In Dorah v. Dyal, 2023 ONSC 2908, a recent case from the Ontario Superior Court of Justice, an Ontario Superior Court of Justice judge halved the billing rates claimed by the defendant’s in-house counsel when determining costs for a personal injury claim.
This blog post will summarize the essential details of this case and explain the judge’s rationale behind the reduction of costs.
The Facts
In Dorah v. Dyal, the plaintiff brought a personal injury claim against the defendant, who was represented by an insurer, Aviva. The plaintiff was awarded $652,521 in damages following a four-week jury trial. However, after applying statutory deductibles, the net award of damages was $191,228.65.
Before trial, the defendant made an offer to settle the case for $250,000 plus costs and disbursements. The plaintiff did not accept the offer and, ultimately, was awarded less than the defendant’s settlement offer at trial in net damages. As a result, the defendant argued that they were entitled to indemnification for their costs.
Costs in Personal Injury Claims and Rule 49.10(2)
Legal costs-often referred to simply as “costs” in the legal sphere-refer to the associated costs and expenses of litigation, including legal fees and disbursements. These costs can range from a lawyer’s bill to expenses incurred concerning the litigation.
Depending on the circumstances, parties may be entitled to claim costs when they attend a court proceeding. They may seek an order from the court that the opposing party pays their costs.
Under Rule 49.10 of the Rules of Civil Procedure, RRO 1990, Reg 194, if a defendant makes an offer to settle that is not accepted by the plaintiff. The plaintiff obtains an equally or less favourable judgment at trial. The plaintiff and defendant are entitled to partial indemnification of their costs unless the court orders otherwise.
“Costs” in personal injury claims refer to the financial costs associated with bringing the claim (whether as a plaintiff or defendant) and are separate from the damages award provided to the claimant. Costs may include legal fees, disbursements, court fees, and other expenses.
The Court Decides That Rule 49.10(2) Applies
The judge determined that Rule 49.10(2) applied, and the defendant could not claim partial indemnification of the costs associated with defending their claim. In doing so, he emphasized that denying the defendant of partial indemnification would undermine the policy objectives of Rule 49.10 and discourage reasonable settlement offers.
The Court considered the Defendant’s Legal Fees
However, it’s not enough for plaintiffs and defendants to establish that they are entitled to full or partial indemnification of their costs. The parties must take it one step further and consider whether the fees are “reasonable.”
At this stage of the analysis, the court considered the reasonableness of the parties’ costs. Generally, costs in civil litigation are payable only for allowable expenses and services that are relevant to the case or proceeding.
One issue that attracted the court’s attention was the defendant’s claim for legal fees.
The Defendant Sought Over $150,000 in Legal Fees
The defendant was represented by internal counsel from Aviva, the defendant’s insurer. Aviva’s lawyers did not bill their time like traditional lawyers; they estimated their hours after the fact and then calculated an hourly rate for their lawyers based on the highest hourly rates established in 2005 under the Rules’ Cost Grid and adjusting for inflation.
The Plaintiff Challenged the Defendant’s Claimed Fees
The plaintiff challenged the defendant’s claim, noting that the defendant’s claimed number of hours and hourly rate were questionable.
In particular, the plaintiff noted that the defendant claimed roughly the same number of hours of work that the plaintiff claimed, despite having fewer witnesses and letting the plaintiff take the lead in preparing and assembling a Joint Document Brief.
The Court Reduced the Defendant’s Claimed Costs for Legal Fees
In considering the parties’ positions, the judge noted that the combined billing rates for the defendant’s lawyers appeared to be excessive (noting that the combined annual costs would amount to $1,610,000 for two lawyers if Aviva was indemnified for costs at the rate sought). Notably, the judge stated that “allowing the billing rates that Aviva claims would not indemnify Aviva for its costs but would turn cost awards into a source of profit.”
To avoid a potential windfall for the defendant, the court reduced the billing rates claimed by the defendant by 50% to help improve the likelihood that Aviva would be indemnified for their legal costs, rather than receiving a windfall.
What This Case Means for Personal Injury Claimants
This case provides important reminders for personal injury claimants on two points: the importance of remembering the implications of Rule 49.10 and critically assessing defendants’ costs claims if they are entitled to claim costs in a personal injury action.
Rule 49.10 and Costs Consequences
Proving that you are entitled to costs is one thing – but establishing that you’re claiming reasonable costs requires a separate analysis. While Rule 49.10 allows defendants to seek partial indemnity for their costs in personal injury actions, this Rule does not provide carte blanche to claim costs of any kind. Rather, defendants must still prove that their costs are necessary and reasonable. Likewise, plaintiffs must scrutinize their claimed costs when preparing a bill of costs to ensure that the costs they seek are reasonable in the circumstances.
Challenging Costs Claimed by a Defendant
The judge’s decision to reduce the defendant’s claimed legal fees demonstrates the court’s commitment to ensuring that costs awards are fair and reasonable. By addressing concerns about the possibility of turning a costs award into a potential windfall for the defendant, the judge aimed to maintain the integrity of Ontario’s justice system and ensure trial fairness. This case is a great reminder for plaintiffs to maintain vigilance when assessing costs claimed by another party and for both plaintiffs and defendants to exercise transparency and avoid inflating their billing rates in personal injury cases.
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At Tierney Stauffer LLP, our skilled personal injury lawyers have many years of experience going up against insurance companies to get full and fair settlements for our clients. We will advise you of the best course of action to obtain the maximum possible settlement so that you can recover financially and move on with your life. Call us at 1-888-799-8057 or contact us online to set up a free consultation with one of our experienced personal injury lawyers.