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Ontario Court of Appeal Sends Strong Message about Mandatory Mediation

January 2010

First published in MB's Insurance Coverage Newsletter

The Ontario Court of Appeal, in Keam v. Caddey, 2010 ONCA 565, has awarded plaintiffs $40, 000 in additional costs after an insurer refused to participate in mediation prior to trial. In this case, the parties were involved in a motor vehicle accident on April 10, 2003. The main plaintiff, Mr. Keam claimed that he suffered personal injuries and his wife was a Family Law Act claimant. A court action was commenced in May, 2004 and defended in October, 2004 by the Caddeys' insurer, Aviva Canada.

In September 2006, following examinations for discovery, counsel for the Keams made the first of two formal requests for private mediation pursuant to section 258.6(1) of the Insurance Act by letter to Aviva's lawyer. The letter suggested several names as potential mediators, and stated that if Aviva did not agree to mediation, the letter would be referred to after trial on the issue of costs. Aviva's lawyer did not respond to this first request.

In June 2007, counsel for the Keams renewed the request that Aviva participate in private mediation and again referred to costs consequences following trial if Aviva failed to participate.

In July 2007, Aviva's counsel replied that they were of the opinion that Mr. Keam's injuries did not meet the threshold test under the Insurance Act, and that Aviva was not willing to attend private mediation of this claim.

The trial of the case was scheduled for October 2008. Aviva served an offer to settle in July 2008 for $17,500 for general damages plus prejudgment interest and partial indemnity costs. This offer seems to suggest that Mr. Keam's claim could have met the statutory threshold test and that mediation may have been useful.

On October 1, 2008, the parties exchanged offers. Aviva only changed the period of time it was willing to pay pre-judgment interest with all other terms remaining the same from its previous offer. The plaintiffs offer to settle was: general damages of $60,000, 5% prejudgment interest from November 27, 2003, special and pecuniary damages of $130,000, damages of $15,000 under the Family Law Act and partial indemnity costs, including disbursements.

The parties did not settle and the action proceeded to trial. After trial, a jury awarded the plaintiffs $70,000 in general damages (gross), $22,500 for the Family Law Act claim, $1,200 for past loss of income, plus prejudgment interest of $19,360.20. As a result, although there were no Rule 49 costs consequences, having won their case, the plaintiffs were entitled to partial indemnity costs. The trial judge also determined that Mr. Keam's claim met the statutory threshold under the Insurance Act.

The parties subsequently filed written submissions on costs and made oral submissions as well. The trial judge issued written reasons dealing with the issue of costs on September 29, 2009.


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