Bernard v. Lamarsh: Pursuing Credits or Saving Costs - We Can't Have it All
Jan 14, 2020
The facts of this case, as with many concerning intentional acts, are disturbing. Jane Lamarsh drove her car into a river, drowning her two grandchildren. She and another passenger managed to survive. Ms. Lamarsh’s conduct was intentional and she pleaded guilty to second degree murder charges.
A number of civil claims resulted from the grandchildren’s death and from the injuries sustained by the surviving passenger, who was also a child. Aviva had insured Lamarsh at the material time, but was able to properly deny coverage under the intentional act exclusion further to s. 118 of the Insurance Act. Aviva’s maximum exposure, therefore, was the $200,000.00 statutory minimum plus costs, as per s. 251 of the same act. That $200,000.00 would be apportioned between any plaintiffs who obtained judgment against Lamarsh.
Unsurprisingly, underinsurance claims were brought further to various OPCF-44R endorsements. Lamarsh’s surviving passenger was an eligible OPCF-44R claimant under Lamarsh’s policy with Aviva. Lamarsh’s daughter Stephanie and the estates of the two deceased grandchildren were eligible OPCF-44R claimants under Stephanie’s policy with State Farm.
The plaintiffs obtained judgment against Lamarsh and agreed to an apportionment of the $200,000.00 as follows: 52.5% to Stephanie and the granchildren’s estates; 30% to the surviving passenger; and 17.5% to Greg Talbot, another plaintiff.
Stephanie and the grandchildren’s estates also obtained judgment against State Farm in its capacity as Stephanie’s OPCF 44R carrier. The judgment was for $700,000.00, plus $100,000.00 in costs and a further amount in disbursements. State Farm then brought a motion against Aviva, seeking a 50% contribution to the $100,000.00 in costs awarded to Stephanie and the grandchildren’s estates, and a 50% contribution to the disbursements. State Farm’s arguments relied on principles of judicial discretion and fairness as set out in the Courts of Justice Act and Rules of Civil Procedure. According to State Farm, both insurers were parties to the litigation, and opposed the relief sought by the Plaintiffs. Therefore, it argued that the costs of opposing the litigation should be born equally as between the insurers.
Aviva opposed the motion, and in the alternative argued that, if anything, it should be responsible for a portion of the costs determined pro rata. Aviva stated that it was well-known that its $200,000.00 limits would be exhausted, and that conversely, State Farm did not pay out its OEF-44R limits. Rather, State Farm had pursued further litigation and by doing so was ordered to pay $700,000.00 out of a possible $1,000,000.00 in damages. Aviva argued it should not be called upon to underwrite the cost of State Farm’s defence of its policy limits, and that it should not be liable for the cost of ongoing litigation once its limits were relinquished.
The Court agreed with Aviva’s arguments in theory, but not in practice. Had Aviva relinquished its limits, paid them into court, and ceased negotiating, Aviva might truly have been released from the litigation process and in doing so, ceased to expose itself to ongoing costs. However, Aviva did not pay its limits into court and, perhaps more compellingly, continued to negotiate the apportionment of the $200,000 limits as between the plaintiffs. Aviva had a vested interest in crediting the surviving passenger as much as possible out of the $200,000 primary limits so as to reduce her OPCF-44R claim against Aviva by the same amount.
The Court ruled that, because Aviva continued to participate in the litigation process, it was just as liable for costs as State Farm. Accordingly, a 50/50 split of costs and disbursements was ordered as between the two insurers.
This decision does not close the door on different modes of apportionment of costs: judicial discretion under the Courts of Justice Act is broad and well-entrenched. However, it should give insurers and their counsel pause to consider the merits of remaining involved in litigation once limits are exhausted. If, as may have been the case here, there is more to be gained in a credit against an OPCF-44R claim than can be saved in costs, continued negotiations once limits are relinquished may be the fiscally practical approach. However, in instances where there are no credits to be had, or where such credits are unlikely to outweigh potential cost consequences of ongoing litigation, insurers might be well-advised to pay the policy limits into court and stop participating in the litigation.