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Review of settlement and calculations

The Ontario government recently introduced a minor change to Section 267.5(9) of the Insurance Act.  The change, while minor, will have a big impact on how Plaintiff’s lawyers assess Rule 49 Offers to Settle presented by Defendants.

Section 267.5(9) of the Insurance Act, now states “in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party’s entitlement to costs shall be made with regard to the effect of paragraph 3 of subsection (7) (the deductible) on the amount of damages”.

In other words, when considering Offers to Settle, and the cost consequences that may flow from them, the Court must now reduce its award by the deductible.  Once the deductible is removed, if the Offer to Settle served is higher than the award, the cost consequences that result from the Offers to Settle can be determined by the court.

This small change means that a successful Plaintiff in a motor vehicle action could now face negative cost awards if the Defendants have submitted an Offer to Settle that is still higher that the after-deductible award.

As an example, take a Plaintiff who was awarded $80,000 in general damages.  The Defendants had previously submitted a Rule 49 Offer to Settle of $60,00.00.  If the deductible to be applied is $30,000.00, then the net award if only $50,000.00.  This means that the Defendants beat their Offer to Settle and they are now entitled to ask the court to award costs to them instead of to the successful Plaintiff.

This change appears to be an attempt by the legislature to counter-act the impact of the 2007 decision in Ryder v. Dydyk.  The court of appeal in Ryder determined that statutory deductibles were not to be considered when determining a party’s entitlement to costs.

Plaintiff’s lawyers will need to be more vigilant in the future when reviewing Offers to Settle presented by Defendants.

For more information on the above information or should you have any questions, please feel free to contact me directly.

Teena Belland

Associate with the Personal Injury and Litigation Group

Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact a legal professional for advice on any matter referenced in this document before making any decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving.

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