Rule 37B and the Significance of Insurance
(Please note the case discussed in this post was upheld by the BC Court of Appeal in June, 2010. You can click here to read my post discussing the BCCA decision)
When a party beats a formal settlement offer at trial in the BC Supreme Court the existence of the offer can be brought to the courts attention and the Court can then award or deprive a party of Costs as permitted under Rule 37B.
In determining costs consequences Courts have discretion and are to consider various factors as set out in Rule 37B(6). One of these factors requires the court to consider ‘the relative financial circumstances of the parties‘. One of the matters still being worked out by BC Courts under Rule 37B is whether a party being insured is a relevant factor when weighing the financial circumstances of the parties.
Today reasons for judgement were released by the BC Supreme Court, Chilliwack Registry addressing this matter. In today’s case (Smith v. Tedford) the Plaintiff made a settlement offer. The defendant did not immediately accept and proceeded to trial. Several days into trial the Defendant accepted the offer. At issue was what costs the Defendant should pay the Plaintiff.
The Defendant was apparently insured with ICBC. In arguing what costs consequences should follow the Defendant submitted that the fact insurance was in place was not a relevant consideration. In asking the court to consider the ‘relevant financial circumstances of the parties‘ the defendant put forward an affidavit setting out her ‘modest circumstances‘.
Mr. Justice Grist rejected this argument and held that the existence of insurance was relevant and could properly be considered by the Court. Specifically Mr. Justice Grist reasoned as follows:
[14] Here, I think the consideration stipulated in Rule 37B(6)(c), “the relative financial circumstances of the parties,” also has a bearing. The plaintiff has very limited financial resources and the personal defendant had the advantage of a defence conducted by her automobile insurer. This fact should not constantly put the defence at a disadvantage on costs but, in my view, it is particularly relevant when a late acceptance of an outstanding offer has required the plaintiff to submit to a less certain and potentially prohibitively costly mode of trial.
[15] Counsel for the defence argues that insurer’s conduct of the case is not a relevant feature and cites Bailey v. Jang, [2008] B.C.J. No. 1952, in this regard. In Bailey the court held that the fact a defendant’s case was conducted by the defendant’s insurer was irrelevant to the Rule 37B(6)(c) consideration of relative financial circumstances. Almost contemporaneous to this decision, however, the issue was independently considered in Radke v. Parry, [2008] B.C.J. No. 1991. In the Radke case, the court awarded the plaintiff double costs for a trial ultimately settled by the exchange of a further plaintiff’s offer and the defendants’ acceptance of the offer, in circumstances where the plaintiff had earlier made a much more modest initial offer. The relevant comment (at para. 42) was as follows:
…The defendants, represented by ICBC, had substantially greater resources to finance a trial than the individual plaintiff. Had the defendants accepted the plaintiff’s initial reasonable offer, the plaintiff would not have had to incur the significant costs associated with nearly two weeks of trial.
[16] I choose to follow Radke in this regard. The ability to have a case advanced by experienced and well funded counsel is, to my mind, a resource that should be taken into account in exercising the judicial discretion stipulated under the new Rule. As an example of how the obvious intent of the Rule can be perverted if the consideration is made independent of insurance coverage, here counsel for the defendant produced an affidavit speaking of her modest circumstances. She, like the plaintiff, is a young person employed at near minimum wage. This was particularly hard to accept as a relevant consideration after the 6-day course of this abbreviated trial, during which the Insurance Corporation twice had separate counsel appear to argue issues that might easily have been dealt with by the two trial counsel appearing on the defendants’ behalf.
[17] The appropriate order of costs is to award costs of the action to the plaintiff with the cost of the trial to be assessed as double costs, all at Scale B.
It appears that this interpretation may be gaining favor with BC Courts and hopefully this trend continues. As always I will continue to report on these cases as they come to my attention.