July 8, 2019

Levelling the Playing Field: Costs Insurance Is a Compensable Disbursement

In the recently released Costs decision, Stewart et al. v. Wood et al. [2019 ONSC 3931] Justice Tausenfreund was required to assess costs and disbursements in a settled personal injury lawsuit.

The main plaintiff, Steven Stewart was injured in a car accident on January 5, 2015 when he struck and killed a stray horse on his way to work at night. He suffered a mild traumatic brain injury and extensive soft tissue injuries. He sued the owner of the horse, Tracey Wood and the property owners where Wood stabled the horse.

Liability was a contested issue in the lawsuit, which created an obstacle to settlement. Wood did not defend the claim and was noted in default. The barn owners took the position that they were not liable for Wood’s failure to secure her horse properly.

The defendants also vigorously disputed the quantum of damages claimed by Stewart, which totalled $1.2 million including Family Law Act claims. At the time of the accident, he had recently received his Electrical Technician diploma and was in the process of applying for employment with Ontario Power Generation. He claimed that, as a result of his ongoing injuries, he did not complete the application process, and remained off work for approximately 2.5 years. At that time, he was hired full-time, and was working towards becoming a millwright at the time of the settlement.

The dispute did not resolve at pre-trial and was scheduled for a three-week trial. 10 days prior to commencement of trial, the parties settled for $75,000, with costs and disbursements to be assessed by the Court. Shortly before settlement, several offers were exchanged. With trial less than 2 months away, Stewart made an offer on March 11, 2019 that was eventually accepted. At the time of the offer, he indicated to the defendants that he had incurred disbursements of approximately $25,000 to date, as he had sought opinions from several experts in preparation for trial. He also indicated that he would accept $115,000 all in to settle the claim. This amount was rejected by the defendants.

The costs assessment proceeded by written submissions. The parties also submitted their pre-trial memoranda in support.

The plaintiffs sought legal costs of $107,458 including HST, and disbursements of $29,070. The bulk of the disbursements was for opinions from a Chronic Pain specialist, a neuropsychologist, a neuro-radiologist an actuary and a vocational expert. Also included was $1,458 for “costs” insurance, which the Plaintiffs purchased on their lawyer’s advice, to protect them against personal costs payable to the defendants if they lost at trial.

The defendants claimed that the costs were excessive given the $75,000 settlement. They also claimed that the plaintiffs had incurred unreasonable disbursements for expert reports, and that costs insurance was not a recoverable disbursement.

Regarding costs insurance, the defendants argued that the settled law in Ontario opposed reimbursing voluntary insurance purchased by the plaintiffs. Justice Tausenfreund disagreed. He acknowledged that there was case law that stood for this principle, but the matter had yet to be decided finally. He cited Armstrong v. Lakeridge Resort Ltd. [2017 ONSC 6565], in which Justice Salmers ordered a costs insurance award, explaining:

Without costs insurance, the fear of a very large adverse costs award would cause many Plaintiffs of modest means to be afraid to pursue meritorious claims. It is in the interests of justice that Plaintiffs be able to pursue meritorious claims without fear of a potentially devastating adverse costs award.

Justice Tausenfreund agreed with this reasoning and accepted that costs insurance is a compensable disbursement.

Turning to the other amounts submitted, Justice Tausenfreund dismissed the defendants’ argument that the costs were unreasonable, although they outweighed the settlement amount.

He explained that, in an of itself, the settlement amount would not limit a costs award. However, citing Bourcher v. Public Accountants Council for theProvince of Ontario,his Honour conceded that, “what is fair and reasonable is generally considered to be the amount that an unsuccessful party could reasonably expect to pay for costs”.

He noted that this was not a case where the parties took advantage of the pre-trial conference to reach settlement. The defendants pushed the plaintiffs to the brink of trial in order to achieve the best possible outcome for themselves. Until 10 days before trial, the plaintiffs were forced to prepare for a three-week proceeding. Plaintiffs’ counsel devoted significant time to this preparation, leading to considerable legal costs.

Similarly, the various expert reports were required to prove the damages sought by the plaintiffs and therefore, were reasonably incurred in view of the impending trial.
As a result of these factors, and in view of the amounts the defendants could reasonably expect to pay, Justice Tausenfreund set costs at $75,000 plus HST of $9,750 with disbursements fixed at $29,070.

This is a fair result and encouraging both for its even-handedness and support of costs insurance as a compensable disbursement.

If you have been seriously injured in a car accident, and have questions about accident benefits, your lawsuit, costs insurance, or any other matters related to your accident, we are pleased to offer a free consultation. Hire the experts – Campisi LLP: “Clients First, Excellence Always!”


Cesar Carranza

Cesar Carranza is the head of Campisi Law's Accident Benefits Department. He represents the firm’s clients at mediations and pre-arbitration hearings at the Financial Services Commission of Ontario (FSCO). Under Cesar’s representation, clients are in very good hands. Cesar is a veritable encyclopaedia of accident benefits and is well-versed in the intricate issues that surround Accident Benefits claims.

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