Maxwell v. Luck: A Warning to Insurers

The recent decision of the Ontario Superior Court shows that insurers may face additional remedial costs sanctions where they take unreasonable settlement positions throughout the litigation.

Following a modest jury verdict and the predictable threshold motion in this chronic pain case, Justice Howden was required to fix the costs of the action.  He would not engage in a line by line review of the Bill of Costs, but used his experience of many years on the bench to conduct a global assessment taking into account the reasonable expectations of the losing party.

However, Justice Howden then went further and imposed a remedial costs penalty based upon the criteria set out in the Court of Appeal decision of Keam v. Caddy:

It is remedial because it is intended not only to compel compliance by insurers with an important statutory purpose, but also to provide a remedy to the other party who was deprived of the opportunity for an early settlement of the claim. It is a penalty because it is not intended to be merely compensatory of costs unnecessarily incurred by the other party or parties, as that objective is already addressed by other costs provisions of the Rules of Civil Procedure, but to provide a meaningful consequence to an insurer that elects not to comply.

The legislature chose not to provide a specific cost consequence for an insurer’s failure to participate in mediation, such as substantial indemnity costs against a losing defendant or deprivation of full costs of a winning defendant. Instead, the trial judge is accorded the discretion to determine the appropriate cost consequence in each case. In summary, 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.

In the Maxwell case Justice Howden found that Aviva had taken a hardnosed approach that included making offers that showed no reasonable attempt to resolve the claim and Aviva  attended at mediation for the sole purpose of declaring that they had no money to offer.  The Court indicated that this type of approach by an insurer will attract censure by way of costs where the plaintiff ultimately succeeds in his or her action.  In this case the Court added a $50,000 remedial penalty on top of the  $150,400.00 awarded as costs and the $56,332 awarded for disbursements.
This ruling is a reminder to insurers that if they elect not to comply with their obligations to make good faith efforts to resolve cases under the Insurance Act that there will be consequences.

D. Joel Dick is an Associate at Howie, Sacks & Henry. He can be reached at or 416-572-3516.

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