Igbokwe et al. v. HB Group Insurance Management Ltd. et al. [Indexed as: Igbokwe v. HB Group Insurance Management Ltd.]

55 O.R. (3d) 313

[2001] O.J. No. 3018

Docket No. C35449

Court of Appeal for Ontario

Labrosse, Abella and Rosenberg JJ.A.

July 27, 2001

• Application for leave to appeal to the Supreme Court of Canada was dismissed with costs March 14, 2002 (L'Heureux-Dubé, Bastarache and Binnie JJ.). S.C.C. File No. 28802. S.C.C. Bulletin, 2002, p. 195.

Civil procedure--Offer to settle--Statutory Accidents Benefits--Motion for judgment--Insured commencing action for benefits--Insurer making settlement offer--Insurer not serving notice under s. 9.1 of Insurance Act Regulations--Section 9.1 of regulations not applying once an action has been commenced --R.R.O. 1990, Reg. 664--Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49.

Insurance--Automobile insurance--Statutory Accidents Benefits --Offer to settle--Insured commencing action for benefits --Insurer making settlement offer--Insurer not serving notice under s. 9.1 of Insurance Act Regulations--Section 9.1 of regulations not applying once an action has been commenced --R.R.O. 1990, Reg. 664--Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49.

DI was injured in an automobile accident and claimed benefits under the Automobile Insurance Regulation under the regulations for the Insurance Act. A dispute arose about part of his claim and, in May 2000, he commenced an action against the insurer. By letter dated September 8, 2000, DI's solicitor wrote the insurer's adjuster and offered to settle the claim for $45,000 plus party and party costs. The letter was forwarded to the insurer's solicitor, who, by letter dated September 28, 2000, accepted the offer with DI's costs to be assessed. However, DI's solicitor took the position that costs must be fixed, and when the parties could not agree, the insurer moved for judgment under rule 49.09. The motions judge dismissed the motion on the basis that the settlement did not comply with s. 9.1 of the Insurance Act regulations, which requires the insurer before a settlement to give the insured a written notice with information including, amongst other things, a statement that the in sured may rescind the settlement within two business days after the settlement is entered into. The motions judge also ruled that the September 8, 2000 letter was not a Rule 49 offer because it had not been properly served. The insurer appealed.

Held, the appeal should be allowed.

The September 8, 2000 letter was an offer to settle under Rule 49. Accepting that the offer should have been served on the insurer's solicitor of record, this technical failure did not alter the nature and legal effect of the offer. Rule 2.02(1) provides that a failure to comply with the rules is an irregularity and does not render a proceeding or a step in a proceeding a nullity. In this case, the service of the offer did not create any difficulty, confusion or otherwise mislead the plaintiff. The failure to serve a s. 9.1 notice did not invalidate the Rule 49 offer. Section 9.1 applies before an action is commenced. Its purpose is to provide a claimant with adequate information before the commencement of an action. Section 9.1 and Rule 49 do not work together; once an action is commenced, s. 9.1 does not apply. Accordingly, the offer to settle of September 8, 2000 was a Rule 49 offer and the motion for judgment should have been granted.

APPEAL of an order dismissing a motion for judgment under rule 49.09 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

Cases referred to Jimenez v. Markel Insurance Co. of Canada (2000), 2000 CanLII 22389 (ON SC), 49 O.R. (3d) 402, 5 M.V.R. (4th) 110 (S.C.J.); Kibalian v. Wellington Insurance Co. (2001), 2001 CanLII 28025 (ON SCDC), 52 O.R. (3d) 92 (Div. Ct.), revg [2000] I.L.R. 1-3823, 46 C.P.C. (4th) 342, [2000] O.J. No. 1689 (S.C.J.); Opoku v. Pal (2000), 2000 CanLII 1539 (ON CA), 49 O.R. (3d) 97, 3 M.V.R. (4th) 203 (C.A.), affg (1999), 1999 CanLII 19913 (ON SC), 49 O.R. (3d) 100 (S.C.J.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 279, 279(1), 279(2), 280 to 284 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 2.01(1), 16.01(4)(a), 49, 49.02(1), 49.09 Automobile Insurance Regulation, R.R.O. 1990, Reg. 664, s. 9.1 (en. O. Reg. 780/93, s. 7)

Timothy S.B. Danson and Alexander Voudouris, for appellants. Alan L. Rachlin, for respondents.

The judgment of the court was delivered by

[1] LABROSSE J.A.:-- This is an appeal from the order of Matlow J. refusing to grant judgment in accordance with the settlement of an action pursuant to Rule 49 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] The issue in this appeal is the effect, if any, of the procedural requirements of s. 9.1 of the Automobile Insurance Regulation under the Insurance Act, R.R.O. 1990, Reg. 664, as amended ("the regulation") upon offers to settle pursuant to Rule 49.

The Facts

[3] Following a motor vehicle accident on May 19, 1999, the plaintiff/respondent Donald Igbokwe (the "plaintiff") claimed and received statutory benefits (SABs) from his insurer/ appellant Coseco Insurance Company. The insurer retained the co-appellant HB Group Insurance Management Ltd. to adjust the claim. I will refer to both appellants as the "insurer".

[4] A dispute arose as to certain parts of the plaintiff's entitlement to benefits. On May 19, 2000, counsel for the plaintiff issued a statement of claim seeking past and future accident benefits as well as general, punitive and exemplary damages. The insurer retained counsel and a statement of defence was duly filed. By way of a letter dated September 8, 2000, counsel for the plaintiff wrote directly to the adjuster for the insurer, stating:

I have received instructions from Mr. Igbokwe to settle his accident benefits claim, past and future, for an additional payment of $45,000.00, plus party and party costs.

The offer was forwarded to counsel for the insurer who wrote to counsel for the plaintiff on September 28, 2000, accepting the offer of "$45,000.00, plus party and party costs". The letter requested that the plaintiff's costs be assessed.

[5] Counsel for the plaintiff took the position that an assessment of the costs was not acceptable. He demanded a fixed amount for costs. Counsel for the parties could not agree on a fixed amount and the insurer moved under rule 49.09 to enforce the settlement of the plaintiff's claim.

[6] The motions judge dismissed the motion for judgment finding that the matter had not been settled. He did so on the basis that the alleged settlement did not comply with s. 9.1 of the regulation; and that the offer of September 8, 2000 was not a Rule 49 offer to settle since it had been improperly served. I will deal firstly with the second issue.

Relevant Legislation

[Rules of Civil Procedure](https://www.canlii.org/en/on/laws/regu/rro-1990-reg-194/latest/rro-1990-reg-194.html)

49.02(1) A party to a proceeding may serve on any other party an offer to settle any one or more of the claims in the proceeding on the terms specified in the offer to settle (Form 49A).

Automobile Insurance Regulation

9.1(1) In this section, "settlement" means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefits Schedule.

(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:

1. A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.

2. A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.

3. A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.

4. A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.

5. If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act, a statement of the insurer's estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.

6. A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.

(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under subsection 279(2) of the Act if,

(a) the restriction is contained in a settlement; and

(b) the insurer complied with subsection (2).

[Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)

279(1) Disputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.

(2) Any restriction on a party's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284, . . . is void except as provided in the regulations.

(Emphasis added)

Analysis

(1) Was the offer of September 8, 2000 a Rule 49 offer?

[7] Leaving aside for the moment the issue of the service of the offer, there is, in my view, no question that the offer of September 8, 2000 complied with Rule 49 and was a proper offer to settle the plaintiff's claim.

[8] The offer satisfies the requirements of rule 49.02 as it relates to a claim in the proceeding, being a claim included in the statement of claim, namely, the entitlement to accident benefits. It can only be interpreted as a settlement of all the plaintiff's claims because otherwise it would make no sense to request party and party costs. It is not suggested that the offer applied to anything less than the whole of the plaintiff's claim.

[9] With respect to service, the motions judge concluded that the offer could not constitute an offer to settle under Rule 49 because it was not properly served by the solicitor for the plaintiff on the insurer, in accordance with rule 16.01(4)(a) (service on solicitor of record). In my view, the motions judge was clearly in error.

[10] Accepting that the offer should have been served on the insurer's solicitor of record pursuant to rule 16.01(4)(a), failure to comply with this technical requirement ought not to alter the nature and legal effect of the offer under Rule 49. Indeed, rule 2.01(1) provides that a failure to comply with the rules is an irregularity and "does not render a proceeding or a step, document or order in a proceeding a nullity".

[11] In the circumstances of this case, the service of the offer to settle on the adjuster did not create any difficulty, confusion or otherwise mislead the plaintiff. The plaintiff's offer was properly received and subsequently accepted by the solicitors for the insurer both as to the amount and as to costs. The manner of service was never challenged by the insurer. The plaintiff is in effect relying on his own imperfect compliance with the rules to rescind his own offer. Although he had offered to settle for party and party costs, he did not want the costs to be assessed but instead wanted a fixed amount. This is not what he had asked for in the offer to settle.

[12] The rules are designed to encourage and facilitate settlements and should be interpreted accordingly. An offer to settle, as a matter of principle, should not be invalidated on a mere technicality of service, especially when the error lies with the person attempting to rescind the settlement.

[13] The offer of September 8, 2000 was a proper Rule 49 offer to settle ongoing litigation.

(2) What is the effect of section 9.1 of the regulation on the Rule 49 offer?

[14] The motions judge held that the failure of the insurer to serve a s. 9.1 notice on the plaintiff upon acceptance of his offer to settle invalidated any settlement.

[15] In Kibalian v. Wellington Insurance Co. (2000), 46 C.P.C. (4th) 342, [2000] O.J. No. 1689 (S.C.J.), Jennings J. considered, in similar circumstances, the same issue as in this case, namely, the effect of the failure to send a s. 9.1 notice on an offer to settle pursuant to Rule 49. In his reasons, he stated [at pp. 345-46 C.P.C.]:

I respectfully agree with the finding of my brother Nordheimer J. in Birjasingh v. Coseco (supra) [1999 CanLII 14888 (ON SC), [1999] O.J. No. 4546 (S.C.J.)] at paragraph 12, where he states that the purpose of section 9 was to protect unrepresented insureds from being pressured into unwise settlements.

I would go further and find that it was intended that the settlements to which the legislation was to apply were those arising out of the settlement regime contained in the regulation. The evil at which the legislation was addressed was to prevent the exploitation by a party experienced in the negotiation of claims, of its inexperienced insured to whom it owed the duty of dealing in utmost good faith.

It cannot be that the legislation was to apply in the situation before me, in which the parties are in an adversarial process represented by competent counsel, in the course of which, the insured plaintiff instructs his counsel to put forward an offer to settle his claim.

It is apparent to me that Section 9.1 and Rule 49 cannot work in tandem. I do not accept the submission to the contrary made by Mr. Shields. To permit an offer to be made under Rule 49, which can be withdrawn two days after acceptance if Section 9.1(2) information is provided with the offer, or if it is not, two days after the day on which the information is provided, is to make a mockery of the Rule 49 procedure.

Legislative enactments are presumed to operate in harmony and to be consistent with one another. Those dealing with the same subject, here settlement, are to be presumed to be drafted with one another in mind, thereby offering consistent treatment of the subject.

See Driedger on the Construction of Statutes, 3rd ed., Butterworths, page 285/286.

In my opinion, given the purpose of the Insurance Act to which I have referred, it was not intended that the settlement regime contained in the legislation was to apply to the settlement of ongoing litigation to the exclusion of Rule 49. Rule 49 takes over when the parties are, as here, represented by counsel and into litigation. Litigation is settled for a variety of reasons, by no means all of which are related to the amount of the claim. [See Note 1 at end of document]

The Rule was invoked by plaintiff's counsel, as he states, after receiving settlement instructions from his client. To permit the client to avoid the consequences of the proper acceptance of a proper offer made under those circumstances would not only inflict upon the Rule a serious wound, but would defy common sense.

[16] The judgment of Jennings J. in Kibalian was appealed to the Divisional Court [2001 CanLII 28025 (ON SCDC), 52 O.R. (3d) 92] and the appeal was allowed. O'Leary J., speaking for the court, rejected the reasoning of Jennings J. and concluded that s. 9.1 applied to offers to settle made under Rule 49. He found comfort in the wording of s. 9.1(2)5 to the effect the section still applied during the arbitration process. If it applied during the arbitration process, in his view, it was intended to apply during the litigation process. O'Leary J. also quoted with approval [at p. 96 O.R.] from the endorsement of the motions judge in the present case when he said "that there is nothing in the wording of s. 9.1 which could reasonably lead to the conclusion that it does not equally apply to settlements made pursuant to Rule 49".

[17] With respect, the reference in s. 9.1(2)5 is to arbitration (and mediation) under the Insurance Act, R.S.O. 1990, c. I.8. That is an entirely different process from the litigation process under the rules of practice, with its panoply of disclosure rights.

[18] The settlements to which s. 9.1 is intended to apply are those arising out of the settlement regime contained in the regulation, a regime generally designed to accommodate unrepresented claimants. However, the section also clearly applies to an insured person who is represented by counsel, prior to litigation: Opoku v. Pal (1999), 1999 CanLII 19913 (ON SC), 49 O.R. (3d) 100 (S.C.J.), affd (2000), 2000 CanLII 1539 (ON CA), 49 O.R. (3d) 97, 3 M.V.R. (4th) 203 (C.A.). In my view, s. 9.1 was intended to apply to an insured person, whether represented or not by counsel, as part of a scheme that deals with settlements which preceded court proceedings.

[19] In my view, Jennings J.'s analysis of the correlation between Rule 49 and s. 9.1 of the regulation is essentially correct. Rule 49 is intended to encourage settlements of litigation and it carries costs consequences. Section 9.1 is not concerned with offer, acceptance and cost consequences, but rather with the right of rescission within a cooling-off period once an agreement between the insurer and a claimant has been reached for benefits (SABs). Its purpose is to provide a claimant with adequate information prior to the commencement of an action in order to avoid a quick and uninformed decision as to the benefits the claimant is entitled to receive from the insurer. Once an action is commenced, any such relevant information would be available in the course of litigation, something an insured would not otherwise be entitled to receive but for the requirements of s. 9.1.

[20] Section 9.1 was never intended to affect Rule 49. The difficulties that would result from offers to settle under Rule 49 received on the eve of trial and during trial, particularly jury trials, do not permit s. 9.1 and Rule 49 to work in tandem. Once an action has been commenced, the relationship between claimant and insurer becomes adversarial. Offers to settle litigation fall under Rule 49 and the rule is a complete code. Section 9.1 was not designed to accord special rights or impose obligations on claimants and insurers in settling their court proceedings.

[21] The respondent also submits that the insurer was required to comply with s. 9.1 because of s. 279 of the Insurance Act.

[22] In my view, s. 279 and hence s. 9.1 of the regulations have no application once the parties are in litigation. Sections 280 to 284 are in a part of the Act headed "Dispute Resolution -- Statutory Accident Benefits" and deal exclusively with the scheme for resolving disputes through mediation or arbitration. The only reference to litigation is contained in s. 281 and requires the parties to exhaust mediation before bringing a proceeding in a court of competent jurisdiction. If the parties have exhausted mediation under ss. 280 and 280.1, chosen not to attempt arbitration in accordance with ss. 282 to 284, and embarked upon litigation, the Rules of Civil Procedure apply and the litigation must be settled in accordance with the rules, including Rule 49. As I have indicated, s. 9.1 and Rule 49 cannot work in tandem.

[23] As stated earlier, s. 9.1 was intended to protect the right to information an insured person would not otherwise have against the insurer but which protection would be available in court proceedings. Although s. 9.1 and Rule 49 operate in different spheres, it would indeed be an unwise insurer who would attempt to have the court enforce a Rule 49 offer to settle, whether it came from the insurer or the unrepresented litigant, without having provided the unrepresented litigant with the type of notice foreseen under s. 9.1(2).

Disposition

[24] In the result, I conclude that the offer to settle of September 8, 2000 was a Rule 49 offer. I also conclude that s. 9.1 of the regulation does not apply to a Rule 49 offer. I would allow the appeal, set aside the order of Matlow J. dated December 5, 2000 and grant judgment in accordance with the terms of the plaintiff's offer to settle of September 8, 2000, as accepted by the defendants on September 28, 2000.

[25] The insurer is entitled to its costs of this appeal and of the motion for judgment.

Judgment accordingly.

Notes

Note 1: Paragraph 19 was quoted with approval by C. Campbell J. in Jimenez v. Markel Insurance Co. of Canada (2000), 2000 CanLII 22389 (ON SC), 49 O.R. (3d) 402, 5 M.V.R. (4th) 110 (S.C.J.).