COURT FILE NO.: 5233/11 (Chatham)
DATE: 20191031
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
STEFANIE BERNARD,
ESTATE OF TYLER RYAN BERNARD, by his Litigation Administrator, Stefanie Bernard, ESTATE OF TAIYA LYNN TALBOT, by her Litigation Administrator, Stefanie Bernard, JENNIFER LAMARSH, by her Litigation Guardian, Stefanie Bernard,
Plaintiffs
– and –
JANE LAMARSH,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
AVIVA INSURANCE COMPANY OF CANADA
Defendants
– and –
AVIVA INSURANCE COMPANY OF CANADA, added by Order pursuant to s. 258(14) of the Insurance Act, R.S.O. 1990, c. 1.8
No one appearing for the Plaintiffs
Robert W. Weisser, for the Defendant, State Farm Mutual Automobile Insurance Company
Alon Barda, for the Defendant and Third Party, Aviva Insurance Company of Canada
HEARD: June 5, 2019
REASONS ON COSTS MOTION
KING J.
OVERVIEW
[1] This is an application by the defendant, State Farm Mutual Automobile Insurance Company (“State Farm”) for an apportionment of costs with the defendant and third party, Aviva Insurance Company of Canada (“Aviva”). It is the last issue that needs to be decided in order to bring an end to a series of civil actions arising out of a horrible and unspeakable tragedy.
[2] On December 3, 2009, the defendant, Jane Lamarsh, was driving her personal vehicle when she intentionally drove the vehicle into the St. Clair River.
[3] There were three passengers in the car. They were Tyler Ryan Bernard (“Tyler”), Taiya Lynn Talbot (“Taiya”) and Jennifer Lamarsh (“Jennifer”). Tyler and Taiya were the children of Stefanie Bernard (“Stefanie”). Stefanie was the daughter of Jane Lamarsh. Jennifer was another daughter of Jane Lamarsh. She was the younger sister of Stefanie and aunt of Tyler and Taiya.
[4] Despite the valiant efforts of Jennifer to free her niece and nephew from their seat belts, they both tragically died. At the time of this horrific incident, Jennifer was 12 years old, Tyler was 10 years old, and Taiya was 6 years old. Jennifer and Jane Lamarsh both survived.
[5] Jane Lamarsh pleaded guilty to second degree murder on September 16, 2011 and served time in prison.
The Litigation
[6] A number of civil actions arose out of this tragedy. Stefanie claimed for damages in this action on her own behalf, as Litigation Administrator for her two children, and also for her sister, Jennifer.
[7] The claim was made by Stefanie against Jane Lamarsh and her insurer, Aviva. Because the actions of Jane Lamarsh were intentional, Aviva was able to deny coverage under the policy as prescribed in s. 118 of the Insurance Act, R.S.O. 1990, c I.8 (the “Insurance Act”). The only amount that could be claimed as against Aviva on this policy was the statutory minimum of $200,000, plus costs, as set out in s. 251 of the Insurance Act. Once judgment was obtained against Jane Lamarsh, s. 258(9) prescribed that amount could be paid out and apportioned between all plaintiffs. All plaintiffs obtained judgments.
[8] Stefanie was also able to claim against the defendant State Farm as her underinsurer/OPCF 44R Family Protection Endorsement Carrier.
[9] As well, Aviva was the OPCF 44R Family Protection Endorsement Carrier for Jennifer. Accordingly, a claim was also made on Jennifer’s behalf in this regard.
[10] This action was commenced in 2011 in Chatham.
[11] In addition to this action, Greg Talbot, the former spouse of Stefanie, and the father of Tyler and Taiya, commenced two actions in Windsor.
[12] In file CV-11-00017155, he claimed against Jane Lamarsh and certain physicians and nurses that had allegedly provided medical treatment to Jane Lamarsh in a negligent manner. The claims against the nurses and physicians were ultimately dismissed without costs and have no bearing on the issues before the court on this motion. His action against Jane Lamarsh continued.
[13] He also made a claim against his OPCF 44R carrier, Echelon Insurance Company (“Echelon”). The claim against Echelon was resolved and has no bearing on the issues before the court on this motion.
[14] Aviva was made a third party to this action pursuant to an order dated May 1, 2012 and to Greg’s action on October 22, 2013.
[15] A long litigation history followed.
[16] The last issue to be settled pertained to the damages entitlement of Jennifer.
[17] Jennifer reached the age of majority on July 8, 2015 and Stefanie’s role as Litigation Guardian ended at that time. There was no change in legal representation.
[18] The parties to the respective actions agreed that the defendant Jane Lamarsh was not entitled to coverage pursuant to her liability coverage because her actions were intentional. Aviva’s liability on the direct claim was limited to the sum of $200,000.
[19] Further to that, commencing in 2012 and continuing to July 2016, Aviva forwarded various versions of a Memorandum of Understanding (“MOU”) to the parties.
[20] Eventually a MOU was executed by the parties as follows:
By counsel for Aviva and counsel for the plaintiffs on October 27, 2015;
By State Farm on February 11, 2016; and
By counsel for Greg Talbot on July 11, 2016.
[21] The MOU confirmed that the statutory minimum limits payable pursuant to s. 258 of the Insurance Act was $200,000. This amount was to be shared by the various plaintiffs. As well, the MOU provided as follows:
The liability coverage of Jane Lamarsh did not apply because her actions were intentional;
The minimum liability limit of $200,000 was to be apportioned amongst all plaintiffs who obtained judgment, which they did;
The only plaintiff who met the definition of an “eligible claimant” pursuant to the underinsurance motorist coverage of Aviva was Jennifer; and
The only plaintiffs who met the definition of “eligible claimant” with respect to the underinsurance motorist coverage of State Farm were Stefanie in her personal capacity, and as Litigation Administrator of Tyler and Taiya.
[22] Pretrial conferences were held before me on October 17, 2017, January 16, 2018, September 4, 2018 and November 28, 2018.
[23] On October 17, 2017, State Farm resolved the claim of Stefanie Bernard for the sum of $700,000, plus costs of $100,000 and disbursements totalling $27,372.65.
[24] On that date, the distribution of the $200,000 amount among the plaintiffs was discussed. Significantly it is noted that at that time:
There was no agreement as between Stefanie, Jennifer or Greg as to the specific distribution of the $200,000 amount;
State Farm had no guarantee as to what amount of the costs and disbursements, if any, would be shared with Aviva; and
As the provider of underinsurance to Jennifer, Aviva stood to receive a credit on that claim equal to what was allocated from the distribution of the funds to her, Stefanie and/or Greg. In other words, the higher Jennifer’s allocation, the lower the amount Aviva would pay on the underinsurance claim.
[25] It was ultimately agreed that Aviva would pay the $200,000 policy limit as follows:
$105,000 to Stefanie and the estates of her children (52.5%);
$60,000 to Jennifer (30%); and
$35,000 to Greg Talbot (17.5%).
[26] While acknowledging that it was obligated to pay the full amount of the coverage ($200,000), at no time did Aviva pay that amount (or any amount thereto) into court as prescribed in Rule 72 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[27] Parenthetically, it is noted that the amount attributed to Stefanie’s claim ($105,000 from her underinsurance claim against Aviva) was 15 percent of the total amount contributed by State Farm ($700,000) in the settlement of her claim.
[28] State Farm has brought this motion seeking an order that the costs pertaining to the claim of Stefanie should be apportioned equally between State Farm and Aviva. Aviva opposes the motion and takes the position that there should be no costs payable by Aviva to State Farm. Alternatively, Aviva submits the costs should be awarded in proportion to the defendants’ respective contributions of the total settlement. That is, Aviva’s contribution to costs should be $15,000, or 15 percent of the $100,000 costs allocation.
ISSUE
[29] The issue on the motion is whether Aviva should contribute to the costs, and if so, in what amount?
POSITIONS OF THE PARTIES
State Farm
[30] State Farm seeks an order that Aviva contribute 50% of the costs and disbursements provided to Stefanie pursuant to the settlement dated October 17, 2017. Such an order would require Aviva to contribute $50,000 towards legal fees (50% of $100,000) and $13,686.32 towards disbursements (50% of $27,372.65).
[31] State Farm relies on s. 131(1) of the Courts of Justice Act, R.S.O. c C.43, that states:
...subject to the provisions of the Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the direction of the court, and the court may determine by whom and to what extent the costs shall be paid.
[32] The applicant also references Rule 57.01(4) of the Rules of Civil Procedure, which prescribes the various factors the court may consider when exercising its discretion regarding costs. That rule provides:
(4) Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,
(a) to award or refuse costs in respect of a particular issue or part of a proceeding;
(b) to award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding;
(c) to award all or part of the costs on a substantial indemnity basis;
(d) to award costs in an amount that represents full indemnity; or
(e) to award costs to a party acting in person. R.R.O. 1990, Reg. 194, r. 57.01 (4); O. Reg. 284/01, s. 15 (2); O. Reg. 42/05, s. 4 (2); O. Reg. 8/07, s. 3.
[33] Counsel for State Farm emphasized that Aviva had a vested interest in the allocation of the $200,000 between Stephanie, Jennifer and Greg. The higher the proportion of those funds paid to Jennifer, the lower the amount Aviva would have to pay to Jennifer on her underinsurance claim.
[34] In these circumstances, State Farm submits the most reasonable and equitable allocation of costs is on a 50/50 basis as held in Broadhurst & Ball v. American Home Assurance Co. (1990), 1990 CanLII 6981 (ON CA), 1 O.R. (3d) 225 (CA). At page 24, Robins J.A. stated:
On what basis, then, should the costs of defending the Lumsden Building action be apportioned between these insurers? In American Home’s submission, they should be shared pro rata in proportion to the coverages afforded by each insurer, that is, 95 per cent of costs should be borne by Guardian and 5 per cent by American Home. I cannot accept that submission. The underlying action here, unlike the situation in most of the American cases, has not yet been tried or settled; it remains outstanding and its final outcome will not likely be known for some time. 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] State Farm also encouraged the court to follow the rationale applied by the Ontario Court of Appeal in Burns v. Hedge (2001), 2001 CanLII 4718 (ON CA), 146 O.A.C. 333.
[36] In Burns, the Court of Appeal overturned the decision of the motion judge who had ordered one of the three defendant insurers to pay 100% of the costs on the basis that it was the primary loss insurer and the court had no jurisdiction to award costs against underinsurers. At para. 48 of the decision, Goudge J.A. stated:
Having in mind the factors set out in Rule 57, I think the appropriate division amongst the three insurers is that each be responsible for a third of the costs component of the settlement. The broad reality of this litigation is that each insurer opposed the plaintiff’s claims and sought to limit its own exposure, each in its own way with its own arguments.
[37] I agree with counsel for the applicant that the factors considered by the court in Burns are all applicable in this matter, as follows:
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] Since the court could not ascertain which steps were necessitated by the position taken by the plaintiff, it was determined the costs should be borne equally as a matter of fairness.
[39] In summary, counsel for State Farm did not place blame on Aviva, nor was State Farm at fault. However, as both parties stood to gain from continuing the litigation in the manner that unfolded, the costs payable on the Stefanie claim should be apportioned on a 50-50 basis.
Aviva
[40] Aviva distinguishes this situation from that in Burns stating that it was known by all parties, including, but not limited to, State Farm, that the Aviva policy limit of $200,000 would be exceeded for some time before final settlement.
[41] Aviva should not be responsible for contributing to the costs because State Farm continued to pursue the litigation to reduce its liability. In point of fact, this strategy was successful because the $700,000 settlement of Stefanie’s claim was for $300,000 less than the $1,000,000 policy limit. Accordingly, Aviva should not have to underwrite the cost of maintaining the litigation when only State Farm stood to gain as it did.
[42] Aviva relies on Riddoch (Litigation Guardian of) v. Anderson, [1991] O.J. No. 2667, for the proposition that an insurer should not pay costs once it is clear that its policy limits are exhausted.
[43] Riddoch is worth examining in detail. Further to a motor vehicle accident for which the insured driver was negligent, the insurance company for the defendant admitted liability with respect to personal injuries, property damage and Family Law Act claims, as the quantum of the damages of the plaintiff exceeded the policy limits. Accordingly, the primary insurer offered to pay the policy limits.
[44] An underinsurance claim was then made against the insurer of the plaintiff. The plaintiff succeeded at trial in obtaining damages in excess of the defendant’s policy from his own carrier.
[45] The primary insurer claimed that the underinsurer was responsible to pay costs subsequent to the date the primary insurer offered to pay the policy limit.
[46] The underinsurer took the position that the primary insurer was responsible for all costs to the completion of trial.
[47] Morin J. agreed with the primary insurer that once it offered to pay the policy limit, it could do nothing more and could provide no further benefit to the insured defendant.
[48] At p. 4 of the decision, Morin J. stated:
Why should the primary insurer pay the Plaintiffs costs once it is clear that its policy limits are exhausted? In my view, it should not. 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. In effect, the Courtroom would become the playground of the underinsurer with no risks of paying costs, yet entitled to costs. In my view, this position is not fair, equitable nor tenable in good conscience. It simply does not accord with good common sense. To give a litigant a free ride in today’s Courts when Courtrooms, Judges and staff are at a premium would in my view simply encourage litigation. Such a result would therefore increase rather than reduce delay.
[49] Counsel for Aviva takes the position that since it was known by all for some time that the maximum amount of $200,000 would be expended, it should not be held liable for any costs. Alternatively, it should only be responsible for $15,000 in costs as Stefanie’s allocation of $105,000 from the $200,000 was 15 percent of her total settlement of $700,000.
ANALYSIS
[50] I start by indicating that both insurance companies and their counsel acted fairly, properly and responsibly through this complicated and troubling litigation. Furthermore, Aviva is to be credited for being the driving force in preparing the various versions of the MOU. The MOU codified that Aviva was going to contribute the full amount of $200,000. However, in the unusual circumstances of this case, that was not dispositive of all issues pertaining to Aviva because they were also the underinsurer of Jennifer. That is pivotal to my assessment of this motion.
[51] For the reasons that follow I have determined that in the circumstances of this case the costs and disbursements of Stefanie’s settlement should be borne on a 50-50 basis by State Farm and Aviva.
[52] Counsel for Aviva ably presented evidence and made submissions suggesting that since it was a fait accompli that Aviva would be paying the full $200,000, it should not have to bear the costs of State Farm continuing with the litigation to reduce their liability. In his words, “there was nothing more that they could do.”
[53] However, there was.
[54] As counsel for State Farm advised, at no time did Aviva simply pay the sum of $200,000 into court and tell the parties that they could sort it out on their own. Had they done so, that might have brought them within the four corners of the Riddoch decision. However, while Aviva promoted, negotiated and executed the MOU, understandably but significantly, it did not make a payment into court. That is, it continued to participate in the negotiations in an effort to maximize the portion of the $200,000 that was to be received by Jennifer in order to be credited in that amount towards what they would be paying to Jennifer pursuant to her underinsured claim.
[55] Had Aviva not been the underinsurer of Jennifer, it could have paid the amount into court without risk, or interest in the eventual disposition. Or, as in Riddoch, it could have made it clear it had no vested interest in the distribution of the funds and accept whatever credit flowed from Jennifer’s claim, as would be determined by the other parties. At that point, they would have been ending their involvement in the case and should not have been held responsible for costs from that point on as set out in Riddoch.
[56] While State Farm pursued its defence of the action in order to minimize liability when it settled with Stefanie, it did so by taking a leap of faith. That is, State Farm took a step to settle a major component of the litigation without any knowledge, promise or assurance as to what percentage of the $127,372.65 in costs and disbursements it would have to shoulder. It potentially could have been required to fund that entire amount.
[57] On the contrary, Aviva readily agreed to contribute the sum of $200,000, but did not do so unconditionally. It remained a participant in the process of allocating that amount as between the three plaintiffs. It had a vested financial interest in the amount to be received by Jennifer. While I do not fault Aviva for electing not to pay the money into court, or otherwise abandoning interest in the distribution of the funds from a business perspective, I fail to see how they should be considered other than as a continued and interested party in the litigation to the end.
[58] Mr. Barda suggested the court should just focus on the settlement of Stefanie’s claim. With respect that is not possible in the circumstances of this horrendous criminal incident. The multiple tort claims and underinsurance tort claims were inextricably bound together.
[59] While Stefanie’s allocation of $105,000 was only 15 percent of her settlement with State Farm, I am not persuaded the allocation of costs should be on a pro rata basis. Both insurers fully participated in the process. They should share the costs burden equally.
[60] Had Aviva paid the money into court and left to chance the apportionment to be paid to Jennifer, they might have ended or eliminated their potential costs exposure. While they cannot be faulted for wanting to oversee the distribution of the funds in order to maximize the credit they would receive towards their settlement with Jennifer on her underinsurance claim, they should not be permitted to do so without risk with respect to costs. This would have permitted Aviva to have continued financial involvement in Jennifer’s claim and seek a potential benefit/reduction without any risk of costs. That is exactly what Morin J. determined was not appropriate in Riddoch.
[61] As set out in Boucher v. Public Accounts Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (CA) at para. 26, I have determined that this outcome is fair and reasonable.
[62] I have concluded that both parties had a vested interest in taking the steps they followed through the multiple pre-trials conducted to resolve this matter and should share the costs payable to Stefanie.
ORDER
[63] It is ordered that State Farm and Aviva equally share the total costs of $127,372.65, inclusive of disbursements. The respondent’s share is $63,686.32.
COSTS
[64] The parties have agreed that the successful party is entitled to costs in the amount of $7,500, all inclusive. Accordingly, that amount is also ordered, payable by Aviva.
(Original Signed by Justice George King)
George W. King
Justice
Released: October 31, 2019
COURT FILE NO.: 5233/11 (Chatham)
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
STEFANIE BERNARD,
ESTATE OF TYLER RYAN BERNARD, by his Litigation Administrator, Stefanie Bernard, ESTATE OF TAIYA LYNN TALBOT, by her Litigation Administrator, Stefanie Bernard, JENNIFER LAMARSH, by her Litigation Guardian, Stefanie Bernard,
Plaintiffs
– and –
JANE LAMARSH,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
AVIVA INSURANCE COMPANY OF CANADA
Defendants
– and –
AVIVA INSURANCE COMPANY OF CANADA, added by Order pursuant to s. 258(14) of the Insurance Act, R.S.O. 1990, c. 1.8
REASONS FOR JUDGMENT
King J.
Released: October 31, 2019