The Plaintiff’s action, in which it was alleged that the Defendant insurer engaged in a systematic process of directing the use of non-original equipment manufacturer parts when effecting repairs to vehicles damaged in collisions, was certified as a class proceeding under the Class Proceedings Act

Hague v. Liberty Mutual Insurance Company, [2004] O.J. No. 3057, Ontario Superior Court of Justice

The Plaintiffs applied to certify their action as a class proceeding under the Class Proceedings Act, 1992, S.O. 1992, c. 6. It was alleged that the Defendant motor vehicle casualty insurer engaged in a process of directing the use of non-original equipment manufacturer (“non-OEM”) parts, when effecting repairs to vehicles damaged in collisions. Non-OEM parts were alleged to be inherently inferior to OEM parts and it was claimed that their use led either to a reduction in the value of vehicles repaired or to a lesser payment to the Insureds than they were entitled to under their automobile insurance policies. Under the policies, the Defendant promised to pay for the repair of the Insureds’ vehicles using parts of “like kind and quality.”

The causes of action asserted included: breach of contract; breach of a duty of good faith; and breach of settlement negotiations.

The proposed class included all persons in Canada other than in the Province of Quebec (where a class had already been certified) who had non-OEM parts either installed on their vehicles or recommended to be installed at the direction of the defendant. This would involve many thousands of people. Damages claimed totalled $200,000,000 together with punitive damages of $3,000,000.

The Plaintiffs contended that there was a common issue in respect of the Defendant’s practice of specifying non-OEM crash parts, namely, that this occurred uniformly and without consideration of individual factors relating to a particular insurance claim. The Plaintiffs filed an expert’s report in which it was asserted that non-OEM crash parts cannot be of like kind and quality compared to OEM crash parts due to fundamental flaws in the process of their design and manufacture. Damages were claimed either as the savings of the Defendant as a result of specifying non-OEM crash parts or as the cost of replacing the non-OEM crash parts with OEM crash parts.

The Defendant contended that the Plaintiffs’ claim was based on the mistaken premise that the Defendant controlled the repair process and therefore directed the use of non-OEM crash parts. The Defendant said that its involvement was primarily in the appraisals or estimate stage which occurs before repairs are conducted. In addition, the decision regarding the type of repair parts to be written for appraisal purposes to return the vehicles to their pre-loss condition was always discretionary and determined on a case-by-case basis. Therefore, each claim would have to be reviewed on a part-by-part basis. As such, the Plaintiffs’ claims were not suitable for class certification.

Under s. 5(1) of the Class Proceedings Act, there are five requirements that must be met before an action is entitled to be certified as a class proceeding. Each of these requirements was addressed in turn.

First, the certification judge determined that the pleadings disclosed a cause of action despite the fact that neither of the representative Plaintiffs owned their vehicles at the time of the application.

Second, the certification judge determined that there was an identifiable class that would be represented by the representative Plaintiffs.

Third, the certification judge determined that the proposed common issues satisfied the requirements set out by the Supreme Court of Canada in Western Canadian Shopping Centres Inc. v. Dutton (2001), 201 D.L.R. (4th) 385 (S.C.C.). The resolution of the common issues was necessary to each member’s claim; the common issues were a substantial common ingredient of each member’s claim and the common issues justified a class action because the resolution of the common issues was significant in relation to any individual issues that may have remained.

The judge also clarified that the question on an application for certification is not simply whether there are common issues but rather whether the resolution of the proposed common issues is going to move the litigation forward to a sufficient degree so as to justify the certification of the action as a class proceeding.

Fourth, the certification judge determined that a class proceeding would be the preferable procedure for the resolution of the common issues.

Fifth, the certification judge determined that there was a representative Plaintiff who: would fairly and adequately represent the interests of the class; had a plan for the proceeding; and did not have, on the common issues, an interest in conflict with the interests of the other class members.

In the result, the court held that the requirements of the Act were met, and an order was granted certifying the action as a class proceeding for the purpose of determining the common issues.

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