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Fall 2017 Newsletter

Welcome to In|Sight, Rogers Partners’ quarterly newsletter that offers our unique perspective on relevant legal issues and the internal happenings of the firm.

Two Impactful Court of Appeal Decisions Affecting Auto Claims

By Brian Sunohara

On September 19, 2017, the Ontario Court of Appeal released two decisions that have a profound impact on the automobile insurance industry:  Cobb v. Long Estate, 2017 ONCA 717, and El-Khodr v. Lackie, 2017 ONCA 716.  The decisions are very favourable to insurers.  They deal with the deductible, prejudgment interest, collateral benefit deductions, assignment of future collateral benefits, and costs.

Cobb v. Long Estate


The action arose out of a motor vehicle accident in July 2008.  The defendant driver was impaired.  He died prior to trial.

At a 19 day trial, which concluded on October 5, 2015, the jury assessed the total damages at $220,000.

After deductions for the deductible and collateral benefits, and after adding in prejudgment interest, the final judgment was $34,000.  The trial judge awarded the plaintiffs costs in the amount of $409,000.

Collateral Benefit Deductions

The jury awarded $50,000 for past loss of income and $100,000 for future loss of income.  Prior to trial, the plaintiff had received $29,300 in income replacement benefits up to June 29, 2010.  On June 29, 2010, the plaintiff settled the accident benefits claim with $130,000 allocated to all past and future income replacement benefits.  The trial judge deducted these benefits from the awards for past and future income loss, which resulted in zero income loss.

The plaintiff argued that the defendant had a strict onus of proof to establish how much of the settlement related to past income loss and how much related to future income loss, in order to be entitled to a deduction in the tort claim.

The Court of Appeal disagreed.  The court noted that s. 267.8(1) of the Insurance Act requires the deduction of all payments that the plaintiff has received prior to trial for statutory accident benefits in respect of income loss and loss of earning capacity.  The legislation does not distinguish between amounts that relate to past and future income loss.

The plaintiff also suggested that part of the accident benefits settlement may have related to damages for bad faith.  The Court of Appeal rejected this argument, stating that there was no evidence to support such a finding.  Further, the argument was inconsistent with the Settlement Disclosure Notice in the accident benefits claim, which did not allocate any amounts to damages for bad faith.

Accordingly, the court upheld the trial judge’s decision to reduce the jury award for past and future income loss to zero.

As a result, courts are required to combine a plaintiff’s award for past and future income loss and deduct from that global amount all amounts received before trial for income losses.  Whether these amounts relate to past or future claims is irrelevant for the purpose of deductibility.

Punitive Damages

The plaintiffs argued that the trial judge erred in refusing to allow the plaintiffs to seek punitive damages from the jury.  The plaintiffs believed that the issue of punitive damages was relevant since the defendant was convicted of impaired driving.

The Court of Appeal held that the trial judge’s decision in this regard was reasonable.  An award of punitive damages is intended to accomplish the objectives of retribution, deterrence, and denunciation.

In the impaired driving conviction, the defendant was sentenced to a fine of $1,300 and a one year driving prohibition.  There was no evidence to suggest that this was insufficient to meet the objectives associated with punitive damages.

Only in “rare instances” should the question of punitive damages go to the jury when punishment has already been imposed in a separate proceeding for the same misconduct.

Prejudgment Interest

Effective January 1, 2015, the Insurance Act was amended in regards to the rate of prejudgment interest for non-pecuniary loss.  Prior to the amendment, plaintiffs were entitled to prejudgment interest of 5% per year for damages for non-pecuniary loss.

The amendment required prejudgment interest to be calculated based on the rate specified in s. 127(1) of the Courts of Justice Act.  These rates have been much lower than 5% for the past several years.  For example, at the time of the claim in question, the rate was 0.5%.

The Insurance Act did not specify whether this amendment would apply retrospectively to actions commenced before January 1, 2015, but where the trial occurred after that date.  There was no transition rule.

Based on the principles of statutory interpretation, the Court of Appeal held that the legislature intended for the change to the prejudgment interest regime to have retrospective effect so as to apply to pre-existing causes of action.  The amendment applies to actions tried on or after January 1, 2015.

In the case at bar, the prejudgment interest rate on non-pecuniary damages would have been 0.5% instead of 5%.  However, the Court of Appeal noted that a trial judge has discretion under s. 130 of the Courts of Justice Act to vary the prejudgment interest rate to address concerns such as perceived unfairness to litigants.

The trial judge exercised his discretion to award prejudgment interest at 3%.  The defendant was content with this, and the Court of Appeal did not disturb the trial judge’s ruling in this regard.

Housekeeping Damages

The jury awarded the plaintiff $5,000 for past housekeeping loss and $10,000 for future housekeeping loss.  Prior to trial, the plaintiff had received $9,150 from his accident benefits insurer for housekeeping expenses.

The trial judge treated the housekeeping benefits received from the accident benefits insurer as past benefits and deducted $5,000 from the jury’s award for past housekeeping loss.  However, the trial judge refused to apply the remaining $4,150 in housekeeping expenses to the jury’s award of $10,000 for future housekeeping loss.

The Court of Appeal set aside the trial judge’s ruling in this regard, indicating that there is no reason to distinguish between the past and future awards, and that all housekeeping benefits received from the accident benefits insurer prior to trial had to be deducted.  This reduced the plaintiff’s damages for future housekeeping loss by a further $4,150.

Statutory Deductible

For several years, the deductible for non-pecuniary loss was $30,000.  Effective August 1, 2015, the Court Proceedings Regulation was amended to increase the deductible to $36,540.  This applied to non-pecuniary damages that did not exceed $121,799.  The deductible is adjusted each year to account for inflation.  The current deductible is $37,385 for non-pecuniary damages that do not exceed $124,616.

The amendment to the Regulation did not contain a transition provision.  The Court of Appeal held that the increased deductible applies to judgments on or after August 1, 2015.  The Court of Appeal overturned the trial judge’s ruling that a $30,000 deductible applied.


The trial judge awarded costs to the plaintiffs of approximately $409,000.  This was on a judgment of $34,000, which was reduced by the Court of Appeal to $22,136.60.

The Court of Appeal stated that the trial judge’s assessment of costs was out of all proportion and could not stand.

The Court of Appeal noted that the trial involved a chronic pain case and that these sorts of cases are never a sure thing from the plaintiff’s perspective.  The court stated that the defence will put the plaintiff to the strict proof of his case.  A defendant is not expected to sit back and simply take a plaintiff’s evidence at face value.  The court indicated that there was nothing inappropriate for the defence to lead psychiatric evidence to suggest that the plaintiff was a malingerer.

Prior to trial, the defendant had made an offer to settle of $40,000 plus prejudgment interest and costs.  In contrast, the plaintiffs’ lowest offer to settle was $500,000 plus costs.

The plaintiffs argued that the defendant’s offer was not valid, primarily because there was a provision which required the plaintiffs to pay costs after the offer was served.  The Court of Appeal disagreed and held that the offer was a valid rule 49 offer.

The Court of Appeal overturned the trial judge’s ruling on costs and agreed with the defendant that each party should bear its own costs.


The Court of Appeal addressed a number of important issues in Cobb v. Long Estate, including:

  • All collateral benefits received by a plaintiff prior to trial, including benefits received from a settlement, must be deducted from past and future tort damages that are of a similar nature.
  • The amendment to the prejudgment interest rate for non-pecuniary loss has retrospective effect and applies to all actions that are tried on or after January 1, 2015.
  • The amendment which increases the statutory deductible has retrospective application and applies to judgments on or after August 1, 2015.
  • Offers to settle with de-escalating costs provisions are valid rule 49 offers.
  • Costs must be proportional.

The decision provides needed clarity, particularly on the issues of prejudgment interest and the deductible, which have been a source of controversy among the personal injury and insurance bars.

El-Khodr v. Lackie


The action arose out of a motor vehicle accident in January 2007.  The plaintiff was rear-ended and sustained catastrophic injuries.

A jury trial proceeded, and the jury rendered a verdict on April 30, 2015, awarding damages totalling $2,931,006.

Prejudgment Interest

The trial judge awarded prejudgment interest on non-pecuniary damages at 5% instead of applying the rate prescribed in s. 127 of the Courts of Justice Act, which was 2.5% at the time the proceeding was commenced.

For the reasons outlined in Cobb v. Long Estate, the Court of Appeal held that this was an error.  The Court of Appeal reiterated that the amendment effective January 1, 2015 regarding the prejudgment interest rate was effective from the day it came into force and applied to all actions then in the system.

Assignment of Future Income Replacement Benefits

The jury awarded damages of $395,593 for future loss of income.  The trial judge held that the defendants were entitled to an assignment of income replacement benefits based on a retirement age of 60.

The Court of Appeal disagreed and held that the defendant’s insurer was entitled to an assignment of income replacement benefits until the plaintiff turned 64 years old.

The Court of Appeal stated that the jury must have accepted one of the scenarios presented by the plaintiff’s accounting expert, which indicated that, according to Statistics Canada evidence, the average retirement age was 64 years old.

Contingency for Ontario Drug Benefit Program Benefits

People over the age of 65 are eligible for the Ontario Drug Benefit Program, which covers the cost of prescription drugs.  The trial judge instructed the jury to treat the plaintiff’s eligibility for drug benefits as a contingency because there was substantial uncertainty on whether the drug plan would be available when the plaintiff reached age 65.

The Court of Appeal held that the trial judge erred in this regard.  The trial judge should have instructed the jury to award damages based on the law as it currently exists.  In particular, the trial judge should have instructed the jury to not award any damages for drug benefits after the plaintiff reached the age of 65.

However, the Court of Appeal stated that it was impossible to correct the trial judge’s error because it could not be concluded from the jury award what portion of the damage award for drug benefits, if any, extended past the age of 65.

Assignment of Future Medical and Rehabilitation Benefits

The jury awarded the plaintiff $1,450,000 for future attendant care costs/assistive living; $424,550 for future professional services; $133,000 for future housekeeping and home maintenance; and $82,429 for future medication and assistive devices.

The defendants sought an assignment of the accident benefit payments to which the plaintiff would be entitled post-trial.  The trial judge did not allow an assignment of the future medication and future professional services benefits.

The trial judge indicated that the jury verdict sheet did not adopt the language she had proposed, including separate headings for different types of professional services.  The trial judge held that the defendants could not meet their very strict onus of proving that the jury award compensated the plaintiff for the same loss in respect of which the defendants claimed an assignment.

The trial judge applied a strict matching approach based on the Court of Appeal’s decision in Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.).

In the present case, the Court of Appeal indicated that strict qualitative and temporal matching requirements should not be applied because the policy rationale underlying Bannon is not relevant to the current statutory scheme, and Bannon may no longer be good law in Ontario.

In reaching this determination, the Court of Appeal cited and relied on a detailed paper written by Stephen Ross and Meryl Rodrigues of Rogers Partners LLP, entitled “The Interplay Between Tort and Accident Benefits”.

The regime in place in Bannon permitted a collateral benefit deduction from a tort award based on benefits available in the future immediately after a verdict on damages, and at a time when the entitlement to the future receipt of benefits might have been uncertain.  Therefore, certainty that a plaintiff would receive future benefits was required to avoid the risk of under-compensation.  Further, in Bannon, the plaintiffs did not seek recovery of benefits already provided to them by their accident benefits insurer.  Their claims were presented net of those benefits.  Therefore, any further deduction would have amounted to a double counting of the accident benefits.

The current statutory scheme does not require courts to calculate the present value of future benefits and deduct that amount from the damage award.  Rather, the benefits are held in trust or assigned.  The Court of Appeal noted that the concern in Bannon regarding the uncertainty of future accident benefit payments does not arise under the current legislation.

Further, in Gurniak v. Nordquist, [2003] 2 S.C.R. 652, a majority of the Supreme Court of Canada stated that a specific matching between the particular benefit received under the statutory accident benefits scheme and the heads of damage in the tort award was not required.

The Court of Appeal indicated that the court is only required to match statutory accident benefits that fall into the “silos” created by s. 267.8 of the Insurance Act with the tort heads of damage.  Income awards are to be reduced only by the collateral benefit payments in respect of income loss, and health care awards are to be reduced only by the collateral benefit payments in respect of health care expenses.  All other expenses that are covered by the SABS fall into the “other pecuniary losses” category in section 267.8.

Therefore, as an example, a tort award for health care does not have to be broken down into categories such as medications, physiotherapy, psychology sessions, and assistive devices in order to facilitate the deductibility of collateral benefits.  The strict matching approach should not apply.

Another previous Court of Appeal decision, Gilbert v. South, 2015 ONCA 712, was also considered.  In that case, the Court of Appeal upheld a trial judgment in which a very strict matching approach was applied.

In Gilbert, the plaintiff was not catastrophically injured, so the accident benefits insurer only had to pay medical and rehabilitation benefits for 10 years and with a monetary limit of $100,000.  The trial judge in Gilbert held that there were uncertainties with respect to the plaintiff’s future entitlement of benefits.  The Court of Appeal upheld the trial judge’s decision, indicating that the insurer can obtain an assignment of a plaintiff’s future collateral benefits only if the jury award mirrors the benefits sought to be assigned and there is no uncertainty about entitlement.

In the present case, the Court of Appeal distinguished Gilbert on the basis of the trial judge’s factual determination in Gilbert that the jury award encompassed future care costs for which accident benefits would not be received.  In the case at bar, the risk of under-compensation due to assignment of future benefits was much smaller than in Gilbert.

For example, since the plaintiff had been catastrophically impaired, the 10 year temporal limitation for accident benefits did not arise.  Further, there were no benefits for which the assignment was requested that were not covered by accident benefits.  The Court of Appeal stated that, without a trust or assignment in respect of the accident benefits to which the plaintiff will be entitled and which he will receive in the future, he would be over-compensated.  The legislative scheme is specifically designed to avoid double recovery.

The court noted that, under the present regime (as opposed to the previous regime in place at the time of Bannon), the trust and assignment provisions ensure that no risk of under-compensation passes to the plaintiff.  The court cited its previous decision in Basandra v. Sforza, 2016 ONCA 251, noting that courts are moving towards a more relaxed approach that considers whether the pre-trial benefit received generally fits within one of the broad statutory category of damages.

The court goes further and suggests that the more relaxed approach in Basandra should also apply in relation to the assignment provisions in view of the text of the legislation and the decision of the Supreme Court in Gurniak.

As a result, the Court of Appeal permitted an assignment in relation to the awards for the cost of future medication and assistive devices and future professional services.


The Court of Appeal addressed a number of important issues in El-Khodr v. Lackie, including:

  • Juries should be instructed to not award any sum for drug benefits after a plaintiff reaches the age of 65.
  • The strict matching approach for collateral benefits outlined in Bannon McNeely and Gilbert v. South may no longer be good law.
  • The court is only required to match statutory accident benefits that fall generally into the “silos” created by s. 267.8 of the Insurance Act with the tort heads of damages.

The Court of Appeal’s decision is very positive for defendants and insurers as it reduces the likelihood of plaintiffs receiving double recovery and being overcompensated.


Important Insights for Commercial Defendants in Slip and Fall Claims

By Stephen G. Ross and Julie DeWolf

Civil litigation lawyers are no strangers to slip-and-fall claims.  As insurance defence counsel, many of our clients’ insureds are commercial entities whose customers turned into plaintiffs.  These insureds may include the owner or lessee of the premises (often a retail store), and/or a third party service provider.  This article is from the perspective of a retail store as occupier.

Often, commercial parties with ongoing matters with one another will have the foresight to enter into a service contract governing an agreed-upon response to legal disputes.  Such service contracts generally include the following terms:

  • definition of the scope of the service provider’s services or operations;
  • hold harmless & indemnity clause (an agreement that the service provider will not assert a claim against the store for incidents arising out of the services, and will indemnify the store for any expenses incurred in responding to claims related to or arising out of the services); and
  • covenant to insure (an agreement to obtain certain insurance coverages and add the store as a named insured under the policy.)

Consider the following scenario: the insured, Rogers Mart, owns and operates a retail store, and owns an adjacent parking lot. A plaintiff trips and falls in the parking lot.  She commences a civil action, and pleads that she tripped on uneven pavement.

Rogers Mart was party to a service contract with a litter pick-up company, Pick-It-Up Inc. Pick-It-Up contracted to keep the parking lot free from garbage and debris, and to regularly inspect the parking lot and alert Rogers Mart of any hazards.

The service contract contains a hold harmless clause and a covenant to insure in favour of the store.

The plaintiff names the store and the service provider as co-defendants in the statement of claim, alleging negligence and breach of the Occupier’s Liability Act.  Particulars of negligence (against both) include failure to inspect the parking lot, failure to maintain the parking lot, failure to report the uneven pavement, and failure to repair the uneven pavement.

This one fairly typical factual context gives rise to three separate potential rights and remedies to a commercial occupier.  The first is a fairly standard negligence based analysis which turns first on which entity is responsible (at common law or assumed by contract) for the area where the plaintiff fell.

The second arises from the terms in the standard service agreement which may include contractual remedies for breach of a hold harmless/indemnity or covenant to insure provision.  The third arises when the covenant to insure is complied with and the store finds itself as an additionally named insured on the contract of insurance policy with corresponding rights and potential remedies.

This article takes a high level look at these three available approaches and remedies.

Issue no. 1 – Claims in negligence and/or under the Occupier’s Liability Act

We first must consider whether the insured store may ultimately be liable to the plaintiff for her injuries, in either negligence or for breach of the duty of care under the Occupier’s Liability Act.[1]  Liability will ultimately depend on whether the trier of fact finds that Rogers Mart owed a duty of care, breached the duty of care, and the breach caused the plaintiff some compensable injury.

In the above example, both Rogers Mart and Pick-It-Up exercised a level of care and control over the parking lot.  At first blush, both entities appear to be properly named defendants.

Both may well be liable to the plaintiff.  Pick-It-Up may be liable for failing to inspect, and the store may be liable for failing to inspect and repair.  Ultimate legal responsibility will depend on the facts as found at trial based on evidence developed throughout the action and properly adduced at trial.

Unless altered by other considerations (in contract or insurance), the store would be well advised to institute a crossclaim as against the co-defendant contractor to ensure and preserve the store’s rights of contribution and indemnity as against the contractor.

Issue no. 2 – Claims in insurance: The contractor’s insurer’s duty to defend the store

Assume that Pick-It-Up obtain the required insurance and named Rogers Mart as an insured.  Given that Pick-It-Up complied with its contractual obligations, Rogers Mart would most likely look to the insurer for defence coverage.

An insurer’s duty to defend is triggered when the pleadings allege facts that, if true, require the insurer to indemnify the insured.[2]  The “mere possibility” that a claim falls within the policy triggers the duty to defend.[3]  Relevant documents include the pleadings, the service contract, and, of course, the insurance policy as informed and restricted by the certificate of insurance.[4]  The outcome at trial is irrelevant.[5]

If the insurer breaches the duty to defend, available remedies, depending on the timing and context of the duty to defend determination, could include a defence, damages, or both.

An insurer may be required to fund the entire defence, or only a portion.  If the statement of claim raises only covered claims, an insurer would logically be required to cover all defence costs.

When a statement of claim raises both covered and uncovered claims, the insurer may be required to cover all or only a portion of defence costs.

The Court of Appeal noted in Hanis v. University of Western that if defence costs do not increase simply because the defence of covered claims assisted in the defence of an uncovered claim, then an insurer will be required to fund the entire defence. [6]

The statement of claim may raise uncovered claims that are entirely distinct from covered claims, and defence of same would incur costs that are exclusively related to the uncovered claims.  If so, courts may order that defence costs be split among the parties and their insurers.

Assume that the statement of claim in our example alleges that the plaintiff entered the store after falling in the parking lot, slipped on a wet floor, and sustained further injuries.  Pick-It-Up’s business operations do not extend beyond the parking lot and so the allegations regarding the in-store incident are uncovered claims.  Pick-It-Up’s insurer would not likely be required to fund the store’s defence as it relates to the in-store incident, as defending the in-store incident would incur costs exclusively related to an uncovered claim.

The claims against the store, however, regarding the failure to inspect and remedy any defects in the parking lot would likely all be covered.

It is also important to be aware of the potential for overlapping coverage arguments to be raised.  If the store is already defended pursuant to a policy containing defence costs, coverage or priority disputes may arise regarding which insurer (the policy on which the store is the named insured, versus the contractor’s policy upon which the store is an additionally named insured) is primary.

Priority of liability coverage in such circumstances will likely turn on a comparison of the ‘excess or other insurance’ clauses in the two policies.

A detailed analysis of the priority issue is beyond the scope of this paper, but available outcomes include: one insurer as primary with the other as excess, or the mutual excess clauses effectively cancelling each other out and the insurers being required to share the store’s defence costs on a pro-rata basis.[7]

Issue no. 3 – Claims in contract and the breach of the covenant to insure

Assume now that that Pick-It-Up obtained the required insurance, but failed to name Rogers Mart as an additional insured as required.  Rogers Mart would thus have a valid claim against Pick-It-Up for breach of contract.  What, then, is the appropriate remedy?

The answer lies in the pleadings and the terms of the service contract. Evidence of liability or damages is irrelevant.  If the claim as pled arises out of Pick-It-UP’s contractually defined services, this would likely have triggered the insurance coverage that Pick-It-Up was required to provide.

Here, the plaintiff’s claim arises out of the defined services and business operations of Pick-It-Up. Pick-It-Up was required to inspect the parking lot and notify Rogers Mart of any hazard, which reasonably includes uneven pavement.  The plaintiff pled that Pick-It-Up failed to notify Rogers Mart of the hazard, causing or contributing to her fall.

The appropriate remedy for breach of a covenant to insure is an award of damages equal to the value of the insurance that would have been in place, absent the breach of contract.  Generally, this equates to the costs of the defence of the action, save for any costs incurred exclusively to defend claims that do not arise from the performance or non-performance of the service contract.[8]

If Pick-It-Up did not breach the covenant to insure (i.e., the obtained the requisite insurance), Rogers Mart may still look to Pick-It-Up for indemnification pursuant to the hold harmless and indemnity clause.

In Pagé v. Rogers, the defendant cable company, Rogers, retained a third party subcontractor, Forefront, to install and place a temporary cable on the plaintiff’s property, pursuant to a standard service contract.[9]  The plaintiff tripped over the cable and sued Rogers and Forefront.  Forefront had taken out the appropriate insurance and named Rogers as an additional insured.

Rogers nevertheless brought an action against Forefront seeking full defence costs pursuant to Forefront’s contractual obligations to hold harmless and indemnify Rogers.  The Superior Court noted that while Rogers could have demanded that Forefront’s insurer fulfill its duty to defend, Forefront still had a contractual obligation to pay the reasonable costs of defending claims arising out of the performance of the contract with Rogers, and Rogers had a right to indemnification for same.

Damages equal to the defence costs for claims that were considered covered by the hold harmless and indemnity provision (which the court held would likely have been 50% of total defence costs) to date, as well as a declaration that 50% of ongoing defence costs would also be covered (if reasonable) were awarded.


In the face of a civil action against commercial defendants that are party to a service contract for a retail store, at least three issues must be considered.

First, what is the likelihood that the insured store will be liable to the plaintiff in negligence or under the Occupier’s Liability Act?  This requires consideration of the material facts (including identification of the occupier and responsibility for the area where the plaintiff fell), availability of admissible evidence regarding same, and the likely outcome at trial.

Second, if insurance is obtained, is a duty to defend triggered?  The answer lies in the pleadings, service contact, certificate of insurance, and the terms of the applicable policy.  If the insurer breaches the duty to defend, appropriate remedies may include a defence, funding defence counsel of the insurer’s choice, or damages, depending on the timing of a coverage application.

Third, has the service provider fulfilled their contractual obligation to obtain insurance and name the store as an additional insured?  Again, the answer lies in the pleadings, terms of the service contract, and the certificate of insurance.  If there has been a breach of contract, an appropriate remedy is an award of damages equal to the value of the defence, if any, that would have been provided by an insurer.

With respect to both the insurance and contractual considerations, much can turn on the certificate of insurance and whether the plaintiff’s claims arise out of the business operations of the named insured (contractor).

It is important to consider all three aspects, negligence; breach of contract; and claims against a contractor’s insurer, when determining the appropriate response to claims made against an insured store.

The available remedies may overlap (i.e., breach of hold harmless agreement and/or defence obligations on a contractor’s insurer) and so strategic consideration much be given to the most cost effective and efficient approach for your insured/client.

We, of course, would be pleased to assist in the determination of the best approach in all of the circumstances.

[1] Section 3(1) of the Occupier’s Liability Act, R.S.O. 1990, c. O.2, provides that an occupier of premises owes a duty to take such care as in all the circumstances of the case is reasonable to see that persons entering on the premises, and the property brought on the premises by those persons are reasonably safe while on the premises.

[2] The Corporation of the City of Markham v. Intact Insurance Company, 2017 ONSC 3150, at para 26. See also: Carneiro v. Durham (Regional Municipality), 2015 ONCA 909; Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699 (S.C.C.), at para. 28.

[3] City of Markham, supra note 2, at para 28.

[4] See: Sinclair v. Markham (Town), 2014 ONSC 1550, at para 12-14; City of Markham, supra note 2, at para 31.

[5] City of Markham, supra note 2, at para 28; Carneiro, supra note 2, at para 26.

[6] Hanis v. University of Western, 2008 ONCA 678.

[7] See generally: Mackenzie v. Dominion, 2007 ONCA 480 (leave to appeal to SCC denied); Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48; State Farm Fire & Casualty Co. v. Royal Insurance of Canada, [1998] O.J. No. 4465,  [1999] I.L.R. I-3696 (ONCA); and McGeough v. Stay ‘N Save Motor Inns Inc.,  46 B.C.A.C. 219, 75 W.A.C. 219, 92 B.C.L.R. (2d) 288 (BCCA).

[8] Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506.

[9] Pagé v. Rogers, 2017 ONSC 2341.

The Risks of Social Hosting: Wardak v. Froom

By Kevin S. Adams

Earlier this year, the Ontario Superior Court of Justice reconsidered social host liability issues in the context of a terrible car accident which left a young man a brain-injured quadriplegic.[1].

The defendant parents hosted a house party in their basement for their son’s 19th birthday.  Although the defendants were not serving liquor, they were aware that guests had brought their own liquor and that many of the guests were under the age of 19.

The plaintiff, Dean Wardak, was an 18 year-old guest at the party and a good friend of the defendants’ son. Dean lived a short walking distance from the defendants’ home. He had walked to the party and was drinking that night.

Just before 11:00 p.m., the defendant father noticed Dean was wobbling and that Dean’s behaviour was “odd”.  The father offered to walk Dean home twice, but Dean declined.

Sometime later, the defendants’ daughter saw Dean leaving the house. She and her boyfriend drove past Dean’s house to ensure he arrived home safely and saw Dean reversing his vehicle out of his driveway. The daughter called 911 to advise that Dean was driving while intoxicated and tried to follow him. Once he noticed Dean was missing, the defendant father walked over and knocked on Dean’s door to speak with Dean’s father, who later went out looking for him.

Dean was not driving long before he hit a street light pole and suffered catastrophic injuries. The plaintiffs (Dean and his family) brought a personal injury action and the defendants brought a summary judgment motion seeking a dismissal of the action on the basis that there was no social host liability.

Citing Childs v. Desormeaux[2], the defendants argued that they owed no duty of care because, they did not serve alcohol at the party and, if they did owe a duty, then they did not breach the standard of care because they “did everything they could to get him home safely”.

In Childs, the Supreme Court of Canada concluded that the defendant social hosts (the Childs) did not owe a duty of care to the third party highway user.  However, the Supreme Court left the door open for cases where a host may owe a positive duty to act where foreseeability of harm is present and there is sufficient proximity between the plaintiff and the defendant, including where there is a “paternalistic relationship of supervision and control”.

In this case, the Court agreed with the plaintiffs’ argument that Childs did not preclude a finding of a duty of care. The Judge recognized that there was a paternalistic relationship, since Dean Wardak was an underage invited guest. She also noted that, unlike in Childs, the injured plaintiff was an intoxicated party-goer, not a third-party highway user. The Court stated that “although serving alcohol is relevant to the analysis, it is not, by itself, determinative of social host liability post-Childs[3].

With respect to the standard of care, the Judge noted significant deficiencies and unreliability regarding the evidence put forth by both parties, which included hearsay, unsworn witness statements and summaries of “anticipated evidence”.

The Judge pointed to numerous contradictions in the parties’ evidence, but declined to use her fact-finding powers or order a mini-trial, as permitted by the summary judgment rules.  Instead, Justice Matheson dismissed the defendants’ summary judgment motion on the basis that there were genuine issues requiring a trial on the facts needed to reach a decision on the merits.

Unfortunately, the decision raises more questions than it provides answers regarding the level of supervision and control which hosts must exert over their guests in certain circumstances. However, the clear message is that, even if hosts do not serve alcohol to guests, they may still be found liable if a guest is involved in an accident.

[1] Wardak v. Froom, 2017 ONSC 1166

[2] 2006 SCC 18 [Childs]

[3] Wardak, supra note 1 at para 54

Liability for Oil Spills

By Stephen G. Ross

In July 2017, Justice Charney released a comprehensive decision following a lengthy trial in Gendron v. Thompson Fuels, 2017 ONSC 4009.  The case arose out of a residential oil leak in which over $2 million in damages was claimed.

Brian Sunohara and Meryl Rodrigues of Rogers Partners LLP were trial counsel for the oil tank manufacturer, Granby.  The plaintiff and Granby entered into a Pierringer Agreement approximately one week into the trial.

The decision emphasizes the importance of homeowners taking responsibility for the equipment at their houses, and also the responsibility of technicians who service equipment to do a competent job and provide advice to homeowners.

The case circumstances also illustrate the benefits associated with partial settlement agreements and the impact of such agreements on the litigation landscape.


In November 2000, the plaintiff purchased two end-outlet oil tanks that were manufactured by Granby.

Instead of having a qualified technician install the tanks, the plaintiff and a friend installed the tanks in the plaintiff’s basement.

In 2001, Thompson Fuels became the plaintiff’s fuel oil supplier.  Thompson Fuels was supposed to conduct a comprehensive inspection of the tanks to ensure that they were safe to fill.  However, this was never done.  Thompson Fuels continued to deliver fuel until December 18, 2008 because its computer system incorrectly indicated that an inspection had been conducted on February 27, 2002.

The plaintiff was required to have the oil tanks inspected on an annual basis.  Thompson Fuels sent newsletters to its customers to advise of this obligation.  There were some service calls by Thompson Fuels in 2006 and 2007, but the plaintiff did not have the required annual inspections.

The oil leak was discovered on December 18, 2008.  The oil escaped through a crack in the plaintiff’s basement and went under his house.  Some of the oil made its way through a drainage system into a municipal culvert and into a lake.

The experts agreed that the cause of the leak was internal corrosion, specifically, microbiologically influenced corrosion.  The corrosion was caused by the build-up of water and sludge inside of the tank, which, combined with microbes, resulted in the production of sulphur and organic acids within the tank.  The key to preventing internal corrosion is to test for water inside of tanks and to remove any water if found.

Due to the contamination, the plaintiff’s house was demolished and a new house was built.  A great deal of contaminated soil was removed from the property.  Further, the Ministry of the Environment required the plaintiff and subsequently the City of Kawartha Lakes to clean-up the public property, including the oil in the lake.

The off-site remediation costs were slightly over $1.8 million.  The cost of replacing the plaintiff’s house was approximately $545,000.


Justice Charney apportioned liability 60% to the plaintiff and 40% to Thompson Fuels.  Justice Charney did not find any liability on the tank manufacturer, Granby, or on the Technical Standards and Safety Authority (“TSSA”).

Justice Charney stated that the plaintiff was negligent for failing to have the oil tanks property installed by a qualified technician.  Further, the plaintiff did not follow the recommendations of Thompson Fuels to purchase a maintenance plan.  The plaintiff took no steps to ensure that the tanks were regularly inspected.  This fell below the standard of care expected of a homeowner.  Moreover, there was evidence that the plaintiff occasionally filled the tanks with jerry cans of oil, which likely introduced water and microbes into the tanks.  Justice Charney stated that this was negligent.

Further, Justice Charney found the plaintiff negligent for not promptly reporting the oil leak.  The plaintiff contacted Thompson Fuels the day after discovering the leak instead of immediately.

Justice Charney found that Thompson Fuels was liable for failing to perform a comprehensive inspection.  Further, Thompson Fuels should have checked for water inside of the tank.  Moreover, the tanks did not have proper clearances and could not be properly inspected.  As a result, Justice Charney found that Thompson Fuels should have ordered that the tanks be taken out of service until the problem was corrected.

Justice Charney dismissed the claim as against the tank manufacturer, Granby.  In 2000, Granby became aware of issues involving an increased rate of internal corrosion in end-outlet tanks.  Granby took steps to address this issue.

In 2001, Granby added warning stickers to its tanks regarding proper installation.  In 2003, Granby included a manual with its tanks which provided instructions on proper installation and maintenance.  In 2003, Granby began to provide seminars to people in the industry regarding the dangers of improper installation and maintenance, as well as the importance of checking for water inside of tanks.  Employees of Thompson Fuels attended these seminars.

In terms of the distribution of tanks, Justice Charney noted that Granby only sold to wholesalers.  It did not sell to homeowners or to retailers, such as Home Depot.  Any duty to warn on the part of Granby would have been a duty to warn the fuel distributors and installers who had direct contact with consumers.  Granby accomplished these warnings through its education seminars and its manual.  Justice Charney found that Granby appeared to be ahead of the curve.

The claim was also dismissed against the TSSA.  The plaintiff argued that the TSSA failed to adequately ensure that the response to the oil spill was prompt and adequate.  Justice Charney rejected this argument and further found that the TSSA does not have a private law duty to the property owner where a spill occurs.

There was only a modest reduction to the damages claimed.  Justice Charney found that the remediation was necessary and largely reasonable.

Thompson Fuels has filed a Notice of Appeal and is also bringing a motion to vary or set aside the judgment based on alleged slips, omissions and errors by the trial judge.


Homeowners are well-advised to follow recommendations regarding maintaining the equipment in their homes.  Technicians need to keep up-to date with regulations and trends in the industry in order to provide competent service.

The case also demonstrates the benefits of Pierringer Agreements.  In a Pierringer Agreement, the plaintiff settles with a defendant and agrees to pursue the non-settling defendants for only their several, not joint and several, liability.  In other words, the non-settling defendants are not responsible for any liability that may be found to rest on the settling defendant.

The settling defendant is extracted from the litigation.  The plaintiff’s focus shifts away from the settling defendant as the plaintiff wants as much liability as possible to be found on the non-settling defendants.

By entering into the Pierringer Agreement, Granby obtained certainty and avoided four additional weeks of trial time, as well as the pending appeal and post-trial motions.

The MIG is Unconstitutional? A Surprising FSCO Decision

By Alon Barda

In Abyan v. Sovereign General Insurance Company (FSCO A16-003657, September 14, 2017) Arbitrator Benjamin Drory has released a surprising and unexpected decision finding that section 3 (the definition of “minor injury”) and section 18(2) of the Statutory Accident Benefits Schedule are unconstitutional, as the sections infringe upon section 15(1) of the Charter of Rights and Freedoms on the basis of physical disability. Furthermore, he finds that the infringements are not justifiable under section 1 of the Charter.

The substantive issues in this case are minimal and include $1,995.32 for psychological treatment and the applicability of the Minor Injury Guideline. The Applicant served notice of the intention to raise a constitutional argument as a preliminary issue on the Attorney General of Canada and the Attorney General of Ontario. The Attorney General of Canada did not respond and the Attorney General of Ontario simply advised the Applicant that constitutional questions should only be heard as necessary and not in a factual vacuum. The insurer surprisingly opted not to attend, simply adding its position that no other substantive issues ought to be considered.

The Arbitrator first found that he had jurisdiction to hear the constitutional argument, relying on three Supreme Court of Canada cases. In discussing the issues with the MIG under section 15 of the Charter, he highlights that the definition of “minor injury” in the MIG includes various minor injuries, such as a sprain, and also includes any “clinically associated sequelae”. He notes that this term is not defined and he accepts evidence that it means “anything that is a following sequel of”, which includes chronic pain. As such, he opines that individuals such as the claimant with chronic pain are caught by the definition of minor injury in ways that even some with lesser injuries are not.

He therefore (confusingly) concludes that he “is satisfied that the effect of the MIG arbitrarily discriminates against MVA victims who suffer chronic pain as a clinically associated sequelae to the MVA, in ways that those who do not suffer from chronic pain resulting from an MVA do not.” As a result, Arbitrator Drory finds that “clinically associated sequelae” in the definition of “minor injury” in section 3 of the Schedule is unconstitutional as it is interpreted to exclude individuals who suffer from chronic pain among the sequelae related to the injury.

He then goes on to agree with the claimant that the phrase “that was documented by a health practitioner before the accident” as found in the MIG has a discriminatory effect against individuals such as those without access to OHIP, or those that were asymptomatic prior to the accident, as these individuals did not have their conditions documented before the accident. As a result, he finds that the provision “that was documented by a health practitioner before the accident” in section 18(2) is severed.

Having found that the MIG violates section 15 of the Charter, Arbitrator Drory goes on to analyze section 1 and ultimately finds that the limitations on the insured’s rights are not demonstrably justifiable in a free and democratic society in accordance with that section of the Charter.

This is a results based decision with problematic findings that are at least partially based on evidence that does not appear to have been in the evidentiary record before the Arbitrator. It can be anticipated that this decision will likely result in similar arguments being advanced at the LAT, particularly with cases involving chronic pain. Considering this decision, we anticipate that the Attorney General of Ontario will respond the next time such arguments are advanced.

Thankfully, the Arbitrator states on multiple occasions that the decision is only of application to this case and is not a declaration of general invalidity applicable to any other cases. While this is an issue for the insurer in this case, there is comfort in knowing it is currently of only limited application.

The Nature of the Force Matters: A Priority Dispute and the Transmission of Force

By Alon Barda

The conceptual interplay of physics and law was on display in the recent appeal case of Unifund Assurance Company v. ACE INA Insurance Company (2017 ONSC 3677). The facts in this priority dispute were somewhat convoluted and the decision hinged on an interpretation of the “transmission of force” doctrine.

The claimant was a pedestrian walking on the southeast corner of Pharmacy Avenue and Steeles Avenue. The vehicle insured by ACE was travelling eastbound on Steeles Avenue when it collided with the Unifund vehicle, which was travelling westbound on Steeles Avenue and attempting to make a left turn onto Pharmacy Avenue. A vehicle insured by The Personal was stopped northbound on Pharmacy Avenue behind the pedestrian crosswalk.

As a result of the impact, the ACE vehicle was propelled towards and ultimately struck the claimant. The Unifund vehicle was propelled in a different direction and ultimately collided with The Personal vehicle.

The arbitrator first found that The Personal vehicle was not involved in the incident from which the entitlement to SABS arose and that the claimant was not an “insured” under the policy issued by The Personal (the claimant was also not insured under any other policy of automobile insurance at the time of the accident). The Arbitrator then turned to section 268(2)2(ii) of the Insurance Act, which states that the claimant next has recourse against the insurer of the automobile that “struck” the claimant.

On the facts, it is apparent that only the ACE vehicle struck the claimant. Nevertheless, the Arbitrator noted the added “twist” with the analysis of the term “struck”. She discussed the evolution of the “transmission of force” concept dating back to the 1970s and agreed with the comments of an earlier arbitration case on the issue, which held that a person is considered “struck by” a vehicle when that vehicle provides the transmitting force for the injury to occur.[1] Most notably, this occurs even when the actual contact is made with another vehicle.

The Arbitrator applied the above reasoning and found that the Unifund vehicle was the “striking vehicle” and, therefore, the priority insurer. She reasoned that, while the ACE vehicle came into contact with the claimant, it was propelled in that direction by the Unifund vehicle and would not have made contact with the claimant if the Unifund vehicle had not engaged in the left turn.

The decision was overturned on appeal as it was found to be unreasonable.

In the appeal decision, Justice Brown canvasses various cases that applied the transmission of force principle and highlights the distinction between cases where stationary objects (including vehicles) are propelled into a pedestrian by a third moving vehicle and those with two moving vehicles colliding, which causes one vehicle to strike the pedestrian (this latter scenario involving independent force on the part of the striking vehicle as opposed to a stationary object simply being propelled).

Justice Brown ultimately found that the arbitrator erred in her application of the legal principle of transmission of force. She held that while the ACE vehicle was diverted or deflected by the Unifund vehicle, it nevertheless “continued under its own propulsion and momentum that had existed prior to the collision, and exerted its own ‘independent force’.”

Furthermore, Justice Brown held that it was not “the Unifund vehicle that applied the transmission of force to the ACE vehicle propelling it into the claimant, but rather the ACE vehicle’s own, albeit diverted, movement, or the actions of the ACE insured driver which caused the ACE insured vehicle to strike the pedestrian.“

This is well-reasoned decision that accords with the findings in the various cases cited.  Most notably, this case reinforces the importance, when assessing priority pursuant to 268(2) of the Insurance Act in accidents with a similar factual matrix to the one in this case, to consider all vehicles involved and to particularly consider whether the vehicle that was propelled into another vehicle exhibited its own propulsion and independent force.

Look to a future newsletter for updated commentary as an Application for leave to the Court of Appeal was filed in July 2017.

[1] See: Co-opearators v. Royal Insurance, Arbitrator Samis, August 29, 1996 (involving the transmission of force between a moving vehicle and a stationary vehicle).

Crafting the Perfect Rule 49 Offer

By Nathaniel Dillonsmith

Offers to settle can take a wide range of forms and can involve a variety of terms. However, an offer to settle which is intended to be Rule 49 compliant generally includes certain key terms that are intended to engage the costs consequences in rule 49.10 of Ontario’s Rules of Civil Procedure.

The outcome of a Rule 49 compliant offer depends on the circumstances of the case and the party that made the offer. In short, rule 49.10 operates by mandating a costs award that is favourable to any party who (i) makes a Rule 49 compliant offer; and (ii) achieves a more favourable result at Trial.

Basics of Rule 49 compliant offers

Certain requirements apply to any party seeking to make a Rule 49 compliant offer, including: 1) the offer must be made at least 7 days before the commencement of the hearing; and 2) the offer cannot be withdrawn or expire before the commencement of the hearing.[1] There are additional requirements if the action involves multiple defendants, which are set out in rule 49.11.

Litigants may be incentivized to make an offer because they hope that it will be accepted and the Trial will be avoided entirely. However, most parties are motivated to serve a Rule 49 compliant offer in an effort to engage the following cost consequences.

If a plaintiff “beats” their Rule 49 compliant offer at Trial, they are entitled to partial indemnity costs up to the date of the offer, and substantial indemnity costs thereafter. Conversely, if a defendant “beats” their Rule 49 compliant offer at Trial, the plaintiff is still entitled to their partial indemnity costs up to the date of the defendant’s offer, but the defendant is entitled to their own partial indemnity costs thereafter.

Determining whether a party “beat” their offer at Trial

In some cases, it will be patently obvious that a party’s Rule 49 offer “beat” the result obtained at Trial, but in many cases, parties will dispute whether an offer was in fact more or less favourable than the result.

Ontario Courts apply a high standard when assessing whether a Rule 49 offer is better or worse than the result a Trial. For a settlement offer to engage the cost consequences of rule 49.10, some Courts have stated that the offer must be “crystal clear”, and “[u]ncertainty or lack of clarity in any aspect of an offer may prevent a party from showing that the judgment obtained was “as favourable as the terms of the offer to settle, or more or less favourable”, as the case may be”.[2]  The party looking to rely on rule 49.10 has the burden of proving that the result obtained at Trial was more or less favourable than their Rule 49 offer(s).[3]

That being said, uncertainty alone will not make a settlement offer non-compliant with Rule 49. Rather, uncertainty or lack of clarity impacts whether a party can meet their burden of proving that the judgment at Trial is more or less favourable than their offer.[4] In other words, if a party beats their Rule 49 offer by a very high margin, it should not matter if the offer gave rise to some minor uncertainty when it was made.

For example, in the leading case of Elbakhiet v. Palmer, the defendant’s offer ($145,000 plus interest and costs), barely exceeded the damages awarded ($144,013.07). The offer did not specify what rate of pre-judgment interest would apply, and how much interest was awarded would determine if the offer was better than the result. Due to the small margin, the Court of Appeal held that “only by making some arbitrary distribution of interest could the [defendant] establish that their offer exceeded the Judgment”.[5]

Consequently, the offer in Elbakhiet did not engage Rule 49. This was not because of the uncertainty in and of itself, but because the defendant failed to prove that the offer was more favourable. If the margin between their offer and the damages award had been higher, the defendant might have been able to do so, notwithstanding the uncertainty.

In a jury Trial, the Rule 49 offer is not compared to the quantum of damages awarded by the jury; instead, the offer is measured against the damages awarded by the judge plus pre-judgment interest, and after any applicable reductions.[6] Reductions such as statutory deductibles, past collateral benefits and equitable setoff will generally be applied before determining whether an offer beat the verdict at Trial.[7] That is unless a statutory provision requires a reduction to be ignored for the purpose of fixing costs (as was the case until recently for the statutory deductible applied to motor vehicle claims).

Key terms to consider when drafting a Rule 49 compliant offer

As a result of the high threshold described above, every case will turn on its particular facts, namely the terms of the Rule 49 offer and the result at Trial. A term that is found ambiguous or uncertain in one case might be “crystal clear” in another case.

Thus, when crafting the “perfect” Rule 49 compliant offer, certain terms should be avoided or included, depending on the circumstances of the case. The following is a non-exhaustive list of terms that can impact whether an offer will be Rule 49 compliant:

  • If an action involves multiple plaintiffs, the offer should be explicitly severable as between the plaintiffs.[8] Logic dictates that a properly severable offer must also specify any amount(s) to be paid to each plaintiff, if accepted by any one of them. However, recently in Cobb v. Long Estate, the defendant offered to settle the claims of all plaintiffs, without a breakdown among the main plaintiff and the Family Law Act The Court of Appeal held that the offer was Rule 49 compliant, although it did not specifically address the issue of one offer being made to multiple plaintiffs.[9]
  • There is no freestanding requirement for a Rule 49 compliant offer to be broken down by heads of damage. However, where an offer covers multiple heads of damage, a lump sum can create uncertainty (and thus render the party who made the offer unable to prove that it “beat” the offer at Trial), especially if different interest rates apply.[10]
  • Similarly, there is conflicting case law on whether pre-judgment interest can be included in a lump sum offer, or must be provided for separately. Depending on the facts of the case, an amount inclusive of pre-judgment interest might create sufficient uncertainty to render the offer non-compliant.[11]
  • The costs and disbursements component of an offer should be broken out from any payment to be made towards damages. However, in at least one case, an offer to pay a fixed amount for damages and costs, plus interest, was held to be Rule 49 compliant.[12]
  • In Cobb v. Long Estate, the Court of Appeal also held that the defendant’s offer was Rule 49 compliant, even though it required the plaintiffs to pay the defendant’s costs from the second day after the offer was served, unless the offer was accepted within 30 days.[13]
  • If a party makes a subsequent Rule 49 offer, that party’s earlier Rule 49 offer(s) are deemed withdrawn, unless the latter offer explicitly states the contrary intention.[14] If a party intends to make a subsequent Rule 49 compliant offer, the offer should explicitly state whether earlier offers are withdrawn or are available concurrently.
  • Although an offer that requires a Full and Final Release could be Rule 49 compliant,[15] it is submitted that this practice should be avoided. A plaintiff who obtains judgment after Trial does not sign a Full and Final Release, and an at-fault defendant is not entitled to insist upon a Confidentiality Agreement. Including these devices as terms in an offer will make it difficult, if not impossible, to prove that the offer was “beaten” at Trial.

Depending on the circumstances, it might be appropriate to make an offer non-severable as between multiple plaintiffs, to include a term requiring the plaintiff to sign a Confidentiality Agreement, or to include any of the other terms discussed above. Defence counsel and insurance adjusters should appreciate that these terms might make the offer non-compliant with Rule 49, and weigh the risks of doing so accordingly.

“Close” does not count – but it will be taken into consideration

The Ontario Court of Appeal has specifically held that there is no “near miss” principle, which had previously allowed the consequences of Rule 49 to be invoked where the amount of an offer came very close to beating the result at Trial.[16] Similarly, there is no such thing as a “near miss” when it comes to the 7-day time requirement of Rule 49.[17]

However, under rule 49.13, the Court may consider any written offer to settle in fixing costs, and it appears that “near miss” offers will be given particularly strong consideration, even if the strict consequences of 49.10 do not apply.

As a prime example, in Cadieux (Litigation guardian of) v. Cloutier, the plaintiffs obtained a total judgement of $500,827, compared to the defendant’s offer of $500,000 plus costs. When fixing costs, Justice Hackland referred to this as a “near miss” case and awarded the plaintiffs only $100,000 in costs (plus HST and disbursements of $98,798). It is fair to say that this costs award was low, given that he also found the plaintiffs’ request for costs of $494,039 was “appropriate and reasonable” for the complex 7-week jury Trial.[18]

Where an offer comes close to meeting the requirements of Rule 49, but is found to be non-compliant as a result of technical deficiencies that could have been resolved by counsel, significant weight may still be given to the offer when fixing costs.[19] This is because “rule 49.13 is not concerned with technical compliance with the requirements of rule 49.10”, but instead calls for a “holistic approach” to assessing settlement offers.[20]

Discretion of the Court to “order otherwise”

Judges and Masters in Ontario generally have a significant amount of discretion when it comes to awarding costs after a Trial or motion. However, the presumptive costs consequences of Rule 49 are one of the few areas where the Court’s discretion to award costs is narrowly prescribed.

When faced with a Rule 49 compliant offer that has clearly beaten the result at Trial, the Court may exercise its residual discretion to depart from the cost consequences mandated by rule 49.10, but “only in exceptional circumstances, where ‘the interests of justice require a departure'”.[21] This narrow interpretation encourages the settlement of cases by providing predictability in cost awards.

In rare cases, the interests of justice can extend to awarding costs against a successful party. In Oliveira v. Zareh, Justice Donohue dismissed the plaintiffs’ action on the basis that it was improperly pled and a proper party was not named as a defendant. Thus the defendant beat their Rule 49 offer (which was to pay $25,000 all-inclusive). However, the defendant’s conduct (including theft and lying about it on his discovery) was such that if the action had been properly pled, punitive damages would have been granted. In the result, the unsuccessful plaintiffs were awarded $40,000 in costs.[22]


A cynical defence counsel or insurance adjuster might think that the hurdles imposed by the Courts in assessing whether a Rule 49 offer “beat” the result at Trial are used to protect individual plaintiffs from well-deserved adverse cost awards. However, it is submitted that a very high threshold is appropriate before engaging the costs consequences of Rule 49, because those consequences can be quite harsh, even draconian. Plaintiffs are not immune to the costs consequences of Rule 49.

Take for example the recent case of Bosnali v. Michaud.[23] After a long jury Trial, the plaintiffs were awarded a total of $130,791.21 for damages and interest. The defendants had served an initial offer of $310,000 inclusive of interest, and a subsequent offer of $550,000 for all damages claimed. As a result of Rule 49, the defendants were awarded costs of more than $300,000, which wiped out all amounts awarded to the plaintiffs. The end result was the plaintiffs owed the defendants just over $2,000 (not to mention any obligation the plaintiffs’ may have had for their own lawyers’ costs and disbursements).

The key takeaway about drafting a Rule 49 compliant offer is to make it as clear and certain as possible, in the circumstances of the case. It is also advisable to make a reasonable offer as early as possible in the litigation, so that if the offer is not accepted, the opposing party may be subject to more severe cost consequences.

[1] See rules 49.03, 49.10(1) and 49.10(2), Rules of Civil Procedure, R.R.O. 1990, Reg. 194. What triggers the “commencement of a hearing” is a complex issue with its own body of case law. But for Rule 49 purposes, a civil Trial commences when evidence has been heard. See Elbakhiet v. Palmer, 2014 ONCA 544, at paras 16 and 20, leave to appeal refused ([2014] S.C.C.A. No. 427) [Elbakhiet].

[2] Mayer v. 1474479 Ontario Inc., 2014 ONSC 2622, at para 111 [Mayer], citing inter alia, Rooney (Litigation Guardian of) v. Graham (2001), 53 O.R. (3d) 685 (Ont. C.A.) at para 44 [Rooney].

[3] See rule 49.10(3), Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and Elbakhiet, supra note 1 at para 28.

[4] Rooney supra note 2, cited with approval by the Court of Appeal in Elbakhiet, supra note 1 at para 25.

[5] Elbakhiet supra note 1 at para 28.

[6] Wilson v. Cranley, 2014 ONCA 844, at para 17.

[7] Only past collateral benefits are noted above, as the interplay between future collateral benefits and Rule 49 offers, in particular in motor vehicle cases, is particularly complex and beyond the scope of this article. For a detailed discussion of this issue, see “The Interplay Between Tort and Accident Benefits – The Law and Practical Issues at Trial”, at page 22, by my colleagues, Stephen Ross and Meryl Rodrigues, and the Court of Appeal’s recent decisions: Cobb v. Long Estate, 2017 ONCA 717 and El-Khodr v. Lackie, 2017 ONCA 716.

[8] Mayer supra note 2 at para 115: non-severable offers are non-compliant with Rule 49 “because they raise the danger of defendants encouraging plaintiffs to “play off their claims against each other””.

[9] Cobb v. Long Estate, 2017 ONCA 717 at paras 143 and 147 [Cobb].

[10] Elbakhiet supra note 1 at paras 26 and 28.

[11] Mayer at para 113, citing Mathur v. Commercial Union Assurance Co. of Canada, [1988] O.J. No. 144 (Ont. Div. Ct.). In Mayer, Justice Leach found that the “all inclusive” offer lacked the clarity required by rule 49, because pre-judgment interest increases over time, with a corresponding decrease in the damages paid.

[12] See Hydrastone Inc. v. Clearway Construction Inc., 2015 ONSC 6358, where the defendant offered to settle for $75,000 for damages and costs, plus interest. Master Albert awarded the plaintiff damages and costs totaling only $72,084.94 (i.e. around $3,000 less than the defendant’s offer), but refused to apply Rule 49. This finding was overturned on an appeal to Justice Mew, who found that the defendant’s offer was not vague, and that “[a]n offer which is inclusive of costs can readily be valued once the costs have been assessed or fixed by the court”. Justice Mew applied the cost consequences of Rule 49. Notwithstanding this case, it is submitted that an offer inclusive of costs will only rarely be found to be Rule 49 compliant.

[13] Cobb supra note 9 at paras 143 and 147. In making this finding, the panel in Cobb relied upon the Court of Appeal’s earlier decision in Rooney supra note 2, where the plaintiffs’ offer had contained a similar term for the ongoing payment of costs, but was still found to be Rule 49 compliant. Although such terms are “in some measure” uncertain, they do not invalidate an offer that is otherwise Rule 49 compliant.

[14] See Stradiotto v. BMO Nesbitt Burns Inc., 2015 ONSC 1760 at para 17, and Diefenbacher v. Young (1995), 22 O.R. (3d) 641 (Ont. C.A.) at paras 20 and 21.

[15] See Evoke Solutions Inc. v. Chive Inc., 2017 ONSC 1684, at paras 9 to 12 and 32.

[16] Elbakhiet supra note 1 at para 31. See also McLeish v. Daines, 2017 ONSC 3117 at paras 13 to 15.

[17] König v. Hobza, 2015 ONCA 885, at para 33.

[18] Cadieux (Litigation guardian of) v. Cloutier, 2016 ONSC 7604, at paras 58 to 68.

[19] See Mayer supra note 2, where Justice Leach awarded no costs to either party – although the defendants’ offers were technically non-compliant with Rule 49, they were also generous in light of the jury’s verdict.

[20] Elbakhiet supra note 1 at para 33.

[21] Ibid at paras 30 to 31.

[22] Oliveira v. Zareh, 2015 ONSC 515.

[23] Bosnali v. Michaud, 2017 ONSC 3943.

What's Happening at Rogers Partners

  • Don Rogers has again been named in the Best Lawyers in Canada in the areas of insurance law, personal injury litigation, and energy regulatory law.
  • Stephen Ross has again been selected for inclusion in the Best Lawyers in Canada in the area of insurance law.
  • Kevin Adams has been named in the Best Lawyers in Canada in the area of insurance law.
  • Anita Varjacic has been named in the Best Lawyers in Canada in the area of personal injury litigation.
  • In a decision released in July 2017, Justice Charney found no liability on an oil tank manufacturer for an oil leak that was caused by internal corrosion of the tank. Brian Sunohara and Meryl Rodrigues were counsel for the oil tank manufacturer at trial.  Our client entered into a Pierringer Agreement with the plaintiff approximately one week into the trial.
  • Alon Barda was interviewed and quoted in Law Times in September 2017. Alon was asked for his opinion on a court case in which the applicant challenged the constitutionality of the exclusive jurisdiction of the Licence Appeal Tribunal to determine accident benefits disputes.  Alon provided an opinion from the insurers’ perspective.
  • In a decision released on September 19, 2017, El-Khodr v. Lackie, 2017 ONCA 716, the Ontario Court of Appeal cited and relied on a comprehensive paper written by Stephen Ross and Meryl Rodrigues on “The Interplay Between Tort and Accident Benefits”.
  • A paper written by Don Rogers and Julie DeWolf, “Actions Against Insurance Brokers – What’s Next in the Law?”, has been selected for publication in The Oatley McLeish Guide to Motor Vehicle Litigation 2017.

From the Desk of Anita Varjacic

As litigation lawyers  we always consider whether there is an effective mechanism to weed out cases, that in our wisdom, probably should never have been commenced.  These include cases where there is no liability at all or no liability against certain parties.  This can also include cases where there is a straightforward legal issue (like an obviously missed limitation period).

The Supreme Court of Canada’s decision in Hryniak v. Mauldin[1] expanding the scope and use of summary judgment motions was a welcome relief to assist in that pursuit.  The Supreme Court made it clear that summary judgment should be used more frequently to vet out those cases that do not require a trial.  The goal was to provide an easy and early mechanism that we have all been searching for.

Unfortunately in my experience, that has not borne out to be the case.  In many jurisdictions the procedure to even arrange a motion date for a summary judgment motion is extremely complicated.  Take as an example a recent case in which I was involved in Toronto.

The case had been proceeding along for many years.  There were procedural delays.  There were companion proceedings in another forum that caused further litigation delays.  The matters were arguably complex, at least relating to the issue of damages.  About a year before the fixed trial date, all expert reports on liability had been exchanged. After an unsuccessful attempt to resolve the matter, the matter was ripe for a summary judgment motion to determine a straightforward and relatively uncomplicated issue of liability.

There were few fact witnesses.  Police documentation was not contentious.  There were only two engineering experts who only differed on minor points.

The process to try and schedule the summary judgment motion took almost four months and two court attendances.  The second court attendance was a chambers appointment where a judge, with no materials and no knowledge of the case was asked to decide whether the matter was appropriate for summary judgment.  How could a judge decide that issue in a vacuum?  The judge could not.

Given that the trial date that was now only eight months away with the only available motion dates a month before the trial date, the request to schedule the summary judgment motion was denied.

We are now left with a case, which is nearing its tenth year anniversary, that will go to trial.  The matter is scheduled for eight weeks of court time.  It may take even longer. The case could have been dispensed with in a one day summary judgment motion, possibly two.

Thus, while I personally welcome the Supreme Court of Canada’s mission statement in Hryniak, in practice it is extremely difficult to implement.  I say that not with criticism, but simply to point out that the current justice system, which is overworked, and underfunded and understaffed, will be hard pressed to implement the goals to their fullest without substantial changes.

As a legal community and judicial system, we should canvass other alternatives including dedicated weekly lists solely for summary judgment motions, ease of scheduling summary judgment motions, omit court attendances simply for scheduling purposes or other such avenues that could streamline and expedite the process.

[1] [2014] 1 S.C.R. 87