Carr v. Modi, 2016 ONSC 7255

PJI Amendment is Not Retroactive and Costs Incurred Pursuing ABs May be Paid by Tort Defendant

Released November 18, 2016 | Full Decision [CanLII]

The Divisional Court upheld the decision of Lederer J. from a motion to determine the applicable pre-judgment interest rate and the quantum of costs following a settlement between the parties on September 25, 2015. The latter dispute is of greater interest to the author of this article although the former deserves some summary and commentary, especially in light of its favourable outcome for the Plaintiff’s bar.


Pre-Judgment Interest Rate:

At the time of the subject motor vehicle accident (January 30, 2008) and when the action was commenced (January 12, 2010), pre-judgment interest was calculated in accordance with section 128(2) of the Courts of Justice Act, which deferred to Rule 53.10 of the Rules of Civil Procedure. Rule 53.10 provided that “The pre-judgment interest rate on damages for non-pecuniary loss in an action for personal injury is 5 per cent per year”. On January 1, 2015, section 258.3(8.1) of the Insurance Act was amended to read that section 128(2) of the Courts of Justice Act “does not apply in respect of prejudgment interest for damages for non-pecuniary loss in an action” “for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile”. Thus, effective January 1, 2015, rule 53.10 of the Rules of Civil Procedure no longer governs the calculation and application of pre-judgment interest and parties must resort to the Courts of Justice Act for guidance on the “prejudgment interest rate”. That term is defined in section 127(1) of the Courts of Justice Act as the bank rate on the first day of the last month of the quarter preceding the quarter in which the action was commenced. In the subject action, the applicable pre-judgment interest rate would be 1.3%.

Lederer J. was charged with determining whether to apply the January 1. 2015 amendment to the Insurance Act retrospectively, which would have the effect of applying the 1.3% pre-judgment interest rate. The Plaintiff submitted that the rate of interest ought to be the 5% that was in place prior to the amendment to the Insurance Act given that the impact of the amendment is substantive because it affects the material rights of the Plaintiff and because it was not specifically provided for in the legislation. The Defendants submitted that the amendment was procedural and thus, it can have retrospective effect. Lederer J. preferred the position of the Plaintiff as supported by the case law in El-Khodr v. Lackie (2015), which found that section 258.3(8.1) of the Insurance Act was substantive in nature, and held that the pre-judgment interest rate ought to be calculated at a rate of 5%.


Costs Arising from the Accident Benefits Claim:

The settlement between the parties included payment of partial indemnity costs to be agreed upon by said parties or otherwise assessed. In negotiating those costs, a dispute arose between the parties as to whether any portion of the Plaintiff’s costs arising from the Arbitration in the accident benefits claim (addressing entitlement to income replacement benefits) should form a portion of the partial indemnity costs payable as part of the subject settlement. The motion before Lederer J. also addressed this question, which was decided in the affirmative and in favour of the Plaintiff and subsequently upheld by the Divisional Court.

The Dispute Resolution Practice Code restricts hourly rates recoverable by an insured against insurers to $150. Following the Plaintiff’s successful Arbitration to determine his entitlement to income replacement benefits, the Arbitrator awarded “expenses” for a quantum less than the fees claimed by Plaintiff’s counsel for his costs of the hearing. Said Plaintiff’s counsel felt that the award for “expenses” was insufficient and so the Plaintiff sought a further amount in the herein tort action on account of the aforementioned shortfall.

Lederer J. recognized that when a claimant of accident benefits is successful in an Arbitration such as the one in which the Plaintiff succeeded, the insurer of the tortfeasor benefits because payment of accident benefits reduces its liability to pay those damages recovered from the accident benefits carrier. In this case, the value of the income replacement benefit was deducted from any award for loss of income in the tort claim. The Plaintiff submitted that on account of this reality, it would be appropriate for the Defendants to pay a portion of the costs of a proceeding that results in the aforementioned benefit. The Plaintiff supported this position by referring to the comments of Wilson J. in Ananthamoorthy v. Ellison (2013), where she commented that the payment of accident benefits is

… inextricably linked to the action against the driver because the defendant insurer can claim a deduction for amounts the Plaintiff receives from her own insurer. Thus, the solicitor for the Plaintiff is bound to pursue his client’s entitlement to various benefits or face the argument at trial from the tort insurer that the Plaintiff could have and should have received benefits from the no-fault insurer.

Wilson J. went on to quote another decision, Moodie v. Greenway (1997), in which the Court held:

… In my view such pursuits are part and parcel of the Plaintiff’s obligations in an action against the tortfeasor by reason of the releases available to the tortfeasor under the Insurance Act and only in any compelling circumstances should the unsuccessful tortfeasor escape responsibility to indemnify the Plaintiff for the costs of such pursuits….

In Anand v. Belanger (2010), Stinson J. came to a similar conclusion:

It is quite something else, however, tor the tortfeasor (or more accurately its insurer) to reap the benefits of the risk and expense undertaken by the plaintiff in commencing legal proceedings and risking adverse cost consequence (not to mention her own legal expenses) pursuing a claim for unpaid IRBs or STDs or LTDs, without the tortfeasor/insurer bearing the costs of accomplishing that result.

Wilson J., however, added a cautionary note that costs will not always be included in any award that is made. She stated that there may be “compelling circumstances” where it would be inappropriate and that there is “no hard and fast rule”.

In the case at bar, Lederer J. held that because the Plaintiff was successful in his Arbitration in which he sought payment of income replacement benefits, the tortfeasor was saved from liability to pay a portion of an income loss claim on account of the successful Arbitration award. He held that the herein case presented an appropriate circumstance for the tortfeasor to pay a portion of the costs of the Arbitration.

Read the full decision on CanLII

Questions & Commentary

The decision, however, has provoked the curiosity of this author. I have given considerable thought as to whether the Court’s decision may be extended to include tort actions involving other sorts of accident benefits resolutions and/or disputes. Some questions and commentary are found below:

  • Is the Plaintiff entitled to the costs of the Arbitration should he/she be unsuccessful in disputing or recovering accident benefits denials?

Theoretically, the Plaintiff will have incurred legal expenses and assumed risk in mitigating the expenses to the tort insurer. It is inconclusive as to whether a successful Arbitration result is necessary to trigger an award of costs. To make matters more complex, how is one to determine what constitutes a “successful” Arbitration result. Does an award of $1 constitute “successful mitigation”? Why not? Plaintiffs’ counsel should put forward the argument that any effort to mitigate (in all its forms, as discussed below) ought to be the primary consideration.


  • Is an award of costs to the Plaintiff more likely if the accident benefits disputes are heard by the Licensing Appeal Tribunal (LAT)?

Given that no costs are awarded at the LAT, potential costs awarded in the tort action ought to be of a greater quanta. Substantively, however, whether disputes are arbitrated before the Financial Services Commission of Ontario (FSCO) or an independent arbitrator, the prevailing consideration ought to be whether expenses to the tort insurer are mitigated, in which case costs should be payable.


  • Is the Plaintiff entitled to costs payable by the tort insurer if there is no termination of benefits? What if there is no LAT Application filed or Arbitration commenced?

Many times in our careers we, as Plaintiffs’ counsel, have picked up the phone or written a stern letter and swayed accident benefits adjusters to reverse denials, reinstate benefits, or pre-approve Treatment Plans on the merits and without litigating the disputes. Those efforts required time and preparation, without which the accident benefits would not have been paid to the insured/Plaintiff. If partial indemnity costs are intended to offset a Plaintiff’s legal expenses, then it follows that costs ought to be payable by the tort insurer irrespective of the status of accident benefits paid, denied, or disputed. In fact, any work that counsel for the Plaintiff carries out helps to mitigate the liability of the tort insurer. Is that limited to an Arbitration or vigorous advocacy and debate? I don’t believe so. Does having one’s clerk or assistant schedule a phone call, send a request letter, or produce clinical notes and records assist in mitigating the tort insurer’s liability? Absolutely. Although some tasks contribute more than others, each specific task represents a legal expense which, conceivably, was necessary in order to bring about payment of accident benefits (or at least an attempt to recover said payment). Further, one could argue that legal expenses are incurred even where the accident benefits carrier does not terminate benefits. This can often be on account of a claimant’s/Plaintiff’s counsel’s expertise and advocacy, and at the very least, production of damage documentation to substantiate claims for benefits. It is the author’s opinion that if someone is docketing for time on a given file, then legal expenses are being incurred. Partial indemnity costs are intended to offset said expenses for the benefit of the victor of the legal dispute, whether litigation arises or not – and even whether a dispute arises or not.


In summation, there are four scenarios in which the Plaintiff ought to put forth the argument that the tort insurer should pay a portion of the costs arising from the accident benefits claim, even if the claim has not been resolved on a full and final basis (and arguably even if the accident benefits carrier has refused to pay a single penny for accident benefits). So long as the Plaintiff mitigated the expenses and liability of the tort insurer, whether successful or not, costs ought to be payable by the tort insurer. Although a sufficient sample size of case law to validate this theory does not yet exist, I would presume that the degree of anticipated success would increase as one progresses from scenario one to scenario four, which are outlined below:

  • Scenario one: Accident benefits claims where there was no termination of benefits;
  • Scenario two: Accident benefits claims where there was a termination of benefits that was not litigated (at the LAT or otherwise);
  • Scenario three: Accident benefits claims where disputes were settled before a LAT Hearing or Arbitration, but which included terminations of benefits where litigation was commenced by way of an Application for Mediation or Arbitration or a LAT Application; and
  • Scenario four: Accident benefit claims where disputes were resolved after a LAT Hearing or Arbitration, like in the subject action referenced in this article.


In order to enforce, in the tort action, the payment of partial indemnity costs arising from the accident benefits claim, the parties would have to negotiate their inclusion, or the Court would have to render a judgment for said costs after Trial. Alternatively, the parties would have to agree on a Rule 49 offer that is silent to the specific particulars of the costs award, and then apply to a Judge for a determination on the entitlement of costs; or apply to an Assessment Officer for an assessment as to whether the costs from the accident benefits claim ought to be payable by the tort insurer. A Judge may, however, be reluctant to hear this sort of motion, unless it is following a Trial, because it seems at first glance as though it is an assessment of costs following settlement. Maybe it is and maybe it is not. I would submit that the motion is a determination on an issue of law regarding the Plaintiff’s entitlement to costs arising from the accident benefits claim, and the Judge ought to be informed that the matter would subsequently go to an Assessment Officer, if required, to decide on the quantum of costs should the parties still not be able to come to a resolution. Alternatively, it may go to an Assessment Hearing upon settlement and the Assessment Officer ought to follow the Divisional Court’s decision in the herein action. If not, I suspect that there would be grounds for an appeal.


We, as Plaintiffs’ counsel, should not shy away from seeking these costs when settling our clients’ tort claims, not should we shy away from relying on this novel decision to substantiate these positions. There are a variety of scenarios where Courts may support the argument that these costs are payable and we should continue to push the envelope in order to advocate as aggressively as possible for our clients in their times of need. As my father always told me from a young age, “If you don’t ask, you don’t get”. So let’s start asking.


Steven Glowinsky
Written by

Steven Arie Glowinsky was called to the Ontario Bar in 2010 and is an associate at Pace Law Firm in Toronto, ON.