In 2018, these were the top ten Canadian court rulings that we believe will have an impact on the landscape of insurance litigation in the years ahead.
- 3091-5177 Québec inc. (Éconolodge Aéroport) v. Lombard General Insurance Co. Of Canada
- Société des traversiers du Québec c. Construction CGP inc.
- Compagnie d'assurances Missisquoi c. Constructions Reliance inc.e
- Tardif c. Succession de Dubé
- Condominium Corp. No. 9312374 v. Aviva Insurance Co. of Canada
- Clubine v. Paniagua
- Hanson v. Totten Insurance Group Inc.
- Trade Finance Solutions Inc. v. Equinox Global Limited
- Scale Estate v. The Cooperators General Insurance Company
- Canadian Elevator Industry Welfare Trust Fund v. Skinner
When cars are stolen from a hotel parking lot, the hotel’s insurer must pay. That was the ruling handed down by the Supreme Court of Canada in 3091-5177 Québec inc. (Éconolodge Aéroport) v. Lombard General Insurance Co. Of Canada. The case involved a park and fly hotel, where guests would leave their car while travelling and using a shuttle service to get to the airport. Guests had to hand over their keys at the front desk so that their car could be moved for snow removal, but the hotel‘s liability insurance policy contained a care, custody or control exclusion clause. The Court found that the clause was unambiguous, but that the question surrounding whether the hotel operator had been transferred custody of the vehicles was “a question of mixed fact and law.” The decision by the trial judge – who found both that the hotel operator failed to secure its parking lot and that the cars were not in its care, custody or control – is not open to review by an appellate court, unless there has been a palpable and overriding error. Our understanding is that this standard of review would not be applicable when the terms of a standard policy require interpretation.
In another Quebec case, an insured contractor, who was being sued for damages in connection with work it had done, brought a Wellington motion to force its insurers to take up its defence. The main point of contention in Société des traversiers du Québec c. Construction CGP inc. stemmed from the fact that the insurers modified their coverage opinion as the file progressed. Before proceedings were brought, the insurers had reserved all rights to raise any other provision of the insurance policy. Once the proceedings had been filed and amended, the circumstances on which the insurers based their opinion were clarified. This led them to modify their coverage position and invoke the application of additional exclusions in support of their coverage denial and refusal to take up the insured’s defence. Generally speaking, insurers may not change their coverage positions unless such change is warranted by new circumstances.
Also out of Quebec is a case, currently under appeal, that is noteworthy for having clarified the scope of Builder's Risk and Wrap-Up insurance policies. In Compagnie d'assurances Missisquoi c. Constructions Reliance inc., a painter, hired as a subcontractor struck the head of a sprinkler during the his work on a condominium project. The event, which took place 14 days after the expiry of the Builder's Risk policy insuring the construction site against property damage, caused water damage and a loss of almost $169,000. Under Builders' Risk and Wrap-Up policies, all parties working on the construction site are considered insureds, either named or unnamed. Work was still being performed, however, as the construction of the building was not complete. But when the loss occurred, several co-owners had already moved into the building, and the condominium syndicate had taken possession. The syndicate’s insurer, subrogated in the syndicate’s rights after having indemnified it, brought an action against the general contractor, the subcontractor painter and its general liability insurer, as well as the Wrap-Up liability insurer (whom we represented) for the construction project. The Court agreed with the Wrap-up insurer’s position that its policy was not applicable. Specifically, the Completed Operations Hazard coverage extension for property damage occurring after completion of the work could not be triggered because the work had not yet been completed. This decision, if upheld on appeal, will give us a better sense of where the boundaries of Builder's Risk policies end and those of Wrap-Up policies start.
In Tardif c. Succession de Dubé, the Quebec Court of Appeal reminded insurers of their good faith obligation when managing an insured’s claim. The insured had undergone surgery, and the insurer granted her granted a disability period of a few weeks. Her condition deteriorated, and she submitted another medical certificate stating she was unable to go back to work. The insurer refused to extend the period. The Court of Appeal upheld the Superior Court’s judgment, which found the insurer to be at fault for setting out to prove from the outset that the claim was fraudulent instead of managing the claims objectively and in good faith. The Court of Appeal quashed the Superior Court’s conclusion to award punitive damages, however. Though the insurer had been negligent, it had no intention of harming the insured. Even so, it awarded moral damages. The decision aligns with others from Canadian courts in sanctioning insurer who breaches their obligation to manage claims in good faith.
The Alberta Court of Queen's Bench handed down a ruling in a case in which the insured sought coverage for damage under its all-risks property policy, but coverage was excluded for the "cost of making good… faulty or improper workmanship." In Condominium Corp. No. 9312374 v. Aviva Insurance Co. of Canada, an insured condominium had retained contractors to provide maintenance work on its parkade. The contractors caused damage to its structural integrity. The court found that the exclusion applied to the facts. What was interesting is that it distinguished from the Supreme Court of Canada's decision in Ledcor, which held that the builder's risk policy provided an exception for the faulty workmanship exclusion if the resulting damage was otherwise covered. In this case, the multi-peril policy in Condominium Corp. only provided coverage for the resulting insured perils.
The Supreme Court of British Columbia held that having legal costs insurance is to be taken into consideration by a court when awarding costs, especially in light of the offer to settle rule. In Clubine v. Paniagua, the defendants had made a settlement offer to the plaintiff who, before the trial, bought adverse cost insurance known as "After-the-Event" insurance. He explained in submissions that the insurance could cover the defendants' disbursements and costs from the date of the settlement offer if costs were awarded against him. The defendants argued that the insurance effectively undermined the intent of the offer to settle rule as it allowed the plaintiff to avoid any punitive costs consequences. He was incentivized to ignore reasonable offers to settle. The plaintiff won at trial, but the court allowed the defendants’ application requiring the plaintiff to pay the defendant's costs and disbursements from the date of the offer.
In Ontario, the Court of Appeal ruled that an insurance policy providing coverage to a mortgagee might not also protect a mortgagor's interest in a property. In Hanson v. Totten Insurance Group Inc., the new home owners had obtained a private mortgage from the sellers and were unable to obtain home insurance. The sellers/mortgagees obtained home insurance for their own benefit for which the new home owners were required to pay the premiums. Following a loss to the property, the insurer paid the sellers/mortgagees for their loss and moved to begin a subrogated claim against the new home owners using power of sale proceedings. The new home owners brought a motion to determine whether the insurance policy also covered their interest in the property such that the payment on the policy extinguished their mortgage debt. The Court of Appeal concluded that the obligation to insure fell to the mortgagor. Where they failed to obtain insurance, the mortgagee was entitled to obtain it for their benefit alone.
Another noteworthy Ontario case involved an insurance contract, issued by Equinox and Lloyd's Underwriters, which contained an “action against insurer” clause. In Trade Finance Solutions Inc. v. Equinox Global Limited, the insured had made several claims for loss under the policy, before the insurers identified a number of concerns. That was taken as an attempt to frustrate the claims process, and the insured sued the insurers for losses under the policy. There was a clause in the policy by which the underwriters were to be designated or named as "Lloyd's Underwriters" in any action to enforce the insured's obligations. The Court of Appeal found the clause simply defined the circumstances under which an insurer will accept being served if it is outside the jurisdiction or is part of a syndicate of many individual insurers. The plain wording of the provision should not have been widened into an alternative dispute resolution process as other civil actions available to insureds can include actions to determine jurisdiction or compel arbitration or actions to enforce arbitral awards.
In settling three actions by paying out an entire policy limit pro rata, an insurer was taking the risk it would later be found liable for further claims up to that same limit. That’s what the Ontario Superior Court of Justice found in Scale Estate v. The Cooperators General Insurance Company. The case dates back to a 2006 automobile accident that spurred three actions, none of which the plaintiffs initiated. The insurer heard nothing from the plaintiffs until after settlements were concluded with the other claimants, and the $1 million in policy limits had been apportioned pro rata. The plaintiffs took action against the insurer claiming entitlement to have their damages paid under the policy, or a pro rata share of the $1 million limit. The Ontario Superior Court of Justice found that the insurer was aware of the plaintiffs' potential claims and did nothing to follow up. There was no evidence that the settlement of the three other actions was on the insurer's understanding that the plaintiffs would not advance a claim. The court held that the first-past-the-post principle deals with claims against general liability policies and does not apply to standard automobile policies under s. 258 of the Ontario Insurance Act.
The Nova Scotia Human Rights Commission erred when it found that non-coverage of medical marijuana discriminated against a disabled claimant. That’s what the province’s Court of Appeal held in Canadian Elevator Industry Welfare Trust Fund v. Skinner. The claimant was a member of a union welfare plan; after experiencing chronic pain, his physician prescribed medical marijuana. But the insurer rejected his request for reimbursement of medical marijuana expenses because the plan did not cover prescription drugs, such as medical marijuana, not approved by Health Canada. The rejection constituted discrimination "based on" his disability, the Commission found. But the Court of Appeal found that it could not be automatically discriminatory for the insurer to impose reasonable limits on reimbursable benefits. Similar plans necessarily have limited benefits for those with a disability, and the claimant had access to all the medications available to other plan members.