Lacombe v. Don Phillips Heating Ltd.,  O.J. No. 3936, Ontario Superior Court of Justice
This was a motion by the Defendant, Francis Fuels Ltd. (“Francis”), for partial summary judgment dismissing the subrogated portion of the Plaintiffs’ claims by their insurer, Aviva Insurance Company of Canada (“Aviva”). The Defendant Francis was also an insured of Aviva under a separate policy. Francis therefore argued that the anti-subrogation rule applied to prevent Aviva from advancing such a claim against its own insured.
The Plaintiffs’ claims were for damages arising out of an oil spill at their residence. The Plaintiffs had hired the Defendant Francis to replace their oil furnace and Francis in turn, had subcontracted with the Defendant Don Phillips Heating Ltd. (“Don Phillips”). Don Phillips was party to a service contract with the Defendant Francis. The service contract required Don Phillips to maintain a CGL policy of insurance. Aviva was Don Phillips’s liability insurer under this policy and Francis was an additional named insured under the same policy.
Francis argued that because the Plaintiffs’ claims were wholly or partially subrogated and that because Francis was an insured of Aviva, Aviva was barred from advancing such a claim against its own insured. While it is well-established law that an insurer cannot subrogate against its own insured, the issue to be determined was whether the same rule was available where the defendant was insured by the same insurer but under a different policy.
While no Canadian cases were cited, it has been held in the U.S. that the “anti-subrogation rule” applies in cases where multiple policies are issued by the same insurer. The Court cited American case law which held that in refusing to allow the claim of an insurer against its own insured to proceed, the courts have observed that subrogation is an equitable right. This principle has been cited with approval in Canadian case law. The Court therefore concluded that the Defendant Francis was entitled to summary judgment with respect to the subrogated portion of the Plaintiffs’ claims.
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