COURT OF APPEAL FOR ONTARIO DATE: 20200601 DOCKET: C66633, C64430 & C64479
Hoy A.C.J.O., Doherty J.A. and Marrocco A.C.J. (ad hoc)
DOCKET: C66633 BETWEEN Gregory Alan Tuffnail, Patricia Diane Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail Plaintiffs (Appellants/Respondents by way of cross-appeal)
and
Steven Andrew Meekes, State Farm Mutual Automobile Insurance Company and Sharon Carlene Drown as Litigation Administrator for the Estate of Thomas Michael Bolton Defendants (Respondent/ Respondent and Appellant by way of cross-appeal)
and
Steve Coulthard Third Party (Respondent)
DOCKET: C64430 AND BETWEEN Gregory Alan Tuffnail, Patricia Diane Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail Plaintiffs (Respondents)
and
Steven Andrew Meekes, State Farm Mutual Automobile Insurance Company and Sharon Carlene Drown as Litigation Administrator for the Estate of Thomas Michael Bolton Defendants (Appellant)
and
Steve Coulthard Third Party (Respondent)
DOCKET: C64479 AND BETWEEN Gregory Alan Tuffnail, Patricia Diane Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail Plaintiffs (Respondents)
and
Steven Andrew Meekes, State Farm Mutual Automobile Insurance Company and Sharon Carlene Drown as Litigation Administrator for the Estate of Thomas Michael Bolton Defendants (Respondents)
and
Steve Coulthard Third Party (Appellant)
Counsel: Peter W. Kryworuk and Jacob R.W. Damstra, for State Farm Mutual Automobile Insurance Company James D. Virtue and Rasha M. El-Tawil, for Gregory Alan Tuffnail, Patricia Diane Tuffnail, David Alan Tuffnail, and Michael Alan Tuffnail D. Romano Reid, for the Litigation Administrator for the Estate of Thomas Michael Bolton Brian A. Pickard, James K. Brown and Ayren J. Brown, for Steve Coulthard
Heard: January 14 and 15, 2020
On appeal from the judgment of Justice Helen A. Rady of the Superior Court of Justice, dated July 23, 2019, with reasons reported at 2017 ONSC 4610, 72 C.C.L.I. (5th) 281; 2018 ONSC 4113; 2019 ONSC 525, [2019] I.L.R. I-6127; 2019 ONSC 1334; and 2019 ONSC 2399.
Hoy A.C.J.O.:
Overview
[1] Gregory Tuffnail was seriously injured in a single-vehicle crash on September 13, 2009, following a rural wedding reception. The other passenger, Kristopher Petrie, was killed. Tuffnail and the driver, Steven Meekes, had been served alcohol at the reception. The groom, Thomas Bolton, had hosted the reception. Steve Coulthard was the bartender.
[2] Tuffnail and his family – to whom I refer individually and collectively as “Tuffnail” – commenced an action against Meekes, Bolton and State Farm, Tuffnail’s automobile insurer. Tuffnail claimed that the collision and resulting injuries were caused by Meekes’ and Bolton’s negligence and/or, in the case of Bolton, breach of the provisions of the Liquor Licence Act, R.S.O. 1990, c. L.19. In the case of State Farm, Tuffnail sought a declaration that they were entitled to coverage under the OPCF 44R (Ontario Policy Change Form 44R – Family Protection Coverage endorsement), the optional underinsured motorist coverage Tuffnail had purchased from State Farm.
[3] State Farm defended Tuffnail’s claim for a declaration that Tuffnail was entitled to coverage under the OPCF 44R and brought a third party claim against Coulthard for contribution and indemnity in respect of amounts it was required to pay under the OPCF 44R. Bolton also brought a third party claim against Coulthard. Both State Farm and Bolton alleged that Coulthard’s negligence and/or breach of the Liquor Licence Act caused or contributed to the accident. Tuffnail did not sue Coulthard.
[4] On May 10, 2017, following a six-week trial, the jury awarded damages and apportioned liability among Meekes, Bolton, [1] Coulthard and Tuffnail as follows:
Meekes (the driver) – 65% Bolton (the host) – 20.03% Coulthard (the bartender) – 11.12% Tuffnail (the plaintiff) – 3.85%
[5] Taking Tuffnail’s contributory negligence into account, the net amount payable to Tuffnail is $3,435,034.71.
[6] The following insurance coverage was available to the tortfeasors:
Meekes – $200,000 Bolton – $2,000,000 Coulthard – $1,000,000
[7] Petrie’s family were plaintiffs in a companion action. The Petrie plaintiffs agreed to be bound by the findings of liability and apportionment of damages in the Tuffnail action. According to counsel, Meekes’ and Bolton’s policy limits were subject to pro rata sharing with the Petrie plaintiffs, with Tuffnail entitled to 94.89 percent of the proceeds. Accordingly, Tuffnail is entitled to $189,780 from Meekes and $1,897,800 from Bolton.
[8] This does not cover Tuffnail’s loss. The net amount Tuffnail is entitled to under the judgment exceeds the aggregate of Meekes’, Bolton’s and Coulthard’s insurance coverage. Key issues on the appeal impact how much State Farm is required to pay to Tuffnail under the OPCF 44R and how, given the “shortfall”, the amount recovered should be divided between State Farm and Tuffnail.
[9] State Farm, Tuffnail and Coulthard sought numerous post-verdict rulings, many of which were inter-related. They were heard between June 2017 and April 2019, and the judgment is dated July 23, 2019. Each of State Farm, Tuffnail and Coulthard appeals the judgment, arguing that the trial judge made various errors in her post-verdict rulings. They raise the following five issues:
- State Farm argues that the trial judge erred in her interpretation of s. 7 of the OPCF 44R, leading to an erroneous calculation of the amount State Farm is required to pay Tuffnail;
- Tuffnail argues that the trial judge erred in ordering that State Farm share any amounts it recovers by way of subrogation with Tuffnail until Tuffnail “receive[s] full indemnification pursuant to the terms of the OPCF 44R endorsement” and, by way of conditional cross-appeal, State Farm argues that the trial judge erred in requiring it to share at all;
- Tuffnail argues that the trial judge erred in limiting Coulthard’s liability to Bolton to a proportion of the total judgment equal to the 11.12% of fault found by the jury;
- State Farm argues that the trial judge improperly exercised her discretion to award prejudgment interest at a rate higher than the bank rate; and
- Coulthard argues that the trial judge erred in denying him leave to amend his pleadings, after the jury returned their verdict, to plead limitations defences.
[10] A sixth issue – the costs awarded to Tuffnail – was resolved by the parties before the appeal was heard.
[11] I address the five alleged errors, in turn.
1. Did the trial judge err in her interpretation of the OPCF 44R?
Background
[12] In para. 6 of her judgment, the trial judge ordered State Farm to pay Tuffnail the sum of $800,000, which the parties agree is the limit of coverage under the OPCF 44R. [2]
[13] The OPCF 44R is the standard form contract which applies when, for an additional premium, an Ontario insured purchases optional underinsured motorist coverage. Meekes was an “inadequately insured motorist” within the meaning of the OPCF 44R: he had motor vehicle liability coverage for only $200,000, an amount less than the $1,000,000 limit of Tuffnail’s family protection coverage under the OPCF 44R.
[14] Pursuant to s. 7 of the OPCF 44R, the amount payable by an insurer (State Farm) to an eligible claimant (Tuffnail) is excess to “an amount received by the eligible claimant from any source, …and is excess to amounts that were available to the eligible claimant from” nine enumerated sources. This case is concerned with amounts available from the source enumerated in s. 7(b): “the insurers of a person jointly liable with the inadequately insured motorist”. Section 7(b) provides as follows:
- The amount payable under this change form to an eligible claimant is excess to an amount received by the eligible claimant from any source, other than money payable on death under a policy of insurance, and is excess to amounts that were available to the eligible claimant from (b) the insurers of a person jointly liable with the inadequately insured motorist for the damages sustained by an insured person;
[15] The specific issue before the trial judge was whether Coulthard’s insurance coverage was “available” to Tuffnail. If so, the $1,000,000 limit of Coulthard’s policy would be deducted in calculating State Farm’s liability to Tuffnail under s. 7 and, on State Farm’s calculation, its liability under the OPCF 44R would be reduced from $800,000 to $347,454.71.
[16] The trial judge rejected State Farm’s argument that, because Tuffnail could have sued Coulthard, the limits of Coulthard’s policy were “available” to Tuffnail. In State Farm’s submission, an insured can only resort to the coverage provided by the OPCF 44R as a matter of last resort, and an insured’s failure to sue all reasonably possible tortfeasors should not increase the insured’s entitlement under the OPCF 44R.
[17] In summary, in the trial judge’s view, because Tuffnail had not commenced a claim against Coulthard in their own name and named Coulthard as a defendant, the proceeds of Coulthard’s policy were not “available” to Tuffnail within the meaning of s. 7 of the OPCF 44R.
[18] The trial judge noted that, under the prior version of s. 7(b) in the SEF 44 Family Protection Endorsement, [3] the insured’s liability was calculated with reference to “any amounts the eligible claimant is entitled to recover ( whether such entitlement is pursued or not )”. The reference to “whether such entitlement is pursued or not” was not included in s. 7(b) of the OPCF 44R. The trial judge concluded that “the change in the language of the OPCF 44R is significant and signals that it is not necessary for an insured to pursue all possible tortfeasors before becoming entitled to access his own insurance”: Tuffnail, et al v. Meekes et al, 2017 ONSC 4610 (“September 20, 2017 reasons”), at para. 84. The trial judge rejected State Farm’s argument that Loftus v. Robertson, 2009 ONCA 618, 96 O.R. (3d) 721, interpreted the OPCF 44R as requiring plaintiffs to seek recovery from all reasonably possible tortfeasors. The trial judge characterized the court’s comments in Loftus as obiter and noted that the court did not consider the change in language between the SEF 44 and the OPCF 44R. The trial judge wrote that, at the very least, there is an ambiguity that must be resolved in favour of the insured: September 20, 2017 reasons, at para. 89.
Analysis
[19] The parties agree that because the OPCF 44R is a standard form contract, the standard of review applicable to the trial judge’s interpretation of s. 7 is one of correctness.
[20] The parties advance numerous arguments as to whether the trial judge’s interpretation was correct. One of them, only fully explored for the first time on appeal, is in my view determinative. Accordingly, I need not address the balance of the arguments.
[21] In response to State Farm’s arguments that the trial judge erred in her interpretation of s. 7, Tuffnail focuses on the wording in s. 7(b): “excess to the amounts that were available to the eligible claimant from…the insurers of a person jointly liable with the inadequately insured motorist ”. Tuffnail argues that Coulthard is a third party only and, therefore, cannot be “jointly” liable to Tuffnail. Further, in her ruling of January 23, 2019 – made about 16 months after her ruling interpreting s. 7 of the OPCF 44R – the trial judge found that Coulthard is severally liable to Bolton: Tuffnail v. Meekes, 2019 ONSC 525, [2019] I.L.R. I-6127 (“January 23, 2019 reasons”). This is repeated at paragraph 8 of the judgment.
[22] Tuffnail is clear that, if Coulthard were jointly liable to Tuffnail, his insurance coverage would be “available” to Tuffnail, within the meaning of s. 7(b). But Tuffnail adds that a person cannot be “jointly liable” unless and until so found, and the trial judge did not find Coulthard “jointly liable”.
[23] Tuffnail’s argument on appeal that Coulthard is not “jointly liable” to Tuffnail sits uneasily with Tuffnail’s position before the trial judge as reflected in the January 23, 2019 reasons. In that ruling Tuffnail took the position that Coulthard was jointly and severally liable to Tuffnail for the full amount of the damages awarded by the jury and that the Bolton Estate was entitled to recover from Coulthard a proportionate share of the plaintiff’s damages.
[24] As I will explain, Coulthard is “jointly liable” to Tuffnail within the meaning of s. 7(b), his insurance is “available” to Tuffnail within the meaning of s. 7(b), and accordingly, State Farm is entitled to deduct the limits of Coulthard’s insurance coverage in calculating the amount it is required to pay to Tuffnail.
[25] In short, the trial judge’s determination that Coulthard’s policy was not “available” to Tuffnail resulted from the fact that Tuffnail had not commenced a claim against Coulthard in their own name and named Coulthard as a defendant. She was not asked to and did not consider whether Coulthard was “jointly liable” through the lens of the State Farm subrogated action against Coulthard.
[26] As I will explain, while State Farm framed its claim against Coulthard as a claim for contribution and indemnity in respect of any amounts it is called upon to pay Tuffnail, it actually makes a subrogated claim against Coulthard on behalf of Tuffnail. The legal consequence of State Farm’s claim is that Coulthard’s liability to Tuffnail was effectively put in issue. In finding that State Farm had a right of subrogation against Coulthard under s. 20 of the OPCF 44R, the trial judge necessarily found that Coulthard is jointly liable with Meekes.
[27] Thus, correctly interpreted, s. 7 of the OPCF 44R permits State Farm to deduct the limits of Coulthard’s insurance coverage. [4]
[28] In analyzing whether Coulthard is “jointly liable” within the meaning of s. 7(b) of the OPCF 44R, I turn first to the nature of State Farm’s claim against Coulthard and then to the effect of bringing such a claim as a third party claim.
a) The nature of State Farm’s third party claim against Coulthard
[29] The trial judge ordered, at para. 8 of the judgment, that Coulthard is severally liable to Bolton. However, the nature of Bolton’s third party claim against Coulthard is very different from State Farm’s third party claim against Coulthard.
[30] Unlike Bolton’s third party claim against Coulthard, State Farm had no independent right to claim against Coulthard. State Farm did not cause or contribute to Tuffnail’s damages, and therefore, unlike Bolton, could not assert a right of contribution and indemnity against Coulthard under s. 1 of the Negligence Act, R.S.O. 1990, c. N.1.
[31] Rather, it sought contribution and indemnity from Coulthard through its subrogated third party claim.
[32] Under the common law, an insurer has a right, upon fully indemnifying the insured for both the insured and uninsured losses caused by a third party, to bring an action against the third party in the insured’s name. When an insurer is entitled to bring such an action, it is said to be subrogated to the insured’s rights and is entitled to exercise those rights in the name of the insured: Zurich Insurance Co. v. Ison T.H. Auto Sales Inc., 2011 ONSC 1870, 106 O.R. (3d) 201, aff’d 2011 ONCA 663, 342 D.L.R. (4th) 501; Douglas v. Stan Fergusson Fuels Ltd. 2018 ONCA 192, 139 O.R. (3d) 721, at para. 48, leave to appeal refused, [2018] S.C.C.A. No. 141.
[33] The common law doctrine of subrogation can be modified by contract and statute and, in this case, both the Insurance Act, R.S.O. 1990, c. I.8, and the OPCF 44R permitted State Farm to subrogate before Tuffnail was fully indemnified.
[34] Subsection 278(1) of the Insurance Act provides as follows:
Subrogation 278(1) An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights.
[35] Section 20 of OPCF 44R provides as follows:
- Where a claim is made under this change form, the insurer is subrogated to the rights of the eligible claimant by whom a claim is made, and may maintain an action in the name of that person against the inadequately insured motorist and the persons referred to in section 7 of this change form.
[36] State Farm relied on its right of subrogation under s. 20 of the OPCF 44R, submitting that s. 7(b) permitted it to subrogate against Coulthard because Coulthard was “a person jointly liable” with Meekes, the inadequately insured motorist, for the damages sustained by Tuffnail.
[37] Notably, the right of subrogation is derivative in nature and in exercising the right of subrogation, the insurer is advancing only the cause of action that the insured would otherwise have against the party responsible for causing the loss to the insured. In other words, the insurer assumes the insured’s right of recovery against the tortfeasor: Barbara Billingsley, General Principles of Canadian Insurance Law, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at pp. 343, 350. This means that the insured must have a legally enforceable cause of action against the tortfeasor: Denis Boivin, Insurance Law, 2nd ed., (Toronto: Irwin Law Inc., 2015), at p. 491; Craig Brown and Thomas Donnelly, Insurance Law in Canada, loose-leaf, vol. 2 (Toronto: Thomson Reuters Canada Ltd., 2019), at p. 13-2.
[38] Because the right of subrogation is derivative, the insurer can be in no better position as against the third party than the insured would be: Douglas, at para. 55, Matt (Litigation Guardian of) v. Barber (2002), 216 D.L.R. (4th) 574 (Ont. C.A.), at para. 25; Freudmann-Cohen v. Tran (2004), 70 O.R. (3d) 667 (C.A.), at para. 40. If Tuffnail did not have a claim against Coulthard, State Farm did not have a right to subrogate. In substance, then, in bringing its third party claim against Coulthard, State Farm stepped into Tuffnail’s shoes to claim against Coulthard.
b) The effect of bringing a subrogated claim as a third party claim
[39] As indicated above, State Farm relied on its right of subrogation under s. 20 of the OPCF 44R. Similarly, s. 278(1) of the Insurance Act permits an insurer to bring an action in the name of the insured. These sections do not contemplate that State Farm could bring the action in its own name.
[40] The issue of whether State Farm could proceed by way of third party claim in its own name does not appear to have been raised before the trial judge. The trial judge simply accepted that State Farm was entitled to bring a third party subrogated claim for contribution and indemnity: September 20, 2017 reasons, at paras. 40-41.
[41] In this court, State Farm relied on this court’s decision in Freudmann-Cohen. An examination of that case explains the underlying basis for State Farm’s right to bring a third party subrogated claim against Coulthard.
[42] In Freudmann-Cohen, the plaintiff had not sought to add Pizza Nova as a defendant and the insurer issued a third party claim against Pizza Nova. This court held that, in certain circumstances, an insurer is entitled to resort to r. 29.01 (c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to put its subrogated claim on behalf of the plaintiffs into play, by way of a third party claim, instead of bringing a claim against the third party in the plaintiff’s name. [5] The rationale for permitting a third party subrogated claim is that the proposed third party is a person who should be bound by the determination of an issue between the plaintiff and the defendant. In that case, this issue was the insurer’s maximum liability under the O.E.F. 44 Family Protection Endorsement, which in turn would require an assessment as to whether Pizza Nova’s insurance had to be deducted in that calculation. This necessarily entailed an examination of Pizza Nova’s potential liability to the plaintiff.
[43] It is important to recognize that in Freudmann-Cohen the insurer’s subrogated action was based on the theory that if the plaintiff suffered injuries, the injuries were caused or contributed to as a result of the want of care or negligence of the third party, Pizza Nova. Zurich pleaded the following particulars of negligence: Pizza Nova failed to train the employee defendants; it employed incompetent employees; and it implemented a delivery system that involved the risk of harm to others. In addition, Zurich alleged Pizza Nova was potentially liable to the plaintiff as a joint tortfeasor on the basis of its vicarious liability for its employees. Blair J.A. specifically noted, at para. 24, that the insurer sought to add Pizza Nova on the basis of a claim by which Pizza Nova was or might be liable to the plaintiff.
[44] He also referred to the result in Morey v. Knipple (1994), 7 M.V.R. (3d) 134 (Ont. Gen. Div.). In Morey, the injured plaintiff was a passenger in the defendant Knipple’s car. The plaintiff’s SEF 44 insurer had brought a subrogated third party claim against the driver of a second car that had allegedly been racing with the defendant Knipple’s car. The plaintiff had not sued the driver of the second car, Wannamaker. The motion judge noted at para. 21:
As a result of obtaining statements from independent witnesses, it became apparent that another party (i.e. Wannamaker) was “jointly liable” with Knipple for this accident. [Emphasis added.]
[45] The insurer’s action alleged that Wannamaker caused or contributed to the motor vehicle accident because Wannamaker and Knipple were racing prior to the accident.
[46] It is apparent from both these cases that the subrogated claims were advanced as causes of action that could have been available to the plaintiffs and in both cases the third party’s negligence vis-à-vis the plaintiff was in issue. The insurers sought to add the third parties on the basis of a claim by which the third parties were or might be liable to the plaintiffs.
[47] In this case, the third party claim similarly makes an allegation of negligence on the part of Coulthard vis-à-vis Tuffnail. Paragraph 7 of State Farm’s third party claim alleges that Coulthard was negligent in that he: failed to monitor the quantity of alcohol that he served to Meekes and Tuffnail; continued to serve alcohol to them when he knew or should have known that they were intoxicated and in danger of causing injury to themselves or others; failed to ensure that Meekes did not drive when leaving; and failed to warn Tuffnail that Meekes was intoxicated.
[48] A subrogated claim advanced by way of a third party claim is necessarily based on the third party’s status as a potentially responsible joint or concurrent tortfeasor and given the pleadings, Coulthard was a concurrent tortfeasor who was potentially “jointly liable” for causing the plaintiff’s damages. If, in substance, State Farm was asserting Tuffnail’s claim against Coulthard, as well as against Meekes and Bolton, a conclusion that State Farm was entitled to bring that action in conjunction with the jury’s finding of Coulthard’s liability necessarily means that Coulthard is jointly liable with them for causing Tuffnail’s injuries for the purposes of s. 7 of the OPCF 44R. In this case, not only was Coulthard potentially liable for having caused Tuffnail’s injuries given State Farm’s pleading, the parties asked the jury to apportion liability as between Tuffnail, Meekes, Bolton and Coulthard. The jury found that Coulthard was in fact partially liable for causing or contributing to Tuffnail’s injuries.
[49] Accordingly, the nature of State Farm’s subrogated action, the trial judge’s determination that State Farm was entitled to bring that action, and the jury’s finding of Coulthard’s liability compel the conclusion that Coulthard is jointly liable with Meekes, within the meaning of s. 7 of the OPCF 44R.
[50] I would add that even if an insurer’s objective in bringing a third party claim is only to protect its right to subrogate in relation to amounts it is called upon to pay the insured plaintiff, and the insurer accordingly restricts its third party claim to a claim in contribution for amounts it is required to pay the insured plaintiff, such a claim is necessarily founded on the third party’s potential responsibility for causing the insured’s damages.
2. Did the trial judge err in ordering that State Farm share any amounts it recovers by way of subrogation with Tuffnail only until Tuffnail receives “full indemnification pursuant to the terms of the OPCF 44R endorsement”?
[51] The net amount received or recoverable from Meekes’, Bolton’s, and Coulthard’s insurers is less than the amount of the judgment in favour of Tuffnail. Tuffnail and State Farm disagreed on who, as between them, should bear the shortfall and sought a ruling from the trial judge. She ordered, at para. 7 of the judgment:
This Court further orders that State Farm is entitled to pursue recovery of its subrogated interest against the Defendant, Bolton Estate, and against the Third Party. State Farm shall share with the Plaintiffs on a pro rata basis any amounts it recovers by way of subrogation until the Plaintiffs receive full indemnification pursuant to the terms of the OPCF 44R endorsement. [Emphasis added.]
[52] In the absence of statutory or contractual terms to the contrary, the insurer’s right of subrogation does not arise until the insured has been fully indemnified for both insured and uninsured losses: Douglas, at para. 50. Thus, at common law, the insurer generally stands behind its insured, in terms of recovery. [6]
[53] In Ontario, the common law of subrogation has been modified by the provisions of the Insurance Act, including ss. 278(1) and (2). Subsection 278(1) permits an insurer to subrogate before the insured is fully indemnified and s. 278(2) stipulates that where the net amount recovered is insufficient to provide complete indemnity, the insurer and the insured shall recover pro rata:
Subrogation 278(1) An insurer who makes payment or assumes liability therefore under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights.
Pro-rating recovery (2) Where the net amount recovered whether by action or on settlement is, after deduction of the costs of the recovery, not sufficient to provide complete indemnity for the loss or damage suffered, the amount remaining shall be divided between the insurer and the insured in the proportion in which the loss or damage has been borne by them.
[54] As indicated above, in this case State Farm’s common law right of subrogation was also modified by s. 20 of the OPCF 44R which permits State Farm to subrogate even sooner than s. 278(1) (when a claim is made under the OPCF 44R, as opposed to when the insurer makes any payment or assumes liability, as s. 278(1) provides). However, the OPCF 44R is silent on what happens where the net recovery is insufficient to provide complete indemnity.
[55] The issues in this case are did the trial judge err in providing for pro rata sharing under s. 278(2) only until Tuffnail receives full indemnification pursuant to the terms of the OPCF 44R, or in concluding that the section was applicable? [7]
[56] Tuffnail argues that the trial judge erred in providing for pro rata sharing only until Tuffnail receives full indemnification pursuant to the terms of the OPCF 44R endorsement, rather than until they receive full indemnification under the judgment. They submit that this is a clear, and possibly unintentional, error. On Tuffnail’s argument, the “loss or damage suffered” in s. 278(2) means the amount of damages awarded to him, as reflected in the judgment, that will not be recovered from the defendants in the action or from State Farm under the OPCF 44R, plus State Farm’s payment to Tuffnail.
[57] State Farm argues that there was no error. As I understand its argument, it says that, in this context, the “loss or damage suffered” in s. 278(2) means the limit of coverage under the OPCF 44R, which it describes as Tuffnail’s underinsured loss. Accordingly, once Tuffnail receives the $800,000 limit of coverage under OPCF 44R, he has received the maximum indemnity that he is contractually entitled to and State Farm is not required to share anything recovered in the subrogated action.
[58] If this court accepts Tuffnail’s argument that there is an error in the judgment, State Farm argues, by way of conditional cross-appeal, that the trial judge erred in concluding that s. 278(2) applies for two reasons.
[59] First, State Farm argues that s. 278(2) of the Insurance Act does not apply to it because its right of subrogation arose under s. 20 of the OPCF 44R. Section 20 of the OPCF 44R contains no pro rata sharing requirement and s. 278(2) cannot be imported into s. 20. Accordingly, it is entitled to recover in priority to Tuffnail.
[60] Second, in the alternative, it also argues that s. 278(2) only applies to property damages.
[61] State Farm does not argue that s. 278(2) does not apply to excess insurance or where the insurer frames its subrogated claim against the tortfeasor as a third party claim, in the insurer’s name, for contribution and indemnity in respect of any amounts it is called to pay its insured.
[62] In response to State Farm’s cross-appeal, Tuffnail argues that s. 278(2) applies in this instance.
a) There was an error in the judgment
[63] State Farm’s argument respecting the alleged error in the judgment seems to have been premised on the requirement in the judgment that it pay Tuffnail $800,000 under the OPCF 44R. Given that State Farm has been successful on the first issue, its liability under the OPCF 44R is reduced from $800,000 to $347,454.71 and Tuffnail will not receive the limit of coverage under the OPCF 44R.
[64] However, even without taking into account State Farm’s success on the first issue, I agree with Tuffnail that the trial judgment as written contains what is possibly an unintentional error. To require pro rata sharing of those amounts that State Farm receives by way of subrogation only until Tuffnail receives full indemnification pursuant to the terms of the OPCF 44R endorsement makes no sense. Had the trial judge intended to give effect to State Farm’s position that indemnification for the purpose of s. 278(2) is achieved on Tuffnail’s recovery of the OPCF 44R policy limit, there would have been no need to provide both for State Farm’s payment of $800,000 under the OPCF 44R and pro rata sharing with Tuffnail out of State Farm’s subrogation recoveries.
[65] At least notionally, an insurer pays under an insurance contract before it can seek to recover, by way of subrogation, the amounts that it has paid its insured. Subsection 278(2) is about sharing the recovery. The wording at issue in paragraph 7 of the judgment gives no effect to the purpose of s. 278(2). It results in the pro rata sharing ending before it would even begin.
[66] I also note that State Farm’s argument would require this court to read the words “the loss or damage suffered” in s. 278(2) as really meaning “the maximum possible loss or damage recoverable under the OPCF 44R”. Among other things, the “maximum possible” loss is inconsistent with the clear wording of the section which requires that the loss have been “suffered”.
[67] The point I decide is a narrow one: did the trial judge err in providing for pro rata sharing only until Tuffnail receives full indemnification pursuant to the terms of the OPCF 44R endorsement? While the parties attempted to give us assistance on the interpretation of s. 278(2) at the hearing of the appeal, the correct interpretation of s. 278(2) was not explored below and I am not satisfied that the court has a sufficient record to more broadly address the correct interpretation of s. 278(2). My conclusion that the trial judgment contains a possibly unintentional error (and my conclusion below that s. 278(2) applies) are based on the arguments made by the parties. I make no comment on Tuffnail’s precise interpretation of and calculations under s. 278(2).
b) Subsection 278(2) applies
[68] With respect to State Farm’s arguments on its cross-appeal, I disagree that s. 278(2) cannot apply to its right of subrogation under the OPCF 44R. While, as State Farm asserts, its right of subrogation arose under the OPCF 44R, State Farm also acquired a right of subrogation under the stricter provisions of s. 278(1) of the Insurance Act. Section 278(1) provides that an “insurer who makes any payment or assumes liability therefor under a contract is subrogated…” By virtue of the judgment, if not before, State Farm assumed liability for payment under the OPCF 44R, thereby meeting the stricter pre-condition for subrogation in s. 278(1). Moreover, State Farm will have made payment under the OPCF 44R by the time the issue of sharing of recovery arises.
[69] As I have said, the OPCF 44R is silent on what happens where the net recovery is insufficient to provide complete recovery. Subsection 278(2) fills that gap.
[70] Lastly, I reject State Farm’s argument that s. 278 only applies to claims for property damages. There is nothing in the section that suggests that this is the case. Moreover, under the legislative scheme, subrogation rights in respect of property damage are narrowly limited. Property damage is addressed through a direct compensation scheme in the Insurance Act; the insured’s own insurer is liable to the extent that the insured is not responsible for the accident: Denis Boivin, Insurance Law, 2nd ed. (Toronto: Irwin Law Inc., 2015), at pp. 510-11. An insurer’s right of subrogation in respect of damage to an automobile is specifically dealt with in s. 263(5)(b). Except as permitted in the narrowly enumerated instances by ss. 6 to 8 of the regulation Automobile Insurance, R.R.O. 1990, Reg. 664, insurers have no subrogation right. There would have been no need to specifically include a general subrogation right in s. 278 if subrogation were restricted to the narrow property damage circumstances already designated by the Automobile Insurance regulation.
[71] Accordingly, I would allow Tuffnail’s appeal and dismiss State Farm’s conditional cross-appeal of para. 7 of the judgment and alter para. 7 of the judgment to provide that:
This Court further orders that State Farm is entitled to pursue recovery of its subrogated interest against the Defendant, Bolton Estate, and against the Third Party. State Farm shall share with the Plaintiffs on a pro rata basis any amounts it recovers by way of subrogation until the Plaintiffs receive full indemnification under the Judgment. [Emphasis added.]
3. Did the trial judge err in limiting Coulthard’s liability to Bolton to a proportion of the total judgment equal to the 11.12% of fault found by the jury?
[72] Shortly before the trial commenced, Tuffnail, Meekes, Bolton, Coulthard, the Petrie plaintiffs and State Farm entered into an agreement whereby Meekes admitted liability for the accident and the parties agreed that the jury would be told of his admission, and that the trial was to determine which of the other parties may also be liable. The parties agreed to accept $200,000, the full limit of Meekes’ automobile insurance policy, plus a further $75,000 towards costs and disbursements, as representing Meekes’ and his insurer’s full contribution. The agreement provided that the defendants were entitled to maintain their crossclaims for the purpose of trial but would not pursue Meekes personally for judgment in excess of his $275,000 settlement contribution.
[73] As indicated above, Bolton brought a third party claim against Coulthard for contribution or indemnity in respect of any amounts Bolton was called upon to pay to Tuffnail. In light of the agreement with Meekes, Coulthard is the only other party Bolton can look to for contribution and indemnity.
[74] The jury was asked whether there was negligence on the part of each of Meekes, Bolton, Coulthard and Tuffnail which caused, or caused or contributed, to the collision or (in the case of Tuffnail) to his damages. The trial judge told them, with respect to Meekes, that, obviously, the answer was “yes”. The jury answered “yes”, with respect to each of Meekes, Bolton, Coulthard and Tuffnail.
[75] The jury was asked to apportion liability among Meekes, Bolton, Coulthard and Tuffnail, and did so as follows:
Meekes – 65% Bolton – 20.03% Coulthard – 11.12% Tuffnail – 3.85% contributory negligence
[76] All parties were provided an opportunity at trial to make submissions about the jury questions, and there is no suggestion in the transcripts that any party took issue with the jury being asked to assign a percentage of liability to Meekes.
[77] After trial, Bolton and Tuffnail entered into minutes of settlement pursuant to which Bolton agreed to pay Tuffnail $1,897,800 plus $325,241 for legal fees and disbursements, Tuffnail agreed to execute a release of Bolton, and Bolton assigned his claim against Coulthard to Tuffnail. Therefore, the amount that Bolton is entitled to recover from Coulthard now belongs to Tuffnail. This portion of the decision addresses only what Tuffnail can recover from Coulthard via Bolton’s assignment of his claim against Coulthard, and not Tuffnail’s ability to recover from Coulthard via State Farm’s subrogated claim.
[78] Section 1 of the Negligence Act provides as follows:
Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent. [Emphasis added.]
[79] According to the trial judge’s reasons, after Bolton assigned his claim against Coulthard to Tuffnail, Tuffnail sought a determination that Coulthard was jointly and severally liable to Tuffnail for the full amount of the damages awarded by the jury, and that Bolton was entitled to recover from Coulthard a proportionate share of Tuffnail’s damages as contribution and indemnity: January 23, 2019 reasons. In Tuffnail’s submission, this was because Coulthard defended the main action and because of s. 1 of the Negligence Act. The trial judge did not elaborate upon Tuffnail’s submission relying on s. 1 of the Negligence Act.
[80] Coulthard conceded that he would have been jointly and severally liable to Tuffnail had he been named as a defendant, but argued that he was not jointly and severally liable to Tuffnail because Tuffnail did not sue him. State Farm argued that Coulthard was liable to make contribution and indemnity to Bolton only to the degree he was found to be at fault.
[81] The trial judge first addressed Tuffnail’s argument that Coulthard was jointly and severally liable because he defended the main action. She concluded that the fact that Coulthard defended the main action did not render him liable for damages to Tuffnail under r. 29 and did not make him jointly and severally liable for damages to Tuffnail: January 23, 2019 reasons, at para. 26.
[82] The trial judge reasoned that r. 29.01 (a) of the Rules of Civil Procedure speaks to the third party’s liability to the defendant for all or part of the plaintiff’s damages, not liability for all or part of the plaintiff’s damages. Accordingly, a plaintiff cannot recover from a third party, absent a finding of fault against the defendant who commenced the third party claim: January 23, 2019 reasons, at para. 28.
[83] She held that Martin v. Listowel Memorial Hospital (2000), 51 O.R. (3d) 384 (C.A.) answered the issue. It held, at para. 48, that under s. 1 of the Negligence Act, joint and several liability only attaches to party defendants. She also considered this court’s decision in Taylor v. Canada (Attorney General), 2009 ONCA 487, 95 O.R. (3d) 561, at paras. 16-19, which describes how a tortfeasor can exercise its statutory right to apportion fault by adding third parties.
[84] The trial judge concluded, in her January 23, 2019 reasons, at para. 38:
As a result, I have concluded that the fact that [Coulthard] is a third party and he participated in the main action does not render him jointly and severally liable to the plaintiffs. Rather, on the strength of Martin and Taylor, [Coulthard’s] liability is several vis-à-vis the Bolton Estate. [Emphasis added.]
[85] At para. 8 of the judgment, the trial judge ordered:
This Court further orders that [Coulthard] is severally liable and must contribute to and indemnify the Bolton Estate for the damages owed to [Tuffnail] under this Judgment in the degree to which [Coulthard] is at fault, i.e. 11.12%, being the sum of $381,975.86, plus pre-judgment interest thereon[.]
[86] In this appeal, relying on this court’s decision in Endean v. St. Joseph Hospital, 2019 ONCA 181, C.C.L.T. (4th) 183, which was released after the trial judge’s January 23, 2019 ruling, [8] Tuffnail argues that: because of Meekes’ admission of liability and agreement to limit his liability in the settlement agreement, Meekes effectively became a “non-party”; Endean directs that a non-party’s fault should not be considered in apportioning liability; and the trial judge accordingly erred in considering the jury’s finding as to the degree to which Meekes was at fault in calculating Bolton’s entitlement to contribution from Coulthard. Tuffnail does not otherwise challenge the trial judge’s reasoning. Tuffnail submits that proportional division of Meekes’ 65 percent results in Bolton being 64.3 percent at fault and Coulthard being 35.7 percent at fault. Accordingly, Tuffnail submits, Coulthard should contribute 35.7 percent of the damages, or $1,125, 339.14 to Bolton.
[87] I do not agree that Endean requires that fault be reapportioned, without regard to Meekes. Endean is very different from this case.
[88] In Endean, the plaintiffs suffered injury from devices implanted in their temporomandibular joints. They sued the hospital where the surgery was performed and the oral surgeons who performed the surgery and provided follow up care. Before trial, the plaintiffs settled with the oral surgeons and Pierringer Orders were made in each action.
[89] The Pierringer Orders dismissed the actions against the oral surgeons and the crossclaims between the hospital and the oral surgeons and restricted the plaintiffs’ claims “such that [the plaintiffs] will only claim those damages, if any, arising from the actions or omissions of the Defendant Hospital.” The Pierringer Orders also required the statement of claim in each action to be amended to limit the claim against the hospital to its several liability or proportionate share of joint liability to the plaintiffs and to include an acknowledgment that the court at trial had the authority to adjudicate upon the apportionment of fault among all defendants who had been named in each action, i.e. the hospital and the oral surgeons.
[90] The trial was bifurcated and the trial judge first dealt with the issue of liability. Relying on this court’s decision in Taylor, he apportioned 5 percent of the fault to the hospital; 20 percent of the fault to the oral surgeons; 50 percent of the fault to the manufacturer of the device; and 25 percent of the fault to the distributor of the device. Neither the manufacturer nor the distributor was ever party to the actions and both were bankrupt.
[91] In the one action that he did not dismiss on the basis that it was statute barred, the trial judge granted judgment against the hospital for 5 percent of the damages that were to be assessed at the second phase of the trial.
[92] On appeal, Zarnett J.A., writing for the court, concluded that the trial judge erred in doing so. While the Pierringer Order required the plaintiffs to reduce their claim against the hospital by the amount that would be apportioned to the oral surgeons at trial, the Pierringer Order did not authorize the reduction of recovery due to fault of any other person. For this reason, the fault of the manufacturer and the distributor should have been irrelevant to the hospital’s liability to the plaintiffs.
[93] Further, while Taylor held that fault could be apportioned at trial to proposed third parties even though they were non-parties, the facts of Taylor were unique. In Taylor, the plaintiff made clear by an amendment to the claim that the liability of the defendant was limited only to the defendant’s relative degree of fault. In other words, the plaintiff in Taylor was not pursuing the defendant for 100 percent of its damages. Zarnett J.A. held that Taylor does not entitle the court in any case to apportion fault to non-parties and then reduce the plaintiff’s recovery by that apportioned share of fault: at para. 69.
[94] To remedy the error of the trial judge, Zarnett J.A. reapportioned the fault of the non-party manufacturer and distributor to the hospital and the oral surgeons, in the same proportions as the hospital’s and oral surgeons’ own degrees of fault: 20 percent and 80 percent.
[95] The trial judge in the instant appeal made no error in apportioning fault to Meekes. The position of Meekes is very different from that of the manufacturer and distributor in Endean. Meekes was a party to the action. He was not released from the action by the settlement agreement; in fact the settlement agreement specifically provided that the defendants were entitled to maintain their crossclaims for the purpose of trial. Moreover, there is no suggestion in the transcript that any party objected to the jury question which asked the jury to apportion fault to Meekes.
[96] Accordingly, I would dismiss Tuffnail’s appeal of para. 8 of the judgment.
4. Did the trial judge improperly exercise her discretion to award prejudgment interest at a rate higher than the bank rate?
[97] The trial judge exercised her discretion under s. 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43, to allow prejudgment interest at a rate of 3 percent – a rate higher than the statutory bank rate of 1.3 percent otherwise applicable in this case under ss. 127(1) and 128(1) of the Courts of Justice Act.
[98] As I will explain, I agree with State Farm that the trial judge erred in the exercise of her discretion in two ways. First, in her reasons dated February 26, 2019, the trial judge misapplied the factor of changes in market interest rates specified under s. 130(2). Second, the trial judge considered an inappropriate factor, namely that “[t]he case was undoubtedly conducted by [Tuffnail] with the understanding or expectation (although no vested entitlement) of a certain rate of prejudgment interest”: Tuffnail v. Meekes, 2019 ONSC 1334 (“February 26, 2019 reasons”), at para. 16. As a result, deference to her exercise of discretion is displaced. Taking the factors under s. 130(2) of the Courts of Justice Act into account, I would not award prejudgment interest at a rate higher than the default rate.
[99] As the trial judge noted, prior to January 1, 2015, the rate of prejudgment interest on non-pecuniary damages in an action for personal injury was 5 percent: Courts of Justice Act, ss. 66(2)(w), 128(2); Rules of Civil Procedure. As the result of an amendment to the Insurance Act, as of January 1, 2015, prejudgment interest on damages for non-pecuniary loss in an action for loss or damage from bodily injury or death arising from the use or operation of an automobile was exempted from s. 128(2) of the Courts of Justice Act. It is now calculated pursuant to s. 127(1) of the Courts of Justice Act by reference to the bank rate: Insurance Act, s. 258.3(8.1). The parties agree that the bank rate calculated under s. 127(1) of the Courts of Justice Act in this case is 1.3 percent. The amendment operates retrospectively: Cobb v. Long Estate, 2017 ONCA 717, 416 D.L.R. (4th) 222, at paras. 66-105; El-Khodr v. Lackie, 2017 ONCA 716, 416 D.L.R. (4th) 189, at paras. 6-7, leave to appeal refused, [2017] S.C.C.A. No. 461; Cadieux v. Cloutier, 2018 ONCA 903, at para. 145, leave to appeal refused, [2019] S.C.C.A. No. 63.
[100] However, s. 130 of the Courts of Justice Act permits the court, having regard to all the circumstances, to exercise discretion to award prejudgment interest at a rate other than the default rate prescribed by s. 127:
130 (1) The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129, (a) disallow interest under either section; (b) allow interest at a rate higher or lower than that provided in either section; (c) allow interest for a period other than that provided in either section.
Same (2) For the purpose of subsection (1), the court shall take into account, (a) changes in market interest rates; (b) the circumstances of the case; (c) the fact that an advance payment was made; (d) the circumstances of medical disclosure by the plaintiff; (e) the amount claimed and the amount recovered in the proceeding; (f) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and (g) any other relevant consideration.
[101] The trial judge averted to s. 130(2) and the circumstances of the case. In her February 26, 2019 reasons, the trial judge noted, among other considerations, the following:
- The lawsuit commenced on March 18, 2011, arising from a collision on September 13, 2009.
- With respect to s. 130(2)(a), there was some fluctuation in market interest rates from 2009 to 2017.
- “The case was undoubtedly conducted by [Tuffnail] with the understanding or the expectation (although no vested entitlement) of a certain rate of prejudgment interest”: February 26, 2019 reasons, at para. 16.
[102] Respectfully, the fluctuation in market rates adverted to by the trial judge was not relevant. She relied on this factor to justify awarding prejudgment interest at a rate higher than the default rate, but market rates never fluctuated above the 1.3 percent default rate during the litigation.
[103] Further, the trial judge improperly exercised her discretion to overrule the intention of the legislation amending the Insurance Act on the basis that Tuffnail had “the understanding or the expectation (although no vested entitlement) of a certain rate of prejudgment interest”.
[104] As MacFarland J.A. explained in Cobb, there can never be a vested entitlement to a certain rate of prejudgment interest because, while there is an entitlement to prejudgment interest, the actual rate was always subject to judicial discretion that could only be exercised at the time the damage award was made. As a result, “there can be no expectation on the part of a litigant that he or she is entitled to prejudgment interest at any particular rate until the trial judge determines that rate”: Cobb, at para. 90.
[105] Cobb is not authority for awarding prejudgment interest at a rate of 3 percent simply because the action was commenced before the Insurance Act was amended. This court concluded that the amendments to the Insurance Act were retrospective: at para. 104. In Cobb, the trial judge had exercised his discretion to award prejudgment interest at a rate of 3 percent, while explicitly refraining from taking a position on the retrospectivity of the legislation. The defendant in Cobb was content with prejudgment interest at a rate of 3 percent, and this court did not interfere with the trial judge’s exercise of discretion to award prejudgment interest at that rate: at para. 105.
[106] MacFarland J.A. left open the possibility in Cobb that s. 130 of the Courts of Justice Act could be used to ameliorate any perceived unfairness to litigants who commenced their actions before the effective date of the retrospective amendment: at para. 103. However, recent Superior Court decisions have relied on s. 130 to depart from the default rate where some external or prior unfairness made the retrospective application of the amendment particularly acute, such as where proceedings were delayed so that the amendment to the Insurance Act applied where it might not have otherwise. I endorse that view.
[107] For example, in A.B. v. Waite, 2018 ONSC 2151, MacLeod J. noted that he was not entitled to exercise his discretion under s. 130 to overrule the retrospective effect of the legislation amending the Insurance Act: at para. 11. In awarding interest at a rate of 4 percent under s. 130 of the Courts of Justice Act, he relied on the length of time the matter had been before the court and the fact that the trial was originally scheduled to take place before Cobb was decided. In relying on these factors, MacLeod J. was in essence relying on prior unfairness – delay in proceedings – in exercising his discretion under s. 130.
[108] Similarly, in McKnight v. Ontario (Transportation), 2018 ONSC 1742, Edwards J. declined to order interest at a rate greater than the default interest rate, noting that to do so would overrule the clear intention of the legislation amending the Insurance Act: at paras. 34-35.
[109] As a result of the trial judge’s errors, deference to her exercise of discretion to award prejudgment interest at a rate other than the default rate prescribed by s. 127(1) is displaced.
[110] Considering the factors in s. 130(2), the justness of the case does not require that prejudgment interest be allowed at a rate greater than the default rate.
[111] As indicated above, market interest rates have not fluctuated above the default rate during the period of the litigation. Under s. 130(2)(a) of the Courts of Justice Act, this factor weighs against departing from the default interest rate.
[112] As the trial judge noted, the jury awarded Tuffnail damages which, subject to contributory negligence, were reasonably close to what they had proposed to the jury, albeit considerably less than what they had claimed in their statement of claim. In my view, this factor, considered under s. 130(2)(e), is neutral.
[113] None of the remaining factors under s. 130(2) influence my conclusion. There are no unusual circumstances that warrant departing from the default rate. Nor is there special, case-specific unfairness resulting from the operation of the retrospective amendment. No advance payment was made. The trial judge indicated that there had been no suggestion that medical disclosure was withheld or delayed. The trial judge made no findings, and the parties made no submissions on appeal, about conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding.
[114] Accordingly, taking the factors in s. 130(2) into account, I would decline to award prejudgment interest at a rate other than the default rate of 1.3 percent calculated in accordance with s. 127(1) of the Courts of Justice Act. I would delete the reference to “3 percent” in paragraph four of the judgment and substitute “1.3 percent”.
5. Did the trial judge err in not allowing Coulthard to amend his pleading to plead a limitation defence, after the jury returned their verdict?
[115] After the jury returned their verdict, Coulthard sought leave to amend his pleadings to plead limitation defences in the Tuffnail and Petrie actions, pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and the Trustee Act, R.S.O. 1990, c. T.23.
[116] In her September 20, 2017 reasons, the trial judge noted that r. 26.01 of the Rules of Civil Procedure provides that leave to amend a pleading must be granted at any stage of an action, absent non-compensable prejudice. The trial judge acknowledged that it is possible to amend a pleading, even post-verdict, for example, to amend the prayer for relief to accord with a verdict on damages. However, she concluded that there was non-compensable prejudice and denied Coulthard leave to amend his pleadings.
[117] In the case of Tuffnail, she held that evidence would undoubtedly have been led at trial on the issue of discoverability, and it was now too late to do so. Moreover, trial and pre-trial tactics might have been affected.
[118] In the case of Petrie, the trial judge proceeded on the basis that the limitation period in the Trustee Act applied, and that the concept of discoverability did not apply to the limitation period under that Act. Therefore, she did not rely on the inability to lead evidence on the issue of discoverability in her analysis. However, she concluded that there was non-compensable prejudice because the Petrie’s strategy in proceeding with the case would undoubtedly have been affected.
[119] Coulthard’s main argument on appeal is that the trial judge’s finding of non-compensable prejudice constitutes a palpable and overriding error: he had raised the possibility of a limitation defence some three years before the trial commenced and there was no evidentiary basis for the trial judge’s finding of prejudice. Rather, her finding of prejudice was based on speculation that Tuffnail would have led evidence on discoverability, or that trial tactics might have been different.
[120] I reject this argument. The trial judge’s finding of non-compensable prejudice is entitled to deference. Moreover, I agree with her conclusion. Had Coulthard raised a limitations defence earlier, Tuffnail may have led different evidence at trial, and both Tuffnail and the Petrie plaintiffs may have made different pre-trial strategy and settlement decisions. This is not improper speculation. Moreover, at some point, “the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party”: Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 31, citing 1588444 Ontario Inc. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 681, at para. 25.
[121] Coulthard also argued that the trial judge erred in law because she held that only minor amendments can be made post-verdict. Respectfully, this misconstrues her reasons. As noted above, she acknowledged that amendments can be made post-verdict, and gave an example of when they might be allowed. She dismissed Coulthard’s motion to amend because of her finding of non-compensable prejudice, not because she categorized it as a non-minor amendment.
[122] I would dismiss this ground of appeal.
Disposition
[123] For these reasons: I would allow State Farm’s appeal, amend para. 6 of the judgment by substituting “$347,454.71” for “$800,000”, and amend para. 4 of the judgment by substituting “1.3 percent” for “3 percent”; I would allow Tuffnail’s appeal, to the extent of amending para. 7 of the judgment by substituting “under the Judgment” for “pursuant to the terms of the OPCF 44R endorsement”, and dismiss State Farm’s conditional cross-appeal of para. 7 of the judgment; and I would dismiss Coulthard’s appeal.
[124] I would order that if the parties are unable to resolve the issue of costs of the appeals, they make written submissions to the panel, via the court’s Senior Legal Officer, not more than three pages in length, within three weeks of the release of these reasons.
Released: June 1, 2020 Alexandra Hoy A.C.J.O. I agree Doherty J.A. I agree Marrocco ACJSC
Footnotes:
[1] Thomas Bolton died during the litigation. The litigation was continued by Sharon Carlene Drown, as Litigation Administrator for the Estate of Thomas Michael Bolton. For simplicity, I use “Bolton” throughout to refer to Mr. Bolton himself, as well as the legal liabilities and interests of the Estate.
[2] The limit of coverage is determined by s. 4 of the OPCF 44R. That section indicates that coverage under the OPCF 44R is excess to the total of all limits of motor vehicle liability insurance held by the inadequately insured motorist (Meekes) and any person jointly liable with that motorist. Separate and apart from the question of whether Coulthard was “jointly liable” with Meekes, the Bolton and Coulthard policies were not motor vehicle liability insurance policies. Thus, State Farm’s maximum liability under the OPCF 44R is $800,000 (i.e. the amount by which the $1,000,000 of family protection coverage under the OPCF 44R exceeds the $200,000 limit of the Meekes motor vehicle policy).
[3] The language referred to by the trial judge was last used in the SEF 44 Family Protection Endorsement, which was superseded by the O.E.F. 44. The wording of the O.E.F. 44 removed reference to “whether such entitlement is pursued or not” and adopted the current language, which was maintained in OPCF 44R.
[4] I note that Tuffnail does not argue that if Coulthard is jointly liable to Tuffnail, the amount deductible under s. 7 of OPCF 44R is the amount of State Farm’s claim for contribution and indemnity, to the extent it is characterized as such, and not the limits of Coulthard’s insurance policy. For the purposes of my analysis, I therefore accept that the amount deductible is the limits of Coulthard’s insurance policy.
[5] I make a cautionary observation: it is not clear that Freudmann-Cohen permits an insurer to resort to r. 29.01 in all circumstances.
[6] Napier v. Hunter, [1993] A.C. 713 (H.L.) provides support for the proposition that where insurance is layered, subrogated recovery is applied on a downward basis, beginning with the top layer of insurance. Accordingly, it appears that in the United Kingdom an excess insurer may recover its loss first from the subrogation proceeds, where those proceeds are payments in respect of the layer of insurance the excess insurer agreed to cover. However, to my knowledge, Napier has not been considered with respect to this particular point by a Canadian court.
[7] State Farm seeks to recover from Coulthard’s policy – an amount deducted in calculating its liability to Tuffnail under the OPCF 44R. There is authority for the proposition that an insurer is not entitled to recover payments allocated to uninsured losses: T&N Limited v. Royal & Sun Alliance plc, [2003] EWHC 1016 (Ch), at paras. 605-606. Query whether the amount of Coulthard’s policy is an uninsured loss under the OPCF 44R. However, none of the parties have appealed or dispute the trial judge’s conclusion that State Farm is entitled to “pursue recovery” of its subrogated interest against Coulthard. They dispute only whether and how the pro rata sharing mechanism operates. My analysis accordingly proceeds on the assumption that State Farm is entitled to recovery from Coulthard’s policy. I leave an insurer’s right of recovery against amounts deducted in calculating its liability under the OPCF 44R for another day.
[8] Endean was released on March 8, 2019. On April 10, 2019, the parties appeared before the trial judge to seek clarification of her January 23, 2019 reasons. At this hearing, counsel for Tuffnail relied on Endean and argued that Coulthard should owe Bolton 35.7 percent of the damages awarded by the jury. The trial judge held that she was not being asked to clarify her January 23, 2019 reasons, but was being asked to reconsider them. She declined to do so, noting that appeals had already been filed.
