Election of Arbitration or Court Proceeding

Gordyukova v. Certas Direct Insurance Company, 2012 ONCA 563 (C.A.)

The subject of this appeal is s. 281.1(1) of the Insurance Act, which provides that an insured shall commence a court proceeding or arbitration within two years of the insurer's refusal to pay benefits.

The plaintiff was in a motor vehicle accident in 2001.  She applied for accident benefits and a dispute arose over certain medical benefits.  After mediation failed, she issued a Statement of Claim in 2002. In 2005, the insurer advised her she had exhausted her non-catastrophic limits for medical and rehabilitation benefits.  Her application for a catastrophic designation was rejected so she commenced an arbitration at FSCO in 2008.  Certas brought a motion to stay the arbitration on the grounds that the CAT dispute should be added to the court action. The arbitrator ruled the plaintiff could not proceed with both the court action and the arbitration, but could proceed with arbitration if she discontinued the court action.  The arbitrator ruled he was not ruling on the limitation issue.  The plaintiff gave notice of her intention to discontinue the court action and proceed with arbitration, and the insurer brought a motion seeking a ruling on the limitation issue.  The arbitrator ruled the plaintiff could add all of the matters pending before the Superior Court to the arbitration.

Certas appealed, arguing that the plaintiff could not re-elect the method of proceeding eight years after the court action was commenced. The matter was appealed to the Director 's Delegate then the Divisional Court.

The Court of Appeal held that the arbitration should be stayed.  Section 281.1(1) of the Insurance Act requires an election between a court action and an arbitration. It provides that a proceeding shall be brought within two years. The insured has the choice of forum, but cannot switch forums after the expiry of the limitation period.  Since the court proceeding included a claim for "continued accident benefits", it would necessarily include a determination of the CAT issue. 

Threshold Motion Successful

Surveillance evidence can be useful in showing that the plaintiff does not meet the Insurance Act threshold.

In Dahrouj v. Aduvala, 2012 ONSC 4090 (S.C.J.), the plaintiff was injured in a minor rear end collision.  She was a homemaker and alleged she developed chronic pain which impaired her functioning in the home and her social interaction in the community.

The evidence at trial was that the plaintiff visited her family doctor on multiple occasions prior to the accident complaining of head, neck and back pain.  She made similar complaints post-accident.  The defendant obtained surveillance showing the plaintiff engaged in a variety of activities, including scraping snow and ice off her car, pumping gas, reaching for groceries on an upper shelf and carrying groceries.  Justice Hackland described the video as “particularly devastating” to the plaintiff’s credibility, as it showed the plaintiff stretching and lifting, the activities she alleged restricted her functioning as a homemaker.

The plaintiff’s expert diagnosed her with “central sensitization”, based on a 45 minute interview and relying only on the plaintiff’s self reports.  Justice Hackland preferred the defence expert, who conducted a more thorough assessment and whose opinion was corroborated by the surveillance evidence.

Justice Hackland held the plaintiff had not proved she sustained a serious, permanent impairment of an important physical function.  As a result, she was not entitled to general damages and her recovery was limited to $32,000, the amount the jury awarded for past housekeeping. 

Surveillance of the plaintiff can be extremely important in defending claims, especially those alleging chronic pain.  When surveillance can be combined with expert opinion, it can be effective in showing that the plaintiff’s claim does not meet the threshold.

Adding an Insurer as a Defendant Rather than a Statutory Third Party

Can an insurer add itself as a defendant rather than as a statutory third party?

In Azad v. Dekran, 2012 ONSC 4257 (S.C.J.), the Personal insured the defendant and brought a motion pursuant to r. 13.01 to intervene as an added defendant.  It wished to allege that the accident did not occur or was staged and to crossclaim against its insured.  It preferred this route rather than being added as a statutory third party since s. 258(14) of the Insurance Act prohibits a statutory third party from taking a position incongruous to its insured.

Master Dash dismissed the motion, holding that it was not a proper use of r. 13.01.  One of the purposes of s. 258 is to permit an insurer to contest the plaintiff’s claim in a situation where it denies coverage.  The plaintiff’s action is not the appropriate forum to decide issues between the insured and insurer.  Any dispute could be decided in subsequent proceedings, including a proceeding to recover the statutory minimum paid to the plaintiff. 

Master Dash noted that if the accident was staged, the plaintiff would not be entitled to damages; on the other hand, if the trial court did award damages, it would mean there was a legitimate accident and there would be no basis for a crossclaim against the insured.  In addition, as a statutory third party, the insurer would have a right to discover its insured.

Master Dash refused to follow the decision in Esho v. Dekran, 2012 ONSC 3638 (S.C.J.), where the insurer was added as a defendant.  Now that there are conflicting decisions on this issue, perhaps it will be up to the Divisional Court to provide clarity.

Production of Statements Made Following an Accident

A recent motion decision deals with two issues that can arise in defending claims: the extent of litigation privilege with respect to statements made following an incident, and whether reviewing such a statement prior to examination for discovery waives privilege.

In Knox v. Applebaum Holdings, 2012 ONSC 4181 (CanLii) the plaintiff brought a motion seeking production of a statement prepared by the defendant’s property manager following an accident in its parking lot.  The accident occurred at 8:55 p.m..  The property manager was quickly notified, travelled to the parking lot, took pictures and called her risk manager to report what she had found at 12:35 a.m.  At this point, she was aware that two people had been injured.  She typed up a statement detailing her recollection of what she had seen and learned of the accident while it was fresh in her mind.  The statement was delivered to the adjuster later that day.

On the motion, the issues were whether the statement was protected by litigation privilege and whether privilege was lost when the property manager reviewed it when she prepared for her examination for discovery.

Justice Hockin held that litigation privilege attached to the document.  The property manager knew there was an accident and that two people had been injured.  She believed that litigation would follow.  It did not matter that the defendant was not represented by counsel at the time.  The dominant purpose of the document was to facilitate her employer’s defence and to assist in her forensic involvement of the case. 

Privilege was not waived.  Justice Hockin relied on Wronick v. Allstate (1997), 7 C.P.C. (4^th) 285 (Gen. Div.) where Justice Leitch held that reviewing a privilege document to refresh one’s memory in preparation for examination for discovery does not amount to a waiver of privilege.

Failure to Add Property Owner as Additional Insured

Many winter maintenance contracts require the contractor to add the property owner as an additional insured on its policy.  But what happens when the contractor fails to do so and the owner is sued?

In Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506 (C.A.), the plaintiff sued the Cora Group, alleging she slipped and fell on black ice on its property.  Cora contracted with Collingwood Landscape for winter maintenance services.  In the service contract, Collingwood agreed to name Cora as an additional insured on its CGL policy, but failed to do so.  On a motion for summary judgment, Collingwood was ordered to assume Cora's defence and indemnify it for damages.  Collingwood appealed.  Cora conceded that the order to indemnify was premature so the primary issue on appeal was whether the motions judge erred in ordering Collingwood to assume Cora's defence.

The Court of Appeal set aside the original Order and substituted an Order that Collingwood pay for Cora's defence.

Simmons J.A. held that Collingwood's breach of its contractual obligation to name Cora as an additional insured did not create a duty to defend; rather, it gave rise to a remedy in damages.  The quantum of such damages is the amount Cora will be required to pay for a defence of the claims that Collingwood's insurer would have paid had Collingwood fulfilled its contractual obligations.  The costs would include all of the costs of Cora's defence except for those incurred exclusively to defend claims that do not arise from Collingwood's performance or non-performance of the contract.  Cora was entitled to separate counsel given there were distinct claims against the two parties, which meant there would be an inherent conflict between them.

Withdrawing Deemed Admissions

When will a party be permitted to withdraw deemed admissions arising from the failure to respond to a Request to Admit?

In Epstein Equestrian Enterprises Inc. v. Cyro Canada Inc., 2012 ONSC 4653 (S.C.J.), the plaintiff served a Request to Admit eleven days before trial was scheduled to begin in 2010.  Trial was adjourned initially for one week and then again until 2012.  One of the defendants, Jonkman, failed to respond to the Request to Admit.  Rule 51.02(1) provides that a party is deemed to admit the contents of a Request to Admit if it does not respond to it within 20 days after it is served.  Jonkman sought to either set aside the Request to Admit or to withdraw the admissions.

Justice Morgan held that even though the Request to Admit was not served 20 days before trial, once the trial was adjourned and did not start for 20 days, the deeming provision applied. The main issue therefore centred on whether Jonkman was entitled to withdraw its admissions. The court may grant leave to withdraw the admissions if the following conditions are met:

1. The proposed change raises a triable issue;
2. There is a reasonable explanation for the change of position; and
3. The withdrawal will not result in any prejudice that cannot be compensated for in costs. (citing Antipas v. Coroneos, 1988 CarswellOnt 358)

Justice Morgan permitted the admissions to be withdrawn. At the time the Request was served, Jonkman was basically without legal representation as its counsel was in the process of being removed from the record. It had instructed counsel not to respond to the Request to Admit.  It subsequently brought a coverage application and was now being defended by an insurer.  The plaintiff supported the coverage application and must have understood that if coverage was achieved, a defence would be pursued. Jonkman's new counsel and insurer were unaware of the Request Admit and it would be unable to defend itself if the admissions stood.  The coverage application had been settled, and Justice Morgan speculated that the insurer's position may have been different had it known that Jonkman had effectively deprived itself of a defence by failing to respond to a wide ranging Request to Admit.

Justice Morgan was of the view that any prejudice to the plaintiff would not be inordinate as a trial would have been needed to canvas issues with the co-defendant in any event. The plaintiff further argued it was prejudiced as it had entered into a Pierringer Agreement with the remaining defendants and was concerned Jonkman would attempt to pin liability on those parties at trial. Justice Morgan held that the plaintiff had previously assumed Jonkman was insolvent when it entered the settlement and so this factor was to the plaintiff's benefit not prejudice.  The admissions were withdrawn.

Action Dismissed for Failing to Comply with Municipal Act Notice Requirement

Argue v. Tay (Township), 2012 ONSC 4622 (CanLii)

A municipality was recently successful in having a case dismissed based on the failure of the plaintiff to comply with s. 44(10) of the Municipal Act.  The section requires written notice be given to the clerk within ten days of the incident.  Section 44(12) provides that the failure to give notice can be excused if the plaintiff has a reasonable excuse and the defendant is not prejudiced by the lack of notice.

In Argue v. Tay (Township), the plaintiff alleged she sustained soft tissue injuries in a motor vehicle accident caused by potholes in the defendant municipality's road.  She provided written notice through her lawyer almost two years after the incident.  By that time, the surface of the road had changed materially.  The plaintiff argued the municipality had either actual or constructive knowledge of the accident as the municipal volunteer fire department attended the scene and would have received a copy of the police report.  The municipality brought a summary judgment motion seeking to have the action dismissed for failing to comply with the Municipal Act notice requirement.

DiTomaso J. held the plaintiff did not comply with the notice requirements.  Section 44(10) requires written notice be given to the clerk and the fact that the fire department attended or may have received a copy of the police report was insufficient to comply with the section.  There is no support in the jurisprudence that actual or construction notice pre-empts the requirement to give written notice to the clerk, and the section cannot be dispensed with in favour of notice to a different municipal department.

The plaintiff had no reasonable excuse for the failure to give notice.  She was discharged from hospital the same day as the accident, had no broken bones and was able to return to work two to three weeks after the accident.  She was aware people could bring lawsuits and believed the state of the road contributed to the accident, yet took no steps to inform herself about the law.  She was physically and mentally able to instruct counsel. 

The municipality had been prejudiced by the lack of notice.  There is a presumption of prejudice where notice has not been provided and the plaintiff bears the onus of showing there was no prejudice.  She failed to do so.  Neither she nor the municipality had photos or measurements of the road, the condition of the road had changed materially since the accident and the municipality had lost the opportunity to interview witnesses.  As a result, summary judgment was granted.

Argue is a useful summary of the relevant authorities relating to s. 44(12). Those defending municipal claims with notice issues should consider whether it would be useful to bring a summary judgment motion in the circumstances.