COURT FILE NO.: CV-13-471948 DATE: 2018 1029 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Lisa Layland and Fabio Calabrese Plaintiffs – and – State Farm Mutual Automobile Insurance Company Defendant

Alissa Goldberg, for the Plaintiffs Cary Schneider, for the Defendant

HEARD: July 31, 2018

Reasons for decision Nishikawa J.

Overview and Factual Background

[1] The Plaintiffs, Lisa Layland and Fabio Calabrese, commenced this action against State Farm Mutual Automobile Insurance Company (“State Farm”) in January 2013 seeking $1 million in damages for negligent misrepresentation and “bad faith.” State Farm brings this motion for summary judgment dismissing Mr. Calabrese’s action. The Plaintiff Lisa Layland resolved her claim against State Farm and took no part in this motion.

[2] The claim relates to the resolution of an action the Plaintiffs commenced in 2006 (Court File No. 06-CV-324914 PD3) against State Farm and various defendants for injuries sustained by the Plaintiffs in a motor vehicle accident that occurred on December 25, 2004. The claim against State Farm was for both accident benefits and an underinsurance claim. The Plaintiffs’ claims were resolved at a private, global mediation that took place on August 8, 2012. The Plaintiffs executed Minutes of Settlement and Full and Final Releases. Mr. Calabrese’s accident benefits claim was settled for $17,500 (the “Settlement Amount”). Mr. Calabrese did not seek an amount for income replacement or housekeeping, and none are included in the Settlement Amount. At the relevant time, the maximum medical benefits for non-catastrophic injuries was $100,000 for a period of up to ten years. Mr. Calabrese also settled his tort claim against the other defendants for an undisclosed amount.

[3] After the settlement, the Plaintiffs’ lawyer, Joseph Falconieri, wrote to State Farm’s counsel seeking confirmation of the amount of accident benefits paid to each Plaintiff. In a letter dated August 14, 2012, Katharine Northcott, a claims adjuster for State Farm, advised that the Defendant had paid Mr. Calabrese $5,813.33 in medical and rehabilitation benefits and $3,986.81 for assessments, for a total of $9,800.14 (the “Actual Amount”). State Farm’s mediation brief (the “Mediation Memorandum”) mistakenly stated that it had paid $35,543.43 in medical and rehabilitation benefits to Mr. Calabrese (the “Misstatement”).

[4] Plaintiffs’ counsel wrote to Ms. Northcott seeking an explanation for the discrepancy between the Actual Amount and the Misstatement. State Farm admits that it mistakenly provided the wrong payment summary figures for medical and rehabilitation benefits. State Farm admits that the Misstatement was incorrect, but claims that the error was inadvertent.

[5] To date, Mr. Calabrese has not returned the Settlement Amount to State Farm.

[6] For the reasons that follow, I grant the Defendant’s motion for summary judgment dismissing Mr. Calabrese’s claim. There is no genuine issue requiring a trial as to State Farm’s liability for negligent misrepresentation or breach of the duty of good faith.

[7] In this motion, State Farm did not argue that the Plaintiff could not commence a new claim for misrepresentation based on a statement made within the context of confidential, without prejudice settlement discussions. Therefore, I have not considered this issue, or the issue of whether the proper course for the Plaintiff was to move to set aside the settlement and dismissal of the underlying action.

Issues

[8] The issues in this motion for summary judgment are whether there is a genuine issue requiring a trial in respect of:

(i) Mr. Calabrese’s claim of negligent misrepresentation; and (ii) State Farm’s breach of the duty of good faith.

Analysis

The Parties’ Positions

[9] State Farm submits that Mr. Calabrese’s claim for negligent misrepresentation raises no genuine issue requiring a trial because Mr. Calabrese cannot demonstrate reasonable reliance upon the Misstatement, nor that such reliance was to his detriment. State Farm further submits that any reliance by Mr. Calabrese was not reasonable because the amount State Farm had paid was within Mr. Calabrese’s knowledge. According to State Farm, the Misstatement caused no prejudice to Mr. Calabrese and, in fact, strengthened his bargaining position.

[10] Mr. Calabrese submits that the motion should be dismissed as there is a genuine issue requiring a trial, or alternatively, that partial summary judgment should be granted in his favour on his negligent misrepresentation claim. Mr. Calabrese argues that had State Farm provided the correct amount of benefits paid to date, his counsel would not have recommended accepting State Farm’s settlement offer at the mediation. According to Mr. Calabrese, his counsel assessed the claim at approximately $50,000. Since State Farm stated that it paid Mr. Calabrese $35,543.43 in accident benefits, his counsel recommended that he accept the $17,500 Settlement Amount.

Principles Applicable to Summary Judgment

[11] Rule 20.04(2) (a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[12] The Supreme Court of Canada has held that “summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.

[13] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using their fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under rr. 20.04(2.1) and (2.2): Hryniak, at para. 66.

[14] On a motion for summary judgment, the court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, [2014] O.J. No. 851, at paras. 26-27, aff’d 2014 ONCA 878, [2014] O.J. No. 5815, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97. Each party must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Hryniak, at paras. 57, 66; Sweda, at para. 26.

(i) Did the Defendant Make a Negligent Misrepresentation?

[15] To establish a claim for negligent misrepresentation, the Plaintiff must demonstrate the following five elements:

(a) There must be a duty of care based on a “special relationship” between the representor and the representee; (b) The representation in question must be untrue, inaccurate, or misleading; (c) The representor must have acted negligently in making the misrepresentation; (d) The representee must have relied, in a reasonable manner, on the negligent misrepresentation; and (e) The reliance must have been detrimental to the representee in the sense that damages resulted.

Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110.

[16] For the purposes of this motion, State Farm concedes the first three elements, but submits that Mr. Calabrese has not met the fourth and fifth elements of the test.

Can the Plaintiff Demonstrate Reasonable Reliance?

[17] In Soboczynski v. Beauchamp, 2015 ONCA 282, 125 O.R. (3d) 241, leave to appeal to SCC refused, [2015] S.C.C.A. No. 243, at para. 86, the Court of Appeal stated that “to prove reasonable reliance, it was incumbent on the respondents to adduce evidence sufficient for the court to conclude that the misrepresentation somehow caused them to act to their detriment.” The Court of Appeal, at para. 72, held that reasonable reliance is fundamental to the tort of negligent misrepresentation, as it “states a factual test for causation.”

[18] Mr. Calabrese’s affidavit does not state that he read the Misstatement before the mediation or what he did in reliance upon the Misstatement. Mr. Calabrese states that counsel advised him that State Farm represented that, by the mediation date, they had paid $35,543.43 in medical and rehabilitation benefits. He further states that “I am advised by my counsel and do verily believe that had they been provided with the correct amount of benefits paid out, they would not have recommended that I accept the Defendant’s settlement offer on August 8, 2012.”

[19] On cross-examination, Mr. Calabrese admitted that he could not recall whether he saw the Misstatement before the mediation. Moreover, Mr. Calabrese could not explain how he relied upon the Misstatement or how the Misstatement impacted upon his decision-making:

Q. So, the fact that the Defendant’s mediation memorandum said that $35,543.00 had been paid out for treatment, how did that impact your decision making in order to settle the accident benefits aspect of the lawsuit? A. Well, it was a relationship of trust and – well, not a relationship, but the settlement was a moment in which I trusted that everybody had done their due diligence. Had I known the figures weren’t correct, I would have, at the very least, taken more time to think about whether the settlement was fair and I may have actually gone forward and rejected it. Q. What I’m asking you is if you had known that the correct amount that had been paid to date with respect to treatment was $5,813.00, plus there was an additional amount that was listed for assessments that brought the total amount [to] $9,800.00, [if] you had been told the correct amount, how would that have changed your decision making? Why would it have mattered to you? A. When there’s a gap, when there’s some sort of a gap or some sort of an error or some sort of an inconsistency, it casts doubt on other parts of the action or whatever it might be. So, it would have caused me to go back, look at the numbers more carefully.

[20] Mr. Calabrese’s evidence is that had he known the amount was incorrect, he would have been more careful in reviewing the proposed settlement. He does not say how he would have acted differently had he known the Actual Amount. It is not sufficient for the Plaintiff to show that the Actual Amount would have been a relevant consideration to him. The question is whether he relied upon the Misstatement, such that it caused him to act to his detriment. In other words, “but for” the Misstatement, would Mr. Calabrese have accepted the Settlement Amount: Sacks v. Ross, 2017 ONCA 773, 417 D.L.R. (4th) 387, at paras. 117-20.

[21] The Plaintiff was candid in his cross-examination and did not overstate the impact of the Misstatement on his decision to accept the Settlement Amount. Mr. Calabrese did not testify that knowing the Actual Amount would have caused him to seek a higher settlement, or to reject the amount offered, only that he “may have” rejected it. Ultimately, Mr. Calabrese stated that he would have relied upon his counsel’s advice. Based on this evidence, the Plaintiff has not demonstrated that “but for” the Misstatement, Mr. Calabrese would not have accepted the Settlement Amount. It is clear from Mr. Calabrese’s evidence that his counsel’s advice was the main factor influencing his decision to accept the offer.

[22] Mr. Calabrese also admitted on cross-examination that he was unaware of the $100,000 statutory maximum or the 10-year limit for accident benefits. Given that Mr. Calabrese lacked basic information necessary to enable him to assess his claim and a potential resolution, it is difficult to see how knowing the Actual Amount would have had altered his decision.

[23] In his affidavit, Mr. Falconieri states that he valued the Plaintiff’s claim at $50,000. He further states that he would not have recommended that Mr. Calabrese accept the Settlement Amount if he had known that less than $10,000 in benefits were paid. Mr. Falconieri provides no further explanation for his assessment of the claim at $50,000. The $50,000 assessment is also undercut by the fact that in the eight years leading up to the mediation date, Mr. Calabrese obtained only $5,800 worth of treatment. Without knowing the basis for how Mr. Falconieri evaluated the Plaintiff’s claim, it is not possible to determine what the Plaintiff considered when he accepted the Settlement Amount, and whether but for the Misstatement, he would not have accepted it.

[24] Mr. Falconieri also states that if he had known the Actual Amount, he would have “advocated differently.” He does not state how awareness of the Actual Amount would have impacted his advocacy. The fact that Mr. Falconieri may have advocated differently does not mean that he would have secured a higher settlement. As the Defendant points out, the Misstatement could also have strengthened Mr. Calabrese’s bargaining position. If Mr. Calabrese had received over $35,000 in treatment, as opposed to $5,800, this would reveal a more significant treatment pattern, indicating a greater need for future medical treatment. The difference would be a “burn rate” of approximately $5,000 per year, based on a total over $35,000, as opposed to $830 per year for the Actual Amount.

[25] State Farm argues that Mr. Calabrese’s reliance was not reasonable, since it was within his and his lawyer’s ability to determine how much had been paid toward medical benefits. Contrary to State Farm’s position, however, it was not incumbent upon Mr. Calabrese to obtain the information from the treatment facilities he attended. While he perhaps should have sensed that the Misstatement was disproportionate to the amount of treatment he received, it was reasonable for him to expect State Farm to provide the correct amount without the need for additional verification.

[26] Mr. Falconieri was specifically advised in writing and knew that State Farm had paid $1,425.52 for Mr. Calabrese’s treatment to January 2011. The Misstatement was disproportionate to the amount paid to January 2011. If the Misstatement were taken as true, it would mean that Mr. Calabrese would have incurred $34,117.91 or 24 times more treatment in the 18 months preceding the mediation than in the previous 6 years. Based on this knowledge, it would have been appropriate for Mr. Falconieri to make further inquiries.

[27] As the Court of Appeal stated in Soboczynski, in order to prove reasonable reliance, it was incumbent on the Plaintiff “to adduce evidence sufficient for the court to conclude that the misrepresentation somehow caused them to act to their detriment.” (at para. 86). In the circumstances of this case, Mr. Calabrese has not demonstrated that the Misstatement caused him to act to his detriment. The evidence shows that Mr. Calabrese would have taken a closer look if he knew that the Misstatement was incorrect, but does not show that knowing the Actual Amount would have caused him to act differently. At its highest, the evidence demonstrates that Mr. Calabrese relied on Mr. Falconieri’s advice and that Mr. Falconieri relied on the Misstatement. I find there is no genuine issue requiring a trial on the element of the Plaintiff’s reasonable reliance on the Misstatement.

Did the Plaintiff Rely Upon the Misrepresentation to His Detriment?

[28] Since the Plaintiff has not demonstrated reasonable reliance on the Misstatement, it is unnecessary to consider whether the Plaintiff relied on the misrepresentation to his detriment. In case I am mistaken in my finding on reasonable reliance, I find that Mr. Calabrese has also failed to establish that the reliance was detrimental to him in the sense that damages resulted.

[29] Damages for negligent misrepresentation put the plaintiff in the position he or she would have been in if the representation had not been made: Soboczynski, at para. 84. On cross-examination, Mr. Calabrese admitted that he did not suffer financial losses as a result of the settlement in a “direct way.” He said that if he had more money, he could have used it for moving expenses to seek different work opportunities:

Q. Sir, have you suffered any economic losses resulting from the settlement on the accident benefits side? A. Well, if I had had what was laid out on the settlement papers, I would have had more money, of course. Having more money would have influenced my decision making. For example, expenses such as moving. I may have applied at another university as a faculty member somewhere that was a little bit more distant and my moving expenses would have been covered by that extra amount. This is all conjecture, just coming off the top of my head because I didn’t expect to have to answer this question. Or also other possibilities would be I could have actually – rather than using the money for living, the extra money could have gone towards more therapy, for future therapy had I needed it. It could have gone towards buying equipment to start my own business of some sort. There are a number of possibilities that it could have opened up for me to better my life economically.

[30] Mr. Calabrese has not identified losses incurred as a result of his reliance on the Misstatement. An actual loss would arise if Mr. Calabrese accepted the Settlement Amount and then paid amounts out of his own pocket for additional treatment. However, Mr. Calabrese suffered no such losses. He is unable to state how much he thinks he is owed. He only states that “a higher figure would have been more desirable.”

[31] Mr. Calabrese received $17,500 for medical and rehabilitation benefits from the settlement. The amount was for future medical treatment, since State Farm had paid all amounts incurred to the date of the mediation. On cross-examination, Mr. Calabrese admitted that he has not used any of the settlement amount for medical treatment. Since the mediation, he has gone to one clinic for treatment of his accident-related injuries. He stopped going to the clinic because he felt that he could do the exercises on his own. After that, Mr. Calabrese obtained correactology treatment but did not submit a treatment plan or submit the bills to be paid by the insurance company. Mr. Calabrese states that he did not submit the bills because “it seemed to be more of a fringe type of treatment” and he did not think it would be covered. Other treatment that he receives is fully covered by OHIP. In the four years preceding the mediation, he did not submit any treatment claims.

[32] As is evident from Mr. Calabrese’s testimony, he appears to believe that he is owed the difference between the Misstatement and the Actual Amount. If the Actual Amount had been stated in the Mediation Memorandum, it does not follow that Mr. Calabrese would have received the perceived difference. Even if he sought a higher settlement, there is no certainty that he would have obtained it. Because of the ten-year limit on accident benefits, there were only two years remaining when his claim was settled. The Settlement Amount exceeded the annual burn rate leading up to the mediation, even when based on the Misstatement. Mr. Calabrese did not rely upon the Misstatement to his detriment.

[33] Since I have found that no genuine issue requiring a trial regarding Mr. Calabrese’s reliance on the Misstatement to his detriment, it is not necessary for me to consider State Farm’s argument that Mr. Calabrese may have recovered an amount for accident benefits when he resolved his tort claim. If the tort settlement included an amount for accident benefits, this would have been relevant to his alleged losses.

(ii) Did the Defendant Breach the Duty of Good Faith?

[34] The courts have recognized an implied obligation in every insurance contract for the insurer to deal with its insured in good faith. In Bhasin v. Hryniew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 55, the Supreme Court of Canada recognized that the duty of good faith in insurance contracts requires that an insurer deal with the insured’s claim fairly, both with respect to the manner in which it investigates and assesses the claim, and the decision whether or not to pay it. The Supreme Court contrasted the duty of good faith with a fiduciary duty, finding that the duty of good faith “merely requires that a party not seek to undermine” the other contracting party’s contractual interests in bad faith: Bhasin, at para. 65.

[35] The Court of Appeal has clearly stated that mutual obligations of good faith between an insured and an insurer do not involve fiduciary obligations: “[t]he insurer-insured relationship is contractual, the parties are parties to an arms-length agreement. The principle of umberimma fides does not affect the arms-length nature of the agreement, and, in my opinion, cannot be used to find a general fiduciary relationship.” Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co. (1994), 18 O.R. (3d) 663 (C.A.), at p. 669.

[36] In this case, Mr. Calabrese alleges that “the Defendant acted in bad faith in settling [their] accident benefits claim based on erroneous information for a lump sum payment which was significantly lower than the actual value of his claims.” Mr. Calabrese does not allege that State Farm acted in bad faith in investigating or assessing his claim. Nor does he allege that State Farm refused payment or denied coverage in bad faith. There is no allegation that State Farm negotiated the settlement in bad faith. The only allegation of bad faith is State Farm’s making of the Misstatement. Ms. Northcott’s affidavit, which is uncontested, stated that the Misstatement was inadvertent. Mr. Calabrese has not provided any evidence to the contrary. Since there is no evidence of bad faith, there is no genuine issue requiring a trial as to State Farm’s bad faith in making the Misstatement.

Conclusion

[37] Based on the issues in this case and the evidence before me, I find that this summary judgment motion affords a process that allows the court to make the necessary findings of fact and apply the law to those facts. I also find that a summary judgment motion is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial in this case. There is no genuine issue requiring a trial as to Mr. Calabrese’s claims for negligent misrepresentation and breach of the duty of good faith. I therefore grant State Farm’s motion for summary judgment and dismiss the Plaintiff’s claim.

Costs

[38] The parties submitted costs outlines at the motion hearing. State Farm seeks partial indemnity costs of $9,091.40 for the motion and $8,796.91 for the proceeding. Counsel for the Plaintiff’s costs outline for the motion sought $3,725.81. All amounts include HST and disbursements.

[39] Pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), the court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the costs issue.

[40] I have considered these factors, as well as the proportionality principle in r. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice. The issues on the motion were not particularly complex. The Defendant brought the motion promptly. It does not appear that unnecessary procedural steps were taken.

[41] Given the foregoing, I fix costs of the motion and the proceeding at $15,000.00, inclusive of disbursements and HST, payable by the Plaintiff to the Defendant within 30 days of the date of this order.

Nishikawa J.

Released: October 29, 2018