ICBC Law

Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, ordering ICBC to pay ‘double costs‘ after losing a breach of insurance claim.

In today’s case (Barsaloux v. ICBC) the Plaintiff was the owner of a vehicle that was stolen and subsequently recovered.  It was damaged beyond repair.  The Plaintiff had insurance with ICBC and applied for coverage.  ICBC refused to pay stating that the Plaintiff was in breach of his policy of insurance for making a false declaration about the identity of the vehicle’s principal operator.

The Plaintiff successfully sued ICBC and was awarded $13,850 in damages.   Prior to trial, the Plaintiff made a formal settlement offer of $13,700.  The Plaintiff applied to Court to be awarded double costs under Rule 37B.

ICBC objected arguing that the offer was made only two days before trial and therefore there was no reasonable opportunity to consider it.  Mr. Justice Smith disagreed and awarded the Plaintiff double costs.  In doing so the Court made the following useful comments about two notable issues under Rule 37B, timing of settlement offers and the financial disparity between the parties:

[17] I stress that ICBC was directly a party to this action. That distinguishes this case from Bailey v. Jang, 2008 BCSC 1372, where Hinkson J. declined to consider the relative financial positions of the plaintiff and ICBC where ICBC’s involvement was in its capacity as insurer for the named defendant.

[18]         The unequal position of the parties is not determinative because, as counsel for ICBC points out, the same situation will exist in any case where there is a coverage dispute between the corporation and a policy holder. However, I am also of the view that, in this case, ICBC used its position of strength to maintain what it should have known was an untenable, or at least an insufficiently considered, position…

[22]         In the circumstances, ICBC should have realized the weakness of its position well before trial. The offer to settle was the only means the plaintiff had to exert additional, although modest, pressure and to provide ICBC with a further opportunity to re-assess and reconsider its position in light of the evidence that existed. I find that it was an offer that ought reasonably to have been accepted.

[23]         That conclusion is not altered by the fact that the revised offer to settle was delivered only two days before trial. ICBC relies on Bailey, where the court said seven days was a reasonable period of time to consider an offer and ordered double costs for the period beginning seven days after delivery of the offer.

[24]         I do not read Bailey as stating anything more than what was a reasonable period for consideration of an offer on the facts of that case. Rule 37B sets no time limit for delivery of a settlement offer. In that regard, it differs from the former Rule 37, where an offer delivered less than seven days before trial attracted different consequences than one delivered earlier. In fact, Rule 37B(6)(a) specifically refers to an offer that ought reasonably have been accepted “either on the date that the offer to settle was delivered or on any later date” (emphasis added).

[25]         In the circumstances of this case, including the issues involved, the delivery date of the offer gave ICBC sufficient time to consider its position before trial. As said above, ICBC should have known well before the offer was delivered that it could not prove an essential part of what it was alleging. I find the plaintiff is therefore entitled to double costs for the trial of this action.

As readers of this blog are likely aware, Rule 37B will be replaced with Rule 9 on July 1, 2010 when the new BC Civil Rules come into force. The new rule uses language that is almost identical to Rule 37B which will likely have cases such as this one retain their value as precedents moving forward.

One pattern that is becoming well developed under Rule 37B (the Rule dealing with Formal Settlement Offers in BC Supreme Court Lawsuits) is that of timing.  Caselaw seems to require that formal offers need to be available for acceptance for a reasonable period of time before triggering cost consequences under Rule 37B.  Reasons for judgement were released this week demonstrating this.

In this week’s case (Dodge v. Shaw Cablesystems [SBC) Ltd.) the Plaintiff sued for damages as a result of a slip and fall.  As a result of the fall the Plaintiff injured her knee.  Before trial the Defendant made a formal offer for $50,000 on an “all-in” basis (meaning inclusive of all damages, costs and disbursements).  This offer was made two working days before the start of trial.

After trial, the Jury decided that the Plaintiff and the Defendant were equally at fault for the fall an awarded a net sum of $20,000 for her injuries.  The Defendant then brought a motion for costs under Rule 37B.  Mr. Justice Masuhara refused to award the Defendant any costs because the offer was not left open for consideration for a reasonable period of time.  In coming to this conclusion Mr. Justice Masuhara stated as follows with respect to timing of formal offers under Rule 37B:

I conclude that the defendant’s offer was in effect from Wednesday, January 7, 2009 to Friday, January 9, 2009.

[14] A party requires a reasonable time within which to consider an offer and decide in the circumstances existing at the time of the offer whether it should be accepted or rejected:Coquitlam (City) v. Crawford, 2008 BCSC 1507. There is case law on Rule 37B that suggests that a reasonable amount of time to consider an offer is seven days. In Arnold, Butler J. cited Bailey when he stated at para. 22 that “[a] reasonable period of time to consider an offer to settle is seven days”. In Towson v. Bergman, 2009 BCSC 978 at para. 70, Gray J. stated that the seven day period “has been applied in the case law.” I do not, however, read these cases as laying down a rule of general application. In Wright v. Hohenacker, 2009 BCSC 996, for example, Fisher J. did not consider a “seven day rule” when determining whether an offer should have been reasonably accepted, stating that, in the circumstances of that case, the fact that the offer was made only four days before trial was not particularly significant. Suffice it to say that every case must be judged on its own facts. Imposition of an inflexible rule as to what is considered a reasonable amount of time risks returning to the rigid consequences of the old Rule 37 and fettering the wide discretion intended under Rule 37B.

[15] In this case, the plaintiff was only given two days to consider accepting the offer before it expired. Apart from pointing out that the offer was made after mediation and after delivery of the defendant’s expert reports, neither party has led any evidence surrounding the circumstances at the time the offer was made. It is known, however, that the plaintiff was a resident of Ontario at the time, whereas her counsel was resident in Abbotsford. While this alone is not determinative (the plaintiff has not led any evidence of her whereabouts at the time of the offer), when an offer to settle is received, counsel and client are required to make a careful appraisal of the merits, taking into account complex and subjective factors in appraising the eventual outcome of a trial, in this case, a jury trial. Complexity is increased where the plaintiff is asked to evaluate an “all-in” offer where, by the very nature of the offer, the actual amount offered in discharge of the action is not immediately apparent.

[16] Taking into account that analysing the “all-in offer” would have required breaking out the appropriate cost consequences, and that plaintiff and counsel undoubtedly had many other things that required their attention, two days was an unreasonable amount of time in which to properly analyze the offer. Even if the offer did beat the result, counsel for the plaintiff did not have enough time to reach this conclusion within the deadline set by the defendant…

[18] Since I have decided that it was unreasonable for the defendant to expect that the plaintiff would accept the offer within two days, the policy underlying Rule 37B, which is to encourage the settlement of disputes by rewarding the party who makes a reasonable offer and penalizing the party who declines to accept such an offer, is not engaged. Accordingly, as permitted by Rule 37B(4), I decline to consider the defendant’s offer to settle in exercising my discretion relating to costs.

Another interesting point in this decision was the Court’s discussion of “all-inclusive” offers under Rule 37B.  Under the now repealed Rule 37 such offers were not allowed and could not trigger costs consequences.  Mr. Justice Masuhara ruled that such a strict prohibition is not warranted under Rule 37B but parties should make such “all-in” offers at their own peril, Specifically the Court stated as follows:

24] Since the introduction of Rule 37B, there is no longer a complete code to dictate the cost consequences of an offer to settle. Rule 37B contemplates a summary procedure to determine costs. It offers broad discretion to the trial judge to determine cost consequences of a failure to settle. While the defendant is no longer automatically entitled to costs from the date of the offer if the offer is more favourable than the judgment, Rule 37B(5)(d) still states that the court may in such a case “award to the defendant the defendant’s costs in respect of all or some of the steps taken in the proceeding after the date of delivery of the offer to settle.” While I accept that the consequences of an uncertainty in the calculation of costs up to the date of the offer to settle are no longer as stringent, as under the old Rules, the court is still faced with difficulty in summarily determining the relationship between the offer and the costs in an “all-in” offer. Consequently, the potential for injustice still exists. Thus, under Rule 37B, it does not appear to me that the rationale for the rule in Helm is no longer of assistance. In my view the language of Rule 37B is broad and assumes that the trial judge in every case is in the best position to determine whether an “all-in” offer can be considered. Provided that the proper form of an offer to settle is adhered to, the court has under Rule 37B the discretion to take into account that offer to settle. Nonetheless, defendants who make an “all-in” offer do so at their own peril.

In my continued efforts to get prepared for the New BC Supreme Court Civil Rules I am cross referencing Civil Procedure cases that I discuss on this blog with the New Rules.  To this end  it is worth pointing out that Rule 37B will be replaced with Rule 9 under the New Rules. The new rule uses language that is almost identical to Rule 37B which should help cases such as this one retain their value as precedents.