Halifax Insurance Nationale-Nederlanden North American Corporation v. Snair

Halifax Insurance Nationale-Nederlanden North American Corporation v. Snair Court Court of Appeal Date 1995-05-25 Citation 1995 NSCA 118 Docket CA 114451 Judge/Registrar/Adjudicator Freeman, Gerald B. (Honourable Justice) (CA); Hallett, J. Doane (Honourable Justice) (CA); Jones, Malachi C. (Honourable Justice) (CA) Document Type Decision Decision Content C.A. No. 114451 NOVA SCOTIA COURT OF APPEAL Hallett, Jones and Freeman,JJ.A. Cite as: Halifax Insurance Nationale-Nederlanden North American Corporation v. Snair, 1995 NSCA 118 BETWEEN: HALIFAX INSURANCE NATIONALE- ) NEDERLANDEN NORTH AMERICAN ) CORPORATION ) Cathy Dalziel ) for the Appellant Appellant ) ) Michael Ryan,Q.C., - and - ) and Richard Southcott ) for the Respondent ) ) Donald A. Kerr, Q.C., ) for the Intervenors JAMES SNAIR, et al ) ) Respondent ) Appeal Heard: ) May 16, 1995 ) ) Judgment Delivered: ) May 25, 1995 ) SHELLY ANNE CONRAD by her guardian ) LINDA JEAN BEZANSON and MURRAY ) ROBERT BEZANSON, ) Intervenors ) THE COURT: The appeal is dismissed with costs in the amount of $1,000.00 to the respondent and in the amount of $1,000.00 to the intervenor, per reasons of Freeman, J.A., Jones and Hallett, JJ.A. concurring. Freeman, J.A.: The issue in this appeal is whether Justice Merlin Nunn in Supreme Court chambers properly exercised his discretion in granting an interlocutory order permitting the respondent to amend his statement of claim to plead bad faith against his insurer, the appellant, and in staying proceedings under the amendment until the issues it raised matured to the point that the case could be heard. The respondent's action is for a declaration that he was covered by the terms of an insurance policy issued by the appellant at the time of a boating accident August 13, 1988. That accident left the respondent's passenger, Shelley Conrad, permanently totally disabled by head injuries. The respondent James Snair was the named insured in a tenants' package policy issued by the appellant providing indemnity against liability to a limit of $500,000, subject to certain exceptions. Mr. Snair has been found solely liable for her damages; that decision is the subject of another appeal. Damages have not yet been assessed but they are known to be substantial. After defending him until October, 1993, the appellant advised Mr. Snair that it would not indemnify him against his liability because of a policy exception. Mr. Snair's action against the appellant as originally framed was for a declaration that he has a right to indemnification under the policy based on the language of the policy; his statement of claim was amended to plead estoppel. The present amendment adds another arm to the action only if there is a finding that the insurer is liable. In May, 1994, a formal offer was made to the Appellant by Ms. Conrad to settle all of her claims against Snair for an amount within the limits of the policy. This was refused by the appellant insurer. On February 17, 1995, Mr. Snair applied for leave to amend the statement of claim to plead bad faith. Leave was required because the statement of claim had been already amended once to plead estoppel. At the hearing before Justice Nunn it appeared to be accepted by the parties that an insurer may be found to be in bad faith if it refuses a settlement within policy limits that leaves the insured exposed to risks in excess of policy limits. The following are the elements underlying such a claim: (1) that the insurer had a pre-trial opportunity to settle the matter within policy limits and declined; (2) that the insured was held liable at trial; and (3) that the damages assessed against the insured exceeded the policy limits. It also appeared to be common ground that it would be premature to proceed with the bad faith claim pending determination whether the appellant was liable to indemnify Mr. Snair and before the assessment of Ms. Conrad's damages. The concern of Mr. Snair's counsel was that, because of the complexity of the proceedings, the issue of estoppel could arise if bad faith was not included in the pleadings. Counsel for the intervenor, Ms. Conrad, proposed that the amendment be allowed but that the proceedings with respect to bad faith be stayed until the question of the appellant's liability under the insurance policy could be determined and the damages assessed. The intervenor understandably did not wish to assess damages, estimated to cost Ms. Conrad $25,000 to $30,000 in legal fees, until the insurance question of coverage was determined. Counsel for Mr. Snair accepted this proposal as did Justice Nunn after discussions with all counsel. Counsel for the appellant did not object to the amendment but did not agree with the stay unless the claim for a declaration as to the insurer's liability to indemnify the respondent were also stayed. She argued that proceeding in two stages would add complexity and costs. The issues raised in the grounds of appeal are whether the chambers judge erred in holding that the amendment disclosed a reasonable cause of action, in ordering a stay that had not been formally applied for when "no fair opportunity was afforded the appellant to be heard on the issue"; in holding that the circumstances justified exercise of the court's discretion, and in awarding costs. If the appellant is ultimately found liable on the policy it would have been liable at the time the settlement offer was refused. It is a reasonable assumption, given the severity of Ms. Conrad's injuries, that damages will exceed the policy limits. The appellant has not shown that the pleadings, as amended, do not disclose a cause of action for bad faith. In my view Justice Nunn's order was eminently reasonable and a pragmatic means of dealing with what counsel referred to as the problem of "circularity". He was the case management judge, but the appellant had withdrawn from the case management process so the matter was dealt with in chambers. Civil Procedure Rule 15.02 (1) provides that: The court may grant an amendment under Rule 15.01 at any time, in such manner, and on such terms as it thinks just. Civil Procedure Rule 25.01 (1) provides that: The court may, on the application of any party or on its own motion, at any time prior to a trial or hearing, (d) give directions as to the procedure to govern the future course of any proceeding, which directions shall govern the proceeding notwithstanding the provision of any rule to the contrary; . . . (f) order different questions or issues to be tried by different modes and at different places or times. This court's position in matters such as the present one has been expressed many times. It was stated as follows in Exco Corporation Limited. v. Nova Scotia Savings and Loan et al. (1983), 59 N.S.R. (2d) 331 at p. 333: This court is an appeal court which will not interfere with a discretionary order, especially an interlocutory one such as this that is now before us, unless wrong principles of law have been applied or patent injustice would result. The appellant has not demonstrated error of law or injustice. I would dismiss the appeal on the main issue. With respect to costs on the chambers application, the deference paid by this court to the exercise of the judge's discretion is, if anything, higher. I would dismiss the appeal as to costs. I would dismiss the appeal with costs which I would fix in the amount of $1,000 to the respondent and in the amount of $1,000 to the intervenor. Freeman, J.A. Concurred in: Jones, J.A. Hallett, J.A. C.A. No. 114451 NOVA SCOTIA COURT OF APPEAL BETWEEN: HALIFAX INSURANCE NATIONALE-) NEDERLANDEN NORTH AMERICAN) CORPORATION ) ) Appellant ) ) ) - and - ) REASONS FOR ) JUDGMENT BY: ) ) Freeman, J.A. JAMES SNAIR, et al ) Respondent ) ) ) ) )