Ward, by her litigation guardian, MacNaughton, et al. v. Dingwall et al.

[Indexed as: Ward (Litigation Guardian of) v. Dingwall]

Ontario Reports

Ontario Superior Court of Justice,

Shaw J.

January 7, 2014

118 O.R. (3d) 550 | 2014 ONSC 126

Case Summary

Civil procedure — Costs — Apportionment — Plaintiff's claims for damages arising from motor vehicle accident settled for $10 million by way of payment of full policy limits of defendants' insurers — Insurer B offering to settle claim for its policy limits of $2 million seven months after action was commenced — Action not settled until Insurer A finally accepted five years later that its policy limits were $8 million — Plaintiff's costs apportioned between insurers in accordance with their respective policy limits.

The plaintiff brought an action in 2006 for damages arising out of a motor vehicle accident. Two of the three defendants were insured by Intact, and the third was insured by Zurich. The claims were settled in 2013 for $10 million by way of payment of the full policy limits of each insurer. Intact had offered to settle the claim for its policy limits of $2 million seven months after the action was commenced. Zurich resisted for several years the plaintiffs' suggestion that the total coverage was $10 million. Even after accepting that its limits were $10 million, it did not tender those limits without requiring further proof of damages. Zurich brought a motion requesting that the plaintiff's costs of $1,300,000 be shared equally by the two insurers.

Held, the motion should be dismissed.

In the circumstances, it was appropriate to apportion the plaintiff's costs between the insurers in accordance with their respective policy limits, so that Zurich was required to pay 80 per cent of the plaintiffs' party and party costs and Intact was required to pay 20 per cent of those costs. That result was consistent with the policy objectives of achieving fairness and an equitable distribution of the costs of litigation as between insurers. It was also consistent with one of the fundamental purposes of costs, to encourage settlement.

Broadhurt & Ball v. American Home Assurance Co. (1990), 1 O.R. (3d) 225, [1990] O.J. No. 2317, 76 D.L.R. (4th) 80, 42 O.A.C. 161, 4 C.C.L.I. (2d) 89, [1991] I.L.R. Â1-2675 at 1011, 24 A.C.W.S. (3d) 684 (C.A.), consd [page551]

Burns v. Hedge, [2001] O.J. No. 1941, 146 O.A.C. 333, 27 C.C.L.I. (3d) 1, 11 M.V.R. (4th) 225, 105 A.C.W.S. (3d) 380, 2001 CarswellOnt 1743 (C.A.); Jungwirth v. Robertson, [2011] O.J. No. 2281, 2011 ONSC 3021, [2011] I.L.R. I-5158, 2 C.C.L.I. (5th) 324 (S.C.J.), distd

Other cases referred to

Fong v. Chan (1999), 46 O.R. (3d) 330, [1999] O.J. No. 4600, 181 D.L.R. (4th) 614, 128 O.A.C. 2, 93 A.C.W.S. (3d) 222 (C.A.); Riddoch (Litigation Guardian of) v. Anderson, [1991] O.J. No. 2667 (Gen. Div.); Serra v. Serra, [2009] O.J. No. 1905, 2009 ONCA 395, 66 R.F.L. (6th) 40

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131, (1)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 57, 57.01, (4)(b)

MOTION requesting that the plaintiff's costs be shared equally by two insurers.

Kristopher H. Knutsen, Q.C., for plaintiffs not attending on motion.

Eric R. Williams, for defendants Michael A. Dingwall and Woodlake Marine Ltd.

Michael P. O'Hara, for defendant Dingwall Ford Sales Ltd.

[1] SHAW J.: — The issue on this motion is the apportionment of costs payable by two insurers.

Background

[2] The plaintiff Jennifer Ward was seriously injured in a motor vehicle accident in 2004.

[3] In 2006, the plaintiffs brought an action against the defendants, Michael A. Dingwall, as the driver of the vehicle in which Ms. Ward was a passenger, Woodlake Marine Ltd., as the lessee of the vehicle, and Dingwall Ford Sales Ltd., as the owner and lessor of the vehicle.

[4] Mr. Dingwall and Woodlake were insured by Intact Insurance Company. Dingwall Ford was insured by Zurich Insurance Company.

[5] In 2013, the plaintiffs' claims for damages were settled for $10 million by way of payment of the full policy limits of each of Intact and Zurich -- $2 million from Intact and $8 million from Zurich. The plaintiffs' partial indemnity costs were settled at $1,300,000, inclusive of HST. Because Ms. Ward was a party under a disability, the settlement required court approval. On motion of the plaintiffs, I granted judgment on June 3, 2013 in accordance with the settlement. [page552]

[6] The only issue remaining is the apportionment of the plaintiffs' costs as between (a) Dingwall Ford (hereinafter "Zurich") and (b) Mr. Dingwall and Woodlake (hereinafter "Intact").

[7] Zurich brings the within motion, requesting that the costs of $1,300,000 be shared equally between the two insurers. Intact responds that the costs should be apportioned in accordance with the insurers' respective policy limits, namely, 80 per cent of the costs should be paid by Zurich and 20 per cent of the costs should be paid by Intact.

[8] In July 2007, seven months after the action had been commenced, Intact offered to settle the plaintiffs' claims against its insureds for its policy limits of $2 million, plus reasonable costs.

[9] Shortly after Intact tendered its policy limits, counsel for the plaintiffs responded that they could not release Intact from the claim until a subrogation issue with Manitoba Public Insurance Corporation ("MPIC") had been resolved and until Zurich agreed to let the other parties out of the action and to admit liability on the part of its insured.

[10] MPIC was the accident benefits insurer of Mr. Ward. MPIC claimed that it had a subrogated interest against any moneys paid to Ms. Ward. The MPIC issue was resolved, largely in favour of Ms. Ward, but not until late in the action.

[11] By October 2008, Intact had made advance payments to the plaintiffs in the total sum of $396,000. The balance of the policy limits of $1,605,000 were placed in an interest bearing account pending resolution of the action.

[12] As described by the plaintiffs' counsel in his affidavit in support of the motion for court approval of the settlement, the issue of Zurich's policy limits was a moving target. Early in the action, Zurich took the position that total available coverage was $5 million, comprised of Intact's $2 million as the underlying coverage and an additional $3 million from Zurich.

[13] Subsequently, Zurich took the position that its limits were $5 million, with Intact's underlying limit of $2 million being in addition, for total coverage of $7 million. Later still, Zurich advised that there was $8 million in coverage, inclusive of Intact's $2 million.

[14] Counsel for the plaintiffs took the position that the total limits were $10 million, inclusive of the Intact coverage. Zurich did not accept this position. Counsel for the plaintiffs retained Mr. Craig Brown, author of Insurance Law in Canada, to provide an opinion on the insurance limits. In January 2011, Mr. Brown advised: [page553]

a) Intact, under the driver's policy, would pay the first $2 million;

b) Zurich, under the lessor's contingent liability policy, plus an umbrella policy of $5 million, would pay the next $8 million

c) the limits were therefore $10 million in total between the two policies.

[15] Counsel for the plaintiffs demanded payment of the $10 million.

[16] One year later in February 2012, Zurich confirmed that coverage totalled $10 million inclusive of Intact's limits of $2 million. However, Zurich required further proof of future care costs. In 2013, the action was settled for the combined policy limits of $10 million.

Submissions

(a) Zurich

[17] Zurich submits that both it and Intact fully participated in every step of the proceeding from pleadings to court approval of the settlement.

[18] Zurich submits that it did nothing to exacerbate the plaintiffs' costs, which it says from day one were going to be in the area of $1 million.

[19] Zurich states that the main delay in the action was a result of the MPIC subrogation issue.

[20] Zurich acknowledges that Intact offered to pay its policy limits of $2 million at an early stage of the action, but contends that because of the plaintiffs' issues with MPIC, the plaintiffs could not let Intact's insureds out of the action and obtain court approval of the offer. Zurich submits that whether or not Intact wanted to pay its limits early on is irrelevant to the question of costs because Intact was in the action for the long haul until such time as the MPIC issues were resolved.

[21] In response to the statement by plaintiffs' counsel that Zurich's policy limits were a "moving target", Zurich states that there was no demand made by the plaintiffs at an early stage of the action to pay $10 million in policy limits. Zurich submits that before the plaintiffs demanded the $10 million in coverage, the plaintiffs had to obtain considerable medical, rehabilitation, housing and financial information.

(b) Intact

[22] Intact submits that the reason the plaintiffs could not let Intact's insureds out of the action once Intact had offered its policy limits in July 2007 was because the plaintiff did not know the total coverage limits of both the Intact and Zurich [page554] policies. Moreover, the plaintiffs did not have an admission of liability on the part of Zurich and they did not know the assets of the defendants in the event there was going to be a coverage shortfall.

[23] Intact notes that by October 2008, it had made approximately $396,000 in advance payments to the plaintiffs.

[24] Intact submits that it was being proactive to encourage an early settlement. Although Intact could not offer more than its own policy limits, it points to correspondence from its counsel to Zurich's counsel on February 4, 2009 and February 25, 2009 where Intact's counsel encouraged Zurich to tender its policy limits.

[25] Intact points out that Zurich finally acknowledged its policy limits of $8 million in February 2012, five years after Intact offered its policy limits. Intact submits that Zurich only offered its actual limits after plaintiffs' counsel had retained an expert to determine those limits. Intact submits that although Zurich had agreed in February 2012 that its limits were $8 million, it nevertheless did not tender those limits until later, after it required plaintiffs' counsel to further develop his case to satisfy Zurich that its policy limits were in peril. Zurich only offered the limits after Zurich itself retained an expert on the issue of future care costs. Intact submits that these increased costs should not be visited upon Intact after Intact had offered its limits.

[26] Intact submits that the rationale for awarding costs is to ensure that litigation is done efficiently. Intact submits that it did everything that could be reasonably expected of it to resolve the action by offering its limits and making advance payments. Intact submits that the court should encourage such conduct in its award of costs.

[27] With respect to MPIC, Intact submits that the time and effort spent by plaintiffs' counsel on the issue did not impact significantly on the costs of the tort claim. Both Zurich and Intact agreed with plaintiffs' counsel that MPIC's position on subrogation was wrong and that there was no serious prospect that MPIC would succeed.

The Law

[28] An award of costs is a matter in the discretion of the judge by virtue of s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides:

131(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent costs shall be paid. [page555]

[29] Rule 57.01 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] allows the court in exercising its discretion under s. 131 of the Courts of Justice Act, to take into account "any other matter relevant to the question of costs". Rule 57.01(4)(b) provides that nothing in Rule 57 affects the authority of the court under s. 131 of the Courts of Justice Act to award a percentage of assessed costs or to award assessed costs up to or from a particular stage of a proceeding. Read in conjunction with s. 131 of the Courts of Justice Act, the court therefore has wide discretion.

[30] In Serra v. Serra, 2009 ONCA 395, [2009] O.J. No. 1905, 66 R.F.L. (6th) 40 (C.A.), at p. 42 R.F.L., the Court of Appeal reiterated the fundamental purposes which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 46 O.R. (3d) 330, [1999] O.J. No. 4600 (C.A.), at para. 22:

(a) to partially indemnify successful litigants for the cost of litigation;

(b) to encourage settlement; and

(c) to discourage and sanction inappropriate behaviour.

[31] Both counsel referred on the motion to a number of decisions on the apportionment of costs as between insurers. The cases are largely fact driven and none are on all fours with the instant case. The general principle which emerges is that costs should be allocated fairly and equitably on a case-by-case basis.

[32] In Broadhurst & Ball v. American Home Assurance Co. (1990), 1 O.R. (3d) 225, [1990] O.J. No. 2317 (C.A.), the Court of Appeal addressed the allocation of defense costs among primary and excess insurers. Robins J.A., for the court, observed, at para. 41, that because the insurers had no agreement between themselves with respect to the defence, their respective obligations could not be a matter of contract. He then stated [at para. 40]:

Nonetheless, their obligations should be subject to and governed by principles of equity and good conscience, which, in my opinion dictate that the costs of litigation should be equitably distributed between them.

[33] In Broadhurst, the primary insurer argued that the costs of defending that action should be shared in proportion to the coverages afforded by each insurer, namely, that 5 per cent of the costs should be borne by the primary insurer and 95 per cent by the excess insurer.

[34] Robins J.A. held that he could not accept that submission on the facts of the case where the underlying action had not [page556] been tried or settled and the final outcome would not be known for some time. At para. 42:

In this situation, I do not think it appropriate to allocate costs simply by reference to the respective policy limits, although I would add, in other situations, this may well be a fitting basis for the allocation. The costs of providing the defence here are clearly not necessarily related to the monetary limits of the policies. It seems to me, in viewing the matter broadly and as best I can, that the fairest, most reasonable and most equitable allocation of costs that can be made in the overall circumstances of this case is to apportion them equally between the insurers.

[35] In Riddoch (Litigation Guardian of) v. Anderson, [1991] O.J. No. 2667 (Gen. Div.), the primary insurer conceded that the total claims exceeded the policy limits and offered its policy limits. The plaintiffs' underinsurer elected to have the claims assessed. The question of damages was ultimately settled at trial for an amount exceeding the policy limits. The underinsurer argued the responsibility to defend rested with the primary insurer until the trial was over, including costs.

[36] L.R. Morin J. referred to the discretion of the court in awarding costs. He stated that in exercising his discretion he was guided by the principles referred to above in Broadhurst. He held that the primary insurer was responsible for costs only up to the date that counsel agreed that the primary insurer need no longer participate in the trial. He held, at p. 4 (QL), that the primary insuer should not pay the plaintiff's costs once it was clear that its policy limits were exhausted.

To do otherwise would mean the underinsurer could have a free ride of a trial at the expense of the primary insurer. The party and party costs would be borne by the primary insurer, while the conduct of the trial would be with the underinsurer.

[37] In Burns v. Hedge, [2001] O.J. No. 1941, 2001 CarswellOnt 1743 (C.A.), in deciding that the tortfeasor's insurer and the underinsurers should share equally the costs of the action, the Court of Appeal considered the following factors:

(a) all insurers participated in the litigation through productions, discoveries and medical examinations;

(b) all insurers were parties to the action; and

(c) all insurers opposed the plaintiff's claim and sought to limit their own exposure.

[38] Zurich refers to Jungwirth v. Robertson, 2011 ONSC 3021 (S.C.J.), [2011] O.J. No. 2281. In Jungwirth, Corrick J. found that the underinsurer did not have to contribute to the plaintiff's [page557] costs where the primary insurer did not offer its policy limits until shortly after a mediation when the claim was settled for an amount in excess of the primary insurer's limits. Corrick J. held that the underinsurer was not in a position to control the litigation because of its position as an underinsurer and because it took no additional steps in the litigation once settlement was reached. It did not continue the litigation.

Decision

[39] I have determined that in the instant case, the fairest, most reasonable and most equitable allocation of costs would be to divide them in accordance with the respective policy limits of the insurers, namely, Zurich should pay 80 per cent of the plaintiffs' costs and Intact should pay 20 per cent. This is one of those cases, as mentioned in Broadhurst, where reference to the respective policy limits provides a fitting basis for the allocation.

[40] This case is unlike the situation in Jungwirth, where the primary insurer did not offer its policy limits until the matter was settled. It is also unlike the situation in Burns v. Hedge, where all insurers opposed the plaintiff's claim and each sought to limit its exposure. In this case, Intact offered its limits on a timely basis in July 2007, seven months after the action was commenced. The action did not settle until Zurich finally accepted in 2012 that its policy limits were $8 million, not the $3 million or $5 million or $6 million that it had variously represented over the years were its limits. Over the course of those years, the plaintiffs had taken the position that there was a total of $10 million in coverage. Zurich's acceptance of its $8 million limits only came after the plaintiffs retained one of Canada's leading insurance experts to give an opinion on Zurich's limits. One might have reasonably expected that those limits would have been within the knowledge of the insurer that issued the policy.

[41] One of the fundamental purposes of costs is to encourage settlement. I accept that Intact could not have done more to encourage settlement than to put up its policy limits at an early stage of the action. This type of conduct, including making advance payments, should be encouraged by the allocation of costs. It is also fair and equitable to take into consideration that Zurich did not have a clear understanding of what its own limits were until five years after Intact put its limits in play and only after the plaintiffs had repeatedly pressed Zurich on the matter. [page558]

[42] If Zurich's position were to prevail, there would be no incentive for an insurer to do what Intact did early on in the proceeding. It would also give an insurer in the position of Zurich a tactical incentive to drag out proceedings with a view to limiting its own exposure without incurring additional costs.

[43] After Intact offered its limits in July 2007, it had no interest in requiring the plaintiffs to take further steps to prove their case. It was left to Zurich to satisfy itself that the plaintiffs' claims reasonably exhausted the available coverage. The two questions which drove Zurich's conduct over five or six years were (a) what were its policy limits and (b) did the plaintiffs' damages exceed those limits. Those questions had an impact on costs. However, these concerns of Zurich were not the concerns of Intact after July 2007.

[44] I cannot agree with the submission of Zurich that there is no evidence that the delay on the issue of policy limits prevented the action from being settled and that the action did not settle because of the MPIC issue and a changing damages target.

[45] I am satisfied that the plaintiffs could not have reasonably settled without knowing the actual amount of insurance coverage. Plaintiffs' counsel had suggested to the defendants that damages were in the range of $16 million, without deduction of collateral benefits, and that they were $12 million to $13 million, net of collateral benefits, if the plaintiffs opted for a compromise. Nevertheless, once the plaintiff was satisfied by the opinion of Mr. Brown that the total coverage was $10 million, plaintiffs' counsel wrote to the defendants on February 4, 2011, stating:

Given the shifting sands on this, and what has happened here, Zurich/ING, respectfully, should right now, immediately without delay, tender the $10,000,000 limits and I will see what a Court does with this by way of approval, despite the shortfall even net of collaterals.

There still remains a subrogation issue. MPI has stated, in writing, that if this case is settled without recovery of their subrogation for PIPP benefits, they will hold the Plaintiffs accountable.

[46] I understand from this that plaintiffs' counsel was advising that if the $10 million total limits were tendered, he would seek court approval of the plaintiffs' claims for that amount. Notwithstanding that he believed damages could be assessed at a higher amount, he was prepared to settle for policy limits subject to court approval. Although MPIC's position was an issue, this did not appear to affect the plaintiffs' willingness to settle the tort claim at policy limits.

[47] It was a year after this letter from plaintiffs' counsel that Zurich acknowledged the $10 million in total limits, although [page559] Zurich still required further proof of future care damages before settling. This was also three years after Intact had written to Zurich encouraging Zurich to offer up its limits.

[48] All parties appeared to agree that costs incurred by the plaintiffs with respect to the MPIC subrogation issue would not be recoverable from the defendant tortfeasors. On the court approval of the settlement, plaintiffs' counsel was awarded solicitor-client consisting of the party and party costs of $1,300,000, plus a further $500,000 to be paid by the plaintiffs from the damages award. Compensation for the costs incurred by plaintiffs' counsel on the MPIC issue would be reflected in the solicitor-client costs, not in the party and party costs.

[49] In my view, the costs incurred by the plaintiffs after Intact tendered its limits in July 2007 do have a meaningful relationship to the issue of Zurich's policy limits. Intact required no further proof from the plaintiffs after that date on the issues of damages or policy limits.

[50] Zurich did not have an accurate picture of its limits during the action. It resisted for several years the plaintiffs' suggestion that the total coverage was $10 million. Even after accepting that its limits were $10 million, it did not tender these limits without requiring further proof of damages. In my view, Zurich acted throughout most of the action to limit its exposure.

[51] The two alternative positions put forward on the motion on the allocation of costs are to either divide the costs on a 50/50 basis or to split them 80/20 in accordance with the respective limits. I am not bound in exercising my discretion to either of those positions. However, having determined that a 50/50 split would not be fair, there is no better evidence before me that something other than an 80/20 allocation based on policy limits would be more equitable.

[52] In my view, this result is consistent with the policy objective set out in Broadhurst to achieve fairness and an equitable distribution of the costs of litigation as between insurers and it is consistent with one of the fundamental purposes of costs, to encourage settlement.

[53] An order shall therefore issue, dismissing Zurich's motion and requiring Zurich to pay 80 per cent of the plaintiffs' party and party costs and to require Intact to pay 20 per cent of the plaintiffs' party and party costs.

[54] If the parties are unable to agree on the costs of this motion, they shall within the next 45 days contact the trial coordinator to arrange a date to speak to the issue, failing which [page560] costs of this motion shall be deemed to have been resolved and no further order shall issue.

Motion dismissed.

End of Document