Court File and Parties

Court File No.: 25287/10
Date: January 9, 2012
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michele Maida and Erminia Maida, Plaintiffs

AND:

Heather Goodmurphy, Shawn Cote and Lombard General Insurance Company of Canada, Defendants

AND

The Wawanesa Mutual Insurance Company, Third Party

BEFORE: E.J. Koke J.

COUNSEL:
Counsel for the Plaintiffs, Orlando M. Rosa (Wishart Law Firm)

Counsel for the Defendants, Gordon Marsden (Blaney McMurtry)

Counsel for the Third Party, Brian DeLorenzi, agent for Bell Temple

HEARD: January 5, 2012

ENDORSEMENT

[ 1 ] This is a motion by the Third Party Wawanesa Mutual Insurance Company (“Wawanesa”) for an order:

a) dismissing the Defendant, Lombard Insurance Company’s (“Lombard”) Crossclaim as against the Defendant, Shawn Cote in the main action;

b) dismissing Lombard’s Third Party Claim as against Wawanesa;

c) for costs of this motion and for defending the Third Party Claim and the Crossclaim.

[ 2 ] At the commencement of the motion counsel advised that the parties were in agreement that the Crossclaim and the Third Party Claim should be dismissed and the only issue before the court pertained to whether Wawanesa was entitled to the costs of defending the Third Party Claim and the Crossclaim.

Facts

[ 3 ] The action arises out of a motor vehicle accident that occurred on November 26, 2008. The Plaintiffs allege they sustained injuries and damages when they were hit by the Defendant Heather Goodmurphy (“Goodmurphy”) who was operating a vehicle owned by Shawn Cote (“Cote”).

[ 4 ] Lombard issued an auto insurance policy to the Plaintiffs. Wawanesa insured the Cote vehicle.

[ 5 ] By letter dated September 15, 2010 Janice Pearce, Claims Adjuster for Wawanesa wrote Plaintiffs’ counsel and advised that although Wawanesa was the liability insurer of Shawn Cote, “ it would not be appropriate for Wawanesa Mutual Insurance Company to respond to liability claims made against our Insured and Heather Goodmurphy. Heather Goodmurphy was driving while her licence was suspended in contravention of the Statutory Conditions of the policy”...In light of the above, you may wish to contact your client’s uninsured/underinsured carrier.”

[ 6 ] As a result of Wawanesa’s denial of coverage, the Plaintiff added Lombard (its own insurer), as a party to the action, pursuant to the provisions of the policy and the Insurance Act. In its Statement of Claim, the Plaintiffs alleged that they were advised that “ the Cote motor vehicle was uninsured at the time of the collision because the Defendant Goodmurphy was driving while her licence was suspended in contravention of the Statutory Conditions of the Defendant Cote owner’s policy”.

[ 7 ] Lombard’s file contents were then sent to Blaney McMurtry, LLP (Lombard’s counsel herein), with a request that Lombard’s interests be defended. Included in Lombard’s file contents was a copy of the aforementioned letter of September 15, 2010 in which Wawanesa denied coverage on the basis that a statutory condition had been contravened.

[ 8 ] Lombard served a Crossclaim against Mr. Cote and issued a Third Party Claim against Wawanesa on March 9, 2011, for the purpose of determining the validity of the coverage denial. In its Third Party Claim it stated that “ Wawanesa bases its denial of coverage to the Defendants Cote and Goodmurphy on the assertion that Goodmurphy was in contravention of the statutory conditions of the policy, by driving with a suspended driver’s licence at the time of the accident”.

[ 9 ] Lombard refers to the letter of September 15, 2010 in its Claim against Wawanesa.

[ 10 ] Counsel for Wawanesa wrote counsel for Lombard on May 24, 2011 advising that they had been instructed to bring a motion to strike the Crossclaim against their client Cote which had been issued by Lombard, as well as to strike the Third Party Claim against Wawanesa. No explanation or basis was provided for this motion.

[ 11 ] On June 25, 2011 Wawanesa served its Defence to the Third Party Claim. In its Defence, it stated that “ there has been no issue raised that there has been a denial of coverage to Mr. Cote or that there had been a contravention of the statutory conditions because of Goodmurphy’s driver’s suspension.....Wawanesa states that they have not denied coverage to Shawn Cote, but pleads that they have denied any coverage to the Defendant, Goodmurphy, since Shawn Cote’s vehicle was being driven by Goodmurphy without consent.”

[ 12 ] Following receipt of the Defence to the Third Party Claim Lombard’s counsel advised Wawanesa’s counsel forthwith that they would seek instructions to dismiss the Third Party Claim and the Crossclaim against Cote.

[ 13 ] Both parties are in agreement that the Third Party Claim and Crossclaim should be dismissed, but Wawanesa argues that it should be paid costs in relation to the dismissal. Lombard seeks an order for dismissal without costs.

Discussion

[ 14 ] Wawanesa argues that its Defence to the Third Party Claim makes it evident that Lombard’s Claim was baseless and unnecessary, as by virtue of Shawn Cote’s Defence to the main action, Wawanesa had already accepted that it was the insurer of Mr. Cote under an automobile policy of insurance.

[ 15 ] The weakness in Wawanesa’s position, as I see it, is that Shawn Cote’s Defence to the main action was not issued until April 25, 2011 and not served on Lombard’s counsel until May 25, 2011. This was after the Third Party Claim was issued against Wawanesa, which was issued on March 9, 2011. Therefore, at the time Lombard issued its Third Party Claim, it could not have known that Wawanesa had changed its position or would change its position from the one stated in its September 15, 2010 letter (denial of coverage to both Cote and Goodmurphy based on breach of a statutory condition) to one in which Wawanesa denied coverage only on the basis that Ms. Goodmurphy was driving without consent.

[ 16 ] It is noteworthy that immediately after Wawanesa served its Defence to the Third Party Claim Counsel for Lombard advised counsel for Wawanesa that he would seek instructions to have the Third Party Claim against Wawanesa and the Crossclaim against Mr. Cote dismissed.

[ 17 ] In my view, Lombard’s decision to issue the Third Party Claim and the Crossclaim was prompted by Wawanesa’s letter of September 15, 2010 in which Wawanesa denied coverage on the basis that a statutory condition had been breached. This position was later abandoned by Wawanesa, but not until after the Third Party Claim had been issued by Lombard.

[ 18 ] Wawanesa argues that Lombard had no contractual agreement with Wawanesa, and thus no basis for a cause of action against it.

[ 19 ] Rule 29.01 of the Rules of Civil Procedure governs the issuance of Third Party Claims. The Rule provides that a Defendant may commence a Third Party Claim against any person who is not a Party to the action and (c)... should be bound by the determination of an issue arising between the Plaintiff and the Defendant.

[ 20 ] Applying Rule 29.01 (c) Master Sandler held in Rupolo v.Tulshi [1] that in a motor vehicle action against a tortfeaser Defendant and the Plaintiff’s own insurer under the uninsured motorist coverage, it was permissible for the Defendant insurer to assert a Third Party Claim against the putative insurer of the Defendant tortfeaser to determine whether it was liable to the tortfeaser

[ 21 ] I agree with the reasons set out by Master Sandler in Rupolo . This decision recognized that the purpose of Rule 29.01 is to promote efficiency, cost effectiveness and the avoidance of a multiplicity of proceedings in a civil action. It is not necessary that there be a contractual relationship between a Defendant and a Third Party in order for the section to apply.

Decision

[ 22 ] Courts have held that where a bona fide cause of action that is not frivolous or vexatious, the commencement of which was justified having regard to the conduct of the defendant (or third party), the party commencing the action will be relieved from paying any costs on discontinuance. [2]

[ 23 ] The decision by Lombard to issue the Third Party Claim and the Crossclaim was not frivolous or vexatious. Clearly there was justification to commence these Claims given the position taken by Wawanesa in the September 15, 2010 letter.

[ 24 ] In my view, Wawanesa should have agreed to the proposal by Lombard to dismiss the Third Party Claim and the Crossclaim against Cote without costs, a proposal which was made immediately after Wawanesa filed its Statement of Defence to the Third Party Claim and clarified its position with respect to coverage.

[ 25 ] The parties have agreed that the Third Party Claim and the Crossclaim by Wawanesa against Cote should be dismissed, and it is so ordered. The part of the motion for costs in relation thereto by Wawanesa is dismissed.

[ 26 ] Lombard has been successful with respect to the issue before the court. It is therefore entitled to costs of this motion. Unless I hear from counsel within 30 days that there is an offer to settle which should be considered, I am ordering that Wawanesa pay Lombard’s costs with respect to this motion.

[ 27 ] Counsel for Lombard has filed a costs outline, claiming costs in the total amount of $6671.34 on a substantial indemnity scale and $4811.29 on a partial indemnity scale. I note that the costs claimed by Lombard include two attendances and two airfares for counsel from Toronto to attend in Sault Ste. Marie. I understand the motion could not be dealt with at the first attendance in Sault Ste. Marie, due to a fire related emergency at the court house.

[ 28 ] In other circumstances I would be inclined to rule that each of the parties should assume their respective costs thrown away with respect to the emergency. However, in this case I note that Lombard proposed that this motion be dealt with by way of written argument. Wawanesa did not agree and advised that it wished to argue the motion orally. It is understandable that Lombard therefore decided to argue the motion orally. With due respect to counsel, in my view this motion could easily have been dealt with by way of written argument only. The motion materials and factums were extensive and complete. It was Wawanesa’s decision to argue the motion orally which necessitated the two flights to Sault Ste. Marie and the two attendances, and I am therefore ordering that all costs related thereto are to be borne by Wawanesa, on a partial indemnity basis.

[ 29 ] Costs are therefore assessed against Wawanesa, in the sum of $4811.29, inclusive of HST.

E.J. Koke J.

Date: January 9, 2012

[1] Rupolo v.Tulshi (1985), 1985 2172 (ON SC) , 51 O.R. (2d) 288 at 289, aff’d O.R. (2d) 288 (Ont. S.C.)

[2] Gianopoulos v. Olga Management Ltd., [2004] O.J. No. 4273, (Ont. S.C.J.) ; Provincial Crane Inc. V. AMCA International Ltd. [1990] 44 C.P.C. (2d) 46, (Ont. S.C.J.) ; Golda Developments Inc. v. Dawe [2008] 64 C.P.C. (6th) (Ont. S.C.J.)