Persampieri v. Hobbs, 2018 ONSC 368 (CanLII)

In a recent costs endorsement against Aviva, the Court held that insurers who took positions on modest claims that necessitated a trial should not be allowed to rely on a strict application of the proportionality principle in determining costs. The Court held that as Aviva had made a tactical decision to reject a Rule 49 offer that the Plaintiff beat at trial, it should bear the full magnitude of the consequences of that strategy. Although the Plaintiff was ultimately awarded only $20,414.83 for her damages, the court ordered a costs award of $237,017.50 payable to the Plaintiff.

Heard: In Writing | Full Decision [PDF]

The Plaintiff was an 84-year-old woman who was rear-ended by a driver insured by Aviva. From the filing of the Statement of Defence to the rendering of the jury’s verdict, Aviva had maintained the position that the Plaintiff did not meet the statutory threshold under section 267.5(5) of the Insurance Act and that they would not pay any tort damages to the plaintiff.

The Defendants served a Rule 49 offer to dismiss the action without costs on November 25, 2016. On March 21, 2017, the Plaintiff served a Rule 49 offer to settle her action for damages of $20,000, without pre-judgment interest, plus partial indemnity fees and disbursements.  On May 15, 2017, the Plaintiff served a further Rule 49 offer to settle her action for damages of $10,000, without pre-judgment interest, plus partial indemnity costs.

Liability was admitted and a two-week jury trial on damages proceed from May 29, 2017 to June 15, 2017.  Counsel for the Plaintiff called extensive lay, medical and future cost of care evidence. After the jury charge, Justice Sanderson heard and dismissed the Defendants’ threshold motion.

The jury awarded the plaintiff a total of $67,500:

  • $40,000 for general damages;
  • $25,000 for housekeeping and home maintenance;
  • $2,000 for attendant care; and
  • $500 for medical and rehabilitation expenses.

After the application of statutory deductibles and deductions for accident benefits, the net award was $20,414.83:

  • $2,614.83 for general damages (net of the deductible);
  • $15,800 for housekeeping and home maintenance damages (net of housekeeping benefits received);
  • $0 for caregiving;
  • $2,000 for attendant care damages;
  • $0 for out of pocket expenses; and
  • $0 for medical and rehabilitation benefits (net of medical rehabilitation benefits.)

After the verdict, counsel provided written submissions on the issue of costs. As the Plaintiff had obtained a more favourable result at trial than her offer to settle on May 15, 2017, Justice Sanderson held that costs should be awarded on a partial indemnity scale to May 15, 2017, and on substantial indemnity thereafter.

The main dispute was whether the costs award should reflect all reasonable costs of the trial, as submitted by counsel for the Plaintiff, or should be proportional to the ultimate verdict, as submitted by counsel for the Defendants.

Justice Sanderson noted that the legislature had intended to give greater cost protection to Plaintiffs than to Defendants, “by imposing stiffer consequences on Defendants where Plaintiffs have beat their own Offers to Settle” (para. 93). Furthermore, a strict application of the proportionality principle, which was generally invoked to foster access to justice,  would deprive the plaintiff of that protection and could stifle access to justice.

In several paragraphs worth quoting in full, Justice Sanderson held:

Here, the party invoking the proportionality principle and thereby seeking to minimize the effects of a usual order for costs under Rule 49.01(1) is a sophisticated insurer that made a tactical decision to reject a Plaintiff’s formal Rule 49 Offer to Settle understanding the risk in costs that it was taking by so doing.

Because it had framed its defence in the manner that it had, it knew that the resolution of the issues at a trial would involve the hearing of lengthy and costly evidence, including extensive medical evidence.

Sanctioning insurers’ litigation strategies involving:

  1. discouraging Plaintiffs from pursuing legitimate but modest claims by refusing to make any meaningful offer to pay damages and forcing those Plaintiffs to trial in circumstances  where, because of defences the insurers have asserted, they cannot possibly be successful unless they call expensive medical and other evidence;
  2. then, raising the spectre of very serious adverse cost consequences of such trials;
  3. then, even after Plaintiffs have chosen to take the serious adverse costs risks of such trials, and even after they have been successful at trial and have received costs awards under Rule 49.01(1) on a substantial indemnity scale;
  4. attempting to unduly minimize the quantum of otherwise usual amounts of costs including substantial indemnity costs on the basis of proportionality, would be, in my view, to sanction under compensation of Plaintiffs for costs legitimately incurred to make many lawsuits uneconomic and could generally discourage Plaintiffs with modest claims, even if valid from pursuing them.

If pursuing such an approach or strategy were to have the effect of generally discouraging Plaintiffs from bringing and pursuing modest sized claims, [even in cases such as here where liability has been admitted] the  benefits to insurers could  be significant and wide ranging.

If insurers were incentivized to pursue such a strategy and to generally resist settlement of such cases, in order to generally discourage such Plaintiffs from pursuing such actions, that could seriously jeopardize overall access to justice.

Insurers can, of course, pursue whatever strategy options they deem fit, but especially where such strategies may have wide ranging and adverse implications involving widespread denial of access to justice, the use such strategies should not be encouraged by the giving of cost breaks on  foreseeable costs consequences.

Total unwillingness to reassess/discuss settlement based on full information and advice should not be sanctioned or encouraged in any way, [including by sheltering insurers from the foreseeable costs consequences of such a decision, should it fail to yield a result favourable to an insurer in a particular case]. (paras 98-103, 208)

Justice Sanderson found that counsel for the plaintiff had acted reasonably in calling such extensive evidence on damages due to the issues in dispute. The Defendants were ordered to pay costs of $237,017.50 to the Plaintiff.

 

Read the full decision [PDF]
Written by

Gillian attained an Honours Bachelor of Arts degree in English Literature from Queen’s University in 2011, receiving the Roscoe R. Miller Award and the Arts 1915 Price for academic excellence. She received her Juris Doctor from Western University in 2014 and was placed on the Dean’s Honour List.

Prior to joining Bogoroch & Associates LLP, Gillian articled at a full-service firm in London, and was called to the Bar in 2015. She has been published in The Advocates’ Journal and participated in the Gale Cup Moot, and is a member of the Canadian Bar Association, The Advocates’ Society, and the Ontario Trial Lawyers Association.