The triggering event for a wrongful dismissal claim is not necessarily the dismissal of the employee.
In a claim for wrongful dismissal, the triggering event for insurance coverage is when the insured’s employee is both terminated and provided inadequate notice for compensation in lieu of notice.
This case was originally edited by David Pilley.
Here is the case citation: Dynacare Co. v. St. Paul Fire and Marine Insurance Co.[2007] O.J. No. 2929. Ontario Superior Court of Justice. T.P. Herman J. July 23, 2007.
Here is a link to the decision.
Dynacare is an employer that obtained insurance (the “Policy”) from St. Paul Fire and Marine Insurance Company (“St. Paul”) on December 31, 2001. On June 20, 2001, prior to obtaining insurance, Dynacare terminated Mr. Meadows.
At the time of Mr. Meadows’ termination, Dynacare provided him with a letter stating that it would continue to pay his salary pending resolution of the amount of compensation that he would be provided in lieu of notice. The letter also stated that negotiations in good faith would continue, and that Dynacare was hopeful that an amicable resolution could be reached. The last communication between Dynacare and Mr. Meadows contained an offer by Dynacare to terminate Mr. Meadows on October 2, 2002, that he would received his full salary to that date at the annual rate of $325,000, and in return, Mr. Meadows would give Dynacare a full Release. There was no evidence of further communication between the parties or their counsel prior to December 31, 2001.
In January of 2003, Mr. Meadows instituted a wrongful dismissal claim against Dynacare. St. Paul refused to provide Dynacare with insurance coverage for the claim on the basis that the August 15, 2001 letter constituted a prior demand for monetary damages and had not been disclosed by Dynacare to St. Pauls prior to its application for insurance. Dynacare commenced this action against St. Paul for a Declaration for Entitlement to Insurance. St. Paul brought a Summary Trial Judgment to dismiss Dynacare’s action.
The Policy had an exclusion clause which stated that it did not provide coverage for any prior or pending written demand for monetary damages. The issue to be decided at the Summary Trial was whether the communication between Dynacare and Mr. Meadows constituted a demand for monetary damages. Herman J. noted that he was bound to follow the Supreme Court of Canada decision of Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252 in considering what constituted a claim under a “claims-made” insurance Policy. He noted that the essence of a wrongful dismissal action was not just that an employee had been dismissed without cause, but that an employee had been dismissed without cause and the employer had failed to give adequate notice for compensation in lieu of notice. At the time of the August 15, 2001 letter, Mr. Meadows was still receiving his salary and the terms of the severance package were under negotiation.
Herman J. concluded that there was a triable issue as to whether Dynacare and Mr. Meadows were negotiating a severance Policy, or whether negotiations had broken down such that the matter would not be resolved through negotiations. The Herman J. refused to dismiss the claim on the Summary Trial application as there was a genuine issue for trial.
