, etc. He applied the test enunciated in Meyer v. Bright. He also drew upon the decision of Justice Toscano Roccamo in Hartwick v. Simser in analyzing the requirement that an injury be “serious”, in a situation where a plaintiff has returned to work. His Honour’s own analysis of the evidence also led him to conclude that the plaintiff’s injuries did not meet the threshold.

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