Plaintiff’s Family Doctor Permitted To Testify As Standard of Care Expert In Medical Malpractice Case

Posted on February 18, 2012 by Stephen Cavanagh

The debate continues as to whether family physicians may testify as experts or only as fact witnesses. In this case, the issue arose with a bit of a twist: the court opened the door for the plaintiff’s family doctor to testify as an expert on the issue of standard of care in a medical malpractice action. In other words, the treating physician would be testifying, not as to damages, but on the issue of liability.

In Farooq v. Miceli, 2012 ONSC 558 (CanLII), the defendant doctor brought a motion for summary judgment on the basis that the plaintiff had failed to obtain an expert’s report on the standard of care.

The motion was heard by Mr. Justice Peter D. Lauwers, who conditionally dismissed it (see below). Counsel for the plaintiff evidently argued that the plaintiff’s family doctor, who had testified that the defendant’s discipline hearing before the College of Physicians and Surgeons, could supply the requisite expert evidence.

Justice Lauwers began by voicing some unhappiness over the changes that have been made to rule 53.03. He said that “one of the regrettable side effects of the changes to the rules has been to sow some confusion about the evidence that can be given by individuals who may not be qualified to be experts under the rule 53.03 but who nonetheless have relevant evidence to give that includes an element of expertise. The best example of such a witness is a treating physician.”

His Honour went on to say that, “for practical purposes, treating physicians have always been allowed to give evidence and have been allowed to give opinion evidence about their working diagnosis and working prognosis. Treating physicians use their expertise to form opinions routinely in the examination of patients, in their assessment of patients and in their treatment.”

Justice Lauwers referred to several cases: Beasley v. Barrand, 2010 ONSC 2095 (CanLII), Gutbir v. University Health Network, Nicholson, 2010 ONSC 6394 (CanLII), Williams v. Bowler, 2005 CanLII 27526 (ON SC), Chrappa v. Ohm, 1996 CanLII 8002 (ON SC) and Greer v. Horton, [1996] O.J. No. 4826 (S.C.). He adopted the following observation, made by Madam Justice Toscano-Roccamo in Williams v. Bowler:

A medical witness who “wears two hats”, and who testifies both as a treating physician and as an expert may, depending on the circumstances of the case, be in the best position to offer first-hand observations as to the patient’s condition over the course of medical history; however, to the extent that the physician has any personal interest in the outcome of the case or lacks the objectivity and independence essential to the medical expert, this may adversely affect the weight to be given to the expert testimony.

(The same passage was also quoted with approval by Madam Justice Wilson in the Gutbir case.)

Justice Lauwers also noted, based on his review of the authorities, that family doctors who testify as experts are subject to challenge in cross-examination.

His Honour then concluded that the plaintiff’s family physician could testify on the issue of standard of care, provided that the requirements of rule 53.03 were satisfied:

Based on the foregoing, I conclude that Dr. Sidhu is not incapable of providing an expert opinion to the court on the standard of care applicable to Dr. Miceli [the defendant]. I put the proposition that way because the final decision on Dr. Sidhu’s qualifications is that of the trial judge after a voir dire. My decision is simply that Dr. Sidhu is not disqualified because he was and is Mr. Farooq’s treating physician.

Accordingly, if Dr. Sidhu prepares and serves a report that complies in substance with rule 53.03 within 30 days of the date of this order, the motion will be dismissed with costs to the plaintiff.

We have not been able to find another case in which a treating physician has been permitted to give expert evidence on the issue of standard of care in a professional negligence case (which is not to say that no such decision exists). However, Justice Lauwers’ decision does seem to run contrary to the trend of the jurisprudence since the Rules of Civil Procedure were amended. In Leonard v. Kline, 2011 ONSC 2730 (CanLII) for instance (a case about which we commented in an earlier post), Justice Gregory Ellies seemed to take it as a given that treating physicians would only be permitted to testify as fact witnesses.

Likewise, in the Gutbir case, to which Justice Lauwers made reference, Madam Justice Wilson said that “counsel were candid in their acknowledgment that they were not aware of any decisions dealing with treating doctors qualified as experts in medical negligence cases tried with a jury since the amendments to rule 53 in January 2010”. She went on to say:

While counsel for the Plaintiffs referred to several cases in which treating physicians were qualified by the court to give expert testimony, in my view these cases were not helpful to the issue I must determine because the facts were very different. In M.(N.) v. Alberta (Public Trustee) (2003), 34 C.P.C. (5th) 225 (Alta. C.A.), the judge stated that in a small centre, it was not uncommon for treating doctors to be expert witnesses at trial and opinion evidence was usually sought from treating specialists. That is certainly not the case in the city of Toronto.”

However, so far as we can see, even in the cases in which there was a debate as to whether or not the family physician could properly testify, it was the issue of damages upon which the treating doctor was being asked to opine. There, at least, the greater familiarity with the plaintiff that the family doctor would obviously enjoy might allow him or her to provide greater assistance to the court with respect to the plaintiff’s prognosis, likelihood of employment, etc.

Eliciting opinion evidence from the plaintiff’s family doctor on the issue of liability seems to us to be quite a bit more controversial. In that context, being a treating physician affords no obvious benefit over the testimony of a medical witness who has had no ongoing relationship with the plaintiff. It seems to us that permitting family doctors to offer opinion evidence on the issue of standard of care ought not to be encouraged.

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Master Dash Orders Defendants to Produce Proportionate Liability Sharing Agreement

Posted on February 18, 2012 by Stephen Cavanagh

Master Ronald Dash has ordered that a secret agreement, entered into by defendants and a third-party in Moore v. Bertuzzi, 2012 ONSC 597 (CanLII), must be disclosed to the plaintiffs. In his reasons, the master undertook a comprehensive review of the jurisprudence relating to disclosure of Mary Carter agreements, Pierringer agreements and other “proportional sharing agreements” that can potentially “change the landscape of the litigation”.

The Master placed considerable reliance upon the decision of Master MacLeod in Noonan v. Alpha-Vico, 2010 ONSC 2720 (CanLII).

The Moore v. Bertuzzi case is familiar. It arises out of a 2004 incident that took place in an NHL hockey game between the Vancouver Canucks and the Colorado Avalanche. Moore was struck from behind by Bertuzzi and suffered a serious injury. In the lawsuit, both Bertuzzi and the owners of the Vancouver Canucks (“Orca Bay”) were named as defendants. By the time of the motion heard by Master Dash, Bertuzzi had commenced a third-party action against his former coach, Marc Crawford in which Bertuzzi claimed contribution or indemnity. There were also crossclaims between the Bertuzzi and Orca Bay, also for contribution or indemnity.

In September, 2011, counsel for the plaintiffs learned that in July of that year, Bertuzzi, Orca Bay and Crawford had entered into minutes of settlement which, among other things, provided for an allocation of liability in particular proportions, notwithstanding the outcome of the trial. The third party claim against Crawford was dismissed on consent, without the knowledge of counsel for the plaintiffs.

On this motion, the plaintiff Moore sought disclosure and production of the agreement. In the course of the argument of the motion, counsel for the defendants advised the plaintiffs’ lawyer that they would be seeking an order, dismissing the crossclaims among their clients.

The defendants and third party resisted disclosure and production of the agreement, relying upon “settlement privilege”.

The master reviewed the jurisprudence that has considered whether settlement privilege is a class privilege or a case-by-case privilege. (In the former case, documents to which the privilege applies are assumed to be protected unless it can be shown that an exception applies. If settlement privilege is properly consider on a case-by-case basis, it will be presumed that documents are not protected unless the party asserting the privilege is able to satisfy the illness upon him or her, to establish the justice of extending the privilege in that particular case.)

The Master concluded that the caselaw on this issue is still somewhat unsettled, in that there are two streams of authorities, one endorsing each theory. However, the Master was satisfied that, regardless of which approach was taken, the result would be the same in this case.

He was quite critical of counsel for the defendants and the third-party, for their failure to disclose the settlement agreement to the plaintiffs’ counsel and to the court. He noted that the Court of Appeal had said, in Aecon Buildings v. Brampton, 2010 ONCA 898 (CanLII) (C.A.), that “we do not endorse the practice whereby such agreements are concluded between or among various parties to the litigation and are not immediately disclosed. While it is open to parties to enter into such agreements, the obligation upon entering such an agreement is to immediately inform all other parties to the litigation as well as to the court.”

In this case, the question became, whether the proportional sharing agreement would “change the landscape of the litigation”. The Master inspected the agreement. He concluded that it would “change the landscape of the litigation” and that therefore, the agreement had to be produced (subject to redaction of two unrelated provisions). He provided a non-exhaustive list of ways in which the litigation landscape could be affected by the agreement:

  • It may affect the rights of the formerly adverse defendants to cross-examine each other’s witnesses.
  • It could affect the right of multiple defendants to cross-examine the plaintiff and his witnesses.
  • It could affect the application of the three expert rule under section 12 of the Evidence Act, since only three experts may be called “upon either side” without leave.
  • If a proportional sharing of liability has been pre-determined by the defendants, the judicial determination of that issue in ignorance of the agreement could be considered a sham.
  • No longer being able to rely on adversity among defendants could affect the plaintiffs’ preparation for trial. For example it may require them to take steps to ensure that necessary evidence, which may no longer be called by the defendants, is before the court.
  • It could affect certain pre-trial motions, such as motions by each defendant for separate defence expert examinations in the same speciality. As will be discussed, that is a live issue in this action.
  • Knowing how liability is divided could affect the way that plaintiffs and the pre-trial judge conduct pre-trial conferences. The same could be said for Rule 49 settlement offers and mediation.

This decision, like the Noonan case are cautionary tales for counsel entering into agreements that partially settle a lawsuit. Counsel for the defendants and the third-party in Moore argued that if the Master were to order production of the settlement agreement, “it would mean that all settlement agreements, at least as among defendants, would need to be disclosed”. The Master disagreed with this proposition, but acknowledged that “it may be that most if not all secret agreements that end adversity between defendants, change their relationship from that set out in their pleadings and pre-determine how liability will be allocated need to be disclosed”.

Certainly, lawyers will have to tread very carefully and inspect the “litigation landscape” closely before deciding not to disclose an agreement by which a partial settlement of a lawsuit is achieved.

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Court grants summary judgment in occupier’s liability case on basis that occupier not required to sanitize environment to negate all inherent risk

Posted on February 17, 2012 by Stephen Cavanagh

In Miltenberg v. Metro Inc., 2012 ONSC 1063 (CanLII), Mr. Justice Andrew J Goodman granted the defendant’s motion for summary judgment and dismissed an action based on breach of obligations under the Occupiers Liability Act. In doing so, he made some observations of general application in such cases.

Here, the 73-year-old plaintiff had been injured while attempting to remove ice cream containers from the top shelf of a freezer at the defendant’s store.

On the motion, there was evidence from the store manager, that “the manner in which the ice cream containers were stacked was safe and in accordance with store procedures in the grocery industry generally”.

The defendant moved for summary judgment. Referring to the B.C. case of Tran v. Kim Le Holdings Ltd. [2011] BCSC 1690 (S.C.), Justice Goodman said: “there is some inherent risk involved in everyday interactions between individuals and society. An occupier is not required to stay sanitize their environment to such a degree to negate all inherent risk. What is required is balancing of what may be a reasonable course of conduct against the potential for harm. The standard of care for occupiers is one of reasonableness. It requires neither perfection nor unrealistic or impractical precautions against known risks.”

His Honour added that “just because the matter becomes litigious and the parties seek redress through the courts, does not mean that any concept of common sense evaporates.” He concluded that the plaintiff had failed to adduce sufficient evidence to demonstrate a genuine issue for trial and granted the defendant’s motion for summary judgment, dismissing the action.

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Superior Court Refuses to Dismiss Accident Benefits Lawsuits, Despite Mediation Not Having Taken Place

Posted on February 15, 2012 by Stephen Cavanagh

Last week, Mr. Justice James W. Sloan delivered a ruling in four cases that will have an impact on statutory accident benefits litigation.

The cases are: Cornie v. Security National, Hurst v. Aviva Insurance Company, Singh v. Aviva Insurance Company and Clarke v. State Farm Mutual Automobile Insurance Company.

In each case, the defendant insurer was moving to “strike the statements of claim or alternatively stay them”. Justice Sloan’s reasons do not say under what rule the motions were brought but the argument was that because mediation had not failed in any of the four disputes, section 281(2) of Insurance Act barred the suits. That section provides that “[n]o person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.”

In each of these cases, mediation had been requested but, because of a backlog at FSCO, mediation did not take place within 60 days following the requests, as required by section 10 of the Dispute Resolution section of O.Reg. 664 under the Insurance Act. (Actually, what the provision says is that “[a] mediator is required, under subsection 280(4) of the Act, to attempt to effect a settlement of the dispute within 60 days after the date on which the application for the appointment of the mediator is filed.”)

The evidence before Justice Sloan was that “there has been a backlog for years (plural) and that nothing has improved with respect to the scheduling of mediations between May and August 2011”.

Insurers argued that because section 280 (7) of the Act states that “mediation has failed when the mediator has given notice that in his or her opinion mediation will fail, or when the prescribed or agreed upon time for mediation has expired and no settlement has been reached” and since no mediations had taken place in any of these four cases, it could not be said that the mediation had “failed”. Therefore, it was argued, section 281 (2) prevented the suits from being brought. His Honour agreed that mediation had not “failed” but he went on to say that “to suggest that an individual must go the expensive route of Judicial Review is ludicrous. This is consumer legislation and SABS issues often relate to small amounts of money and medical/rehabilitative assistance which are needed on a timely basis.” Justice Sloan went on to observe that “the insurance companies take the position that the accident victims must simply wait. To entertain this argument could mean that an accident victim might have to wait 100, 300 or 500 dates for mediation. I find that submission preposterous.”

On that basis, he dismissed the insurers’ motions. No word yet on whether the decision will be appealed.

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C.A. Strikes Down Award of Compound Interest on Fee Charged by Opposing Party’s Expert

Posted on February 13, 2012 by Stephen Cavanagh

In Herbert v. Brantford (City), the Court of Appeal disallowed interest at one and two percent, compounded monthly, that had been awarded in relation to fees charged by the plaintiffs’ expert witnesses in a personal injury case. The Court said that the evidence in the case did not support “this exceptional order”.

In the trial decision (Herbert v Brantford (City), 2011 ONSC 4066 (CanLII)), Justice Alan C.R. Whitten had characterized the issue as one of “access to justice”, saying that the experts’ accounts dated back to 2007 and totalled about $42,000. He said that “It would have been difficult, if not impossible for the Muir’s [the plaintiffs] to address this indebtedness as the litigation evolved.”

He did acknowledge that awarding interest compounded monthly was “at first blush attention-getting”, but drew comfort from the compound interest provisions of the Statutory Accident Benefits Schedule. However, the Court of Appeal said that the reference to the SABS “is of no help in this argument”.

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“Presumption” that Commercial Plaintiffs Entitled to Compound Interest?

Posted on September 1, 2011 by Stephen Cavanagh

We recently ran across an interesting decision of Mr. Justice Frank Newbould, dealing with the issue of whether prejudgment interest should be compounded. In Enbridge Gas. v. Michael Marinaccio et al, 2011 ONSC 4962 (CanLII), he held that it should be. What was intriguing though, was his implicit suggestion that compound interest should be the rule, not the exception, where the plaintiff is a business.

Justice Newbould had granted summary judgment to the plaintiff Enbridge Gas for some $6.5 million, which was then reduced by about $1 million to take into account a partial recovery that Enbridge had been able to effect. It sought prejudgment interest of 4.3% on the award, compounded monthly. (In its statement of claim, Enbridge had only claimed interest “pursuant to the Courts of Justice Act”.) Justice Newbould awarded compound prejudgment interest at 4.3% per annum, on $6,542,928.63 from February 1, 2008 to April 14, 2009 and on $5,723,339.60 from April 15, 2009 to April 14, 2011.

For some reason, not explained, he awarded only simple postjudgment interest, at the rate of 3% per annum.

By our reckoning, the compound prejudgment interest totalled $896,022.65, while simple interest on the same amounts for the same periods would have been $829,920.22, a difference of $66,102.44.

As we all know, prejudgment interest is dealt with in s. 128 of the Courts of Justice Act. Subsection 128(1) provides that “A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.”

“Prejudgment interest rate” is defined, in s. 127, to mean, “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point”.

Paragraph 128(4)(b) is the provision that is usually raised in opposition to a claim for compound interest. It says that “interest shall not be awarded under subsection (1) on interest accruing under this section”.

However, s. 130 gives the court a wide discretion to calculate interest differently than the formula set out in subsection 128(1). The discretion applies to the rate, the period and whether to award interest at all. (There is also discretion with respect to postjudgment interest.)

Here, the key factor for Justice Newbould was this:

On general principles it should be presumed that had the business not been deprived of the money, it would have made the most beneficial use of it available to it. Alternatively, it should be presumed that the wrongdoer made the most beneficial use of it.

His Honour cited two Supreme Court of Canada decisions in support of his conclusion: Air Canada v. Ontario (Liquor Control Board), 1997 CanLII 361 (SCC), [1997] 2 S.C.R. 581 at para. 85 per Iacobucci J. and Bank of America Canada v. Mutual Trust, 2002 SCC 43 (CanLII), [2002] 2 S.C.R. 601 at para. 41 per Major J.

The passage cited from Air Canada v. Ontario was actually a quotation from the Ontario Court of Appeal’s ruling in Brock v. Cole (1983), 40 O.R. (2d) 97 (C.A.), at p. 103, which was, itself, quoting from the opinion of Lord Denning in  Wallersteiner v. Moir (No. 2), [1975] Q.B. 373, [1975] 1 All E.R. 849 at 856.

In Brock v. Cole, the plaintiff who was seeking compound interest was suing to recover an amount of money that he had given to the defendants to be invested on his behalf. So, it was clear on the facts of that case, that maximizing the return on the principal was very much within the plaintiff’s contemplation. And even on those facts, the interest ordered by the Court of Appeal was only compounded annually.

In Claiborne Industries Ltd. v. National Bank of Canada, 1989 CarswellOnt 1425 34 O.A.C. 241, 69 O.R. (2d) 65, 59 D.L.R. (4th) 533, [1989] C.L.D. 1073, the Ontario Court of Appeal again had occasion to consider the issue of compound interest. Justice Carthy said that Brock stood for the proposition that there is a “general jurisdiction of the court to award compound interest where there is a wrongful detention of money which ought to have been paid. This is on the theory that it is reasonable to assume that the wrongdoer made the most beneficial use of the money and is accountable for the profits.” The Court went on to award interest, compounded monthly, on monies that it found to have been stolen, but only simple interest on other monies that were found to be owing by the defendant to the plaintiff (legal and accounting expenses) but which did not amount to a “wrongful application of funds”.

Then we come to the second decision of the Supreme Court of Canada that was cited by Justice Newbould: Bank of America Canada v. Mutual Trust Co.  Interestingly, counsel for the winning appellant in that case was…Frank J.C. Newbould, Q.C., now Mr. Justice Newbould.  The Supreme Court accepted the appellant’s argument (which the Court of Appeal had rejected), that it was entitled to compound prejudgment and postjudgment interest.

Bank of America was a breach of contract case (and this fact was significant). The Bank of America had agreed to provide construction financing of $33 million for a condominium development. The defendant, Mutual Trust, had agreed to provide mortgage financing for investors, in the amount of $36.5 million. Both parties had provided for themselves to receive compound interest from those to whom they were lending.

Because of the downturn in the real estate market in the early 1990’s, Mutual Trust ultimately refused to advance the mortgage funds. The condominium was ultimately sold at a significant loss.

The Supreme Court discussed concepts of “time value” of money and looked at the history of interest in Canadian law. It concluded that the common law now countenances awards of compound interest in contract cases: “To keep the common law current with the evolution of society and to resolve the inconsistency between awarding expectation damages and the courts’ past unwillingness to award compound interest, that unwillingness should be discarded in cases requiring that remedy for the plaintiff to realize the benefit of his or her contract.”

In addition, it held that equity also allows courts to award compound interest: “Equity has been recognized as one right by which interest may be awarded other than as specifically stated in ss. 128 and 129 CJA, including an award of compound interest. However, later in the decision, the Court appeared to sound a note of restraint with respect to awarding compound interest:

An award of compound pre- and post-judgment interest will generally be limited to breach of contract cases where there is evidence that the parties agreed, knew, or should have known, that the money which is the subject of the dispute would bear compound interest as damages. It may be awarded as consequential damages in other cases but there would be the usual requirement of proving that damage component.

Here, the Court was satisfied that compound interest was within the contemplation of both parties and upheld that trial judge’s award of compound prejudgment and postjudgment interest.

While there is no doubt that courts can award compound interest, it is much less clear when they will do so. The more recent cases suggest that the courts are moving in a more liberal direction. For example, in Royal Bank of Canada v. Slopen, 2011 ONCA 516 (CanLII), the Court of Appeal said that its own refusal to award compound interest in a lawyer’s negligence case (Confederation Life Insurance Co. v. Shepherd, McKenzie, Plaxton, Little & Jenkins 1996 CanLII 3206 (ON CA), (1996), 88 O.A.C. 398 (C.A.) had been “overtaken” by Bank of America, such that, in another lawyer’s negligence case, decided this year, an award of compound interest was upheld, with the Court saying, “We can see no difference in principle between awarding compound interest in a breach of contract case and in a solicitor’s negligence case where, as here, the negligence is rooted in a mortgage transaction. Different considerations might well apply in other types of negligence cases.”

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Surveillance Provided to IME Examiner Must Simultaneously Be Given to Plaintiff

Posted on September 1, 2011 by Stephen Cavanagh

In Aherne v. Chang, 2011 ONSC 3846 (CanLII), Mr. Justice Paul Perell decided an appeal from a decision of Master Short. The Master had ordered that if the defendants in a medical malpractice action were to require that the plaintiffs undergo a defence medical examination and were they to provide to the medical examiner any records of surveillance conducted on the plaintiff, those records must be also be given to the plaintiffs at the same time.

Justice Perell dismissed the appeal.

The effect of the decision extends beyond medical malpractice claims, as the same principle would undoubtedly apply in a personal injury action (MVA, occupier’s liability, products liability, etc.)

In this case, the objection made by the defendant was, as summarized by Justice Perell, that “early disclosure of the surveillance records is unsupported by the authorities; that it would enable a plaintiff to deceive the health practitioner; and that no useful purpose is served in disclosing prematurely the surveillance records, which will be disclosed to the Plaintiffs later when the health practitioner’s report is delivered.”

We do not disagree with the order that was made in this case. In our experience though, the usual practice in these situations is to do one of two things:

  1. have the IME conducted in the usual way but without providing any surveillance to the medical examiner. Then, once the examination has taken place but before the report has been prepared, provide the surveillance records to the examiner, so that he or she can incorporate that information into the report. The Aherne decision would require that the surveillance be given to the plaintiff at the same time, but by then, the plaintiff would not be in a position to “deceive the health practitioner”; or
  2. wait until after a report of the examination has been provided and then send the surveillance to the examiner, who can be asked whether his or her opinion would be affected by that information. If so, a second report can be obtained and served. The surveillance would also have be provided to counsel for the plaintiff in that event.

In the case of the second course of action, an interesting question arises as to whether the surveillance must be disclosed, should the medical examiner not prepare a second report. Justice Perell referred to Rule 33.06(1), which provides that a written report must be delivered following a medical examination conducted under the authority of s. 105 of the Courts of Justice Act. (This is the familiar independent or “defence” medical examination.) Since a report must be provided in relation to that examination, there is not much doubt, in our view, that privilege is waived on any documents or information provided to the medical examiner to assist in the preparation of the report.

However, if the practitioner has prepared his or her report without seeing the surveillance, then Aherne has no application. Once the report contemplated by Rule 33.06(1) has been served, there is no explicit obligation in the Rule, to prepare or serve a supplementary report, even if the practitioner is provided with new information. Of course, failure to obtain and serve a new report would probably preclude the introduction of evidence from the practitioner at trial, commenting on the surveillance.

So, it seems to us that if a defendant is really worried that early disclosure of surveillance will allow a plaintiff to “deceive” a practitioner retained to conduct an IME, that problem is easily addressed in the manner outlined above.

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C.A. Says Action Against Underinsured Insurer Can Proceed Even After Plaintiff Settles with Tort Insurer for Less Than Policy Limits

Posted on May 31, 2011 by Stephen Cavanagh

The Court of Appeal has handed down a ruling that is important for auto insurers. The Court has held that an injured plaintiff can still sue his or her own insurer, pursuant to an OPCF-44R underinsured motorist endorsement, even after the plaintiff has settled with the insurer of the at-fault driver for less than that insurer’s policy limits and has released the driver, the vehicle’s owner and the primary insurer. As discussed at the end of this post though, we are left with some questions about the decision.

In Maccaroni v. Kelly, the plaintiff claimed to have been injured when rear-ended by a car driven by Kevin Kelly and owned by his mother, Donna Ainsworth. The Co-operators insured the Kelly/Ainsworth vehicle for third party liability, with limits of $1 million, denied coverage. It claimed that Kelly’s driver’s licence had been suspended and that Ainsworth had allowed him to operate the vehicle while knowing that he was unlicensed. (These would be breaches of the statutory condition in the auto policy, prohibiting anyone from operating a vehicle unless “authorized by law” to do so.)

Co-operators had itself added to the action as a statutory third party and took the position that its liability was confined to the statutory minimum limits ($200,000) as a result of the absolute liability provisions of the Insurance Act. (Those provisions, contained in s. 258(4) of the Act, provide that even when an insured breaches the policy, the insurer remains absolutely liable to an injured claimant, up to a maximum of $200,000.)

The injured plaintiff herself was insured with Intact Insurance and had an OPCF-44R endorsement, providing underinsured motorist coverage, to a maximum of $1 million.

In their statement of claim, the plaintiffs sued Kelly, Ainsworth, Co-operators and Intact.

In due course, the plaintiffs settled with the tortfeasors and Co-operators, for the statutory minimum limits of $200,000. They executed a full and final release in favour of all three parties. That release made it clear that the settlement had been entered into with no admission of liability. The plaintiffs then sought to continue with their claim against Intact for additional compensation to which they thought they were entitled.

Of course, if Co-operators’ full liability limits of $1 million had been available, then there would have been no basis for a claim against Intact. The limits of the two policies do not “stack”. Since both policies had limits of $1 million, there would have been no “underinsured” coverage available, had Co-operators’ full liability limits been payable.

The OPCF-44R endorsement effectively provides that where the limits of the liability policy are reduced to the statutory minimum “by operation of law…because of a breach of the policy”, then the underinsured coverage will respond.

Intact moved for summary judgment, dismissing the action as against it. The motion was based on its argument that just because Co-operators had claimed that its policy had been breached and that it was entitled to deny coverage did not make it so, even if the plaintiffs were prepared to accept Co-operators’ position. This did not reduce Intact’s limits to the statutory minimum “by operation of law”, Intact contended.

Mr. Justice Patrick Flynn heard the motion at first instance. He agreed with Intact and dismissed the action as against it. He said, “I further agree with ING’s [now ‘Intact’s’] argument that no such legal determination can now be made, since the plaintiff has released the tortfeasors and Co-operators from this action.”

However, while the Court of Appeal agreed that Co-operators’ policy limits had not been reduced to the statutory minimum “by operation of law”, it rejected the conclusion quoted in the previous paragraph. In the opinions of Justices MacFarland, Rouleau and Epstein, the action against Intact could still proceed to a conclusion. Thus, the plaintiffs’ appeal was allowed.

In the Court’s view, it would be up to the trial judge to decide whether Co-operators’ off-coverage position was well-founded. The plaintiffs would have the burden of proving that it was:

The fact that Co-operators and the tortfeasors are not parties to the proceeding is of no moment. The tortfeasors and representatives of Co-operators can be called as witnesses and can be examined under oath as non-parties: see rules 31.10 and 53.04 of the Rules of Civil Procedure. While a factual finding made in respect of the coverage issue will bind neither Co-operators nor the tortfeasors vis-à-vis the appellants in view of the release, such a finding can determine, as between the appellants and ING, whether the appellants are entitled to recover anything from ING. If the appellants are successful and establish that the tortfeasors were in breach of their policy provisions and hence, that the off-coverage position taken by Co-operators is correct, they may be entitled to recover from ING. If they are not successful, their action will be dismissed and they will, absent exceptional circumstances, be liable for the costs of those proceedings.

The Court went on to make the following somewhat surprising statement:

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CPP and HOOP Benefits Held Not Deductible from Income Loss Damages

Posted on May 24, 2011 by Stephen Cavanagh

In Demers v. B.R. Davidson Mining & Development Ltd., Mr. Justice Douglas C. Shaw has held that, for the period November 1, 1996 to September 30, 2003, CPP benefits are not deductible from an award of tort damages in a motor vehicle case. A 2005 decision of the same court, Meloche v. McKenzie, came to the opposite conclusion, so it is quite possible that the defendant in Demers will appeal.

Update: We have been advised that this decision has, in fact, been appealed. (See comment below.)

For motor vehicle accidents occurring after September 30, 2003, s. 5.2 of O.Reg. 461/96 makes it clear that CPP benefits are to be deducted, by providing that such benefits are “deemed” to be payments for income loss or loss of earning capacity (and therefore deductible). However, until that amendment was made, the Insurance Act did not deal specifically with the character of CPP benefits. Earlier jurisprudence had held that CPP benefits were not payments for loss of income (since eligibility for CPP did not depend on the claimant having been employed), but the addition of the phrase, “or loss of earning capacity” to the collateral benefits provisions of s. 267.8(1) of the Insurance Act in Bill 59, left uncertainty as to whether that amendment produced a different result..

It was held by Justice Patterson, in Meloche v. McKenzie, that the benefits were deductible. In coming to this conclusion, His Honour applied what he described as a “broad, inclusive and encompassing” interpretation of s. 267.

In the Demers case, Justice Shaw undertook his own statutory interpretation and it led him in the opposite direction. He was of the view that if s. 267.8(1)2, in its original form, allowed for the deduction of CPP benefits, then there would have been no need to amend O.Reg. 461/96 to provide explicitly for their deductibility.

He also felt that it was significant that Justice Patterson had not been referred to a Court of Appeal decision in Kosanovic v. Wawanesa Mutual Insurance Co., which had principally dealt with the question of whether certain disability benefits to which the plaintiff was entitled reduced the amount available under uninsured motorist coverage. In the course of its reasons, the Court of Appeal said that the disability benefits “do not meet the statutory criteria for a deduction under s. 267.8(1)2 of the Act”.

Counsel for the plaintiff in Demers relied upon that passage and Justice Shaw agreed, saying that the decision was binding on him. Accordingly, he held that CPP benefits that had been paid to the plaintiff were not deductible from tort damages.

His Honour then turned to a consideration of whether disability benefits received from the Hospitals of Ontario Pension Plan (“HOOP”) were deductible. He held that they are not. He relied on the Divisional Court’s 2006 ruling in State Farm v. Scott, in which it was held that HOOP benefits were not deductible from income replacement benefits payable under the Statutory Accident Benefits Schedule. Justice Shaw felt that the same reasoning applied to tort damages. In his view, HOOP benefits are non-indemnity in nature and, absent a statutory provision such as the one that now applies to CPP benefits, should not be treated as deductible from tort damages.

His Honour added that, in the event his conclusion about the deductibility of these benefits were wrong, then he would only allow the benefits to be deducted net of income tax.

Finally, the plaintiff in this case had been paid some $40,405 from her accident benefits insurer by way of interest on overdue payments. (The SABS provides for interest to be paid at the rate of 2 per cent per month, compounded monthly.) The defendant argued that these payments should be deductible from the tort damages. However, Justice Shaw rejected that submission. He held that the interest payments represented only the time value of money on benefits unpaid by the no fault insurer and should not diminish the amount payable by the tort insurer.

(The conclusion about the time value of money seems somewhat debatable. Monthly interest of 2 per cent, compounded monthly is the equivalent of about 26.8% in simple interest. It is hard to imagine that in 2011, the time value of money would be that high.)

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Treating Physicians: Fact or Expert Witnesses?

Posted on May 9, 2011 by Stephen Cavanagh

Leonard v. Kline, 2011 ONSC 2730 (CanLII) is a personal injury action arising out of a motor vehicle accident. The plaintiff sought leave from Mr. Justice Gregory Ellies to call ten experts. (Section 12 of the Evidence Act requires that a party who wishes to call more than three expert witnesses at trial obtain leave from the court.) The defendant was only planning to call two experts and took the position that the expert testimony sought to be adduced by counsel for the plaintiff was duplicative.

Justice Ellies agreed, in part. He grouped together two rehabilitation consultants who had worked together and ruled that only one of them could testify. He did the same thing with two occupational therapists: only one was permitted to give evidence at trial.

He permitted an orthopaedic surgeon, a psychiatrist, a psychologist and an actuary to testify, reasoning that each had addressed the issue of the plaintiff’s employability from the standpoint of a different field and the testimony of these witnesses was not duplicative.

Interestingly, two of the experts on the list provided by counsel for the plaintiff were treating physicians. With respect to these witnesses, Justice Ellies said, “it is my view that neither of these experts ought to be permitted to express an opinion on whether the plaintiff is now employable….Drs. Shamess and Maione are ‘fact’ witnesses and their evidence ought to be restricted to that. As treating physicians, they are entitled to give evidence with respect to their observations of the plaintiff, both pre- and post-accident, their medical diagnoses, and the treatment prescribed. They ought not to provide opinion evidence with respect to whether the plaintiff is now competitively employable, as that is the purpose for which the plaintiff proposes to call the other experts.”

(Dr. Maione, the family doctor, had not provided a report in compliance with Rule 53.03.)

Whether a professional witness is an expert or a fact witness (or both) is an interesting question. Placing the professional into one category or the other has significant consequences for their testimony. For example, Justice Ellies held in this case that the two treating physicians were testifying only as to questions of fact. This would presumably mean that they would not have to deliver reports under R. 53.03 and would not have to acknowledge a supervening duty of impartiality to the court. (Justice Ellies did seem to have adverted to this, since he specifically mentioned that one of the two witnesses had not delivered a report.)

However, in limiting the scope of the testimony to be given by these witnesses, His Honour said that they could give evidence as to their “medical diagnoses”. Now, it strikes us that if these doctors were to testify as to the fact of their diagnoses having been made, that would be fact evidence. But if their testimony were being relied upon for the accuracy of their diagnoses, it seems to us that that would be opinion evidence, as it is not evidence that a lay person would be entitled to present.

Master Calum MacLeod referred to the sometimes murky separation between expert and fact witnesses in Andersen v. St. Jude Medical Inc., 2007 CanLII 64140 (ON S.C.), where he said:

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