2013 ONCA 296, 2013 ONCA 296

Williston v. City of Hamilton, operating as Police Services, et al. [Indexed as: Williston v. Hamilton (Police Services)] Ontario Reports Court of Appeal for Ontario, Gillese, Blair and Rouleau JJ.A. May 7, 2013 115 O.R. (3d) 144 | 2013 ONCA 296 Case

Summary Insurance — Automobile insurance — Mediation — Plaintiff writing to legal services division of defendant municipality and requesting mediation pursuant to s. 258.6 of Insurance Act — Legal department not complying with request — Trial judge granting judgment in favour of plaintiff — Trial judge declining to make augmented award of costs pursuant to s. 258.6(2) on basis that defendant's insurer was not involved in action — Neither party raising issue of insurer's involvement in action and trial judge not giving plaintiff opportunity to present evidence and argument on that issue — Evidence establishing that legal services division at minimum held itself out to plaintiff as being authorized by insurer to provide response required of insurer upon receipt of notice under s. 258.3(1)(

b) of Act —

Section 258.6(2) applying — Insurance Act, R.S.O. 1990, c. I.8, ss. 258.3(1) (b), 258.6. In an action arising out of a motor vehicle accident, the trial judge gave judgment in favour of the plaintiff. The plaintiff sought an augmented award of costs under s. 258.6(2) of the Insurance Act on the basis that the defendants had refused repeated requests to engage in mediation pursuant to s. 258.6 . The trial judge denied that request on the basis that s. 258.6(2) applies only to insurers and the defendants were not insurers either as named defendants or by way of subrogation. The plaintiff appealed.

Held , the appeal should be allowed. The trial judge's ruling on augmented costs was made without either party having raised the issue of an insurer's involvement in the action and without giving the plaintiff an opportunity to present evidence and argument on that issue.

Fresh evidence filed on appeal established that the plaintiff had written [page145] repeatedly to the legal services division of the defendant municipality requesting mediation and that the legal services division had, at minimum, held itself out to the plaintiff as being authorized by the municipality's insurer to provide the response required of an insurer upon receipt of a notice under s. 258.3(1)(

b) of the Act. As a result, the plaintiff was justified in dealing with the legal services division as representing both the municipality and the insurer.

Section 258.6(2) applied in the circumstances of this case because the insurer failed to respond to a request to mediate. Cases referred to Keam v. Caddey (2010), 103 O.R. (3d) 626 , [2010] O.J. No. 3650 , 2010 ONCA 565 , 267 O.A.C. 296 , [2010] I.L.R. I-5032 , 88 C.C.L.I. (4th) 177 , 322 D.L.R. (4th) 659 , 98 M.V.R. (5th) 195 Statutes referred to Compulsory Automobile Insurance Act , R.S.O. 1990, c. C.25, s. 2(1) Insurance Act , R.S.O. 1990, c. I.8, ss. 258.3(1) ( b ), (2) , 258.4 , 258.6 , (1) ,

(2) APPEAL from the costs order of Ramsay J., [2011] O.J. No. 4103 , 2011 ONSC 5400 (S.C.J.) . Sumitra Lagoo and Efstathios Balopoulos , for appellant.

Kieran C. Dickson , for respondents. The judgment of the court was delivered by ROULEAU J.A. : — A. Overview [ 1 ] The appellant appeals the trial judge's cost award. Leave to appeal was granted by a panel of this court on April 19, 2012. [ 2 ] The costs decision arises from motor vehicle litigation wherein the trial judge concluded that the respondents were responsible for 100 per cent of the damages to the appellant, in the agreed-upon amount of $100,000. The trial judge awarded the appellant partial indemnity costs fixed at $60,000.

The appellant had also sought an augmented award of costs on the basis that the respondents had refused repeated requests to engage in mediation pursuant to s. 258.6 of the Insurance Act ,R.S.O. 1990, c. I.8. The trial judge denied this request and it is this refusal to grant an augmented cost award that is the subject of the appeal. B. Facts [ 3 ]

Section 258.6(1) provides that a person making a claim for damages for injury arising from the use or operation of an automobile, and an insurer that is defending an action on [page146] behalf of an insured or that receives a notice under s. 258.3(1)(

b) in respect of a claim, shall participate in mediation if the other party so requests. Pursuant to s. 258.6(2) , a failure to comply with a request to mediate shall be considered by the court in awarding costs. [ 4 ] This court considered this provision in Keam v. Caddey (2010), 103 O.R. (3d) 626 , [2010] O.J.

No. 3650 , 2010 ONCA 565 and, at para. 29 , determined that "where an insurer breaches s. 258.6(1) , s. 258.6(2) requires the trial judge to ascertain the appropriate remedial costs penalty in the circumstances". [ 5 ] In the present case, the trial judge declined to make an augmented cost award because he concluded that the provision only applied to insurers. He determined that the respondents were not insurers either as named defendants to the action or by way of subrogation.

This finding was likely based on the fact that the action had been defended throughout by the legal services division of the City of Hamilton, rather than outside counsel. C. Positions of the Parties [ 6 ] The appellant submits that the trial judge erred in ruling that s. 258.6 did not apply because the respondents were not insurers either as named defendants or by way of subrogation. The ruling was made without either party having raised the issue. Further, had the issue been raised, the appellant would have provided ample evidence that s. 258.6(2) had been engaged in the circumstances of this case.

In support of that submission, the appellant has tendered fresh evidence showing that the respondents were insured; that the respondents had confirmed to the appellant that there was coverage and advised of its limits; and that the appellant had made requests for mediation engaging the obligations outlined in s. 258.6(1) . [ 7 ] The respondents acknowledge that the issue was not raised in submissions before the trial judge and candidly stated that the trial judge's basis for rejecting the claim for augmented costs came as a surprise to both parties.

However, they maintain that the trial judge was correct and that the appellant did not establish that s. 258.6(2) applied in the circumstances of this case. D. Analysis [ 8 ] For the reasons that follow, I would allow the appeal. [page147]

(1) Fresh evidence [ 9 ] The appellant's claim arose from a motor vehicle accident in Ontario where insurance is mandatory pursuant to the Compulsory Automobile Insurance Act , R.S.O. 1990, c. C.25, s. 2(1). After the collision, the appellant sought and obtained confirmation from the respondents that there was insurance coverage. [ 10 ] When the appellant sought augmented costs pursuant to s. 258.6(2) of the Insurance Act , he had no reason to expect that there would be an issue as to whether the

section applied in the circumstances. He quite reasonably expected that the insurer had been involved in the defence of the claim, was aware of the appellant's several requests for mediation and had refused to accede to these repeated requests. [ 11 ] Although the respondents opposed the appellant's request for augmented costs at first instance, they did so on the basis that such costs were not warranted. The respondents did not suggest to the trial judge that he could not make the award because no insurer was involved in the defence of the action or in the refusal to mediate.

The appellant was, therefore, taken by surprise by the trial judge's ruling and cannot be faulted for not having filed any material to confirm the applicability of s. 258.6(2) of the Insurance Act . [ 12 ] Before ruling as he did, the trial judge ought to have raised his concern with the parties and given them an opportunity to address the issue of whether the insurer's obligation to mediate had been engaged. Had the trial judge done so, the appellant would no doubt have

sought permission to file relevant material. Because the trial judge did not provide this opportunity, it is appropriate, in my view, for the appellant to file on appeal the fresh evidence touching on this issue.

(2) The applicability of s. 258.6 of the Insurance Act to this case [ 13 ]

Section 258.6 of the Insurance Act reads as follows: Mediation 258.6(1) A person making a claim for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile and an insurer that is defending an action in respect of the claim on behalf of an insured or that receives a notice under clause 258.3(1) (

b) in respect of the claim shall, on the request of either of them, participate in a mediation of the claim in accordance with the procedures prescribed by the regulations. [page148] Failure to comply

(2) In an action in respect of the claim, a person's failure to comply with this

section shall be considered by the court in awarding costs. [ 14 ] Pursuant to s. 258.6(1) , an insurer "that is defending an action in respect of the claim on behalf of an insured or that receives a notice under s. 258.3(1) (

b) in respect of the claim" must participate in mediation if requested by the plaintiff. The respondents argue that there was no basis for concluding that an insurer defended the action. The only evidence was that the action was defended throughout by the legal services division of the City of Hamilton. As a result, the appellant has not established that the

section applies to them. Further, the respondents argue that the appellant has not established that the insurer ever received the s. 258.3(1) (

b) notice referred to in s. 258.6(1) . Finally, the respondents argue that the appellant has not established that the insurer was asked to mediate. [ 15 ] The s. 258.3(1)(

b) notice is a written notice that a plaintiff must serve on the defendant, advising the defendant that the plaintiff intends to commence an action. It is to be served within 120 days of the incident, or such longer period as may be allowed by the court. The fresh evidence shows that the appellant sent the s. 258.3(1) (

b) notice to the City on November 17, 2006. [ 16 ] Once the City received the notice, it was required by s. 258.3(2) to "give a copy of the notice to the insurer within seven days of receiving the notice". In light of the statutory requirement, it is reasonable to presume that the respondents did in fact transmit the notice to the insurer. [ 17 ]

Section 258.4 of the Insurance Act then provides that an insurer who receives a s. 258.3(1) (

b) notice is to promptly inform the plaintiff whether there is a motor vehicle liability policy issued by the insurer to the defendant and, if so, what the liability limits under the policy are and whether the insurer will respond under the policy to the claim. [ 18 ] The fresh evidence contains a November 21, 2007 letter to the appellant advising that "the policy limits under Guarantee Company of North America Policy #A197970 for 2005 are $10,000,000.00.

There are no coverage issues." This letter was authored by the City of Hamilton's legal services division and states that it is in response to correspondence received from the appellant's solicitor dated November 16, 2007. The appellant's November 16, 2007 letter does not appear to be in the record before us.

It is, however, reasonable to conclude that it inquired about the City's insurance coverage, and the City's response to the appellant containing the insurance details was [page149] sent in compliance with the insurer's obligation under s. 258.4 of the Insurance Act . [ 19 ] From this chain of correspondence, and taking into account the statutory requirements, the only reasonable conclusion is that the insurer was fully apprised of the claim and had received the s. 258.3(1) (

b) notice. It is, in my view, highly unlikely that a solicitor for a sophisticated insured such as the City of Hamilton would send a letter to a plaintiff representing that there are no coverage issues without having first obtained confirmation to this effect from the insurer. [ 20 ] I turn now to whether the request to mediate pursuant to s. 258.6(1) was sent to the insurer. The appellant wrote to the legal services division of the City of Hamilton on February 3, 2011, and formally requested private mediation pursuant to s. 258.6(1) of the Insurance Act .

When made by the plaintiff, the s. 258.6(1) mediation request is directed to the defendant's insurer. No response was received from the legal services division of the City. There was no suggestion that the legal services division of the City was not in a position to accept such a request on behalf of the insurer. [ 21 ] On July 7, 2011, the appellant sent the City's legal services division a further request for mediation pursuant to s. 258.6(1) of the Insurance Act . This time, the City's legal services division responded and questioned the utility of mediation.

It stated that it would pass the request for mediation onto its principals, but would not recommend mediating until further discovery, production and a medical exam had been done. The letter did not identify who the "principals" were and, as with the previous request, did not suggest that the legal services division of the City was not in a position to accept the request for mediation on behalf of the insurer. [ 22 ] A third letter requesting mediation was sent by the appellant on July 19, 2011.

Although no specific reference to s. 258.6 is made in the letter, the tenor of the letter makes it clear that the appellant was renewing his request for mediation. [ 23 ] This record allows for no other reasonable conclusion but that the legal services division of the City of Hamilton was, at a minimum, holding itself out to the appellant as being authorized by the insurer to provide the response required of an insurer upon receipt of a s. 258.3(1) (

b) notice and to respond on the insurer's behalf to mediation requests made pursuant to s. 258.6(1) . The respondents filed nothing suggesting otherwise, nor did they indicate what arrangement existed between the legal services division of the City of Hamilton and the insurer. [page150] [ 24 ] As a result, the appellant was justified in dealing with the legal services division of the City of Hamilton as representing both the City and the insurer. I conclude therefore that s. 258.6(2) applies in the circumstances of this case because the insurer failed to respond to a request to mediate, as required by s. 258.6(1) .

Remedy [ 25 ] In my view, an augmented cost award was warranted in the circumstances of this case. The appellant repeatedly requested mediation and the insurer never agreed to participate, despite its obligation to do so pursuant to s. 258.6(1) . [ 26 ] As set out in Keam , at para. 32 , the award should reflect the censure of the court and provide appropriately significant recovery.

In Keam , the court determined that increasing the quantum of the fee portion of the costs awarded to the appellants was warranted and it increased the fee award from $110,000 to $150,000 plus applicable taxes. [ 27 ] In the present case, the fee portion of the trial costs, on a partial indemnity basis, was $41,183.60. In my view, a $20,000 increase is appropriate, thus raising the total cost award from $60,000 to $80,000. I would also award the appellant costs of the appeal, including the leave to appeal motion, fixed in the global amount of $15,000, inclusive of disbursements and applicable taxes.

Appeal allowed. End of Document