Endorsement

Overview

The Plaintiff, Stephane Brazeau, was involved in a motor vehicle collision on May 18, 2018. The Defendant, Tammy N. Smith, was impaired by alcohol and was driving while her license to do so was suspended. Her insurer, Wawanesa Insurance, denied her coverage. Wawanesa was added as a Statutory Third Party.

The Plaintiff’s insurer was Aviva Insurance Company of Canada. Aviva provided underinsured motorist coverage to the Plaintiff at the time of the collision.

Ms. Smith was charged with dangerous operation of a motor vehicle and failure to provide a breath sample under the Criminal Code, as well as with suspended driving under the Highway Traffic Act. The devastating accident occurred because Ms. Smith attempted to make a left-hand turn without yielding to the Plaintiff, who had the right of way. Her ability to operate her car was impaired by the consumption of alcohol at the time.

The Plaintiff suffered numerous devastating injuries. The Plaintiff alleged that he will never be able to work again or live without support and medical care for the rest of his life.

The Plaintiff commenced the Wawanesa action on September 21, 2018, against the Defendant, Smith. After Wawanesa denied coverage to the Defendant, Smith, it was added as a Third Party pursuant to s. 258(14) of the Insurance Act.

The Plaintiff was insured by an Aviva policy with un/underinsured motorist coverage. The Plaintiff commenced the Aviva action on September 17, 2019.

At a case conference in March 2021, it was ordered that a common mediation and pre-trial conference be held for both actions and that the actions be tried together or one after the other.

Both actions were eventually settled on May 7, 2024—six days before the trial was scheduled to commence. The Plaintiff settled separately against Wawanesa and Aviva. The trial was scheduled to begin on May 13, 2024.

The Plaintiff settled his claim with Aviva for $1 million in damages and nothing for costs. On the same day, Wawanesa agreed to settle the Plaintiff’s claim against Ms. Smith for the statutory maximum damages of $200,000. On May 23, 2024, Mr. Brazeau also settled his Statutory Accident Benefits claim for $250,000.00.

The settlement of the Aviva action did not involve any contribution to the Plaintiff’s costs and disbursements. Wawanesa’s counsel was only advised of this fact on May 9, 2024.

The Plaintiff, Stephane Brazeau, moves against the Statutory Third Party, Wawanesa Insurance, to recover all costs and disbursements incurred in the Wawanesa action (CV-18-77897) and the Aviva action (CV-19-81438). The Plaintiff has claimed $600,654.13 in costs for the tort action and $56,144.16 for the Statutory Accident Benefits claim.

The Responding Party, Wawanesa, acknowledges an obligation to pay costs but argues for a pro rata or proportional distribution of liability to pay the Plaintiff’s costs and disbursements between itself and Aviva.

The Plaintiff is not seeking any costs award against Ms. Smith as she is impecunious.

The Issues

The issues to be decided on this motion are:

a. What is the proper apportionment of costs between Wawanesa and Aviva, or what is the percentage of costs each insurer shall pay?

b. Is Wawanesa responsible for paying costs related to the Statutory Accident Benefits claim and their settlement?

For the reasons that follow, I conclude that costs should be equally apportioned between Wawanesa and Aviva. I conclude that no costs are to be paid by Wawanesa regarding the costs related to the Statutory Accident Benefits claim.

Analysis

The Apportionment of Costs

The Plaintiff seeks to recover all costs and disbursements incurred in the Wawanesa action (CV-18-77897) and the Aviva action (CV-19-81438), including the costs associated with the Statutory Accident Benefits claim.

The Third Party, Wawanesa, does not contest that some degree of costs are to be paid by it. It argues that imposing 100% of the costs on it would be an unjust outcome. Instead, Wawanesa argues that costs should be imposed on a pro-rata or proportional basis. Furthermore, Wawanesa argues that costs related to the SABs claim should not be imposed on Wawanesa.

The Plaintiff and the Third Party refer to each other's conduct and that of Aviva to support their arguments regarding awarding costs. As such, reference to the facts and timeline of this litigation will be necessary to present my analysis. Before proceeding, I will outline the legal principles that inform my determination of this question.

The parties agree that the court is empowered with a broad discretion in awarding costs to ensure fairness and equity between the parties. This broad discretion allows the court to consider the specific facts of each case to achieve a just outcome. See section 131(1) of the Courts of Justice Act.

The parties agree that Rule 57 of the Rules of Civil Procedure outlines the factors a court may consider when exercising its discretion regarding awarding costs, considering the specific facts of the individual case. These factors include:

a. The amount claimed and the amount recovered;
b. The apportionment of liability;
c. The complexity of the proceeding;
d. The importance of the issues;
e. The conduct of the parties that tended to shorten or lengthen unnecessarily the proceeding; and
f. A party’s denial of or refusal to admit anything that should have been admitted.

In Burns v. Hedge, the Court of Appeal reaffirmed the court’s broad power to distribute costs equitably and proportionally. In awarding costs between three insurers equally, the court emphasized at para 48 that:

"[t]he broad reality of this litigation is that each insurer opposed the Plaintiffs’ claims and sought to limit its own exposure, each in its own way with its own arguments. As Wilkins J said: 'To sort out what steps in the litigation were necessitated by reason of the position of the Plaintiff in the action as opposed to either one or the other O.E.F. insurers, would, in my view, on the facts of this case, be virtually impossible.'"

Ultimately, the Court of Appeal held in Burns that the appropriate division among the three insurers was that each should be responsible for one-third of the cost component of the settlement.

Wawanesa also relies upon Ward v. Dingwall, 2014 ONSC 126, where the court determined that the fairest and most equitable allocation of costs would be to divide them in accordance with the policy limits of the insurers, allocating the costs proportionally. The costs were awarded on an 80/20 split to reflect the more significant costs to the party that engaged in delay and prolongation of the litigation.

Timeline of the Litigation

a. Date of Accident: May 18, 2018
b. Date claim issued: September 21, 2018
c. Date of Requisition noting Smith in default: February 19, 2019
d. Order adding Wawanesa as a Statutory 3rd Party: August 2, 2019
e. Date of Statement of Defence of Wawanesa: September 11, 2019
f. Date of Statement of Claim against Aviva: September 17, 2019
g. Commencement of examinations for discovery: October 13, 2020
h. Completion of examinations for discovery: December 4, 2020
i. Order that actions be tried together: March 29, 2021
j. Date actions set down for trial: June 30, 2021
k. Date of Global Mediation: December 17, 2021
l. Date of Global Pre-Trial Conference: February 21, 2024
m. Settlement with Aviva and Wawanesa: May 7, 2024
n. Scheduled commencement date of trial: May 13, 2024
o. Settlement with Aviva (SABs Insurer): May 23, 2024

During submissions, it was noted that inconsistencies existed between the agreed-upon statement of facts and the affidavit material filed regarding the sequence of settlements around May 6 and 7, 2024. Counsel made submissions to address the inconsistency; however, both parties ultimately acknowledged that the precise sequence of the settlements made little difference. I agree. In my view, a more comprehensive analysis is necessary to determine the allocation of costs. I place no importance on the sequence of the settlements achieved on May 6 and 7, 2024.

The Plaintiff argues that the factors to be considered justify holding Wawanesa responsible for the litigation costs. The Plaintiff submits that, rather than simply paying the $200,000 statutory maximum that Wawanesa might be required to pay, Wawanesa elected to add itself as a statutory third-party defendant and defended the action. The Plaintiff submits that had Wawanesa not taken these steps, there would have been no costs to pay. Moreover, the Plaintiff cites that Ms. Smith took no steps to defend the action and was noted in default in February 2019. The Plaintiff refers to the acts of Wawanesa being added as a Third Party in these circumstances as requiring six years of litigation.

I do not view the action of Wawanesa in exercising its rights to participate as a Statutory Third-Party and defending the action as illegitimate, nor do I believe that its exercise of its right to participate caused six years of litigation and expense. However, as a result of doing so, Wawanesa is responsible for bearing some costs. Wawanesa does not refute this obligation. I disagree with the Plaintiff's submission that, in exercising its rights as a Statutory Third Party, Wawanesa assumed the role of the Defendant, Ms. Smith. Nor do I accept the Plaintiff's argument that there is a moral imperative for Wawanesa to pay the costs arising from the litigation, as Ms. Smith is the at-fault driver.

The Plaintiff argues that Wawanesa is responsible for the costs as it was frivolous for it to suggest that it was not responsible for the statutory minimum of $200,000. Again, respectfully, I disagree. It was appropriate for Wawanesa to defend the action along with Aviva. Wawanesa appeared to be aware of the costs of the litigation and made early efforts to settle its part in the action for the statutory limits. On December 17, 2021, at the global mediation of the actions, Wawanesa offered $245,000 all-inclusive. While the Plaintiff received this offer favourably and a settlement was reached in principle, Aviva refused to accept Wawanesa’s position to deny Ms. Smith insurance coverage. Wawanesa and the Plaintiff could not agree on a mutually acceptable release, preventing the finalization of the agreed-upon settlement. While it was reasonable for the Plaintiff to decline to settle with Wawanesa while the question of Aviva’s liability and Wawanesa’s exposure was unresolved, I view Wawanesa’s early attempt to resolve their part in the action in December 2021 as a significant factor in determining the allocation of costs. It reflects their efforts to settle the matter as compared to the approach taken by Aviva.

I do not accept the Plaintiff’s submission that Wawanesa should solely bear the costs in this matter as the significant damages and complexity made it evident from the outset that the Plaintiff’s claim was worth at least the statutory minimum damages for two reasons. First, it ignores the early attempt by Wawanesa to settle their part of the action. Second, it does not consider the reality that Aviva continued challenging Wawanesa’s denial of coverage to the defendant, Ms. Smith.

Aviva made no similar early attempt to resolve the litigation. Aviva's first offer to settle was made on May 2, 2024—10 days before the trial was scheduled to commence on May 13, 2024.

Aviva and Wawanesa participated fully in the action, resisting the Plaintiff’s claim. This included discoveries, mediation, pre-trial conferences and medical examinations. I note that Aviva commissioned all the expert reports in the matter. The fact that both insurers fully participated in the defence of the actions is a factor that leads me to conclude that shared responsibility for the costs is appropriate.

Correspondence from Aviva reflects that it understood its responsibilities regarding costs and sought to impart to and convince Wawanesa that it shared in those responsibilities. In a letter dated April 30, 2024, Aviva, through its counsel, wrote to Wawanesa’s counsel advising that:

On the issue of costs, we will be relying on the cases of Burns v. Hedge and Bernard v. Lamarsh, 2019 ONSC 6327. Our position is that Wawanesa participated in the action up to the present in resisting the plaintiffs’ claims and not paying its limits (note that In Bernard the limits were offered but not paid) (sic) and having satisfied that requirement, the cases indicate it should pay 50% of the costs.

Under my broad discretion, I conclude that costs should be allocated equally between the Defendant Aviva and the Third Party Wawanesa on a 50-50 basis. As in Burns, each party opposed the Plaintiff’s claims and sought to limit its own exposure. While Wawanesa sought to settle the matter much earlier than Aviva, I am satisfied that Wawanesa was fully engaged throughout the actions defending the matter, even though its liability was capped at $200,000. In my view, after considering Jones v. Green, 1995 CarswellAlta 756, and Weppler v. Messner, 2005 ABQB 534, an underinsurer does not receive a “free ride” at the expense of the primary insurer. While it would be inequitable to impose all the costs on Wawanesa when Aviva played a more significant role in prolonging the litigation considering its lack of effort to settle the matter earlier in the process, I am of the view that it would also be unfair to award pro-rata costs based on the much less significant liability faced by Wawanesa as the Statutory Third Party when considering its significant role in the litigation. Noting the difficulty cited in Burns of sorting out what steps in the litigation were necessitated by reason of the position of the Plaintiff in the action as opposed to either one or the other insurers, I am of the view that the fair and equitable allocation of costs is on a 50-50 basis between Aviva and Wawanesa. Because of the agreement between the Plaintiff and Aviva, I am aware that Aviva is not required to pay any costs and that, therefore, this decision allocating costs will only impact Wawanesa.

Responsibility for Paying Costs Related to the Statutory Accident Benefits Claim and Settlement

The second issue is whether Wawanesa is responsible for paying the Plaintiff's costs related to the associated Statutory Accident Benefit Claim. The Plaintiff’s counsel has claimed $56,114.16. Wawanesa submits that it should not be responsible for costs incurred in the SABs claim.

The parties agree that Cadieux v. Cloutier, 2018 ONCA 903 is the leading case in this area.

In Cadieux, the Court of Appeal discussed two competing strands of cases regarding the costs of pursuing SABs, concluding that the line of cases articulated in Carr v. Modi, 2016 ONSC 7255, Ananthamoorthy (Litigation guardian of) v. Ellison, 2013 ONSC 4510, Hoang (Litigation guardian of) v. Vincentini, 2014 ONSC 5893 was the preferred one. The court stated at paras 129 to 134:

129 The court has jurisdiction, under s. 131(1) of the Courts of Justice Act, to award "costs of and incidental to a proceeding". Legal fees and disbursements in pursuing SABs can reasonably be considered incidental to the proceeding where the SABs have reduced the damages payable by the tortfeasor.

130 We agree with the observations of D. Wilson J. in Hoang and Ryan v. Rayner, at para. 8, that the tort defendant should not be required to pay the costs of the plaintiff's pursuit of SABs as a general principle or as a matter of course. The issue, as she observed, is fact driven and depends on the particular circumstances of the case.

131 That observation is particularly relevant in the settlement context. The amount, if any, allocated to costs by plaintiff's counsel and the SABs insurer in a settlement disclosure notice should not necessarily determine the costs to be paid by the tort insurer. Many factors can influence the amount allocated to costs.

132 A trial judge considering whether to award such costs, and if so, the amount of the award, will have regard to all the circumstances, including: (a) the fees and disbursements actually billed to the plaintiff in pursuit of the SABs; (b) relevant factors in Rule 57.01, including whether the litigation of the SABs claim involved particular risk or effort; (c) the proportionality of the legal costs and expenses incurred by the plaintiff to the benefit of the SABs reduction to the defendant; (d) whether the SABs were resolved by way of settlement or by arbitration; (e) any costs paid as a result of the settlement or arbitration; (f) whether all or any portion of the costs were incurred as a result of unusual or labour-intensive steps that should not reasonably be visited upon the tort defendant; (g) whether or not plaintiff's counsel was acting on a contingent fee basis and, if so, the terms of the arrangement; and (h) the overall fairness of the allocation of the costs of pursuing SABs as between the plaintiff and the SABs insurer and as between the plaintiff and the tort insurer.

133 There has been a change in the SABs arbitration procedure, effective April 1, 2016. Under the regime in effect at the time of the accident in this case (2006), s. 282 of the Insurance Act provided for the arbitration of disputed SABs claim and s. 282(11) provided that the arbitrator could award a party the expenses of the arbitration. Arbitrations took place under the auspices of the Financial Services Commission ("FSCO"). A party was not required to arbitrate and could pursue a claim in the courts.

134 Effective April 1, 2016, disputed SABs claims must be pursued in proceedings before the Licence Appeal Tribunal ("LAT") and not in the courts. The LAT has no jurisdiction to award costs, except in cases where a party has acted unreasonably or the appeal is frivolous, vexatious, or commenced in bad faith, in which case the party may make a request for costs: Common Rules of the License Appeal Tribunal, Animal Care Review Board, and Fire Safety Commission (effective October 2, 2017), s. 19.1; see also License Appeal Tribunal Act, 1999, S.O. 1999, c. 12, Sched. G, s. 8. The import is that in most cases, the party will bear its own costs of asserting a contested SABs claim against the insurer. The issue is not before us and we make no comment on the effect, if any, of the change in procedure on the recoverability of the costs of the SABs claim in the tort action.

Cadieux cited the following from Hoang v. Vincentini, 2014 ONSC 5893, with approval:

The Regulations provide a comprehensive scheme for the recovery of benefits associated with motor vehicle accidents, and there are provisions for the payment of costs . . . . The pursuit of SABs and whether to settle or proceed to the next level is in the discretion of counsel and the injured party . . . . Tort defendants are not involved in the SABS process and have no ability to control it. It would be unfair as a general proposition, in my view, to lay the costs of the accident benefits pursuit at the feet of the tort defendants. There may be times when a tort defendant derives a clear benefit from the accident benefits matters by way of a deduction of the amounts from damages, and in those circumstances a judge fixing costs in a tort action may consider it appropriate that the tort defendant pay the costs incurred by the plaintiff in securing the benefits. At other times, however, there may be "compelling circumstances" as described in Moodie v. Greenaway Estate, [1977] O.J. No. 6525 (Ont. Ct. J., Gen. Div.), at para. 4, where it would be inappropriate to visit the costs of dealing with other insurers on a Defendant in a tort claim. There is no hard and fast rule . . . . As I stated in Ananthamoorthy, at para. 21"the solicitor for the Plaintiff is bound to pursue his client's entitlement to various benefits . . . " There are limitations on that activity. The statutory scheme which exists for securing accident benefits provides for the payment of costs. In many if not the majority of cases where there is a tort action going forward, the pursuit of accident benefits is quite separate from the tort action, including separate disbursements and expert reports. It is appropriate in these circumstances that the solicitor for the Plaintiff accepts the costs as awarded at FSCO. In other cases, depending on the facts, it may be appropriate for some of the time expended in pursuing statutory benefits to be included in the fees sought in the tort action. I do not agree that a Plaintiff can take whatever steps he or she wishes to recover accident benefits and then demand and expect payment from the tortfeasors in a different proceeding.

In my view, it would be inequitable to require Wawanesa to pay costs over the SABs proceedings when it had no control of the steps taken by the Plaintiff to secure the benefits. The liability of the Third Party Defendant, Wawanesa, was capped at $200,000. It was to be expected that when the dispute between Aviva and Wawanesa regarding the legitimacy of Wawanesa’s decision to deny coverage to the Defendant, Ms. Smith, was resolved, Wawanesa would be liable for $200,000. As such, Aviva secured the benefit of the SABs payment over $200,000. Wawanesa would not, in the circumstances, be in a position to benefit in such a way that its exposure would be lowered. If the costs for the SABs process were appropriate, in my view, Aviva would be responsible for their payment; however, the settlement between the Plaintiff and Aviva foregoes any payment of costs by Aviva.

As noted in para 134 of Cadieux, in most cases, the party will bear its own costs of asserting a contested SABs claim against the insurer.

I conclude that, in the present circumstances, Wawanesa is not responsible for paying costs to the Plaintiff in connection with his pursuit of the contested SABs claim.

Disposition

I conclude that the payment of costs to the Plaintiff in the actions before the court should be apportioned between Wawanesa and Aviva on a 50-50 basis.

Regarding the second issue, the payment of costs for the pursuit of the Statutory Accident Benefits, I conclude that no costs are payable by Wawanesa.

I encourage the parties to agree on the quantum of costs when applying this endorsement. If the parties cannot agree, they may schedule a case conference before me to discuss the next steps.

Costs

I encourage the parties to agree on the question of costs for this motion. If the parties cannot agree, the Plaintiff may file brief submissions, no longer than three pages, exclusive of an outline of costs, within 30 days. Wawanesa may file similarly brief cost submissions and costs outline within 30 days of receiving the Plaintiff’s cost submissions.

Brian C. J. Holowka
Date: April 14, 2025