Ontario statutory deduction doesn’t apply when determining Rule 49 costs

**CORRECTION** The following article has been amended to correct an error brought to our attention since initial publication

Statutory deductions from a plaintiff’s assessed damages, as mandated in s. 267.5(7) of the Insurance Act, are not to be considered in determining a party’s entitlement to costs pursuant to Rule 49 of the Rules of Civil Procedure, according to a ruling by the Ontario Court of Appeal.
The Appeal Court has thus overturned an earlier, 2004 ruling by the Ontario Divisional Court in Wicken v. Harssar. In Wicken, the Divisional Court found that the determination of a party’s costs should happen only after the s. 267.5(7) deduction was applied to a plaintiff’s assessed damage amounts.
"The correct interpretation is in accordance with the clear words used," Ontario Court of Appeal Justice Russell Juriansz wrote in Rider v. Dydyk, released Oct. 10. "The statutory deductions from a plaintiff’s assessed damages are not to be considered in determining a party’s entitlement to costs."
In Rider, Andrew Dydyk admitted liability for injuries the Rider and Kent families suffered in a motor vehicle accident in December 28, 1999.
Prior to going to trial, Dydyk offered a Rule 49 settlement payment of Cdn$5,000 to each of Donald Rider and Randall Kent, plus prejudgment interests and costs and dismissing the family law claims of their spouses without costs.
The Kent and Ryder families elected not to accept the settlement and took their case to trial. After an 11-day jury trial, the jury awarded Cdn$15,000 to Randall Kent, Cdn$1,000 to his spouse, Regina Kent, Cdn$20,000 to Donald Rider, and Cdn$500 to his spouse Kim Rider.
S. 267.5(7) of the Insurance Act provides that the amount of damages awarded to plaintiff for non-pecuniary loss shall be reduced by Cdn$15,000 generally and by Cdn$7,500 for such loss under the Family Law Act. The purpose of the statutory deduction, the court noted, is to reduce insurers’ claims costs.
After the deduction was applied, judgment was entered only for Don Rider for Cdn$5,000. Since this amount was lower than Dydyk’s initial offer to settle, Dydyk made an application for the Kent and Rider families to pay his legal costs of Cdn$119,083.
The Appeal Court found, however, that the Insurance Act deduction should not be subtracted from the award for the purpose of settling Rule 49 cost claims. As a result, the amount the Kents and Riders received did not, in fact, come under the initial settlement amount; thus Dydyk’s appeal for costs failed.