Wrestling with the Elephant: Advancing a claim when insurer employs scorched earth litigation policy

The MLS listing stated you were getting a 3,000 square foot home, but it was later discovered following an appraisal of the property in connection with a mortgage application, after the agreement of purchase and sale was concluded, that the actual size is substantially less. Perhaps the broker has even admitted to being “less than diligent” and not verifying or fact-checking (measuring) the accuracy of details that went into the MLS listing.

Yet, however strong your case might be, due to a massive influx of cases against realtors, the realtors’ insurer might employ a scorched earth litigation policy as a strategy for providing maximum deterrence against future claims, regardless of the merits of your claim. The stance might even seem so unreasonable in your case that it might create tension between the insurer and insured on the other side of the dispute. For litigants that might be hoping for a quick settlement against a negligent broker, the outlook does not look good.

The question is: what strategies can a plaintiff litigant deploy to achieve parity with the elephant? One solution might be that we can expect to see plaintiff’s counsel bringing more summary judgment motions to combat this insurance strategy, hoping that a summary judgment motion judge might decide that there is ‘no genuine issue requiring trial’ rather than letting the defendant insurer wear down the plaintiff’s resources through a war of attrition, lengthy discovery, years before trial, etcetera.

Under the Rules of Civil Procedure, Rule 49 offers have cost consequences. If a plaintiff makes a Rule 49 offer that is not accepted by the defendant, and the court awards the plaintiff judgment ‘as favorable or more favorable’ than under the offer, the plaintiff is entitled to costs on a partial-indemnity basis up to the date of the offer and on a substantial-indemnity basis from the date of the Rule 49 offer onward, the latter being around a 90 per cent recovery rate, unless the court orders otherwise. In short, the offer game and cost consequences penalize a litigant who does not accept a reasonable offer and unnecessarily lengthens the proceeding. Therefore, this is something a plaintiff litigant can do that can pay dividends later on.

The Small Claims Court maximum jurisdiction is now $35,000. If the claim is within $15,000 of the maximum of the Small Claims Court (e.g. worth $50,000 being $15,000 above $35,000), it might be better brought in Small Claims albeit limiting damages to the Small Claims maximum of $35,000, since a litigant might spend at least $15,000 more in costs in the Superior Court that may not be recoverable.

There is also a Rule 12.02(1) Motion within the Rules of the Small Claims Court that, while not technically a summary judgment motion, has a similar function and might operate to allow a motions deputy judge to decide the matter. Rule 12.02 states:

Motion to Strike out or Amend a Document

12.02 (1) The court may, on motion, strike out or amend all or part of any document that,

(a) discloses no reasonable cause of action or defence;

(b) may delay or make it difficult to have a fair trial; or

(c) is inflammatory, a waste of time, a nuisance or an abuse of the court’s process. O. Reg. 78/06, s. 26.

12.02 (2) In connection with an order striking out or amending a document under subrule (1), the court may do one or more of the following:

1. In the case of a claim, order that the action be stayed or dismissed.

2. In the case of a defence, strike out the defence and grant judgment.

2.1 In the case of a motion, order that the motion be stayed or dismissed.

3. Impose such terms as are just.

In Van de Vrande v. Butkowsky 2010 ONCA 230 (CanLII), the Court of Appeal for Ontario determined that Rule 12.02 is directed at weeding out cases that have no chance of success at trial. Rouleau JA stated at para. 19:

“Conceptually, I view rule 12.02 as being situated somewhere between Rules 20 and 21 of the Rules of Civil Procedure. It is not a summary judgment motion involving extensive affidavits and a requirement such as contemplated in Rule 20 of the Rules of Civil Procedure where the responding party must put his “best foot forward”. It is more akin to a Rule 21 motion, although it is worded more broadly and does not have the same prohibition on the filing of affidavit evidence. It is a motion that is brought in the spirit of the summary nature of Small Claims Court proceedings and involves an analysis of whether a reasonable cause of action has been disclosed or whether the proceeding should be ended at an early stage because its continuation would be “inflammatory”, a “waste of time” or a “nuisance”.”

Now that the Small Claims Court jurisdiction has been upped to $35,000, it is substantial enough that we might start seeing more Rule 12.02 motions. Whether this would be an inefficient use of time against a highly sophisticated defendant litigant given that the Small Claims Court is not adapted to summary judgment motions the way the Superior Court is remains to be seen, as there is sparse jurisprudence on the Rule 12.02 motion in Small Claims. However, where a plaintiff’s case is very strong, it would be well to close out the case in a motion rather than going through the rigmarole of a trial.

At the same time, there is a backlog of Small Claims matters that have yet to be cleared, allowing relatively more expedient justice in the Superior Court even though Small Claims was traditionally set up to deal with matters within its jurisdiction in a swift and summary manner. Until the backlog is cleared, justice may be delayed. Many Small Claims litigants are awaiting settlement conferences that were cancelled during the COVID-19 lockdown in early/mid-2020 that have yet to be rescheduled, let alone new matters. This might make the Superior Court a more attractive domain for a litigant despite its more costly and formal aspects.

This blog has summarized some considerations when contemplating suing a broker with an insurer in the background but does not constitute legal advice and is not intended to be a summary of the law relating to procedure or claims against brokers or realtors. If you have a lawsuit on the horizon, it is best to contact a lawyer. Please do not hesitate to reach out for a consultation: colin@cuttresslaw.com