



COURT OF APPEAL FOR ONTARIO

CITATION: Tuffnail v. Meekes, 2020 ONCA 340

DATE:
    20200601

DOCKET: C66633, C64430 & C64479

Hoy A.C.J.O., Doherty J.A. and
    Marrocco A.C.J. (
ad hoc
)

DOCKET:
    C66633

BETWEEN

Gregory Alan Tuffnail, Patricia Diane
    Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail

Plaintiffs (Appellants/Respondents by way of
    cross-appeal)

and

Steven Andrew Meekes,
State Farm Mutual Automobile Insurance Company
and
Sharon
    Carlene Drown as Litigation Administrator for the Estate of Thomas Michael
    Bolton

Defendants (
Respondent
/
Respondent
    and Appellant by way of cross-appeal
)

and

Steve
    Coulthard

Third Party (Respondent)

DOCKET: C64430

AND BETWEEN

Gregory Alan Tuffnail, Patricia
    Diane Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail

Plaintiffs (Respondents)

and

Steven Andrew Meekes,
State Farm Mutual Automobile Insurance Company
and
    Sharon Carlene Drown as Litigation Administrator for the Estate of Thomas
    Michael Bolton

Defendants (
Appellant
)

and

Steve
    Coulthard

Third Party (Respondent)

DOCKET: C64479

AND BETWEEN

Gregory Alan Tuffnail, Patricia
    Diane Tuffnail, David Alan Tuffnail and Michael Alan Tuffnail

Plaintiffs (Respondents)

and

Steven Andrew Meekes,
State Farm Mutual Automobile Insurance Company
and
Sharon
    Carlene Drown as Litigation Administrator for the Estate of Thomas Michael
    Bolton

Defendants (
Respondents
)

and

Steve
    Coulthard

Third Party (Appellant)

Peter W. Kryworuk and Jacob R.W.
    Damstra, for State Farm Mutual Automobile Insurance Company

James D. Virtue and Rasha M. El-Tawil, for
    Gregory Alan Tuffnail, Patricia Diane Tuffnail, David Alan Tuffnail, and
    Michael Alan Tuffnail

D. Romano Reid, for the Litigation
    Administrator for the Estate of Thomas Michael Bolton

Brian A. Pickard, James K. Brown and Ayren
    J. Brown, for Steve Coulthard

Heard: January 14 and 15, 2020

On appeal from the judgment of Justice Helen
    A. Rady of the Superior Court of Justice, dated July 23, 2019, with reasons
    reported at 2017 ONSC 4610, 72 C.C.L.I. (5th) 281; 2018 ONSC 4113; 2019 ONSC
    525, [2019] I.L.R. I-6127; 2019 ONSC 1334; and 2019 ONSC 2399.

Hoy A.C.J.O.:

overview

[1]

Gregory Tuffnail was seriously injured in a
    single-vehicle crash on September 13, 2009, following a rural wedding
    reception. The other passenger, Kristopher Petrie, was killed. Tuffnail and the
    driver, Steven Meekes, had been served alcohol at the reception. The groom,
    Thomas Bolton, had hosted the reception. Steve Coulthard was the bartender.

[2]

Tuffnail and his family  to whom I refer
    individually and collectively as Tuffnail  commenced an action against
    Meekes, Bolton and State Farm, Tuffnails automobile insurer. Tuffnail claimed
    that the collision and resulting injuries were caused by Meekes and Boltons negligence
    and/or, in the case of Bolton, breach of the provisions of the
Liquor
    Licence Act
, R.S.O. 1990, c. L.19. In the case of State Farm, Tuffnail
    sought a declaration that they were entitled to coverage under the OPCF 44R (Ontario
    Policy Change Form 44R  Family Protection Coverage endorsement), the optional
    underinsured motorist coverage Tuffnail had purchased from State Farm.

[3]

State Farm defended Tuffnails claim for a
    declaration that Tuffnail was entitled to coverage under the OPCF 44R and
    brought a third party claim against Coulthard for contribution and indemnity in
    respect of amounts it was required to pay under the OPCF 44R. Bolton also
    brought a third party claim against Coulthard. Both State Farm and Bolton
    alleged that Coulthards negligence and/or breach of the
Liquor Licence Act
caused or contributed to the accident. Tuffnail did not sue Coulthard.

[4]

On May 10, 2017, following a six-week trial, the
    jury awarded damages and apportioned liability among Meekes, Bolton,
[1]
Coulthard and Tuffnail as
    follows:

Meekes (the driver)  65%

Bolton (the host)  20.03%

Coulthard (the bartender)  11.12%

Tuffnail (the plaintiff)  3.85%

[5]

Taking Tuffnails contributory negligence into
    account, the net amount payable to Tuffnail is $3,435,034.71.

[6]

The following insurance coverage was available
    to the tortfeasors:

Meekes  $200,000

Bolton  $2,000,000

Coulthard  $1,000,000

[7]

Petries family were plaintiffs in a companion
    action. The Petrie plaintiffs agreed to be bound by the findings of liability
    and apportionment of damages in the Tuffnail action. According to counsel, Meekes
    and Boltons policy limits were subject to
pro rata
sharing with the
    Petrie plaintiffs, with Tuffnail entitled to 94.89 percent of the proceeds.
    Accordingly, Tuffnail is entitled to $189,780 from Meekes and $1,897,800 from
    Bolton.

[8]

This does not cover Tuffnails loss. The net
    amount Tuffnail is entitled to under the judgment exceeds the aggregate of
    Meekes, Boltons and Coulthards insurance coverage. Key issues on the appeal impact
    how much State Farm is required to pay to Tuffnail under the OPCF 44R and how,
    given the shortfall, the amount recovered should be divided between State
    Farm and Tuffnail.

[9]

State Farm, Tuffnail and Coulthard sought
    numerous post-verdict rulings, many of which were inter-related. They were
    heard between June 2017 and April 2019, and the judgment is dated July 23,
    2019. Each of State Farm, Tuffnail and Coulthard appeals the judgment, arguing
    that the trial judge made various errors in her post-verdict rulings. They
    raise the following five issues:

1.

State Farm argues that the trial judge erred in her interpretation of
    s. 7 of the OPCF 44R, leading to an erroneous calculation of the amount State
    Farm is required to pay Tuffnail;

2.

Tuffnail argues that the trial judge erred in ordering that State
    Farm share any amounts it recovers by way of subrogation with Tuffnail until
    Tuffnail receive[s] full indemnification pursuant to the terms of the OPCF 44R
    endorsement and, by way of conditional cross-appeal, State Farm argues that
    the trial judge erred in requiring it to share at all;

3.

Tuffnail argues that the trial judge erred in limiting Coulthards liability
    to Bolton to a proportion of the total judgment equal to the 11.12% of fault
    found by the jury;

4.

State Farm argues that the trial judge improperly exercised her
    discretion to award prejudgment interest at a rate higher than the bank rate;
    and

5.

Coulthard argues that the trial judge erred in denying him leave to
    amend his pleadings, after the jury returned their verdict, to plead
    limitations defences.

[10]

A sixth issue  the costs awarded to Tuffnail 
    was resolved by the parties before the appeal was heard.

[11]

I address the five alleged errors, in turn.

1. Did the trial
    judge err in her interpretation of the OPCF 44R?

Background

[12]

In para. 6 of her judgment, the trial judge
    ordered State Farm to pay Tuffnail the sum of $800,000, which the parties agree
    is the limit of coverage under the OPCF 44R.
[2]

[13]

The OPCF 44R is the standard form contract which
    applies when, for an additional premium, an Ontario insured purchases optional
    underinsured motorist coverage. Meekes was an inadequately insured motorist
    within the meaning of the OPCF 44R: he had motor vehicle liability coverage for
    only $200,000, an amount less than the $1,000,000 limit of Tuffnails family
    protection coverage under the OPCF 44R.

[14]

Pursuant to s. 7 of the OPCF 44R, the amount
    payable by an insurer (State Farm) to an eligible claimant (Tuffnail) is excess
    to an amount received by the eligible claimant from any source, and is excess
    to amounts that were available to the eligible claimant from nine enumerated
    sources. This case is concerned with amounts available from the source
    enumerated in s. 7(b): the insurers of a person jointly liable with the inadequately
    insured motorist. Section 7(b) provides as follows:

7.        The amount payable under this change
    form to an eligible claimant is excess to an amount received by the eligible
    claimant from any source, other than money payable on death under a policy of
    insurance, and is excess to amounts that were available to the eligible
    claimant from

(b)  the insurers of a person jointly
    liable with the inadequately insured motorist for the damages sustained by an
    insured person;

[15]

The specific issue before the trial judge was
    whether Coulthards insurance coverage was available to Tuffnail. If so, the
    $1,000,000 limit of Coulthards policy would be deducted in calculating State
    Farms liability to Tuffnail under s. 7 and, on State Farms calculation, its
    liability under the OPCF 44R would be reduced from $800,000 to $347,454.71.

[16]

The trial judge rejected State Farms argument
    that, because Tuffnail could have sued Coulthard, the limits of Coulthards
    policy were available to Tuffnail. In State Farms submission, an insured can
    only resort to the coverage provided by the OPCF 44R as a matter of last
    resort, and an insureds failure to sue all reasonably possible tortfeasors
    should not increase the insureds entitlement under the OPCF 44R.

[17]

In summary, in the trial judges view, because
    Tuffnail had not commenced a claim against Coulthard in their own name and
    named Coulthard as a defendant, the proceeds of Coulthards policy were not
    available to Tuffnail within the meaning of s. 7 of the OPCF 44R.

[18]

The trial judge noted that, under the prior
    version of s. 7(b) in the SEF 44 Family Protection Endorsement,
[3]
the insureds
    liability was calculated with reference to any amounts the eligible claimant
    is entitled to recover (
whether such entitlement is
    pursued or not
). The reference to whether such entitlement is pursued
    or not was not included in s. 7(b) of the OPCF 44R. The trial judge concluded
    that the change in the language of the OPCF 44R is significant and signals
    that it is not necessary for an insured to pursue all possible tortfeasors
    before becoming entitled to access his own insurance:
Tuffnail, et al v.
    Meekes et al
,
2017 ONSC 4610 (September 20, 2017 reasons), at para.
    84. The trial judge rejected State Farms argument that
Loftus v. Robertson
,
    2009 ONCA 618, 96 O.R. (3d) 721, interpreted the OPCF 44R as requiring
    plaintiffs to seek recovery from all reasonably possible tortfeasors. The trial
    judge characterized the courts comments in
Loftus
as
obiter
and noted that the court did not consider the change in language between the
    SEF 44 and the OPCF 44R. The trial judge wrote that, at the very least, there
    is an ambiguity that must be resolved in favour of the insured: September 20,
    2017 reasons, at para. 89.

Analysis

[19]

The parties agree that because the OPCF 44R is a
    standard form contract, the standard of review applicable to the trial judges
    interpretation of s. 7 is one of correctness.

[20]

The parties advance numerous arguments as to whether
    the trial judges interpretation was correct. One of them, only fully explored
    for the first time on appeal, is in my view determinative. Accordingly, I need not
    address the balance of the arguments.

[21]

In response to State Farms arguments that the
    trial judge erred in her interpretation of s. 7, Tuffnail focuses on the
    wording in s. 7(b): excess to the amounts that were available to the eligible
    claimant fromthe insurers of
a person jointly liable
    with the inadequately insured motorist
. Tuffnail argues that Coulthard
    is a third party only and, therefore, cannot be jointly liable to Tuffnail.
    Further, in her ruling of January 23, 2019  made about 16 months after her
    ruling interpreting s. 7 of the OPCF 44R  the trial judge found that Coulthard
    is
severally
liable to Bolton:
Tuffnail v.
    Meekes
,
2019 ONSC 525, [2019] I.L.R. I-6127 (January 23, 2019
    reasons). This is repeated at paragraph 8 of the judgment.

[22]

Tuffnail is clear that, if Coulthard were
    jointly liable to Tuffnail, his insurance coverage would be available to
    Tuffnail, within the meaning of s. 7(b). But Tuffnail adds that a person cannot
    be jointly liable unless and until so found, and the trial judge did not find
    Coulthard jointly liable.

[23]

Tuffnails argument on appeal that Coulthard is
    not jointly liable to Tuffnail sits uneasily with Tuffnails position before
    the trial judge as reflected in the January 23, 2019 reasons. In that ruling
    Tuffnail took the position that Coulthard was jointly and severally liable to
    Tuffnail for the full amount of the damages awarded by the jury and that the
    Bolton Estate was entitled to recover from Coulthard a proportionate share of
    the plaintiffs damages.

[24]

As I will explain, Coulthard is jointly liable
    to Tuffnail within the meaning of s. 7(b), his insurance is available to
    Tuffnail within the meaning of s. 7(b), and accordingly, State Farm is entitled
    to deduct the limits of Coulthards insurance coverage in calculating the
    amount it is required to pay to Tuffnail.

[25]

In short, the trial judges determination that
    Coulthards policy was not available to Tuffnail resulted from the fact that
    Tuffnail had not commenced a claim against Coulthard in their own name and
    named Coulthard as a defendant. She was not asked to and did not consider
    whether Coulthard was jointly liable through the lens of the State Farm
    subrogated action against Coulthard.

[26]

As I will explain, while State Farm framed its
    claim against Coulthard as a claim for contribution and indemnity in respect of
    any amounts it is called upon to pay Tuffnail, it actually makes a subrogated
    claim against Coulthard on behalf of Tuffnail. The legal consequence of State
    Farms claim is that Coulthards liability to Tuffnail was effectively put in
    issue. In finding that State Farm had a right of subrogation against Coulthard
    under s. 20 of the OPCF 44R, the trial judge necessarily found that Coulthard
    is jointly liable with Meekes.

[27]

Thus, correctly interpreted, s. 7 of the OPCF
    44R permits State Farm to deduct the limits of Coulthards insurance coverage.
[4]


[28]

In analyzing whether Coulthard is jointly
    liable within the meaning of s. 7(b) of the OPCF 44R, I turn first to the
    nature of State Farms claim against Coulthard and then to the effect of
    bringing such a claim as a third party claim.

a)

The nature of State Farms third party claim against Coulthard

[29]

The trial judge ordered, at para. 8 of the
    judgment, that Coulthard is
severally liable to Bolton
.
    However, the nature of Boltons third party claim against Coulthard is very
    different from State Farms third party claim against Coulthard.

[30]

Unlike Boltons third party claim against
    Coulthard, State Farm had no independent right to claim against Coulthard.
    State Farm did not cause or contribute to Tuffnails damages, and therefore,
    unlike Bolton, could not assert a right of contribution and indemnity against
    Coulthard under s. 1 of the
Negligence Act
, R.S.O. 1990, c. N.1.

[31]

Rather, it sought contribution and indemnity
    from Coulthard through its subrogated third party claim.

[32]

Under the common law, an insurer has a right,
    upon fully indemnifying the insured for both the insured and uninsured losses
    caused by a third party, to bring an action against the third party in the
    insureds name. When an insurer is entitled to bring such an action, it is said
    to be subrogated to the insureds rights and is entitled to exercise those
    rights in the name of the insured:
Zurich Insurance Co. v. Ison T.H. Auto
    Sales Inc.
,

2011 ONSC 1870, 106 O.R. (3d) 201, affd 2011 ONCA 663,
    342 D.L.R. (4th) 501;
Douglas v. Stan Fergusson Fuels Ltd.

2018
    ONCA 192, 139 O.R. (3d) 721, at para. 48, leave to appeal refused, [2018]
    S.C.C.A. No. 141.

[33]

The common law doctrine of subrogation can be
    modified by contract and statute and, in this case, both the
Insurance Act
,
R.S.O. 1990, c. I.8, and the OPCF 44R permitted State Farm to subrogate
    before Tuffnail was fully indemnified.

[34]

Subsection 278(1) of the
Insurance Act
provides as follows:

Subrogation

278(1) An insurer who makes any payment or
    assumes liability therefor under a contract is subrogated to all rights of
    recovery of the insured against any person and may bring action in the name of
    the insured to enforce those rights.

[35]

Section 20 of OPCF 44R provides as follows:

20. Where a claim is made under this change
    form, the insurer is subrogated to the rights of the eligible claimant by whom
    a claim is made, and may maintain an action in the name of that person against
    the inadequately insured motorist and the persons referred to in section 7 of
    this change form.

[36]

State Farm relied on its right of subrogation
    under s. 20 of the OPCF 44R, submitting that s. 7(b) permitted it to subrogate
    against Coulthard because Coulthard was a person jointly liable with Meekes,
    the inadequately insured motorist, for the damages sustained by Tuffnail.


[37]

Notably, the right of subrogation is derivative
    in nature and in exercising the right of subrogation, the insurer is advancing
    only the cause of action that the insured would otherwise have against the
    party responsible for causing the loss to the insured. In other words, the
    insurer assumes the insureds right of recovery against the tortfeasor:
Barbara Billingsley,
General Principles of Canadian Insurance
    Law
, 2nd ed. (Markham: LexisNexis Canada Inc., 2014),
at pp. 343, 350. This means that the insured must have a legally
    enforceable cause of action against the tortfeasor:
Denis
    Boivin,
Insurance Law
, 2nd ed., (Toronto: Irwin Law Inc., 2015), at
p. 491;
Craig Brown and Thomas Donnelly,
Insurance
    Law in Canada
, loose-leaf, vol. 2 (Toronto: Thomson Reuters Canada Ltd.,
    2019), at p.
13-2.

[38]

Because the right of subrogation is derivative,
    the insurer can be in no better position as against the third party than the
    insured would be:
Douglas
,
at para. 55,
Matt (Litigation
    Guardian of) v. Barber

(2002), 216 D.L.R. (4th) 574 (Ont. C.A.), at
    para. 25;
Freudmann-Cohen v. Tran

(2004), 70 O.R. (3d) 667
    (C.A.), at para. 40. If Tuffnail did not have a claim against Coulthard, State
    Farm did not have a right to subrogate. In substance, then, in bringing its
    third party claim against Coulthard, State Farm stepped into Tuffnails shoes
    to claim against Coulthard.

b)

The effect of bringing a subrogated claim as a third party claim

[39]

As indicated above, State Farm relied on its
    right of subrogation under s. 20 of the OPCF 44R. Similarly, s. 278(1) of the
Insurance
    Act
permits an insurer to bring an action in the name of the insured.
    These sections do not contemplate that State Farm could bring the action in its
    own name.

[40]

The issue of whether State Farm could proceed by
    way of third party claim in its own name does not appear to have been raised
    before the trial judge. The trial judge simply accepted that State Farm was
    entitled to bring a third party subrogated claim for contribution and
    indemnity: September 20, 2017 reasons, at paras. 40-41.

[41]

In this court, State Farm relied on this courts
    decision in
Freudmann-Cohen
. An examination of that case explains the
    underlying basis for State Farms right to bring a third party subrogated claim
    against Coulthard.

[42]

In
Freudmann-Cohen
, the plaintiff had
    not sought to add Pizza Nova as a defendant and the insurer issued a third
    party claim against Pizza Nova. This court held that, in certain circumstances,
    an insurer is entitled to resort to r. 29.01(c) of the
Rules of Civil
    Procedure
,
R.R.O. 1990, Reg. 194, to put its subrogated claim on
    behalf of the plaintiffs into play, by way of a third party claim, instead of
    bringing a claim against the third party in the plaintiffs name.
[5]
The rationale for permitting a third party subrogated claim is that the
    proposed third party is a person who should be bound by the determination of an
    issue between the plaintiff and the defendant. In that case, this issue was the
    insurers maximum liability under the O.E.F. 44 Family Protection Endorsement,
    which in turn would require an assessment as to whether Pizza Novas insurance
    had to be deducted in that calculation. This necessarily entailed an
    examination of Pizza Novas potential liability to the plaintiff.

[43]

It is important to recognize that in
Freudmann-Cohen
the insurers subrogated action was based on the theory that if the plaintiff
    suffered injuries, the injuries were caused or contributed to as a result of
    the want of care or negligence of the third party, Pizza Nova. Zurich pleaded
    the following particulars of negligence: Pizza Nova failed to train the
    employee defendants; it employed incompetent employees; and it implemented a
    delivery system that involved the risk of harm to others. In addition, Zurich
    alleged Pizza Nova was potentially liable to the plaintiff as a joint
    tortfeasor on the basis of its vicarious liability for its employees. Blair
    J.A. specifically noted, at para. 24, that the insurer sought to add Pizza Nova
    on the basis of a claim by which Pizza Nova
was or might be liable to the
    plaintiff
.

[44]

He also referred to the result in
Morey v.
    Knipple
(1994), 7 M.V.R. (3d) 134 (Ont. Gen. Div.). In
Morey
, the
    injured plaintiff was a passenger in the defendant Knipples car. The
    plaintiffs SEF 44 insurer had brought a subrogated third party claim against
    the driver of a second car that had allegedly been racing with the defendant Knipples
    car. The plaintiff had not sued the driver of the second car, Wannamaker. The
    motion judge noted at para. 21:

As a result of obtaining statements from
    independent witnesses, it became apparent that another party (i.e. Wannamaker)
    was 
jointly liable with Knipple
for this
    accident. [Emphasis added.]

[45]

The insurers action alleged that Wannamaker
    caused or contributed to the motor vehicle accident because Wannamaker and
    Knipple were racing prior to the accident.

[46]

It is apparent from both these cases that the
    subrogated claims were advanced as causes of action that could have been
    available to the plaintiffs and in both cases the third partys negligence
vis-à-vis
the plaintiff was in issue. The insurers sought to add the third parties on the
    basis of a claim by which the third parties were or might be liable to the
    plaintiffs.

[47]

In this case, the third party claim similarly
    makes an allegation of negligence on the part of Coulthard
vis-à-vis
Tuffnail.
    Paragraph 7 of State Farms third party claim alleges that Coulthard was
    negligent in that he: failed to monitor the quantity of alcohol that he served
    to Meekes and Tuffnail; continued to serve alcohol to them when he knew or
    should have known that they were intoxicated and in danger of causing injury to
    themselves or others; failed to ensure that Meekes did not drive when leaving;
    and failed to warn Tuffnail that Meekes was intoxicated.

[48]

A subrogated claim advanced by way of a third
    party claim is necessarily based on the third partys status as a potentially
    responsible joint or concurrent tortfeasor and given the pleadings, Coulthard
    was a concurrent tortfeasor who was potentially jointly liable for causing
    the plaintiffs damages. If, in substance, State Farm was asserting Tuffnails
    claim against Coulthard, as well as against Meekes and Bolton, a conclusion
    that State Farm was entitled to bring that action in conjunction with the jurys
    finding of Coulthards liability necessarily means that Coulthard is jointly
    liable with them for causing Tuffnails injuries for the purposes of s. 7 of
    the OPCF 44R. In this case, not only was Coulthard potentially liable for
    having caused Tuffnails injuries given State Farms pleading, the parties
    asked the jury to apportion liability as between Tuffnail, Meekes, Bolton and
    Coulthard. The jury found that Coulthard was in fact partially liable for
    causing or contributing to Tuffnails injuries.

[49]

Accordingly, the nature of State Farms
    subrogated action, the trial judges determination that State Farm was entitled
    to bring that action, and the jurys finding of Coulthards liability compel
    the conclusion that Coulthard is jointly liable with Meekes, within the meaning
    of s. 7 of the OPCF 44R.

[50]

I would add that even if an insurers objective
    in bringing a third party claim is only to protect its right to subrogate in
    relation to amounts it is called upon to pay the insured plaintiff, and the
    insurer accordingly restricts its third party claim to a claim in contribution
    for amounts it is required to pay the insured plaintiff, such a claim is
    necessarily founded on the third partys potential responsibility for causing
    the insureds damages.

2.       Did the
    trial judge err in ordering that State Farm share any amounts it recovers by
    way of subrogation with Tuffnail only until Tuffnail receives full
    indemnification pursuant to the terms of the OPCF 44R endorsement?

[51]

The net amount received or recoverable from Meekes,
    Boltons, and Coulthards insurers is less than the amount of the judgment in
    favour of Tuffnail. Tuffnail and State Farm disagreed on who, as between them,
    should bear the shortfall and sought a ruling from the trial judge. She
    ordered, at para. 7 of the judgment:

This Court further orders that State Farm is
    entitled to pursue recovery of its subrogated interest against the Defendant,
    Bolton Estate, and against the Third Party. State Farm shall share with the
    Plaintiffs on a
pro rata
basis
    any amounts it recovers by way of subrogation
until the
    Plaintiffs receive full indemnification pursuant to the terms of the OPCF 44R
    endorsement
. [Emphasis added.]

[52]

In the absence of statutory or contractual terms
    to the contrary, the insurers right of subrogation does not arise until the
    insured has been fully indemnified for both insured and uninsured losses:
Douglas
,
    at para. 50. Thus, at common law, the insurer generally stands
behind
its insured, in terms of recovery.
[6]

[53]

In Ontario, the common law of subrogation
    has been modified by the provisions of the
Insurance Act
, including
    ss. 278(1) and (2). Subsection 278(1) permits an insurer to subrogate before
    the insured is fully indemnified and s. 278(2) stipulates that where the net
    amount recovered is insufficient to provide complete indemnity, the insurer and
    the insured shall recover
pro rata
:

Subrogation

278(1) An insurer who makes payment or assumes
    liability therefore under a contract is subrogated to all rights of recovery of
    the insured against any person and may bring action in the name of the insured
    to enforce those rights.

Pro-rating recovery

(2) Where the net amount recovered whether by
    action or on settlement is, after deduction of the costs of the recovery, not
    sufficient to provide complete indemnity for the loss or damage suffered, the
    amount remaining shall be divided between the insurer and the insured in the
    proportion in which the loss or damage has been borne by them.

[54]

As indicated above, in this case State Farms
    common law right of subrogation was also modified by s. 20 of the OPCF 44R
    which permits State Farm to subrogate even sooner than s. 278(1) (when a claim
    is made under the OPCF 44R, as opposed to when the insurer makes any payment or
    assumes liability, as s. 278(1) provides). However, the OPCF 44R is silent on
    what happens where the net recovery is insufficient to provide complete
    indemnity.

[55]

The issues in this case are did the trial judge
    err in providing for
pro rata
sharing under s. 278(2) only until
    Tuffnail receives full indemnification pursuant to the terms of the OPCF 44R, or
    in concluding that the section was applicable?
[7]

[56]

Tuffnail argues that the trial judge erred in
    providing for
pro rata
sharing only until Tuffnail receives full
    indemnification pursuant to the terms of the OPCF 44R endorsement, rather than
    until they receive full indemnification under the judgment. They submit that
    this is a clear, and possibly unintentional, error. On Tuffnails argument, the
    loss or damage suffered in s. 278(2) means the amount of damages awarded to
    him, as reflected in the judgment, that will not be recovered from the
    defendants in the action or from State Farm under the OPCF 44R, plus State
    Farms payment to Tuffnail.

[57]

State Farm argues that there was no error. As I
    understand its argument, it says that, in this context, the loss or damage
    suffered in s. 278(2) means the limit of coverage under the OPCF 44R, which it
    describes as Tuffnails underinsured loss. Accordingly, once Tuffnail receives the
    $800,000 limit of coverage under OPCF 44R, he has received the maximum indemnity
    that he is contractually entitled to and State Farm is not required to share
    anything recovered in the subrogated action.

[58]

If this court accepts Tuffnails argument that
    there is an error in the judgment, State Farm argues, by way of conditional
    cross-appeal, that the trial judge erred in concluding that s. 278(2) applies for
    two reasons.

[59]

First, State Farm argues that s. 278(2) of the
Insurance
    Act
does not apply to it because its right of subrogation arose under s.
    20 of the OPCF 44R. Section 20 of the OPCF 44R contains no
pro rata
sharing requirement and s. 278(2) cannot be imported into s. 20. Accordingly,
    it is entitled to recover in priority to Tuffnail.

[60]

Second, in the alternative, it also argues that
    s. 278(2) only applies to property damages.

[61]

State Farm does not argue that s. 278(2) does
    not apply to excess insurance or where the insurer frames its subrogated claim
    against the tortfeasor as a third party claim, in the insurers name, for
    contribution and indemnity in respect of any amounts it is called to pay its
    insured.

[62]

In response to State Farms cross-appeal, Tuffnail
    argues that s. 278(2) applies in this instance.

a) There was an
    error in the judgment

[63]

State
    Farms argument respecting the alleged error in the judgment seems to have been
    premised on the requirement in the judgment that it pay Tuffnail $800,000 under
    the OPCF 44R. Given that State Farm has been successful on the first issue,
its liability under the OPCF 44R is reduced from $800,000 to
    $347,454.71 and Tuffnail will not receive the limit of coverage under the OPCF
    44R.

[64]

However, even without taking into account State
    Farms success on the first issue, I agree with Tuffnail that the trial judgment
    as written contains what is possibly an unintentional error. To require
pro
    rata
sharing of those amounts that State Farm receives by way of
    subrogation only until Tuffnail receives full indemnification pursuant to the
    terms of the OPCF 44R endorsement makes no sense. Had the trial judge intended
    to give effect to State Farms position that indemnification for the purpose of
    s. 278(2) is achieved on Tuffnails recovery of the OPCF 44R policy limit, there
    would have been no need to provide both for State Farms payment of $800,000
    under the OPCF 44R and
pro rata
sharing with Tuffnail out of State
    Farms subrogation recoveries.

[65]

At least notionally, an insurer pays under an
    insurance contract
before
it can seek to recover,
    by way of subrogation, the amounts that it has paid its insured. Subsection
    278(2) is about sharing the recovery. The wording at issue in paragraph 7 of
    the judgment gives no effect to the purpose of s. 278(2). It results in the
pro
    rata
sharing ending before it would even begin.

[66]

I also note that State Farms argument would
    require this court to read the words the loss or damage suffered in s. 278(2)
    as really meaning the maximum possible loss or damage recoverable under the
    OPCF 44R. Among other things, the maximum possible loss is inconsistent with
    the clear wording of the section which requires that the loss have been
    suffered.

[67]

The point I decide is a narrow one: did the
    trial judge err in providing for
pro rata
sharing only until Tuffnail
    receives full indemnification pursuant to the terms of the OPCF 44R
    endorsement? While the parties attempted to give us assistance on the
    interpretation of s. 278(2) at the hearing of the appeal, the correct
    interpretation of s. 278(2) was not explored below and I am not satisfied that the
    court has a sufficient record to more broadly address the correct
    interpretation of s. 278(2). My conclusion that the trial judgment contains a
    possibly unintentional error (and my conclusion below that s. 278(2) applies)
    are based on the arguments made by the parties. I make no comment on Tuffnails
    precise interpretation of and calculations under s. 278(2).

b) Subsection 278(2) applies

[68]

With respect to State Farms arguments on its
    cross-appeal, I disagree that s. 278(2) cannot apply to its right of subrogation
    under the OPCF 44R. While, as State Farm asserts, its right of subrogation
    arose under the OPCF 44R, State Farm also acquired a right of subrogation under
    the stricter provisions of s. 278(1) of the
Insurance Act
. Section
    278(1) provides that an insurer who makes any payment or assumes liability
    therefor under a contract is subrogated By virtue of the judgment, if not
    before, State Farm assumed liability for payment under the OPCF 44R, thereby
    meeting the stricter pre-condition for subrogation in s. 278(1). Moreover,
    State Farm will have made payment under the OPCF 44R by the time the issue of
    sharing of recovery arises.

[69]

As I have said, the OPCF 44R is silent on what
    happens where the net recovery is insufficient to provide complete recovery. Subsection
    278(2) fills that gap.

[70]

Lastly, I reject State Farms argument that s.
    278 only applies to claims for property damages. There is nothing in the
    section that suggests that this is the case. Moreover, under the legislative
    scheme, subrogation rights in respect of property damage are narrowly limited.
    Property damage is addressed through a direct compensation scheme in the
Insurance
    Act
; the insureds own insurer is liable to the extent that the insured is
    not responsible for the accident: Denis Boivin,
Insurance Law
, 2nd ed.
    (Toronto: Irwin Law Inc., 2015), at pp. 510-11. An insurers right of
    subrogation in respect of damage to an automobile is specifically dealt with in
    s. 263(5)(b). Except as permitted in the narrowly enumerated instances by ss. 6
    to 8 of the regulation
Automobile Insurance
, R.R.O. 1990, Reg. 664,
    insurers have no subrogation right. There would have been no need to
    specifically include a general subrogation right in s. 278 if subrogation were
    restricted to the narrow property damage circumstances already designated by
    the
Automobile Insurance

regulation.

[71]

Accordingly, I would allow Tuffnails appeal and
    dismiss State Farms conditional cross-appeal of para. 7 of the judgment and
    alter para. 7 of the judgment to provide that:

This Court further orders that State Farm is
    entitled to pursue recovery of its subrogated interest against the Defendant,
    Bolton Estate, and against the Third Party. State Farm shall share with the
    Plaintiffs on a
pro rata
basis any amounts it recovers by way of
    subrogation until the Plaintiffs receive full indemnification
under the Judgment
. [Emphasis added.]

3.       Did the
    trial judge err in limiting Coulthards liability to Bolton to a proportion of
    the total judgment equal to the 11.12% of fault found by the jury?

[72]

Shortly before the trial commenced, Tuffnail,
    Meekes, Bolton, Coulthard, the Petrie plaintiffs and State Farm entered into an
    agreement whereby Meekes admitted liability for the accident and the parties
    agreed that the jury would be told of his admission, and that the trial was to
    determine which of the other parties may also be liable. The parties agreed to
    accept $200,000, the full limit of Meekes automobile insurance policy, plus a
    further $75,000 towards costs and disbursements, as representing Meekes and
    his insurers full contribution. The agreement provided that the defendants
    were entitled to maintain their crossclaims for the purpose of trial but would
    not pursue Meekes personally for judgment in excess of his $275,000 settlement
    contribution.

[73]

As indicated above, Bolton brought a third party
    claim against Coulthard for contribution or indemnity in respect of any amounts
    Bolton was called upon to pay to Tuffnail. In light of the agreement with
    Meekes, Coulthard is the only other party Bolton can look to for contribution
    and indemnity.

[74]

The jury was asked whether there was negligence
    on the part of each of Meekes, Bolton, Coulthard and Tuffnail which caused, or
    caused or contributed, to the collision or (in the case of Tuffnail) to his
    damages. The trial judge told them, with respect to Meekes, that, obviously,
    the answer was yes. The jury answered yes, with respect to each of Meekes,
    Bolton, Coulthard and Tuffnail.

[75]

The jury was asked to apportion liability among
    Meekes, Bolton, Coulthard and Tuffnail, and did so as follows:

Meekes  65%

Bolton  20.03%

Coulthard  11.12%

Tuffnail  3.85% contributory negligence

[76]

All parties were provided an opportunity at
    trial to make submissions about the jury questions, and there is no suggestion
    in the transcripts that any party took issue with the jury being asked to
    assign a percentage of liability to Meekes.

[77]

After trial, Bolton and Tuffnail entered into
    minutes of settlement pursuant to which Bolton agreed to pay Tuffnail
    $1,897,800 plus $325,241 for legal fees and disbursements, Tuffnail agreed to
    execute a release of Bolton, and Bolton assigned his claim against Coulthard to
    Tuffnail. Therefore, the amount that Bolton is entitled to recover from
    Coulthard now belongs to Tuffnail. This portion of the decision addresses only
    what Tuffnail can recover from Coulthard via Boltons assignment of his claim
    against Coulthard, and not Tuffnails ability to recover from Coulthard via
    State Farms subrogated claim.

[78]

Section 1 of the
Negligence Act
provides as follows:

Where damages have been caused or contributed
    to by the fault or neglect of two or more persons, the court shall determine
    the degree in which each of such persons is at fault or negligent, and, where
    two or more persons are found at fault or negligent, they are jointly and
    severally liable to the person suffering loss or damage for such fault or
    negligence, but as between themselves, in the absence of any contract express
    or implied, each is liable to make contribution and indemnify each other
in the degree in which they are respectively found to be at
    fault
or negligent. [Emphasis added.]

[79]

According to the trial judges reasons, after
    Bolton assigned his claim against Coulthard to Tuffnail, Tuffnail sought a
    determination that Coulthard was jointly and severally liable to Tuffnail for
    the full amount of the damages awarded by the jury, and that Bolton was
    entitled to recover from Coulthard a proportionate share of Tuffnails damages
    as contribution and indemnity: January 23, 2019 reasons. In Tuffnails submission,
    this was because Coulthard defended the main action and because of s. 1 of the
Negligence
    Act
. The trial judge did not elaborate upon Tuffnails submission relying
    on s. 1 of the
Negligence Act
.

[80]

Coulthard conceded that he would have been
    jointly and severally liable to Tuffnail had he been named as a defendant, but
    argued that he was not jointly and severally liable to Tuffnail because
    Tuffnail did not sue him. State Farm argued that Coulthard was liable to make
    contribution and indemnity to Bolton only to the degree he was found to be at
    fault.

[81]

The trial judge first addressed Tuffnails
    argument that Coulthard was jointly and severally liable because he defended
    the main action. She concluded that the fact that Coulthard defended the main
    action did not render him liable for damages to Tuffnail under r. 29 and did
    not make him jointly and severally liable for damages to Tuffnail: January 23,
    2019 reasons, at para. 26.

[82]

The trial judge reasoned that r. 29.01(a) of the
Rules of Civil Procedure
speaks to the third partys liability to the
defendant
for all or part of the plaintiffs damages,
    not liability for all or part of the
plaintiffs
damages. Accordingly, a plaintiff cannot recover from a third party, absent a
    finding of fault against the defendant who commenced the third party claim:
    January 23, 2019 reasons, at para. 28.

[83]

She held that
Martin v. Listowel Memorial
    Hospital
(2000)
, 51 O.R.
    (3d) 384 (C.A.) answered the issue. It held, at para. 48, that under s. 1 of
    the
Negligence Act
, joint and several liability only attaches to party
    defendants. She also considered this courts decision in
Taylor v. Canada
    (Attorney General)
, 2009 ONCA 487, 95 O.R. (3d) 561, at paras. 16-19,
    which describes how a tortfeasor can exercise its statutory right to apportion
    fault by adding third parties.

[84]

The trial judge concluded, in her January 23,
    2019 reasons, at para. 38:

As a result, I have concluded that the fact
    that [Coulthard] is a third party and he participated in the main action does
    not render him jointly and severally liable to the plaintiffs. Rather, on the
    strength of
Martin
and
Taylor
, [Coulthards] liability is
    several
vis-à-vis
the Bolton Estate
. [Emphasis
    added.]

[85]

At para. 8 of the judgment, the trial judge
    ordered:

This Court further orders that [Coulthard] is
    severally liable and must contribute to and indemnify the Bolton Estate for the
    damages owed to [Tuffnail] under this Judgment in the degree to which
    [Coulthard] is at fault, i.e. 11.12%, being the sum of $381,975.86, plus
    pre-judgment interest thereon[.]

[86]

In this appeal, relying on this courts decision
    in
Endean v. St. Joseph Hospital
, 2019 ONCA 181, C.C.L.T. (4th) 183,
    which was released after the trial judges January 23, 2019 ruling,
[8]
Tuffnail argues that: because
    of Meekes admission of liability and agreement to limit his liability in the
    settlement agreement, Meekes effectively became a non-party;
Endean
directs that a non-partys fault should not be considered in apportioning
    liability; and the trial judge accordingly erred in considering the jurys
    finding as to the degree to which Meekes was at fault in calculating Boltons
    entitlement to contribution from Coulthard. Tuffnail does not otherwise
    challenge the trial judges reasoning. Tuffnail submits that proportional
    division of Meekes 65 percent results in Bolton being 64.3 percent at fault
    and Coulthard being 35.7 percent at fault. Accordingly, Tuffnail submits,
    Coulthard should contribute 35.7 percent of the damages, or $1,125, 339.14 to
    Bolton.

[87]

I do not agree that
Endean
requires
    that fault be reapportioned, without regard to Meekes.
Endean
is very
    different from this case.

[88]

In
Endean
, the plaintiffs suffered
    injury from devices implanted in their temporomandibular joints. They sued the
    hospital where the surgery was performed and the oral surgeons who performed
    the surgery and provided follow up care. Before trial, the plaintiffs settled
    with the oral surgeons and Pierringer Orders were made in each action.

[89]

The Pierringer Orders dismissed the actions
    against the oral surgeons and the crossclaims between the hospital and the oral
    surgeons and restricted the plaintiffs claims such that [the plaintiffs] will
    only claim those damages, if any, arising from the actions or omissions of the
    Defendant Hospital. The Pierringer Orders also required the statement of claim
    in each action to be amended to limit the claim against the hospital to its
    several liability or proportionate share of joint liability to the plaintiffs
    and to include an acknowledgment that the court at trial had the authority to
    adjudicate upon the apportionment of fault among all defendants who had been
    named in each action, i.e. the hospital and the oral surgeons.

[90]

The trial was bifurcated and the trial judge
    first dealt with the issue of liability. Relying on this courts decision in
Taylor
,
    he apportioned 5 percent of the fault to the hospital; 20 percent of the fault
    to the oral surgeons; 50 percent of the fault to the manufacturer of the
    device; and 25 percent of the fault to the distributor of the device. Neither the
    manufacturer nor the distributor was ever party to the actions and both were
    bankrupt.

[91]

In the one action that he did not dismiss on the
    basis that it was statute barred, the trial judge granted judgment against the
    hospital for 5 percent of the damages that were to be assessed at the second
    phase of the trial.

[92]

On appeal, Zarnett J.A., writing for the court,
    concluded that the trial judge erred in doing so. While the Pierringer Order
    required the plaintiffs to reduce their claim against the hospital by the
    amount that would be apportioned to the oral surgeons at trial, the Pierringer
    Order did not authorize the reduction of recovery due to fault of any other
    person. For this reason, the fault of the manufacturer and the distributor
    should have been irrelevant to the hospitals liability to the plaintiffs.

[93]

Further, while
Taylor
held that fault
    could be apportioned at trial to proposed third parties even though they were
    non-parties, the facts of
Taylor
were unique. In
Taylor
,
the
    plaintiff made clear by an amendment to the claim that the liability of the
    defendant was limited only to the defendants relative degree of fault. In
    other words, the plaintiff in
Taylor

was not pursuing the
    defendant for 100 percent of its damages. Zarnett J.A.

held that
Taylor

does not entitle the court in any case to apportion fault to non-parties and
    then reduce the plaintiffs recovery by that apportioned share of fault: at
    para. 69.

[94]

To remedy the error of the trial judge, Zarnett
    J.A. reapportioned the fault of the non-party manufacturer and distributor to
    the hospital and the oral surgeons, in the same proportions as the hospitals
    and oral surgeons own degrees of fault: 20 percent and 80 percent.

[95]

The trial judge in the instant appeal made no
    error in apportioning fault to Meekes. The position of Meekes is very different
    from that of the manufacturer and distributor in
Endean
. Meekes was a
    party to the action. He was not released from the action by the settlement
    agreement; in fact the settlement agreement specifically provided that the
    defendants were entitled to maintain their crossclaims for the purpose of
    trial. Moreover, there is no suggestion in the transcript that any party
    objected to the jury question which asked the jury to apportion fault to
    Meekes.

[96]

Accordingly, I would dismiss Tuffnails appeal
    of para. 8 of the judgment.

4.       Did the
    trial judge improperly exercise her discretion to award prejudgment interest at
    a rate higher than the bank rate?

[97]

The trial judge exercised her discretion under
    s. 130 of the
Courts of Justice Act
, R.S.O. 1990, c. C.43, to allow
    prejudgment interest at a rate of 3 percent  a rate higher than the statutory
    bank rate of 1.3 percent otherwise applicable in this case under ss. 127(1) and
    128(1) of the
Courts of Justice Act
.

[98]

As I will explain, I agree with State Farm that
    the trial judge erred in the exercise of her discretion in two ways. First, in
    her reasons dated February 26, 2019, the trial judge misapplied the factor of
    changes in market interest rates specified under s. 130(2). Second, the trial
    judge considered an inappropriate factor, namely that [t]he case was
    undoubtedly conducted by [Tuffnail] with the understanding or expectation
    (although no vested entitlement) of a certain rate of prejudgment interest:
Tuffnail
    v. Meekes
, 2019 ONSC 1334 (February 26, 2019 reasons), at para. 16. As a
    result, deference to her exercise of discretion is displaced. Taking the
    factors under s. 130(2) of the
Courts of Justice Act
into account, I
    would not award prejudgment interest at a rate higher than the default rate.

[99]

As the trial judge noted, prior to January 1,
    2015, the rate of prejudgment interest on non-pecuniary damages in an action
    for personal injury was 5 percent:
Courts of Justice Act
, ss.
    66(2)(w), 128(2);
Rules of Civil Procedure
. As the result of an
    amendment to the
Insurance Act
, as of January 1, 2015, prejudgment
    interest on damages for non-pecuniary loss in an action for loss or damage from
    bodily injury or death arising from the use or operation of an automobile was
    exempted from s. 128(2) of the
Courts of Justice Act
. It is now
    calculated pursuant to s. 127(1) of the
Courts of Justice Act
by
    reference to the bank rate:
Insurance Act
, s. 258.3(8.1). The parties
    agree that the bank rate calculated under s. 127(1) of the
Courts of
    Justice Act
in this case is 1.3 percent. The amendment operates
    retrospectively:
Cobb v. Long Estate
, 2017 ONCA 717, 416 D.L.R. (4th)
    222, at paras. 66-105;
El-Khodr v. Lackie
, 2017 ONCA 716, 416 D.L.R.
    (4th) 189, at paras. 6-7, leave to appeal refused, [2017] S.C.C.A. No. 461;
Cadieux
    v. Cloutier
, 2018 ONCA 903, at para. 145, leave to appeal refused, [2019]
    S.C.C.A. No. 63.

[100]

However, s. 130 of the
Courts of Justice Act
permits the
    court, having regard to all the circumstances, to exercise discretion to award
    prejudgment interest at a rate other than the default rate prescribed by s.
    127:

130 (1) The court may, where it considers it
    just to do so, in respect of the whole or any part of the amount on which
    interest is payable under section 128 or 129,

(a) disallow interest under either section;

(b) allow interest at a rate higher or
    lower than that provided in either section;

(c) allow interest for a period other than
    that provided in either section.

Same

(2) For the purpose of subsection (1), the
    court shall take into account,

(a) changes in market interest rates;

(b) the circumstances of the case;

(c) the fact that an advance payment was
    made;

(d) the circumstances of medical disclosure
    by the plaintiff;

(e) the amount claimed and the amount
    recovered in the proceeding;

(f) the conduct of any party that tended to
    shorten or to lengthen unnecessarily the duration of the proceeding; and

(g) any other relevant consideration.

[101]

The trial judge averted to s. 130(2) and the circumstances of the
    case. In her February 26, 2019 reasons, the trial judge noted, among other considerations,
    the following:

 The lawsuit commenced on March 18, 2011, arising from a collision
    on September 13, 2009.

 With respect to s. 130(2)(a), there was some fluctuation in market
    interest rates from 2009 to 2017.

 The case was undoubtedly conducted by [Tuffnail] with the
    understanding or the expectation (although no vested entitlement) of a certain
    rate of prejudgment interest: February 26, 2019 reasons, at para. 16.

[102]

Respectfully, the fluctuation in market rates adverted to by the
    trial judge was not relevant. She relied on this factor to justify awarding
    prejudgment interest at a rate higher than the default rate, but market rates
    never fluctuated above the 1.3 percent default rate during the litigation.

[103]

Further, the trial judge improperly exercised her discretion to
    overrule the intention of the legislation amending the
Insurance Act
on the basis that Tuffnail had the understanding or the expectation (although
    no vested entitlement) of a certain rate of prejudgment interest.

[104]

As MacFarland J.A. explained in
Cobb
, there can never be a
    vested entitlement to a certain rate of prejudgment interest because, while
    there is an entitlement to prejudgment interest, the actual rate was always
    subject to judicial discretion that could only be exercised at the time the
    damage award was made. As a result, there can be no expectation on the part of
    a litigant that he or she is entitled to prejudgment interest at any particular
    rate until the trial judge determines that rate:
Cobb
, at para. 90.

[105]

Cobb
is not authority for awarding
    prejudgment interest at a rate of 3 percent simply because the action was
    commenced before the
Insurance Act
was amended. This court concluded
    that the amendments to the
Insurance Act
were retrospective: at para.
    104. In
Cobb
, the trial judge had exercised his discretion to award
    prejudgment interest at a rate of 3 percent, while explicitly refraining from
    taking a position on the retrospectivity of the legislation. The defendant in
Cobb
was content with prejudgment interest at a rate of 3 percent, and this court
    did not interfere with the trial judges exercise of discretion to award
    prejudgment interest at that rate: at para. 105.

[106]

MacFarland J.A. left open the possibility in
Cobb
that s.
    130 of the
Courts of Justice Act
could be used to ameliorate any
    perceived unfairness to litigants who commenced their actions before the
    effective date of the retrospective amendment: at para. 103. However, recent
    Superior Court decisions have relied on s. 130 to depart from the default rate where
    some external or prior unfairness made the retrospective application of the
    amendment particularly acute, such as where proceedings were delayed so that
    the amendment to the
Insurance Act
applied where it might not have
    otherwise. I endorse that view.

[107]

For example, in
A.B. v. Waite
, MacLeod J. noted that he was
    not entitled to exercise his discretion under s. 130 to overrule the
    retrospective effect of the legislation amending the
Insurance Act
:
    2018 ONSC 2151, at para. 11. In awarding interest at a rate of 4 percent under
    s. 130 of the
Courts of Justice Act
, he relied on the length of time
    the matter had been before the court and the fact that the trial was originally
    scheduled to take place before
Cobb
was decided. In relying on these
    factors, MacLeod J. was in essence relying on prior unfairness  delay in
    proceedings  in exercising his discretion under s. 130.

[108]

Similarly, in
McKnight v. Ontario (Transportation)
, Edwards
    J. declined to order interest at a rate greater than the default interest rate,
    noting that to do so would overrule the clear intention of the legislation
    amending the
Insurance Act
: 2018 ONSC 1742, at paras. 34-35.

[109]

As a result of the trial judges errors, deference to her exercise
    of discretion to award prejudgment interest at a rate other than the default
    rate prescribed by s. 127(1) is displaced.

[110]

Considering the factors in s. 130(2), the justness of the case does
    not require that prejudgment interest be allowed at a rate greater than the
    default rate.

[111]

As indicated above, market interest rates have not fluctuated above
    the default rate during the period of the litigation. Under s. 130(2)(a) of the
Courts of Justice Act
, this factor weighs against departing from the
    default interest rate.

[112]

As the trial judge noted, the jury awarded Tuffnail damages which,
    subject to contributory negligence, were reasonably close to what they had
    proposed to the jury, albeit considerably less than what they had claimed in
    their statement of claim. In my view, this factor, considered under s.
    130(2)(e), is neutral.

[113]

None of the remaining factors under s. 130(2) influence my
    conclusion. There are no unusual circumstances that warrant departing from the
    default rate. Nor is there special, case-specific unfairness resulting from the
    operation of the retrospective amendment. No advance payment was made. The
    trial judge indicated that there had been no suggestion that medical disclosure
    was withheld or delayed. The trial judge made no findings, and the parties made
    no submissions on appeal, about conduct of any party that tended to shorten or
    lengthen unnecessarily the duration of the proceeding.

[114]

Accordingly, taking the factors in s. 130(2) into account, I would
    decline to award prejudgment interest at a rate other than the default rate of
    1.3 percent calculated in accordance with s. 127(1) of the
Courts of
    Justice Act
. I would delete the reference to 3 percent in paragraph four
    of the judgment and substitute 1.3 percent.

5.       Did the
    trial judge err in not allowing Coulthard to amend his pleading to plead a limitation
    defence, after the jury returned their verdict?

[115]

After the jury returned their verdict, Coulthard sought leave to
    amend his pleadings to plead limitation defences in the Tuffnail and Petrie
    actions, pursuant to the
Limitations Act
,
2002, S.O. 2002, c.
    24, Sched. B, and the
Trustee Act,
R.S.O.
    1990, c. T.23.

[116]

In her September 20, 2017 reasons, the trial judge noted that r.
    26.01 of the
Rules of Civil Procedure
provides that leave to amend a
    pleading must be granted at any stage of an action, absent non-compensable
    prejudice. The trial judge acknowledged that it is possible to amend a
    pleading, even post-verdict, for example, to amend the prayer for relief to
    accord with a verdict on damages. However, she concluded that there was
    non-compensable prejudice and denied Coulthard leave to amend his pleadings.

[117]

In the case of Tuffnail, she held that evidence would undoubtedly
    have been led at trial on the issue of discoverability, and it was now too late
    to do so. Moreover, trial and pre-trial tactics might have been affected.

[118]

In the case of
Petrie
,
    the trial judge proceeded on the basis that the limitation period in the
Trustee
    Act
applied, and that the concept of discoverability did not apply to the
    limitation period under that Act. Therefore, she did not rely on the inability
    to lead evidence on the issue of discoverability in her analysis. However, she
    concluded that there was non-compensable prejudice because the
Petrie
s strategy in proceeding with the
    case would undoubtedly have been affected.

[119]

Coulthards main argument on appeal is that the trial judges finding
    of non-compensable prejudice constitutes a palpable and overriding error: he
    had raised the possibility of a limitation defence some three years before the
    trial commenced and there was no evidentiary basis for the trial judges
    finding of prejudice. Rather, her finding of prejudice was based on speculation
    that Tuffnail would have led evidence on discoverability, or that trial tactics
might
have been different.

[120]

I reject this argument. The trial judges finding of non-compensable
    prejudice is entitled to deference. Moreover, I agree with her conclusion. Had
    Coulthard raised a limitations defence earlier, Tuffnail may have led different
    evidence at trial, and both Tuffnail and the Petrie plaintiffs may have made
    different pre-trial strategy and settlement decisions. This is not improper
    speculation. Moreover, at some point, the delay in seeking an amendment will
    be so lengthy, and the justification so inadequate, that prejudice to the
    responding party is presumed. In this event, the onus to rebut the presumed
    prejudice lies with the moving party:
Klassen v. Beausoleil
,
2019
    ONCA 407, 34 C.P.C. (8th) 180, at para. 31, citing
1588444 Ontario Inc. v.
    State Farm Fire and Casualty Co.
,
2017 ONCA 42, 135 O.R. (3d) 681,
    at para. 25.

[121]

Coulthard also argued that the trial judge erred in law because she
    held that only minor amendments can be made post-verdict. Respectfully, this
    misconstrues her reasons. As noted above, she acknowledged that amendments can
    be made post-verdict, and gave an example of when they might be allowed. She
    dismissed Coulthards motion to amend because of her finding of non-compensable
    prejudice, not because she categorized it as a non-minor amendment.

[122]

I would dismiss this ground of appeal.

disposition

[123]

For these reasons: I would allow State Farms appeal, amend para. 6
    of the judgment by substituting $347,454.71 for $800,000, and amend para. 4
    of the judgment by substituting 1.3 percent for 3 percent; I would allow
    Tuffnails appeal, to the extent of amending para. 7 of the judgment by
    substituting under the Judgment for pursuant to the terms of the OPCF 44R
    endorsement, and dismiss State Farms conditional cross-appeal of para. 7 of
    the judgment; and I would dismiss Coulthards appeal.

[124]

I would order that if the parties are unable to resolve the issue of
    costs of the appeals, they make written submissions to the panel, via the
    courts Senior Legal Officer, not more than three pages in length, within three
    weeks of the release of these reasons.

Released:  AH  JUN 01 2020


Alexandra
    Hoy A.C.J.O.

I
    agree Doherty J.A.

I
    agree Marrocco ACJSC





[1]
Thomas Bolton died during the litigation. The litigation was
    continued by Sharon Carlene Drown, as Litigation Administrator for the Estate of
    Thomas Michael Bolton. For simplicity, I use Bolton throughout to refer to
    Mr. Bolton himself, as well as the legal liabilities and interests of the
    Estate.



[2]
The limit of coverage is determined by s. 4 of the OPCF 44R. That
    section indicates that coverage under the OPCF 44R is excess to the total of
    all limits of motor vehicle liability insurance held by the inadequately
    insured motorist (Meekes) and any person jointly liable with that motorist.
    Separate and apart from the question of whether Coulthard was jointly liable
    with Meekes, the Bolton and Coulthard policies were not motor vehicle liability
    insurance policies. Thus, State Farms maximum liability under the OPCF 44R is
    $800,000 (i.e. the amount by which the $1,000,000 of family protection coverage
    under the OPCF 44R exceeds the $200,000 limit of the Meekes motor vehicle
    policy).



[3]

The language referred to by the trial judge was last used in
    the SEF 44 Family Protection Endorsement, which was superseded by the O.E.F.
    44. The wording of the O.E.F. 44 removed reference to whether such entitlement
    is pursued or not and adopted the current language, which was maintained in
    OPCF 44R.



[4]
I
note that Tuffnail does not argue that if Coulthard is
    jointly liable to Tuffnail, the amount deductible under s. 7 of OPCF 44R is the
    amount of State Farms claim for contribution and indemnity, to the extent it
    is characterized as such, and not the limits of Coulthards insurance policy.
    For the purposes of my analysis, I therefore accept that the amount deductible is
    the limits of Coulthards insurance policy.



[5]
I make a cautionary observation: it is not clear that
Freudmann-Cohen
permits an insurer to resort to r. 29.01 in all circumstances.



[6]

Napier v. Hunter
, [1993] A.C. 713 (H.L.) provides support
    for the proposition that where insurance is layered, subrogated recovery is
    applied on a downward basis, beginning with the top layer of insurance.
    Accordingly, it appears that in the United Kingdom an excess insurer may recover
    its loss first from the subrogation proceeds, where those proceeds are payments
    in respect of the layer of insurance the excess insurer agreed to cover.
    However, to my knowledge,
Napier

has not been considered with
    respect to this particular point by a Canadian court.



[7]
State Farm seeks to recover from Coulthards policy  an amount
    deducted in calculating its liability to Tuffnail under the OPCF 44R. There is
    authority for the proposition that an insurer is not entitled to recover
    payments allocated to uninsured losses:
T&N Limited v. Royal & Sun
    Alliance plc
, [2003] EWHC 1016 (Ch), at paras. 605-606. Query whether the
    amount of Coulthards policy is an uninsured loss under the OPCF 44R. However, none
    of the parties have appealed or dispute the trial judges conclusion that State
    Farm is entitled to pursue recovery of its subrogated interest against
    Coulthard. They dispute only whether and how the
pro rata
sharing
    mechanism operates. My analysis accordingly proceeds on the assumption that State
    Farm is entitled to recovery from Coulthards policy. I leave an insurers
    right of recovery against amounts deducted in calculating its liability under the
    OPCF 44R for another day.



[8]

Endean

was released
    on March 8, 2019. On April 10, 2019, the parties appeared before the trial
    judge to seek clarification of her January 23, 2019 reasons. At this hearing,
    counsel for Tuffnail relied on
Endean

and argued that Coulthard should owe Bolton 35.7 percent
    of the damages awarded by the jury. The trial judge held that she was not being
    asked to clarify her January 23, 2019 reasons, but was being asked to
    reconsider them. She declined to do so, noting that appeals had already been
    filed.


