Executive Summary: Key Legal and Evidentiary Issues

• Formation of a settlement agreement requires objective evidence of mutual intention to be legally bound on all essential terms, not the subjective beliefs of either party.
• Oral acceptance of a monetary settlement offer may be negated by subsequent written correspondence indicating intent to pursue litigation instead of settling.
• Refusal to provide a release as a condition of settlement, combined with explicit notification of plans to commence legal action, demonstrates absence of agreed essential terms.
• A party's overt actions—including instructing counsel to commence litigation—can constitute repudiation of any earlier purported acceptance of settlement terms.
• Limitation period considerations do not determine whether a binding settlement agreement was reached; the court applies contract formation principles using objective analysis.
• Extended silence following settlement communications and delayed attempts to revive settlement claims after litigation instructions support finding of no concluded agreement.

The facts of the case

An August 2020 fire at 48 Silverthorn Avenue in Toronto damaged both that property and an adjacent home. Certas Home and Auto Insurance Company insured both homes and paid its insured for the loss at 48 Silverthorn Avenue. Co-Operators General Insurance Company insured a tenant at the fire location allegedly responsible for the blaze. Certas then sought to recover its insured loss ($303,806) from Co-Operators through subrogation rights in July 2021.

Settlement negotiations

Co-Operators offered $125,000 in November 2021 with a release, which Certas rejected because its insured was pursuing the uninsured portion of the loss. On February 15, 2022, Co-Operators offered $200,000. After months of no response, Certas' adjuster left a voicemail on July 7, 2022 stating Certas would accept $200,000 but could not sign a release due to the uninsured loss claim. However, on August 11, 2022, Certas' adjuster wrote that counsel would issue a Statement of Claim to protect all claims. She made no mention of accepting the settlement. Co-Operators understood this meant no settlement had been reached.

The breakdown and aftermath

The limitation period expired September 15, 2022. Certas' counsel never filed the promised statement of claim. On December 8, 2022, Co-Operators reiterated its $200,000 settlement offer subject to a release. Certas did not respond for over a year. On January 22, 2024, Certas inquired about finalizing the settlement, but Co-Operators noted its file was closed and the claim was time-barred. In July 2024, Certas sued its own counsel for $700,000 for failing to commence litigation—making no reference to any settlement with Co-Operators.

The court's decision

Justice Callaghan found that no binding settlement agreement existed. Although Certas may have agreed to $200,000 via voicemail, its August 11 letter announcing litigation plans negated any mutual intention to settle. Viewed objectively, neither party understood there was a settlement. Alternatively, even if an agreement existed, Certas repudiated it by announcing litigation and instructing counsel to commence an action. Co-Operators accepted this repudiation by reiterating its offer in December.

The defendant Co-Operators General Insurance Company was the successful party and was awarded $5,000 in costs.