ING Insurance Co. of Canada v. Federated Insurance Co. of Canada,  O.J. No. 1718, Ontario Court of Appeal
This claim arose out of a single-vehicle accident in which three passengers were injured and one died. Three separate actions were commenced against the driver and owner of the vehicle. Two insurance policies provided coverage and there was no dispute that the limits of the primary coverage were $2M. The excess insurer was not given notice that the claims might reach the $2M policy limits until two months before trial, when the excess insurer was contacted by counsel for the primary insurer. After a settlement conference, counsel for the primary insurer adjusted his assessment closer to $3,000,000. Settlement was ultimately reached prior to trial, with the primary insurer contributing approximately $2,000,000, the Ministry of Transportation contributing approximately $1,000,000, and the excess insurer contributing approximately $900,000.
The primary insurer, on an application, sought a declaration that it was entitled to equitable contribution from the excess insurer for its legal defence costs throughout the course of litigation. The motions judge awarded the costs of the entire defence apportioned proportionately to the share of the settlement costs. The Court of Appeal reversed, holding that the excess insurer had no duty to defend until it was notified of a claim. It further held that an awareness of the claim in general was insufficient. In order to trigger the duty to defend, the excess insurer had to be notified that any award would exceed the policy limits of the primary insurer. The Court distinguished a legislative provision that set out that primary and excess insurers shall, as between themselves, contribute to defence costs in accordance with their respective liabilities for damages, holding that the provision did not apply to settlement.
To stay current with the new case law and emerging legal issues in this area, subscribe here.