COURT FILE NO.: CV-09-377269

DATE: 20121009

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: GOODYEAR CANADA INC., Plaintiff AND: AMERICAN INTERNATIONAL COMPANIES (Formerly American Home Assurance Company), GERLING CANADA INSURANCE COMPANY (Formerly Gerling Global General Insurance Company), ING CANADA (Formerly Guardian Insurance Company of Canada), NORTHUMBERLAND GENERAL INSURANCE COMPANY, ROYAL & SUN ALLIANCE INSURANCE COMPANY OF CANADA, AVIVA CANADA (Assumed The Business Of The General Accident Assurance Company Of Canada, and Scottish & York Insurance Co. Limited), THE HOME INSURANCE COMPANY, ACE USA (ACE INA INSURANCE), JEVCO INSURANCE COMPANY, LOMBARD CANADA LTD. (Assumed the Business Of Phoenix Assurance Company Of London), Defendants

BEFORE: Stinson J.

COUNSEL: William G. Scott and Eli Mogil, for the plaintiff Vern Rogers/Bronwyn Martin, for the defendant, American International Companies Robert J. Clayton, for the defendant Gerling Canada Insurance Company (formerly Gerling Global General Insurance Company) W. Colin Empke, for the defendant, ING Canada Don Rogers/Marcela Saitua, for the defendant, Northumberland General Insurance Company Mark W. Barrett and Mark M. O'Donnell, for the defendant, Royal & Sun Alliance Insurance Company of Canada Steven Stieber and Grace Leung, for the defendant, Aviva Insurance Company of Canada Douglas H. McInnis and Rory Barnable, for the defendants, Lombard Canada Ltd. and The Home Insurance Company

HEARD: By written submissions

ENDORSEMENT AS TO COSTS

[1] This is my costs endorsement in this matter, based on the written submissions made by the parties.

[2] The parties collectively came to court and conducted a five-day hearing in May and June 2011 seeking answers to nine specific questions set out in the consent order of Mr. Justice Colin Campbell dated January 12, 2011. Briefly stated, the plaintiff asked the court to declare that asbestos insurance coverage was not reasonably available in Canada for U.S. claims after 1985 and further that it was not obligated to self-insure for any asbestos injury found to have been suffered from third party claimants after 1985. Ultimately, the plaintiff asked the court to import into Ontario insurance law the so-called "Stonewall principle" (see: Stonewall Insurance Company v. Asbestos Claims Management Corporation, 73 F.3rd 1178 (2d Cir. 1995)). The plaintiff sought a declaration that the defendants (who insured the plaintiff in the pre-1985 era) had a duty to defend all pending and expected lawsuits against it alleging bodily injury from exposure to asbestos, and contribution and indemnity for all amounts it might be liable to pay arising out of asbestos litigation in the United States, including for claims that did not arise until after the periods covered by the defendants' policies.

[3] These issues came before me in a hybrid motion format during which the first several days of a five-day hearing were comprised of oral testimony and cross-examination of expert witnesses, with the remaining portion of the hearing devoted to legal argument. The testimony of the experts related to the question whether the plaintiff would have been able to obtain insurance coverage in Canada for U.S. asbestos claims after 1985, essentially a question of fact. A favourable determination of that factual issue was a prerequisite for the plaintiff to be in a position to argue that the Stonewall principle should be adopted in Canada.

[4] In my decision released September 16, 2011, I held that conventional insurance was not available to the plaintiff in Canada after 1985 in relation to asbestos claims arising in the United States. I went on to hold, however, that the Stonewall principle ought not be imported into the law of Ontario. The net result is that the defendants are not obliged to defend or indemnify the plaintiff pursuant to their pre-1985 policies in relation to post-1985 U.S. asbestos claims.

[5] The defendants now ask for their costs of the motion. The plaintiff resists that claim, arguing that success was divided and at the very least there should be an apportionment of costs to reflect that outcome. The plaintiff also submits that some of the bills of costs submitted by the defendants are excessive.

liability for costs

[6] The defendants seek to recover costs based upon the principle that costs should follow the event: the unsuccessful party should pay costs to the successful one. The plaintiff resists that result by asserting that it prevailed on the factual issues of whether insurance coverage was available post-1985.

[7] For the plaintiff to be successful in securing the relief it sought, it needed to prevail on both the factual and legal issues. At the end of the day, it was not. As a consequence, it came away with no relief.

[8] By contrast, despite being unsuccessful on the factual issue, the defendants prevailed on the legal front. They successfully resisted the declaratory relief sought by the plaintiff both in connection with the incorporation of the Stonewall principle in Ontario and in relation to the application of the deductible on their various policies.

[9] Based on the foregoing outcomes, in my view, the defendants were the clear winners. I am alert to plaintiff's submission that it prevailed on the factual issue. But in my view that argument, to the extent it has any merit, should be considered in relation to the quantification of the defendants' costs award. It does not detract from the overall outcome, which dictates that the plaintiff should pay costs to the defendants.

scale of costs

[10] The defendants seek costs on a partial indemnity basis only. This is not a case where there is any basis for a punitive award on a higher indemnity scale. Partial indemnity costs are appropriate.

quantification of costs

[11] The defendants, most of whom were separately represented, have submitted bills of costs that seek significant amounts. Many of the factors that are enumerated under rule 57.01 are common to them all; other factors warrant individual comment.

[12] The most significant common factor is the submission by the plaintiff that the result of the action (rule 57.01), the conduct of the defendants that tended to lengthen unnecessarily the proceeding (rule 57.01(1)(e)) and the defendants' refusal to admit that no insurance was available for asbestos claims post-1985 is a fact that should have been admitted (rule 57.01(1)(g)), all dictate a reduction in the sums claimed. In essence, the plaintiff submits that more than half of the time that the motion was spent on evidence and submissions on the factual issue, a point on which it prevailed.

[13] Relying on Tricontinental Investments Co. v. Guarantee Co. of North America (1988), 29 C.P.C. (2d) 99 (Ont. H.C.), the plaintiff argues that a successful party can be deprived of costs when it refuses to admit a fact which the other party is forced to prove at significant expense. The plaintiff argues that the defendants should have admitted that coverage was unavailable after 1985. Since they failed to do so, the argument continues, the defendants forced the plaintiff to engage in a lengthy forensic process and they should not recover costs in relation to the factual issue.

[14] In my view, this is not a case in which the principle discussed in Tricontinental Investments should be applied. It was by no means a foregone conclusion that the plaintiff would prevail on the factual issue. The expert witnesses retained by the defendants provided opinions that countered those of the plaintiff and thus their position was an arguable one on the evidence and was not unreasonable. Although I ultimately concluded that the Stonewall principle was concerned only with conventional insurance and not other insurance-like schemes, that outcome was not one that the defendants should have been able to predict. This was not, therefore a case in which the defendants unreasonably refused to admit certain facts: contrast Gibbs v. Grand Bend (Village)(1990), 1990 CanLII 6809 (ON SC), 72 O.R. (2d) 697 (H.C.J.).

[15] Moreover, this is not a case where a clear delineation of the issues was possible such that the allocation of costs on an issue by issue basis is appropriate. The factual dispute and its resolution was an important part of the analysis that led to the ultimate determination of the result.

[16] It follows that I do not accept the plaintiff's submissions that the defendants should be deprived of some of their costs by reason of the result, the conduct of the defendants, or their refusal to admit any facts.

[17] Before turning to the specific objections raised by the plaintiff to the individual bills of costs of the defendants, I make the following observations in relation to other principles listed in rule 57.01(1) that are factors in the exercise of my discretion to award costs:

57.01(1)(0.b)

The reasonable expectation of the unsuccessful party. By means of this motion, the plaintiff sought to effect a significant change to insurance law in Ontario, by importing the Stonewall principle. Given the significant liabilities faced by the plaintiff in relation to the third party claims arising in the United States, the plaintiff had to know that the defendants would take the matter seriously and would incur legal expenses that were reflective of the importance of the case. The coverage periods and deductible provisions were not uniform and each defendant had to consider its own interest when deciding how to respond. Given these factors, it would have been apparent to the plaintiff that, if unsuccessful, it would be called upon to pay significant legal costs to the opposite parties.

57.01(1)(a)

The amount claimed and recovered. No specific amount was claimed and only declaratory relief was sought. That said, the plaintiff obtained no relief on the motion. This factor therefore supports the defendants' cost claims.

57.01(1)(b)

The apportionment of liability. In relation to the legal issues raised, the defendants were successful on the issue of liability. This factor supports their cost claims.

57.01(1)(c)

The complexity of the proceeding. This motion was highly complex, involving sophisticated issues relating to insurance underwriting, availability of insurance coverage, legal principles relating to American jurisprudence involving coverage claims in comparable cases, and the potential importation of American legal principles to Ontario. There was extensive research and many of the factums were lengthy. Considerable case law was presented to the court. This factor supports the defendants' claims for costs.

57.01(1)(d)

The importance of the issues. As indicated previously, given the extent of the U.S. claims for which the plaintiff sought indemnity from its Canadian insurers, the issues brought before the court on this motion were very important for both sides. The plaintiff and the defendants approached the matter with an effort that was commensurate with the importance of the issues. This factor, therefore, supports the cost claims of the defendants.

57.01(1)(e) and (g)

The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding and the party’s denial of or refusal to admit facts that should have been admitted. I have already discussed these factors above and considered them inapplicable.

[18] I do not consider the remaining principles discussed in rule 57.01(1) to be significant for purposes of the exercise of my discretion to award costs here. Most of the factors that I have described above support the conclusion that the defendants should recover significant sums on account of the costs they incurred.

[19] I further observe that the partial indemnity fees charged by counsel for the defendants range from $200 per hour to $350 per hour. In my view, those rates are appropriate having regard to the levels of seniority and experience of the counsel in question. The plaintiff has raised an issue whether it should be held liable for all of the time spent by all of the lawyers who acted for the defendants, having regard to the limited involvement that some had in the factual hearing. I will address that point when I come to deal with the individual bills of costs.

[20] I further note that the bills submitted by the defendants seek widely varying amounts for fees, ranging from a high of $129,000 to a low of $32,000. There is no material before me to indicate the fees incurred by the plaintiff, for use as a comparator.

[21] It is readily apparent that different defendants incurred significantly different legal costs in responding to the plaintiff's motion. As counsel indicated during the course of argument, by the time the matter reached court the defendants had agreed to divide up responsibility for the legal arguments and their respective submissions. On the appearance before me, some counsel were on their feet for extended periods of time, while others made no submissions. Either they had nothing to add or they had agreed to allow other counsel to make the points that were important to their client's position.

[22] It is further apparent from a comparison of the bills of costs that different lawyers for various parties assumed greater responsibility for various aspects of the conduct of the proceeding, presumably based on an understanding (express or implied) among the defendants that they collectively would put their best foot forward. While there was plainly co-operative effort, I am not prepared to fault the defendants for any duplication of efforts. Plainly, each defendant insurer had to evaluate its own position and assess what response and what level of activity it felt compelled to instruct its lawyers to undertake. Even though they may have at the end been conducting only a watching brief during the course of the hearing before me, counsel representing each party was entitled to and indeed obliged to appear to protect his or her client's interest.

[23] I turn now to the specific issues raised by the plaintiff in relation to the various bills of costs filed by the defendants.

American International Companies

[24] This defendant seeks fees and disbursements totalling $90,551.18, inclusive of tax. The plaintiff argues that this defendant's counsel did not make any substantive submissions at the motion and that its factum largely repeated issues already raised by defendants who had filed their facta earlier. I do not accept that criticism. As indicated previously, counsel for each defendant had to evaluate the case from his or her own client's prospective. Compared to the amount of time spent by lawyers for other parties, I do not consider this claim to be out of line. I therefore allow it in its entirety.

Gerling Canada Insurance Company

[25] This defendant's overall request for costs totals $32,923.67. Its counsel conducted a watching brief and made no submissions at the hearing. I am not prepared to be critical of this bill for the same reasons. I allow it in full.

Intact Insurance Company

[26] This defendant claims partial indemnity costs inclusive of disbursements of $74,822. The plaintiff makes no specific submissions in relation to these charges. In my view, they are reasonable and reflect fairly the amount of time spent and effort undertaken by counsel for this defendant. I allow this sum as claimed in full.

Northumberland General Insurance Company

[27] This defendant seeks total fees and disbursements of $52,299.59. No submissions were made by counsel who attended the hearing on behalf of this defendant, although based on the bill of costs, it appears that two lawyers sat in attendance throughout. I agree with the plaintiff that this was unnecessary. I therefore reduce the amount recoverable by this defendant to the all inclusive sum of $42,500.

Royal & Sun Alliance Insurance Company

[28] This defendant seeks total fees and disbursements inclusive of tax of $130,960.14. The plaintiff makes the point, with which I agree, that both lawyers for this defendant are experienced counsel and thus it is unclear why two lawyers of this vintage were required instead of the more appropriate senior/junior division of labour. There also appears to have been some duplication of effort given that one of the lawyers spent 56.4 hours and the other 111.9 hours to prepare for and attend at the hearing. While some overlap may be permissible (given the importance of the case) in my view, the plaintiff cannot be expected to pay for all of this time. I would therefore reduce this bill and fix this defendant's costs at the all inclusive sum of $110,000.

Aviva Insurance Company of Canada

[29] This defendant seeks fees and disbursements in the total amount of $71,090.64. The plaintiff makes no specific submission in response to this bill. I agree that it is fair and reasonable and reflects a suitable division of labour between senior and junior counsel. The amounts claimed in terms of time compare fairly to the time spent by counsel for other defendants. I therefore allow this bill in the full amount claimed.

The Home Insurance Company and Lombard Canada Ltd.

[30] These defendants seek a total of $155,365.58 on account of fees and disbursements. As is apparent, the amount of time spent by the lawyers representing this defendant was considerably higher than any of the other defendants. It also appears that, for a number of steps in the proceeding, two lawyers represented these defendants. I am not persuaded that the attendance of both was required on all such occasions. I therefore would reduce the total cost in favour of these defendants to the all inclusive sum of $125,000.

disposition

[31] For these reasons I fix the costs payable by the plaintiff to the defendants in the amounts indicated above. These sums shall be paid within 60 days.

Stinson J.

Date: October 9, 2012