[2010] O.J. No. 3650

2010 ONCA 565

Ontario Court of Appeal

M. Rosenberg, S.T. Goudge and K.N. Feldman JJ.A.

August 31, 2010

The appellants successfully sued the respondents for damages suffered in a motor vehicle accident. Prior to trial, the appellants twice asked the respondents to participate in mediation. Contrary to its statutory obligation, the respondents' Insurer refused, on the basis that it did not believe that the appellants' damages would meet the statutory threshold under s. 267.5(5) of the Insurance Act, R.S.O. 1990, c. I.8. When dealing with costs following trial, the trial judge accepted the insurer's position as legitimate and declined the appellants' request for substantial indemnity costs as a remedy for its failure to participate in mediation, pursuant to s. 258.6(2) of the Insurance Act.

The Court of Appeal considered whether any cost consequence should attach to the respondent's failure to participate in a mediation.

The appeal was allowed. The Court of Appeal held that the trial judge erred in law when he concluded that the insurer's decision not to participate in mediation was a legitimate one. That decision constituted a breach of the insurer's statutory obligation. An increase of $40,000 in the costs award was ordered as a cost penalty in the circumstances.