Stewart v. Lloyd’s Underwriters

2020 BCSC 669 Stewart v. Lloyd's Underwriters

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Stewart v. Lloyd's Underwriters, 2020 BCSC 669 Date: 20200430 Docket: S173123 Registry: Vancouver Between: Christopher Stewart Plaintiff And Lloyd's Underwriters, North American Air Travel Insurance Agents Ltd., dba TuGo, OneWorld Assist Inc., dba Claims at TuGo and Industrial Alliance Insurance and Financial Services Inc./ Industrielle Alliance, Assurance et Services Financiers Inc. Defendants Before: The Honourable Madam Justice Norell Reasons for Judgment on Costs Counsel for the Plaintiff: R. Parsons J. Hames Counsel for the Defendants: E. Segal W. Godfrey Place and Date of Hearing: Vancouver, B.C. February 11, 2020 Place and Date of Judgment: Vancouver, B.C. April 30, 2020 Introduction [1] In reasons indexed at 2019 BCSC 1582, the plaintiff, Mr. Stewart, was awarded an indemnity against the defendant insurers (the "Insurers") with respect to medical expenses that are covered under a policy of travel insurance, damages for mental distress for breach of that policy, and punitive damages for breach of the Insurers' duty of good faith. Mr. Stewart had also claimed his legal fees as a head of contractual damages following the principles in Hadley v. Baxendale, (1854), 9 Ex. 341, 156 E.R.

145. That particular claim was dismissed. Mr. Stewart's actions against Claims and TuGo (using the same abbreviations for the parties as in the trial judgment) were dismissed. The parties requested that the issue of costs be deferred until after the trial decision was given. These are the reasons on Mr. Stewart's subsequent application for special costs against the Insurers. [2] Mr. Stewart seeks special costs on two separate grounds: a) the interests of justice; and b) litigation misconduct by the Insurers. [3] The Insurers dispute special costs and argue that if the Court is to award costs, the appropriate order is party and party costs on Scale A of Appendix B of the Supreme Court Civil Rules. Affidavits filed on this application [4] By consent, the parties filed several affidavits on this application. I have considered the affidavits, except that of Mr. Shaun Plotkin, filed on February 6, 2020. Mr. Plotkin's affidavit is not relevant to the issue of costs. Legal principles [5] The authority to order costs is found in R. 14-1. Costs are payable to a successful party on a party and party basis in accordance with Appendix B, unless the court orders otherwise or another exception applies: Rules 14-1(1) and (9). Party and party costs provide partial indemnification for legal fees. The court may order special costs, which provide a greater indemnification for legal fees: R.

14-1(1)(b)(i). The general principle is that special costs are punitive, not compensatory in nature, and are only awarded when there has been reprehensible conduct in the course of the litigation: Young v. Young, [1993] 4 S.C.R. 3 at 134-135; Grewal v. Sandhu, 2012 BCCA 26 at para. 106, leave to appeal ref'd [2012] S.C.C.A. No. 120; Smithies Holdings Inc. v. RCV Holdings Ltd., 2017 BCCA 177 at para. 56-57, 134. Reprehensible conduct includes not only conduct that is scandalous or outrageous, but also lesser forms of misconduct deserving of rebuke: Garcia v. Crestbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 (C.A.) at para. 17. [6] Madam Justice Gropper in Westsea Construction Ltd v. 0759553 B.C. Ltd., 2013 BCSC 1352 at para. 73 summarized the relevant principles: [73] I have undertaken a thorough review of the cases involving special costs. Having examined the authorities provided by both sides, it is apparent to me that the courts have been somewhat inconsistent in their determination of what amounts to reprehensible conduct and that those authorities must be reconciled. Based upon my review of the authorities, I have derived the following principles for awarding special costs: a) the court must exercise restraint in awarding specials costs; b) the party seeking special costs must demonstrate exceptional circumstances to justify a special costs order; c) simply

because the legal concept of "reprehensibility" captures different kinds of misconduct does not mean that all forms of misconduct are encompassed by this term; d) reprehensibility will likely be found in circumstances where there is evidence of improper motive, abuse of the court's process, misleading the court and persistent breaches of the rules of professional conduct and the rules of court that prejudice the applicant; e) special costs can be ordered against parties and non-parties alike; and f) the successful litigant is entitled to costs in accordance with the general rule that costs follow the event. Special costs are not awarded to a successful party as a "bonus" or further compensation for that success. [7] In limited circumstances, a court may exercise its discretion to award special costs for non-punitive purposes in the absence of reprehensible conduct (e.g. certain estate litigation and public interest litigation): Gichuru v. Smith, 2014 BCCA 414 at para. 90, leave to appeal ref'd [2015] 2 S.C.R. vi (note). In this case, Mr. Stewart argues that one basis for an award of special costs is another non-punitive exception, being that the award is in the "interests of justice". [8] Special costs in relation to insurance contracts have been the subject of two recent B.C. Court of Appeal decisions. In West Van Holdings Ltd. v. Economical Mutual Insurance, 2019 BCCA 110,

leave to appeal to S.C.C. ref'd 38711 (16 January 2020) [West Van], the Court of Appeal declined to follow a number of decisions in B.C. and other provinces, which held that special costs may be awarded to a successful insured in a duty to defend action in the absence of reprehensible conduct. The Court of Appeal rejected the reasoning in support of this conclusion and held that this previous line of authority in B.C. with respect to special costs should no longer be followed. Mr. Justice Goepel concluded: [109] There is, in my respectful opinion, no principled reason to award costs in a duty to defend case in a manner different than other litigation. There already exist other suitable mechanisms to censure an insurer's wrongful conduct: Smithies Holdings at para.

134. If the insurer has breached its duty of good faith, or conducts itself in a manner that is worthy of rebuke, it will be sanctioned. If not, an insurer facing a duty to defend claim should be treated no differently than any other litigant who may breach a contract. [9] In Tanious v. The Empire Life Insurance Company, 2019 BCCA 329, leave to appeal ref'd [2019] S.C.C.A. No. 417 [Tanious], the Court of Appeal upheld a trial decision awarding special costs to a successful insured seeking disability coverage. At the time the Court of Appeal issued the West Van decision, the trial decision in Tanious had been given, but the appeal was still pending. The Court in Tanious held that in exceptional circumstances, special costs may be awarded in the interests of justice, thus recognizing an exception to the usual rule requiring reprehensible conduct. Madam Justice Fisher, concluded: [69] To summarize, in British Columbia the general rule is that party and party costs are awarded to a successful litigant in the absence of litigation misconduct. In ordinary litigation, this partial indemnity strikes a fair and proper balance of the costs burden to be borne by the winning and losing parties and enhances the policy objectives of predictability and consistency. However, in exceptional cases special costs may be awarded for non-punitive purposes in the interests of justice to provide a

higher degree of indemnification to the successful party. When deciding whether to award special costs, a judge should exercise his or her discretion based on established principles and consider the nature and conduct of the litigation, bearing in mind the purposes and objectives of the costs regime, any salient policy considerations and the relevant facts as established by the evidence. [10] Both parties refer to the facts and principles in Tanious. Ms. Tanious was 25 years old when she was diagnosed as having multiple sclerosis. She continued to work, but declined physically, emotionally and cognitively and began to use an illicit substance to assist in mentation and increase her energy. She eventually became unable to work and the insurer denied benefits. Ms. Tanious was successful at trial, but there was no finding that the insurer had acted in bad faith. The benefits provided subsistence income. Ms. Tanious was in dire financial circumstances and suffering a significant mental and physical illness. Ms. Tanious' trial counsel filed an affidavit describing the challenges she had in representing Ms. Tanious, and the difficulties plaintiffs in disability claims have in retaining counsel on a contingency basis, as there is usually no lump sum award from which a contingency fee can be paid. [11] Both Mr. Stewart and the Insurers refer to paras. 78-84 of Tanious in support of their respective positions. I will summarize that passage briefly. [12] The Court found that the trial judge did not rely on a contractual analysis in making the special costs award. Rather, the judge's main focus was on addressing an injustice arising in a "unique and distinct category of contractual dispute litigation", namely disability insurance litigation: at para.

80. His concern was with providing meaningful access to justice for a plaintiff seeking subsistence-level disability insurance benefits. The Court also situated the trial judge's decision within the Supreme Court of Canada's recent emphasis on the importance of ensuring access to justice, and found that the trial judge was attuned to the implications of ordering special costs for both parties: at para.

81. Although a litigant's personal circumstances are not generally considered to be relevant to an award of costs (para. 60), the Court found that such consideration was warranted in that case, given the exceptional nature of the claim, saying at para. 82: a judge may consider a litigant's challenging personal and financial circumstances, including the availability and nature of counsel's services, in a disability insurance claim of this sort where there is an evidentiary basis for doing so and, if the interests of justice warrant it, may depart from ordinary costs rules and award special costs in the absence of reprehensible conduct. [13] The Court stated that adopting this approach enhanced the policy objective of access to justice, without compromising the policy objectives of maintaining predictability and consistency in the law. Disability insurers are in a unique position, as they "are likely to be familiar with an insured's circumstances and the associated implications of denying benefits": at para.

83. They can weigh the costs of proceeding to litigation and should be encouraged to scrutinize claims carefully, so as to not negatively impact access to justice for disadvantaged litigants. Interests of Justice [14] Mr. Stewart argues that the principles in Tanious apply to him. Access to justice is a recognized policy and the nature of his injury, his personal financial circumstances, the difficulty in retaining counsel, and the unique nature of a travel insurance claim, all indicate that special costs should be awarded in his case in the interests of justice. [15] Mr. Stewart argues that his injuries were very significant, with a prolonged period of recovery. He suffered a spinal cord injury that initially left him unable to use his limbs. Fortunately, he regained the use of his limbs and made a slow recovery. He did not entirely recover. At trial, he was ambulatory, but he still has decreased mobility, stamina, and nerve pain in his limbs, especially in his feet and hands. [16] Mr. Stewart argues that he was in a vulnerable financial situation. He was 65 years old at the time of his injury in 2015. At the time of the trial, at age 69, he was in the process of winding down his career as a mortgage broker and manager. The medical bills from the United States were over $300,000 CDN. He testified that if he had to pay the health care costs, it would "wipe [him] out", and he

did not know what he would have for retirement or if he could support himself. He was worried that he would have to rely upon his adult children. [17] I note here that, at trial, Mr. Stewart gave evidence that he receives income from Old Age Security and the Canada Pension Plan totalling approximately $1,200 per month. He sold his home, which provided $600,000 in investment funds. He receives investment income of approximately $40,000 per year, and he has another $60,000 in retained earnings in a company upon which he can draw. [18] Mr. Stewart argues that he needed the assistance of a lawyer to prosecute his claim. Mr. Stewart tried to appeal the Insurers' denial of coverage through a friend but was unsuccessful. He could not afford to pay for a lawyer on an hourly basis. He then found his present lawyer, who agreed to take his case on a contingency basis. [19] Mr. Stewart argues that contingency fee arrangements are "wholly unworkable" for travel insurance claims. He argues that in Tanious, the Court recognized the inadequacies of contingency fee arrangements in disability insurance actions because there is no lump sum fund against which fees can be claimed. Mr. Stewart argues that travel insurance claims present an even more compelling situation. A travel insurance claim is for expenses that have been incurred. If the insured does not pay the expenses, and the insured's

lawyer convinces the insurance company to directly pay those expenses (as the Insurers were entitled to do in this case), there is no fund from which the lawyer can be paid. Mr. Stewart argues that the Court in Tanious noted the important objective of ensuring access to justice for disadvantaged litigants by encouraging lawyers to act in deserving, but otherwise less remunerative, insurance claims. He argues that the same consideration applies here for travel insurance claims. [20] Mr. Stewart's counsel at trial was Mr. Collette. Mr. Parsons was Mr. Stewart's counsel until shortly before the trial and spoke to this application. Mr. Collette swore an affidavit in support of this application where he states that Mr. Parsons has advised him that he has refused to take on other travel insurance claims on contingency because the "travel insurers could simply pay any outstanding accounts at a discount as soon as they considered they were at risk of losing thereby making it uneconomical". There was no detail provided about those other claims that Mr. Parsons declined to take on. [21] Mr. Stewart refers to the unique nature of travel insurance claims. Like the facts in Tanious, he argues that the reason he was in dire financial circumstances, is for the same reason he needed access to the court; that is, the Insurers' breach of the policy. He refers to the Court's comment in Tanious

that disability insurers are likely to be familiar with an insured's circumstances and the implications of denying benefits. The prospect of facing a special costs award may encourage insurers to scrutinize claims carefully. A well-resourced institutional insurer can afford to litigate even if there is a prospect of special costs, but on the insured's side, there is a barrier to bringing the action. Mr. Stewart argues that these considerations apply to his case. [22] Mr. Stewart argues that insurance is a loss-spreading mechanism and that the cost of paying and adjudicating claims is factored into the price. He argues that "the only way the system can work fairly and effectively is if the insured has access to the courts to enforce the insurer's promise of coverage". [23] Finally, Mr. Stewart argues that at the time he commenced this action, there was case law in B.C. that supported the award of special costs in successful insurance claims: Williams v. Canales, 2016 BCSC 1811 [Williams]. Mr. Stewart argues that like cases should be decided the same. I note that Williams was a duty to defend case. In West Van, the Court of Appeal held that Williams, and three other B.C. cases, should no longer be followed with respect to their costs rulings. [24] The Insurers argue that the facts of this case "fall far outside the four corners of the exceptional circumstances" of Tanious. They

refer to differences in the personal health and financial circumstances of Ms. Tanious and Mr. Stewart, the differences in the nature of the insurance policies, and to the fact that there was not an award of punitive damages in Tanious. [25] The Insurers argue that Ms. Tanious had "physical and cognitive limitations" that resulted in "representational challenges". Ms. Tanious could not afford the hourly rate of counsel and the policy provided for periodic monthly benefits, making contingency arrangements difficult. In contrast, there was no evidence Mr. Stewart had extreme physical or cognitive disabilities that resulted in representational challenges. There was also no periodic payment of benefits. [26] The Insurers argue that Tanious was a disability insurance claim, whereas this claim concerns a travel insurance policy. The Insurers refer to the Court's comments in Tanious regarding the "unusual circumstances" and the "unique and distinct category of contractual dispute litigation" for a claim for "subsistence-level disability insurance benefits, and not in the context of an 'ordinary' insurance or personal harm claim". The Court described Ms. Tanious as an "impoverished and disabled claimant": at para. 84. [27] The Insurers distinguish the nature of the two policies. The Insurers argue that Tanious involved a disability policy, the purpose of which was to provide the

insured with funds for the necessaries of life. The very thing Ms. Tanious fought for, income benefits, would be depleted by paying her lawyer's fees from those funds. Paying her lawyer's fees would have dropped her income below subsistence level. The Insurers argue that the purpose of travel insurance is completely different. The purpose of Mr. Stewart's insurance has already been achieved, as the medical bills have been paid and there is no need to preserve any benefits from dilution by legal fees, as was done in Tanious. Mr. Stewart is not out of pocket for any costs under the insurance policy. The insurance policy specifically provides that the Insurers are entitled to pay the health care providers directly, meaning that Mr. Stewart would not have received the insurance funds to pay the bills himself in any case, unless he had paid the bills out of pocket, which is not the situation here. Mr. Stewart is not being left with insufficient income to meet basic living expenses; the travel insurance did not provide for such a benefit. [28] In response to Mr. Stewart's argument that contingency fee arrangements are not workable for travel insurance claims, the Insurers argue that while a contingency fee arrangement may be a relevant factor in the quantification of special costs, it should not be a factor in considering whether or not to award special costs. The fact that counsel

does not receive more is not a basis to award special costs. [29] The Insurers also distinguish Tanious on the basis that there was no punitive damage award in that case. They argue that Mr. Stewart's award for punitive damages and mental distress damages "far exceeds any possible pecuniary losses". Mr. Stewart will be able to pay his lawyers from the damages award and the party and party costs, if those are awarded. Unlike Tanious, this will not dilute the benefit of the insurance contract. [30] Finally, the Insurers make a floodgates argument that awarding Mr. Stewart special costs would "destabilize the foundation" of the "proverbial slippery slope" and effectively open the door to special costs in the absence of reprehensible conduct in all insurance coverage claims. [31] In reply, Mr. Stewart argues that it is not the differences in the facts between this case and Tanious that are important. What is important are the principles that should apply, and the principles in Tanious are not limited to disability claims. Mr. Stewart required the travel insurance benefits to avoid financial ruin. Both disability and travel insurance polices are purchased to avoid impoverishment. Insureds who have a serious medical conditions and crippling health care expenses will be unable to afford to retain lawyers on an hourly rate basis. [32] Mr. Stewart agrees with the Insurer's submission

that "a percentage of the damages award paid by [him] toward legal fees would not be a dilution of the benefit from the insurance contract" because there is no lump sum award from which lawyer's fees can be paid. Mr. Stewart argues this illustrates his point that insureds in similar cases to Mr. Stewart will not be able to reach the courts because lawyers will not take a case where there is no fund from which to be paid. [33] Finally, Mr. Stewart argues that the punitive damages award in this case has nothing to do with the award of special costs because they are separate matters. In this case, the punitive damages are being sought in the interests of justice, a non-punitive bases. Mr. Stewart refers to para. 70 of West Van, where Mr. Justice Goepel stated: [70] Special costs are not a substitute for damages. They are not a remedy for breach of contract and should not be conflated with punitive damages. In Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29, this Court explained: [69] The judge conflated the analysis of punitive damages and costs. Punitive damages are a remedy for breach of contract that reflects the conduct of a party at the time of the breach. Costs reflect the results and conduct of parties leading to and in the course of litigation. They are not a remedy for breach of contract. Analysis [34] Turning to the legal framework set out at para. 69 of Tanious,

in deciding whether to award special costs, I must consider the nature and conduct of the litigation, bearing in mind the purposes and objectives of the costs regime, any salient policy considerations and the relevant facts as established by the evidence. [35] I agree with Mr. Stewart that it is the principles and framework in Tanious that are important. Although emphasizing the unique nature of disability insurance claims, the Court did not limit the legal principles it enunciated to that specific type of claim. The Court, at paras. 75-76, rejected a categorical approach to assessing special cost awards. Instead, the Court emphasized that judges hearing special cost applications must apply the principles set out in the jurisprudence in a manner that is responsive to the particular facts of each case: at paras. 69, 75-76. This is a discretionary exercise. Nonetheless, it is still of assistance to compare the facts of Tanious to this case, as that case provides a helpful example of where the Court has found "exceptional circumstances" warranting an award of special costs in the interests of justice. [36] The nature of the litigation is that it concerns a travel insurance policy for expenses that have already been incurred. This is different from a disability policy that is intended to provide past and prospective replacement income for an insured who is unable to work. Mr.

Stewart incurred a debt for health care services. He was not relying upon insurance funds for income for the necessaries of life. Nonetheless, the financial repercussions to Mr. Stewart were significant. [37] The work of counsel enabled Mr. Stewart to obtain a significant benefit, which was settlement or purported settlement of up to the full amount of the unpaid health care expenses. A term of the policy is that the Insurers may pay those sums directly to the health care providers. The fact that there is no sum against which Mr. Stewart's counsel may attach his fee is a result of that term of the contract, to which Mr. Stewart agreed. There are many types of actions where the remedy sought is not a damage award and therefore, there is not a fund against which a lawyer can obtain fees. However, those circumstances do not by themselves result in an award of special costs. [38] I accept that it may be difficult for some litigants to retain counsel when there is not the possibility of a lump sum damage award, but Mr. Stewart was not in the same sort of financial situation as Ms. Tanious. Mr. Stewart said he was referred to Mr. Parsons by a friend. There is no evidence he consulted any other lawyer. He understood it may take up to $100,000 to prosecute the claim and that there was no guarantee he would be successful. He stated that with the amount of health care bills it was

"difficult to commit" that kind of money to address the problem. He hoped Mr. Parsons would take the file on a contingency basis, which he did. Mr. Stewart also gave evidence that he had approximately $600,000 in investments and received approximately $40,000 per year in investment income in addition to his pensions. He also had another $60,000 in retained earnings in a company. At the time of his injury, his net worth was approximately $700,000. Mr. Stewart chose not to use those funds to negotiate with the health care providers or pay his lawyer an hourly rate. I am not persuaded Mr. Stewart's financial circumstances prevented him from retaining a lawyer and accessing the courts. I conclude that it was his preference not to risk his investments in the conduct of this litigation. [39] While not in any way discounting the significant injuries Mr. Stewart suffered, he did substantially recover. There was no evidence of any mental or cognitive barriers to him accessing counsel or the courts. There was no evidence of representational challenges that would otherwise have prevented access to justice. [40] The purposes and objectives of a costs award were reviewed in Tanious. They include: a) to "reallocate some of the successful party's litigation costs to the loser, not to make the successful party whole". A discrepancy between actual costs and a costs award is not an injustice: para. 35; b) to "encourage settlement, and deter frivolous actions or defences": para. 36; c) "on occasion to enhance access to justice, mitigate severe inequality between litigants and encourage socially desirable conduct": para. 36; and d) to "guide counsel and litigants in their choices and litigation strategies": para.

40. In this regard, "costs awards should be predictable and consistent across similar cases": para.

39. Exposure to costs "generally depends on the nature of the case itself and the parties' litigation conduct, not on the parties' individual characteristics and circumstances or their pre-litigation conduct": para. 40. [41] The Court in Tanious referred to the Supreme Court of Canada's decision in Walker v. Ritchie, 2006 SCC 45, and noted that "a defendant should only be required to carry the burden of ensuring an opponent's access to justice in exceptional circumstances and where there is no other realistic option for bringing the issues to trial": para. 43. [42] In considering the facts of this case in relation to the purposes and objectives of a costs award, the fact that Mr. Stewart will not be "made whole" by a party and party costs award is not an injustice, nor is the fact that his lawyer may receive less than he anticipated in taking this matter on. [43] As for access to justice, I do not find Mr. Stewart's position nearly as compelling as that of Ms. Tanious. Mr. Stewart was able to retain and instruct counsel and did not have representational challenges. He did not pay the health care expenses and had investments and pension income. He was not impoverished, nor was he relying upon the insurance benefits for the necessaries of life and subsistence. His counsel will not have a large lump sum award against which to attach a fee, but I am not convinced on the facts of

this case, that this was a bar to access to justice. I am not persuaded that Mr. Stewart's circumstances are exceptional, and that he had no other realistic option for bringing his action. He had investments that he could have used, but chose not to put at risk. [44] Finally, with respect to the objectives of predictability and consistency, I find it difficult to distinguish Mr. Stewart's circumstances from those of many litigants who come before this Court who as a result of a breach of contract or tort, find themselves in either difficult financial circumstances or with a difficult decision to make in risking their own assets, yet are not awarded special costs. I am also not persuaded that by reason of a travel insurance policy, the Insurers would have had any particular knowledge of Mr. Stewart's financial situation. The financial situation of purchasers of travel insurance policies must vary widely. The only knowledge the Insurers would have is that Mr. Stewart was facing a large bill. Awarding special costs on the facts of this case would introduce more uncertainty for costs awards and would be contrary to the objectives of predictability and consistency. [45] Before leaving this issue, I comment on two arguments. The first is the Insurers' argument concerning the punitive damages Mr. Stewart received. I agree with Mr. Stewart that the fact I have already made a punitive

damages award is not relevant to this aspect of his argument for special costs. He is not seeking special damages on a punitive basis, but on an interests of justice basis. However, the Insurers' point was that the punitive damages award provided a fund of money. The difficulty with the Insurer's argument is that punitive damages are rarely awarded and I doubt that a lawyer would consider this as a possible source of funds for payment of a contingency fee when considering whether to take on a file. The second is Mr. Collette's affidavit regarding Mr. Parson's advice that he has decided not to take on some travel insurance claims. The difficulty with this is that there is no evidence concerning the circumstances of those claims, and while access to the courts generally because of the nature of a claim is a consideration, what is important in this case is Mr. Stewart's ability to access to the courts. [46] It follows that I find that the circumstances of this case do not come within the exceptional circumstances required to award special costs in the interests of justice. Litigation misconduct [47] As an alternative basis to an award of costs, Mr. Stewart seeks special costs on the basis of reprehensible conduct deserving of rebuke. Special costs awarded under this basis are intended to be punitive as a result of misconduct. [48] Mr. Stewart refers to the discovery of documents

and the timing of those in relation to a settlement offer and the settling of the health care bill as the basis upon which the Court should find reprehensible conduct on the part of the Insurers. Mr. Stewart argues that it is settled law that documents obtained and produced during the initial investigation of a first party claim are documents that must be listed and produced. The defendants' initial list of documents omitted the log notes. The log notes, which were later disclosed, revealed that at the very beginning of their investigation, Claims was told by Dr. McMorran that he had spoken to the trauma physicians and that they advised that alcohol was not a factor in Mr. Stewart's injuries. Further, the log notes showed that on August 27 and 28, 2015, Claims had conversations with Dr. Stahl, and in the latter conversation, he had expressed reservations regarding his opinion and that further investigation was required. [49] Mr. Stewart says that on December 13, 2018, the defendants delivered their list of documents, without listing the log notes mentioned above. In an affidavit filed March 4, 2019, Ms. Zacks stated that in December 2018, the Insurers changed their coverage position. Mr. Stewart's counsel argues that this change must have been before December 10, 2018 because that is when the log notes reveal the Insurers commenced contacting the health care providers. He

states that on December 19, 2018, the Insurers delivered a settlement offer while knowing they had not produced these log notes. The settlement offer does not say that the Insurers have accepted the claim or that they are paying the medical bills. Instead, the letter refers to the risks for both parties. Mr. Stewart alleges this was a "strategy of concealment" when there was no risk to Mr. Stewart because the Insurers had changed their decision on coverage. [50] Mr. Stewart's counsel also argued that Mr. Stewart was in error when he testified at trial that he was advised on December 18, 2018 that the Insurers had reversed their decision on coverage. Mr. Stewart's counsel says the date was actually January 8, 2019 when, in a telephone conversation, counsel for the defendants for the first time advised Mr. Stewart's counsel that the defendants intended to pay the medical expenses. [51] Mr. Stewart's argument is weakened somewhat, as he made an error regarding the date of delivery of the Insurers' list of documents. The list of documents was delivered on January 3, 2019, but was dated December 13, 2018. Further, the Insurers point out that an amended list of documents was produced 11 days later on January 14, 2019, and that list included the log notes, albeit redacted for the log notes starting in December 2018. There was a subsequent application filed by Mr. Stewart for

production of those redacted records and they were produced shortly before trial. [52] The Insurers argue that a party's failure to produce a complete list of documents (which was remedied) is not a basis for special costs: Sonepar Canada Inc. v. Thompson, 2016 BCSC 1195. Further, the Insurers argue that even if the log notes should have been produced initially, this does not mean there are exceptional circumstances to justify an award of special costs. There must be something more, such as an improper motive, abusing the court's process, misleading the court or engaging in persistent breaches of the Rules in a manner that prejudiced Mr. Stewart. In this case, Mr. Stewart has not shown that he took steps in the litigation that were necessitated by the first incomplete list of documents. It did not negatively affect the litigation, as Mr. Stewart did not accept the settlement offer. [53] The Insurers argue that this Court was already critical of the Insurers for not investigating the comments of the trauma physicians to Dr. McMorran, and for not investigating further the cardiac issues following the receipt of Dr. Stahl's opinion. Similarly, to the extent Mr. Stewart relies upon the manner in which the Insurers contacted the medical care providers and settled the bills, that conduct has already been the subject of a punitive damages award. The Insurers say these factors were

included as part of the Court's finding of a breach of good faith and the award of punitive damages. The Insurers argue that Mr. Stewart cannot now ask for this to be a factor in his application for special costs, as this would be punishing the Insurers twice for the same conduct. [54] The Insurers argue that it is not appropriate to consider without prejudice settlement offers in relation to special costs, other than for timing and with regard to the reasonableness of a rejection. Further, Mr. Stewart's allegation relating to the content of the settlement offer is incorrectly premised on Mr. Stewart's attempt at changing facts already found by this Court, specifically Mr. Stewart's own evidence that he was told on December 18, 2018 that the Insurers would be providing coverage. [55] In the alternative, the Insurers argue that if the Court finds special costs are warranted, they should only be for the time period between January 3 and January 14, 2019. [56] The Insurers argue that although Mr. Stewart was successful against them, he did not have "substantial success": Connor Estate, 2017 BCSC 1341 at para.

11. The Insurers argue that the action against Claims and TuGo was not successful, and that Mr. Stewart was only successful in two or his five claims (one of which was the most significant claim, being the difference between the settlement amounts and the amount of the health care bills). [57] Alternatively, the Insurers argue that costs should be awarded on Scale A based on the length of the trial and pre-trial proceedings and the fact that the Insurers agreed to settle the health care bills prior to trial. They say the trial was not sufficiently complex to warrant Scale B. The Insurers refer to the factors for determining the scale of costs, summarized in Mort v. Br. of Sch. Trustees of Sch. Bd. No. 63 (Saanich), 2001 BCSC 1473 at paras. 5-6 [Mort]: [5] The starting point is to determine whether this matter was of little difficulty; less than ordinary difficulty; ordinary difficulty or importance; more than ordinary difficulty or importance; or, of unusual difficulty or importance. Difficulty or importance must be established, not both. [6] Relevant factors to consider in answering that question include: (a) [t]he length of the trial; (b) the complexity of the issues involved; (c) the number and complexity of pre-trial applications; (d) whether or not the action was hard fought with little or nothing being conceded along the way; (e) the number and length of Examinations for Discovery; (f) the number and complexity of Experts' Reports; and (g) the extent of the effort required in the collection and proof of facts. [58] These factors are not exhaustive: Monument Mining Ltd. v. Balendran Chong & Bodi, 2013 BCSC 179 at para.

6. Analysis [59] The Insurers' argument that their conduct in settling the claims was already taken into account in the award of punitive damages misconstrues Mr. Stewart's argument, which is limited to the timing of the alleged "concealment" of the log notes, the settlement offer, and the Insurer's decision to reverse their coverage position. The basis of the punitive damages claim was different. There is a distinction between the Insurer's bad faith conduct in settling the health care claims, which I consider not to be part of the conduct of the litigation, and steps in the litigation itself, such as document discovery and conduct at trial. [60] In my view, Mr. Stewart has not established reprehensible conduct on the part of the Insurers in the conduct of this action that rises to a level that is deserving of rebuke. I do not consider that an 11-day delay in producing a more complete list of documents is reprehensible behaviour. The absence of log notes or a claim file would have been an obvious omission from an insurer's list of document in a first party coverage claim. There is no evidence that Mr. Stewart was put to an unnecessary expense or was prejudiced in the conduct of this litigation because of the 11-day delay. [61] As to when the Insurers made the decision to reverse their decision on coverage, Mr. Stewart testified at trial that he was advised of this reversal on

December 18, 2019. There is no application before me to introduce new evidence to "correct" that evidence, if in fact it is in error. Regardless, it makes no difference to my determination. As set out in the trial decision, although the Insurers had contact with the Reno hospital starting on December 10, 2018, the earliest date of a confirmed settlement was on January 10, 2019, after Mr. Stewart's counsel says he was informed that the Insurers had changed their position. Ms. Zacks testified that the Insurers decided to reverse their coverage decision after they determined that they could obtain discounts and after considering the risks of the trial. An exact date for this was not given. I do not find that, in the circumstances, the initial list of documents and the settlement offer were an active "concealment" of information. No settlement with any health care provider had been concluded on December 19, 2018, the date of the offer. [62] It follows that I dismiss Mr. Stewart's claim for special damages on the basis of alleged reprehensible behaviour by the Insurers. Costs award [63] In my view, Mr. Stewart was successful at trial and is entitled to costs. Almost the entirety of the trial was devoted to the bad faith claim, and not to the claim for the difference in the settlement of the health care bills, as alleged by the Insurers. Mr. Stewart was successful in the bad faith

claim. While he was not successful in obtaining a damage award for the difference in the settlement of the health care bills, he was successful in obtaining an order for indemnification should he be pursued for those costs. Although the action against Claims was dismissed, their conduct as an agent of the Insurers was central to the events of this lawsuit and all of the defendants were represented by the same counsel. The claim against TuGo was not pursued and no time was spent at trial on it. [64] There is no basis on which to order costs at Scale A. The action was of ordinary difficulty. I have considered the factors in Mort and in s. 2(3) of Appendix B. The trial was three days, with another one-half day for argument of this application. The issues were varied and involved multiple bases for liability, one of which - the claim for the difference between the settled amounts of health care bills and the usual discount - was novel. There was a pre-trial application filed arising out of the production of the log notes, as well as litigation and solicitor-client privilege redactions of those log notes. Although coverage was admitted, liability for bad faith was not, and coverage was admitted late in the day. There were examinations for discovery and the parties each retained an expert. There were hospital and other medical records to review. I was not provided information regarding the extent to which facts were collected, but the log notes were part of that process. This was a typical action of ordinary difficulty. [65] I order that Mr. Stewart have his costs of this action against the Insurers paid as party and party costs at Scale B. "Norell J."