Covenant to Insure Did Not Bar Crossclaim

A recent decision looked at whether a contractor could crossclaim against a subcontractor or whether the crossclaim was barred as a result of the covenant to insure between the parties.  In William Osler Health Centre v Compass Construction Resources Ltd., 2015 ONSC 3959 (S.C.J.), the contractor, Compass, was hired by the plaintiff to do kitchen renovations at the Hospital and subcontracted part of the project to Black Creek.  The contract between the Hospital and Compass contained a covenant to insure which required Compass to obtain all risks property insurance.  The covenant to insure contained reference to the terms and conditions of IBC 4042.  IBC 4042 contains language that defines the “Project Site” as the “property in the course of construction”.

 

Black Creek argued that under the principle of tort immunity, when one party to a contract covenants to obtain insurance for another party, this signifies an assumption of the risk and the party obtaining the insurance cannot sue the other party for the losses which are insured. Compass accepted that under the principle of tort immunity, it could not crossclaim for damages to the kitchen, but argued that it could maintain a crossclaim for damages to the rest of the hospital. 

 

The Court found that Compass’ covenant to insure did not extend to the entire Hospital and only covered the Project Site (namely, the kitchen). Thus, the Court held that Compass could crossclaim against Black Creek for damages to the Hospital outside of the kitchen, and was not barred by the covenant to insure.  If Compass’ insurance were intended to cover the entire hospital, the premiums and coverage limits would be much higher and closely resemble that of the Hospital’s; Justice Firestone held that it stood to reason that the covenant to insure only covered the Project Site and not damage done to the entire hospital.

 

Loss Transfer and the Fault Determination Rules

The Court of Appeal recently considered the interplay of the Fault Determination Rules in a loss transfer context.

In State Farm Mutual Automobile Insurance Co. v. Old Republic Insurance Co. of Canada, 2015 ONCA 699 (C.A.), there was a multi-vehicle collision in which a Pepsi truck rear-ended a Dodge, which in turn rear-ended a Nissan.  Old Republic insured the Pepsi truck and State Farm insured the Nissan.  The driver of the Nissan collected accident benefits from State Farm, which in turn sought to be indemnified by Old Republic under the loss transfer provisions of the Insurance Act.  The issue on appeal was whether the Pepsi truck was only responsible for the initial collision with the Dodge or whether it was responsible for the entire chain reaction.

The Court of Appeal held that the Pepsi truck (and its insurer, Old Republic) was 100% responsible only for the collision between it and the Dodge, not the entire chain reaction.    As a result, Old Republic was not required to indemnify State Farm for accident benefits paid to its insured.

The Court's interpretation helps to clarify an area in which there was previously conflicting lines of case law.

Supreme Court Dismisses Westerhof Appeal

We previously blogged on Westerhof v. Gee, where the Court of Appeal held that non-party experts such as treating health practitioners may give opinion evidence formed in the course of treatment or based on observations formed outside of the litigation (such as accident benefits assessments).

The case was appealed to the Supreme Court of Canada.  On October 29, 2015, the Supreme Court dismissed the application for leave to appeal.  As a result, non-party experts will continue to be permitted to give opinion evidence without complying with r. 53.03, subject to the court's gatekeeper function.

The companion appeal in Baker v. McCallum was also dismissed.

Litigation Insurance Does Not Prevent an Order for Security for Costs

The fact that a plaintiff obtains litigation insurance does not prevent a court from making an order for security for costs.

In Shah v. Loblaw Companies Ltd., 2015 ONSC 5987 (S.C.J.), the plaintiff claimed he slipped and fell on a mat at a grocery store in 2012.  At the time of the incident he was a permanent resident of Canada, but his permanent resident card expired in 2013.  He returned to India and did not returned to Canada.  The defendants brought a motion for security for costs.  In response, the plaintiff secured a Legal Protection Certificate and Indemnity Agreement.  He opposed the motion for security and argued that the insurance plan was sufficient security for the defendants.

The Court rejected the plaintiff's argument.  The policy contained a number of exclusions where the insurance proceeds would not be paid, such as where the plaintiff does not accept his counsel's recommendation to accept an offer to settle, decides to represent himself, fails to attend a defence medical examination, provides materially misleading information and so on.  The defendants had no control over the circumstances and if the policy were cancelled, the defendants would have no security in the event of an adverse costs award against the plaintiff. 

Justice Lemon comments that other judges have considered the existence of insurance as a factor in determining whether security for costs should be awarded, but that the circumstances of the case and terms of the policy should be considered.  It would seem important to obtain production of such a policy in the event that the plaintiff raises such an issue in response to a motion for security for costs.