An uninsured driver strikes another vehicle, injuring its
occupants. These injured persons obtain a settlement from their own
motor vehicle insurer (pursuant to Section D of the standard
policy), and they assign their action against the tortfeasor to
Default judgment is awarded against the tortfeasor. The insurer
then seeks a recovery of the settlement amount from the tortfeasor.
A motion for an assessment of damages is set down, and the insurer
points to the reasonableness of the settlement as the appropriate
threshold for judicial consideration.
The above had long been a routine event in civil litigation in
Nova Scotia. That was, until the Supreme Court of Nova Scotia
concluded in January 2014 that the settlement between the insurer
and insured is entirely irrelevant to the assessment of damages.
InMacKean v Royal & Sun Alliance Insurance Company of
Canada, 2014 NSSC 33, the motion judge concluded that damages
must be strictly proved on a balance of probabilities, with
complete evidence, as at the time of the assessment.
But in a unanimous decision released by the Nova Scotia Court of
Appeal on April 10, 2015, the "reasonableness" approach
has now been reaffirmed: MacKean v Royal & Sun Alliance
Insurance Company of Canada, 2015 NSCA 33.
In reasons written by the Honourable Justice Bryson, the
settlement between a Section D insurer and their insured is noted
to be clearly relevant to the assessment of damages in an
undefended case. This is particularly because motor vehicle
insurers are quite experienced and adept at examining the
circumstances of a case. In Justice Bryson's words:
Automobile insurers are very
experienced personal injury litigants, whose routine business is to
evaluate accident claims. They are not in the business of liberally
distributing largesse to undeserving claimants. The Court should
not defer to the insurer's calculation, but because the
principle by which settlement is effected is the same as that by
which the Court would calculate damages, it is relevant.
While the court must have sufficient evidence from which to
assess the reasonableness of the settlement, it does not require
– in an undefended case – a complete package of
evidence for review on a balance of probabilities, such as would be
required at a defended trial. In reaching this conclusion, the
Court of Appeal was persuaded by policy reasons of access to
justice and a concern for the preservation of scarce judicial
resources. On this point, the Court of Appeal wrote:
It is obvious that proving damages on
the standard insisted upon by Justice Wood in this case would be
more time consuming, expensive, and slower, than tendering evidence
of the reasonableness of the settlement.
So there is nothing wrong in principle with a simpler, quicker,
less expensive and proportional basis for assessing damages in
undefended cases such as this one, where the damage claimed is
based on a settlement whose calculation depends on what is legally
recoverable from the defaulting third party.
The Court of Appeal also noted that the practice of filing
evidence from the insurer's representatives is appropriate as
these representatives can best speak to the basis on which the
settlement is made. However, the Court of Appeal also noted that
some evidence from the Plaintiff would be appropriate so the court
may have confidence that the settlement is reasonable.
The Court of Appeal also cautioned that where the settlement was
reached a long time before the court is asked to assess damages,
some contemporary evidence may be required in order to determine
whether the settlement continues to be reasonable. For this reason,
it will be prudent to seek an assessment of damages as soon as
possible after a settlement is reached with an insured.
The Court of Appeal's decision is a welcome and practical
clarification of the law in this context. Congratulations to
C. Patricia Mitchell and
Leah Grimmer, both of Stewart McKelvey, who successfully
represented the appellants in this case.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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