Godonoaga, a minor by his litigation guardian Godonoaga et al. v. Khatambakhsh et al. [Indexed as: Godonoaga (Litigation guardian of) v. Khatambakhsh]

50 O.R. (3d) 417

[2000] O.J. No. 3807

Docket No. C32912

Court of Appeal for Ontario

Finlayson, Labrosse and Goudge JJ.A.

October 18, 2000

Insurance -- Insurer's obligation to defend -- Costs -- Court of Appeal declaring that insurer obliged to defend defendants -- Insurer ordered to pay defendants' solicitor and client costs in main action, third party proceeding against insurer, motion and appeal.

On appeal, a declaration was granted that the insurer was obliged to defend the defendants. Costs were awarded to the defendants. The parties requested amplification of that decision. The insurer submitted that the defendants were entitled to their costs only with respect to that portion of the claim in which allegations of negligence were made against them, and that the insurer was not obliged to be responsible for any prior or current costs involved in the defence of the defendants with respect to allegations of intentional acts or with respect to the claim for exemplary or punitive damages.

Held, the submission was rejected.

The defendants were entitled to a defence by the insurer without expense to them. Accordingly, the matter having been determined in their favour, they should have their costs on a solicitor and client scale for the defence of the main action and cross-claims until such time as the insurer served and filed a notice of change of solicitors and took over the defence. Such costs included the motion and the appeal.

RULING on costs.

Zoran Samac, for appellants, Bijan Khatambakhsh and Fatima Khatambakhsh. Sheldon A. Gilbert, Q.C., for respondent, Allstate Insurance Company of Canada.

[1] BY THE COURT: -- In its reasons released on June 12, 2000 [reported 2000 5737 (ON CA), 49 O.R. (3d) 22], this court, per Finlayson J.A., disposed of this appeal as follows [at p. 32]:

For the reasons given, I would allow the appeal, set aside the judgment of Pitt J. and grant a declaration that the appellants are insured with the third party, Allstate, under Tenants Policy No. 1 46 43564 in respect of the plaintiffs' claims against them in the main action. Further, the appellants are indemnified against any judgment, costs and interest covered by the said policy. It follows that Allstate is obliged to defend the appellants in the main action and the cross-claim by the co-defendants. The appellants are entitled to their costs, here and below.

[2] The parties have by written submissions requested clarification and amplification of these reasons as they relate to the costs incurred by the solicitors for the appellants in defending the main action including the cross-claims to date. We are advised that the respondent will be taking over this file from the solicitors for the appellant and will be defending them in the main action and with respect to the cross-claims. However, the respondent adds the qualifier:

. . . the appellants are entitled to their costs of the motion below and of the appeal, only with respect to that portion of the claim in which allegations of negligence are made against them. There is no obligation on the part of the respondent to be responsible for any prior costs or for any current costs involved in the defence of the appellants with respect to allegations of intentional acts or with respect to the claim for exemplary or punitive damages arising therefrom.

It is the position of the respondent that the appellants are only entitled to their party and party costs of the motion below and of the appeal.

[3] We think that this distinction is impractical at such an early stage of this action for the purposes of determining either party and party costs or solicitor and client costs. Had the respondent taken over the defence of the appellant parents in the main action, as we have held it should, this problem would not have arisen. Now the appellants' solicitors are asked to revisit their docket charges and winnow out any work done for the children of the appellants or for the parents with respect to their participation in the intentional tort alleged against the children. We would be surprised if this was possible. The responsibilities of the respondent insurers to the defendants under its policy of insurance cannot control the conduct of the solicitors who are asked to represent them in the action on the insurer's default. In any event, we would think that such an audit would not create significant saving to the insurer. The preparations of the solicitors in defending the action would be global at this stage of the action and would be directed largely towards determining the responsibilities of the insurer.

[4] The appellants were entitled to a defence by their insurer without expense to them. Accordingly, that matter now having been determined in their favour, they should have their costs on a solicitor and his own client scale for the defence of the main action and cross-claims until such time as the respondent insurer serves and files a notice of change of solicitors and takes over the insurers' defence. Such costs would include the conduct of the third party proceedings and the motion before Pitt J. and this appeal. It would, of course, obviate the necessity of determining their party and party costs of this appeal as ordered by the court.

Order accordingly.