Ontario Court of Appeal addresses available insurance coverage & additional insured

The excerpted article was written By Laura DayKevin McGivney

In Sky Clean Energy Ltd. v. Economical Mutual Insurance Company, 2020 ONCA 558, the Ontario Court of Appeal (the Court) discussed the availability of insurance coverage to an additional insured. The appeal concerned the interpretation of a common insurance term that requires liability to “arise out of the operations” of a named insured. The Court considered the requisite connection between the contractor’s operations and the additional insured’s liability. The Court upheld the traditional limits to the term “arising out of the operations,” requiring more than a “but for” analysis in order to establish the connection between the liability of the additional insured and the operations of the named insured. In the context of this case, it was not enough that the contractor had installed the equipment at issue.


The project owner (the Owner) was a developer of solar energy projects and the contractor was an electrical contracting company. The Owner entered into contracts with the contractor to install a solar power system that the Owner designed, using equipment selected and sourced by the Owner. The Owner contracted with equipment suppliers to provide the main components of the system, including the inverter and transformer. It was the contractor’s responsibility to install the components.

Before beginning to install the first transformer, the contractor discovered that the transformer delivered by the Owner’s supplier did not conform to the Owner’s design specifications. Due to time restrictions, the Owner asked the contractor to help source new transformers. The contractor’s supplier located a transformer manufactured by a third party. It was the Owner’s decision to accept the third party transformer, and the contractor was not asked to provide an opinion on the suitability of the transformer. Upon completing the first project, representatives of both the Owner and contractor observed an anomaly in the power flow and recommended shutting down and investigating the system. The Owner’s representative decided to leave the system energized for “observation” and the Owner formally took control of the facility.

Three days later, the transformer overheated and caught fire.

After investigating the fire, the Owner determined that the third party transformer was suitable for the projects, as long as a technical adjustment was made to one of the connections. The Owner approved the change and authorized the contractor to proceed with the installation at the second site (and replace the transformer at the first site). Soon after, a fire broke out at the second project site and the transformer destroyed. As a result, both systems were shut down temporarily and replacement transformers installed. The Owner paid for the remediation and lost revenue of just under $600,000.

The Owner commenced various proceedings against the insurer (under which it was an additional insured), the contractor and the manufacturer of the transformer.

The contract

Under the contract between the Owner and the contractor, the contractor agreed to indemnify the Owner against the contractor’s failure to perform its contractual obligations and for its negligent acts.  The contractor also agreed to name the Owner as an insured under its Commercial General Liability insurance policy with its insurer, but only with respect to liability arising out of its operations.

The interpretation of “arising out of”

In interpreting the policy language “arising out of,” the Court reiterated that courts consistently interpret language such as “arising out of” or “arising from” as requiring more than a “but for” connection between the liability of the additional insured and the operations of the named insured. There must be an “unbroken chain of causation” and a connection that is more than “merely incidental or fortuitous.”

The interpretation of “operations”

The Court also considered the meaning of “operations,” which was said to include “the creation of a situation, or circumstance, that is connected in some way to the alleged liability.” It does not necessarily imply an “active” role by the named insured in the creation of the liability.

Findings of the Court of Appeal

The Court agreed with the trial judge and found that the contractor’s connection with the failure of the transformer was “merely incidental.” The trial judge found that the failure of the transformer caused the fire. Though the fire would not have occurred “but for” the fact that the contractor ordered and installed the transformers in the course of its operations under the contracts, the contractor’s “operations” under the contract did not require it to select the transformers to be installed in the projects. That was up to the Owner.


Consideration as to the underlying obligations between the parties necessarily informed the Court’s decision in this case. While the Court rejected the argument that the language of the contract between the Owner and the contractor should affect the interpretation of policy of insurance (other than to explain the commercial context), central to the Court’s decision was that the contractor was not responsible to choose the transformer. The Court noted that the Additional Insured Endorsement provided insurance with respect to the liability arising out of the “operations” of the named insured. The contractual obligations, including the scope of work, therefore formed part of the inquiry.

The Court upheld the traditional limits to the term “arising out of the operations,” requiring more than a “but for” analysis in order to establish the connection between the liability of the additional insured and the operations of the named insured. Despite the finding that the failed transformer caused the fire, the transformer was chosen by the Owner and thus it was not enough that the contractor installed the equipment at issue.

Experts say COVID waivers unlikely to shield private schools from legal action

By Cassandra Szklarski


TORONTO _ Some private schools afraid they’d be blamed if a student gets COVID-19 are considering waivers to absolve them, but experts say that wouldn’t stop a parent from suing or a school from racking up legal bills.

Toronto lawyer John Schuman says he’s provided “a couple of clients” with contracts that essentially have parents accept full responsibility if their child contracts COVID-19 in a school setting.

He says private schools could be targeted if they fail to enforce provincial and public health rules around COVID-19 and even if they do follow the rules, they could still be vulnerable.

“What schools are also worried about is that they’re going to do everything and they’re going to be careful and they’re going to sanitize stuff (but) some kid’s going to walk in and before even getting screened, sneeze on a bunch of kids and spread COVID-19,” says Schuman, senior partner at Devry Smith Frank LLP.

“And then they’re going to get sued even if they’ve done everything they could possibly do to stop the virus.”

Eric Roher of the Toronto law firm BLG says COVID-19 waivers are not common but that he has been asked to provide them to some alternative and independent schools.

Nevertheless, he doubts that a parent could be held to a promise not to sue if an outbreak occurs.

“There’s a real issue about whether _ even if the waivers are signed _ they’re enforceable,” says Roher.

“What I would prefer to be honest with you, is that we spell out what the safety and learning protocols will be and have parents confirm that they’ve read and understood them. I think that’s a safer approach.”

That also seems to be more common, he adds, describing the number of schools seeking extreme legal safeguards as  “very few.”

The problem with waivers is that they can be hard to enforce, especially if they’re suddenly foisted on parents who’ve already paid tuition and confirmed enrolment.

“Parents have to have time to consider them and make sure they understand them, and perhaps consult a lawyer,” says Schuman, a specialist in child and family law.

“Where there’s less of that freedom, or (if) parents aren’t really free to fully understand what’s going on and to walk away if they need to, waivers become less enforceable.”

High schools aren’t alone in this request.

Incoming students at St. Francis Xavier University in Antigonish, N.S., were asked to sign a waiver before they could attend class, but that was contested by 350 students, staff, alumni and local residents who signed a protest letter.

The province’s minister of advanced education has since assured students the waiver would be changed.

The original waiver required students give up potential legal claims of “negligence, breach of contract, or breach of any statutory or other duty of care,” even if the university fails to take reasonable steps to safeguard them from COVID-19 risks.

Schuman suspects pressure from insurance companies has spurred some schools to take extraordinary steps.

“(If) two kids in Grade 5 in the back corner take off their mask while they’re talking to each other and whispering, (a teacher) can be seen to be negligent because they haven’t enforced the expected protocols,” he says.

“Generally, private schools operate on fairly thin margins so all the extra costs of sanitizing is going to stretch their finances a bit and (if they also) have an insurance company who’s going to tell them, ‘We’re going to raise your rates if you don’t take some precautions, you don’t have a waiver,’ (then) they need to have the waiver signed.”

The pandemic has already seen several proposed lawsuits target long-term care facilities, where a disproportionate number of Canada’s deaths have occurred.

A COVID-19 school waiver would raise red flags for educational consultant Karen Wolff.

She hasn’t heard of the phenomenon in her work advising families how to choose the right school but says if such contracts are on the way, she’d expect to see them in the coming days and weeks when virtual open houses and introductory sessions begin.

“I would call my lawyer, and I would have a conversation and just sort of say, ‘How enforceable is this? What are the ramifications if I choose not to (sign)? And do I have a choice?” says Wolff, who has one child in private school and another in public school.

Wolff is less concerned with signing a code of conduct that outlines expected precautions.

“Schools and parents need to be partners they need to be partners in everything including protecting the health and welfare and safety of their students,” says Wolff, of Wolff Educational Services.

The Ontario government made it clear earlier this month that private schools are subject to the same reopening guidelines imposed on public schools, says Roher. Nevertheless, he says his office encouraged its private school clients to exceed those measures.

Evidence of less infection risk outdoors is spurring many private schools to boost outdoor programming and excursions activities that are also requiring more waivers this school year, says Sarah Craig of the Conference of Independent Schools of Ontario, which represents 45 schools.

But she notes off-campus waivers were required pre-pandemic, too.

And of course, COVID-specific waivers aren’t really new _ many camps and sports activities began issuing them over the summer, says insurance broker Brooke Hunter, president of Hunters International Insurance.

“I think I’ve signed something like nine waivers so that my nine-year-old can play soccer,” says Hunter.

But it was relatively easy for a parent to walk away from camp if they balked at a waiver, she acknowledges. School is another matter.

Hunter expects to see an overall increase in the use of waivers. She suggests parents who are thinking about forming a learning pod with another family consider the possibility that they, too, could face legal action if things go sideways.

“Unless you’re incorporating your pandemic pod, you’re attracting personal liability,” she warns.

Several jurisdictions in the United States have taken steps to protect businesses, non-profits and government agencies from legal action, as long as they follow health standards and don’t exhibit gross negligence.

British Columbia introduced a broad ministerial order back in April that similarly protected many essential services, later adding emergency protections for child-care operators and amateur sport organizations. In June, it introduced legislation that would allow those provisions to be formalized  “as appropriate” after the provincial state of emergency ends.

Hunter would like to see broad protections offered in Ontario.

“Can we agree that it’s ridiculous to hold each other liable whether it’s organizations or individuals for COVID-19 transmissions?” she says.

This report was first published by The Canadian Press on Aug. 17, 2020.

Vegas: Thomas Keller files suit over coronavirus insurance coverage

The excerpted article was written by  

Chef Thomas Keller, who operates Bouchon Bistro and Bouchon Bakery in The Venetian and is planning a new restaurant in Wynn Las Vegas, has filed what could be a groundbreaking lawsuit in a California court, asking for a legally binding decision on whether his business interruption insurance policy allows him to recover business losses suffered in connection with the COVID-19 crisis.

The suit, filed in the Superior Court of California County of Napa, addresses Keller’s policy with Hartford Fire Insurance Company. But the chef’s attorney, John Houghtaling, says there’s an industry-wide issue at stake.

“To avoid payments for a civil authority shutdown, the insurance industry is pushing out deceptive propaganda that the virus does not cause a dangerous condition to property,” Houghtaling said in a statement issued by the Thomas Keller Restaurant Group. “This is a lie, it’s untrue factually and legally. The insurance industry is pushing this out to governments and to their agents to deceive policyholders about the coverage they owe.”

Locally, Carson Kitchen’s owner and President Cory Harwell says he hopes Keller’s actions will set a precedent that will aid smaller businesses like his own.

“Without the Thomas Kellers of the world, without somebody blazing that trail for us, the little guy like me can’t really do anything. We’re stuck with whatever the insurance company says. Because we can’t expend our very precious resources that we do have on fighting a fight like this, when those funds are earmarked to try to stay alive, to keep our employees employed, and to keep our businesses afloat.”

Harwell has filed a claim with his insurance company on behalf of his restaurants in Las Vegas and Atlanta, under the terms of his business interruption coverage. He’s fearful, however, of how it will be received.

“Almost all (policies) have an exclusion in them for viruses and bacteria. So their stance on this is that this is an excluded event. And I know that that’s probably what’s coming back to us.”

He doesn’t believe that such a response would be appropriate in the current situation.

“A virus didn’t close my restaurant, the government did,” he explains. “And the government closing my restaurant is a protected event.”

At JRS Hospitality, which has temporarily stopped its operations at Alexxa’s, Beer Park, Cabo Wabo Cantina, Chayo Mexican Kitchen, Hexx Kitchen and Bar and Chateau Nightclub on the Strip, managing partners Corey Jenkins and Matt Silverman are having their attorneys prepare the business interruption insurance claims.

“We have not had a claim rejected,” Silverman explains. “But based on what we’re seeing in the news, we’re preparing for that possibility. That’s why we’re having legal do this for us the correct way, so that we have the best shot.”

“It seems obvious to us,” Jenkins says. “We were prevented from entering the premises and operating our business. That is a business disturbance. And that is exactly what business interruption insurance is for.”


What To Do When You Receive a Force Majeure Claim Based On The  Novel Coronavirus

What To Do When You Receive a Force Majeure Claim Based On The Novel Coronavirus

The excerpted article was written by Thomas J. Timmins and Howard XIN Articling student

Gowling WLG

Start with the Clause

A force majeure clause is a common inclusion to contracts for protecting parties from impairment caused by extraordinary or extreme events. These extraordinary events are often referred to as “acts of God”. When a force majeure clause has been included in a contract and force majeure events actually do occur, the expectation is that the party or parties facing impairment as a result of the proscribed force majeure event–a hurricane, war, flooding, political unrest, epidemic, etc.–will be relieved of all or some portion of its delivery obligations under the relevant contract and from all or some portion of liability for damages arising from delay or default occurring in the performance of its contractual obligations.

In drafting these provisions, companies will often use language that defines what will or will not constitute a force majeure event, often by listing specific examples which qualify as such–hurricanes, war, volcanic eruptions, strikes, lockouts, etc. Occasionally, in the rush to get the deal done, not a great deal of thought is given to the breadth or inclusions expressed in the clause and a “boilerplate” is used.

If there is no force majeure clause, courts will still consider defences by the impaired party based on foreseeability of the impairing event. Whether there is a force majeure clause or not, the burden of proof rests on the party seeking to rely upon the force majeure provision. In any case, the key starting point is with the force majeure clause itself. What does it say? Do the events which one party alleges to have occurred actually qualify under the terms of the clause? If so, did those qualifying events actually lead to the delay or the breach in question?

Force Majeure Case Law in Canada

For the past half-century, the leading case on force majeure in Canada has been Atlantic Paper Stock Ltd. v St. Anne Nackawic Pulp & Paper Co. This was a 1975 Supreme Court decision concerning a minimum annual supply of paper pulp over a 10-year period, which allegedly became subject to extraordinary events including acts of God and substantial decline in the market for such paper pulp. In this decision, Justice Dickson established that, “An act of God clause or force majeure clause … generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill” (emphasis added). Since then, no Canadian Supreme Court cases have revisited the matter in depth. However, despite the lack of Supreme Court precedents, there have been various lower-court cases affirming Atlantic Paper and exploring the interpretation of force majeure clauses.

In World Land Ltd. v Daon Development Corp., the court accepted the use of basket clauses to define the scope of force majeure applicability. In this case, a land development company was accused of failing to commence construction on the land by a specific date. In the agreement, the force majeure clause included in its definition of force majeure events, the very broad and inclusive language, “…or any other causes…beyond the control of the vendors or the purchasers”. The company had relied on this language and announced that the development would be delayed on the grounds of not having received a development permit, which it claimed was beyond its control. The court accepted the applicability of the basket clause. However, to the detriment of the land development company, it chose to interpret the language plainly and held that it had been within the company’s control to obtain the permit on time. In other words, the party alleging that force majeure events occurred was not entitled to sit idle.

Subsequently, Atcor Ltd. v Continental Energy Marketing Ltd. seemed to have revised the criteria for what constitutes a force majeure event. In this decision, a gas supplier successfully relied on force majeure when it failed to deliver gas because of various technical pipeline issues suffered by a third party pipeline owner. Here, the Alberta Court of Appeal rejected the idea that a force majeure event had to make performance impossible. Instead, “a real and substantial problem” that makes contractual performance commercially unfeasible was held to be the standard—i.e. a significantly lower threshold than the impossibility of performance standard posited in Atlantic Paper, cited above.  Despite the apparent departure in Atcor, the impossibility standard set in Atlantic Paper has continued to be followed in recent cases. Thus, from a practical viewpoint, unless you have expressly contracted otherwise, ‘impossibility of performance’ should be viewed as the basic standard when reviewing force majeure circumstances.

As if to emphasize this point, in the 2011 British Columbia Supreme Court decision Domtar Inc. v Univar Canada Ltd., there was a focus on language of the force majeure provision. The facts were that a supplier could not source and supply caustic soda on commercially acceptable terms and, therefore, alleged that an event of force majeure had occurred and that it should be exempted from its contractual supply obligations. The force majeure event, in this case, was not being able to purchase raw materials at a commercially acceptable price because of an unprecedented rise in price of caustic soda. The argument was ultimately unsuccessful. The B.C. court found that the force majeure clause in the relevant contract did not include or contemplate economic or market conditions, and agreed with earlier findings from the English courts that, “the fact that a contract has become expensive to perform, even dramatically more expensive, is not a ground to relieve a party on the grounds of force majeure.

Domtar Inc. suggests that “economic” force majeure would be extremely difficult, if not impossible, to justify. It also emphases the point which we made above—start by reading the force majeure clause in your contract.

Considering the Novel Coronavirus

It is not uncommon for force majeure clauses to include specific references to terms such as “plague” or “epidemic” when describing force majeure events. In light of global health emergencies that have surfaced in the last few decades, we have found that these types of clauses have included increasingly specific event references such as “public health emergencies” and “communicable disease outbreaks”. However, whether these specific wording inclusions will be of use to the party alleging that a force majeure event which can be relied upon as relieving it from its contractual obligations has occurred remains uncertain.

The Canadian case law surrounding force majeure provisions based on global health concerns is limited. For example, most mentions of the 2003 SARS outbreak or the 2015 Ebola pandemic pertain to cases of domestic occupational health and safety and refugee protection. Reported cases that refer to these specific health crises as triggers of force majeure are few. There is one 2005 decision issued by the Canadian Radio-television and Telecommunications Commission (CRTC) concerning rate adjustment plans in the Telecom industry that linked SARS to a force majeure event. In the decision, Bell Canada, TELUS, and several other telecom companies submitted that the 2003 SARS outbreak in Toronto fell within the scope of the following force majeure clause:

“No penalty shall apply in a month where failure to meet the standard is caused, in that month, by fire, strikes, default or failure of other carrier, floods, epidemics, war, civil commotions, acts of God, acts of public authorities or other events beyond the reasonable control of the Company which cannot reasonably be foreseen or provided against.”

In this case, Canadian telecom carriers sought to rely upon the force majeure wording above, arguing that factual circumstances, including the necessity to quarantine of a number of Bell Canada employees, and the specific mention of “epidemics” in the force majeure clause, lessened their respective quality of service obligations. (In many force majeure clauses, epidemics are not specifically included in the clause and left to be read-in under the sweeping category “other events beyond the reasonable control of the Company”.) In the end, the CRTC held that the approach to be adopted in order to determine whether or not SARS-related events were sufficient to trigger force majeure clause protections was a case-by-case one.


Surprising Special Award Against Insurer

Article by Alon Barda

A recent decision of the Licence Appeal Tribunal (“LAT”) indicates that an insurer cannot simply rely on the opinion of an assessor when determining a claimant’s needs.

The adjudicator said that the insurer should have considered all relevant medical evidence and should have followed up with the assessors for clarification of the claimant’s needs. The failure to do so resulted in a special award against the insurer.


In Malitskiy v. Unica Insurance, 18-010164/AABS, the claimant sought entitlement to attendant care in the amount of $6,000 per month less the partially approved amount of $1,199.10. He also sought entitlement to a rehabilitation benefit of $344,864 for home modifications and entitlement to some cost of examinations. The claimant also sought a special award for unreasonably withheld or delayed payments.

The claim involves an ice fishing accident that occurred on March 16, 2014. The vehicle in which the claimant was travelling hit a pressure crack on the lake and slipped over, ejecting the passengers in the process.

The impact caused the claimant to suffer a brain injury and multiple fractures, including to his cervical spine and wrist. It was later discovered that the accident caused nerve damage in the claimant’s shoulder as well as cognitive and emotional impairments.

Unica deemed the claimant to be catastrophically impaired as a result of the accident.

The adjudicator was persuaded on a balance of probabilities that: the claimant has pain in his shoulder and cannot lift heavy items; he experiences difficulty while using the stairs in his home; he experiences balance issues; he needs assistance with dressing and supervision while showering; he has cognitive and memory issues; and he has emotional issues and needs cuing to eat and engage in hygiene activities.

Attendant Care

The adjudicator considered the Form 1 completed by the claimant’s OT assessor recommending $6,020.63 in attendant care per month and the insurer’s assessor recommending $1,199.10 per month in attendant care assistance.

The significant difference between the Form 1’s surrounded assistance to respond to an emergency, coordination of attendant care assistance, and supervision/assistance regarding certain daily tasks. In particular, the insurer was of the view that the claimant did not require overnight assistance to ensure safety and security in the bedroom.

When the insurer’s assessor conducted the assessment, she did not consider whether the claimant needed cuing, emotional support and supervision at night, and she was unable to explain conclusively on cross-examination why she did not do so.

The adjudicator ultimately found that, based on the claimant’s various functional limitations, the additional time recommended by the claimant’s assessor represented a reasonable assessment of the claimant’s attendant care needs and that the claimant is entitled to $6,000 per month from October 13, 2017 to date and ongoing less amounts paid by the insurer.

Home Modifications

Unica agreed that some of the home modification recommendations were reasonable and necessary but the significant items of contention included the installation of a home elevator (the insurer proposed an in-home stair lift) and a therapy room for space to engage in exercises and use the equipment while home.

Based on the claimant’s functional needs, the adjudicator found on a balance of probabilities that the claimant required the disputed renovation items and that the home modifications totaling $344,864 are reasonable and necessary.

Special Award

The most notable aspect of this case is the finding regarding the special award. Under section 10 of Ontario Regulation 664, if the LAT finds that an insurer has unreasonably withheld or delayed payments, the LAT, in addition to awarding the benefits and interest to which an insured person is entitled under the SABS, may award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts at 2 per cent per month, compounded monthly.

While the adjudicator found that Unica paid for most of the disputed benefits in part and that it based its decisions on the assessments it completed, the adjudicator still found that there was a failure on the part of the insurer to “ask the relevant questions” about the claimant’s functional needs.

For example, the adjudicator states that, after receiving the Form 1 and the treatment plan proposing the home modifications, Unica “should have asked its assessors to investigate whether [the claimant] needed cuing, emotional support, and nighttime supervision”. The assessor testified at the hearing that she did not consider those issues.

Furthermore, the adjudicator found that it was unreasonable of Unica to focus on the reports of their assessors on the core issues in dispute when its assessors had designated the claimant to be catastrophically impaired on various grounds and the medical and treating evidence confirmed that the claimant “has needs for significant assistance that included not just helping him physically but also being attentive to his psycho-emotional needs.”

The adjudicator found that, when read together, the reports of the insurer’s assessors on the issue of attendant care and home modifications did not correspond with the information in the claimant’s medical and treatment file and that their opinions as to the claimant’s functional needs were not supported elsewhere in the evidence.

While Unica had the information available to make further relevant inquiries into the functional needs of the claimant, the adjudicator found that it did not do so despite the fact that this should have been readily apparent based on the evidence already in its possession.

As such, the adjudicator ultimately held that the position taken by Unica with respect to the attendant care benefit and home modifications amounts to an “unreasonable withholding or denial, when the medical evidence, including evidence from Unica’s own assessors, supported [the claimant’s] need for these claimed benefits.”

Accordingly, the adjudicator found the partial denials of these benefits to be “imprudent, inflexible, and immoderate” and ordered a special award.  Unica is required to pay 25% of the portions of attendant care and home modifications benefit that were denied. This represents half of the limit outlined in the Regulation. Unica is also required to pay interest at 2 per cent per month, compounded monthly.


While the adjudicator was entitled to reject the opinions of the insurer’s assessors, it is highly questionable as to whether Unica “unreasonably withheld or delayed payments” to warrant a special award.

Insurers are not medical experts. An insurer should be able to rely on the expertise of assessors who conduct benefit-specific assessments, including occupational therapists who complete a Form 1, which is a detailed document. There was no evidence that the insurer withheld relevant medical documentation from the assessors.

However, based on the decision of the adjudicator, it seems that insurers should confirm that assessors are asked all the appropriate questions that may arise from the medical evidence available and to ensure that the response to the benefit at issue includes consideration of the file in its entirety.

An attendant care assessor must consider all the attendant care assistance recommended for a claimant and, if providing a response that does not conform to the medical evidence to date (or earlier insurer examinations), then the assessor should provide detailed reasons explaining why that is the case, particularly on more serious cases involving catastrophically injured claimants.

Rogers Partners LLP is an experienced civil litigation firm in Toronto, Ontario. The firm represents insurers and self-insured companies in numerous areas, including motor vehicle negligence, occupiers’ liability, product liability, professional negligence, construction claims, statutory accident benefits, disability benefits, municipal liability, medical negligence, sexual abuse, and insurance coverage disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Protect Your Insured From Being Added To Litigation

Article by Ian S. Epstein

When an opposing party brings a motion to add an insured to existing litigation, the courts usually allows the party to be added, unless there are clear reasons not to do so, such as an expired limitation period. Consent is usually provided, as the threshold to add a party is low. Yet, recent developments show that a court may look deeper and assess the strength of the claim and evidence in support, to determine whether the addition of a party is improper, from the outset.

In Tacoma Engineers Inc. ats TNS Landco Inc. 2019 ONSC 1296, we successfully opposed a motion for Tacoma, a structural engineer, to be added as a Third Party on the basis that there was no merit to the claim against it, and that the claim was statute-barred.

The matter arose out of a failed septic system on a commercial property, which failed partly due to improper coordination of consultants. Without their knowledge or consent, Tacoma was listed as the consultant responsible for coordination, on a contract between the Claimant owner and the Design-Builder. In fact, as the structural engineer on the project, Tacoma was never responsible for coordinating others.

Instead of simply adding Tacoma, and requiring it to subsequently bring a summary judgment motion to strike the action against it, the court considered the evidence to ascertain Tacoma’s involvement. Justice Fowler Byrne dismissed the motion on the basis of the missed limitation period, and the fact that there was no basis to the claim.

The court noted that Tacoma’s invoices all dealt with structural issues, and not coordination. She also found that at no time did the Claimant notify Tacoma about a septic issue, nor ask for their assistance to fix things. The court also drew an adverse inference from the fact that the Claimant did not even mention Tacoma when they retained an expert to opine on the cause of the septic issues.

The key take-away is that while the threshold may be low to add a party, there is a threshold. The court can assess the evidence to determine whether a party is improper or a limitation period is expired, and make a determination to not add them at a very early stage. 

The case has important implications for insurers. Before simply consenting to a motion to add an insured to litigation, take a look at the facts. Is there clear evidence that the insured is an improper party? Is there clear evidence that the limitation period has expired? If so, it may be worth opposing the motion. If successful, it will prevent the insured from being added to the litigation, saving significant costs. If it is not successful, it may help to set up the evidentiary record needed to bring a summary judgment motion at a later stage.

Insurers should give careful consideration as to whether to consent or oppose a motion for an insured to be added as a party to existing litigation. Doing so may help reduce legal costs, and assist in potentially getting an insured out of litigation at an early stage. 

Ian Epstein has a general insurance practice covering a wide array of insurance issues including E&O, general liability and product liability claims as well as coverage assessments. He has been recognized by Lexpert® Canadian Legal Directory as a leading practitioner consistently recommended in Professional Liability matters and ranked by Best Lawyers® in Canada for his expertise as a practitioner in insurance law.

Lauren Rakowski’s insurance practice focuses on professional liability, tort, and commercial litigation. She has experience representing lawyers, engineers, individuals, corporations and financial advisors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be ought about your specific circumstances.

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