Plaintiffs who make unsubstantiated allegations of fraud may be liable for substantial costs if they later decide to abandon their claim.
In Sienna v. State Farm, 2015 ONSC 786 (S.C.J.), the plaintiff sued her own insurer for failing to pay non-earners benefits. The Statement of Claim sought $900,000 for punitive and aggravated damages caused by the defendant's bad faith. It made allegations of "unlawful claims practices" and a "conspiracy" aimed at the plaintiff and other policyholders. The matter was set for trial commencing January 26, 2015. On January 14th, the plaintiff advised she was abandoning her case and would call no evidence.
The issue then became costs. The defendant sought costs on a substantial indemnity basis, arguing the claim was without merit, it made a reasonable offer to settle, and the allegations against it were akin to fraud. The plaintiff argued the allegations in her Statement of Claim were not outrageous and are commonly plead in accident benefits cases, that the defendant should have brought a motion to strike the allegations, and that the defendant should have ceased its trial preparation after a similar case ruled favourably for another insurer.
Justice Arrell did not accept the plaintiff's arguments. He did not agree the allegations are common, when there is no foundation or evidence to support them. They were akin to fraud. The defendant should not be put to the expense of striking allegations made in the Statement of Claim; on the contrary, the plaintiff should have withdrawn the offensive portions. There was no merit to the argument the defendant should have ceased trial preparation as the favourable analogous decision was being appealed, and the plaintiff had not abandoned her claim.
Justice Arrell awarded the defendant the total amount of its bill of costs, plus $2,000 for the costs motion, for a total of $35,92.97.