Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

A fire loss occurred at the UPEI Student Centre. The Centre was in the midst of a renovation and expansion whereby the old UPEI Alumni Gym would be selectively demolished and integrated within the new facility. The insurer had provided the "all risks" insurance coverage to the general contractor for the construction project. The insurer denied coverage on the basis that the fire loss involved the Gym, which according to the insurer was excluded from coverage under the "all risks" policy pursuant to a contractual exclusion for existing structures. UPEI then filed its proof of loss with its own property insurer which paid the claim and brought a subrogated action in negligence against all contractors and sub-contractors on the site who may have been tortfeasors.

Two sub-contractors brought third-party proceedings against the insurer for a declaration that the "all risks" policy that the insurer issued to the general contractor was the primary property insurance in respect of the loss and that the sub-contractors were unnamed insureds under that policy.

After the close of pleadings and completion of oral discovery on the third-party claims, the sub-contractors brought a motion for summary judgment against the insurer for judgment on the third-party claim.

The main issue on the motion was whether the fire loss occurred to a structure that was included or excluded from coverage. The policy provided as follows:

"1. This Policy, except as herein provided, insures

(a) property in the course of construction, installation, reconstruction, or repair."

The insurer issued an endorsement on the "all risks" policy which stated:

"It is hereby agreed that permission is granted for the continuing use and occupancy of the premises for the purposes necessary or incidental to such premises.

It is further agreed that coverage under this policy attaches only to section under renovation and not to existing structure."

The issue therefore was whether coverage under the "all risks" policy covered the damage caused by the fire that occurred in the Gym.

The court concluded that the Gym structure was dedicated to the construction project. The Centre was to be a new building.  The design of the Centre incorporated specific components of the Gym including three brick walls, foundation, steel roofing, and steel girders. During performance of the work, problems were discovered with the structural integrity of the Gym, and reinforcements were commissioned. That undertaking was assigned to one of the sub-contractors which brought the third-party proceedings.

The court also found that insurer's understanding of the construction project was materially at odds with that description.  The insurer understood that the new construction was an addition that would be attached to an existing structure. The Certificate of Insurance described the project as "renovation/additions student union building…". At the time of the fire the Gym was within the construction envelope and under renovation. It was part of the construction site. The contractor had control of the building. It was not then a building for use and enjoyment as a Gym. The court concluded as follows:

"(1) that the property damaged by the fire was property within the construction site and subject to the construction project;

(2) that the fire loss occurred during the operation of the construction project; and

(3) that the "all risks" insurer was operating under a misapprehension that the project was an addition to an existing student-union building and that the Alumni Gym was an existing and occupied building."

Despite these findings, the court found that the insurer's defence survived the "good hard look that is to be applied at the summary judgment stage." The court held that there were questions of fact that would or could involve full evidence at trial. When the fire occurred, the construction project was at a very early stage. There was also a question of fact regarding the nature of the property that was damaged by the fire. On this basis the Court found that the matter should proceed to trial and the motion for summary judgment was dismissed.

Appeal by two minor children of the deceased Insured from a decision of the Divisional Court finding that they were not entitled to a portion of the proceeds from a life insurance policy owned jointly by the Insured and his wife. 

The Insured and his wife jointly owned a life insurance policy which provided that on the death of one, the other was entitled to a lump sum payment of $109,000. The Insured was the sole owner of another life insurance policy which named his wife as the beneficiary. The Insured had made inadequate provision for his dependents, three of whom were minors at the time of his death. The three minors and the Insured's wife fell within the definitiion of "dependents" under the Ontario Succession Law Reform Act ("SLRA").

Two of the minor children brought applications against the Insured's estate claiming entitlement to a share of the proceeds under the policies. The Insured's wife brought a cross-application seeking an order directing the insurance company to pay her the proceeds of both policies. The applications judge held that both policies were caught by the wording of the provisions in the SLRA, namely s. 72(1)(f), and were therefore deemed to be part of the Insured's estate for the purpose of funding the dependents' support order. The net proceeds were ordered divided into three equal shares for the support of the three minor children. The wife's appeal to the Divisional Court was allowed in part and the jointly owned policy was excluded from the Insured's estate. An appeal and cross appeal were brought from this decision.

The Ontario Court of Appeal held that, on a proper interpretation of s. 72(1)(f) of the SLRA, the jointly owned policy was not caught because it was not "owned" by the Insured. At the instant of his death, the wife's joint ownership interest became an absolute entitlement to the proceeds of the policy. The Court of Appeal stated that an interpretation of s. 72(1)(f) which would encompass the jointly-owned policy was not consistent with the overall scheme of s. 72 of the SLRA, which was to capture property owned by the deceased. The Court of Appeal did not interfere with the exercise of discretion by the applications judge in ordering support for the three dependent children given that the policy soley owned by the deceased fell squarely within s. 72(1)(f) and was, therefore, available for the purpose of an order for dependent support.

The issue that arose on this motion was whether the loss suffered by the Plaintiff was covered by a comprehensive business policy such that there was a right of subrogation by the Plaintiff as against the Defendants; or, alternatively, was the loss covered by a builder's risk policy held by the Defendants, such that there would be no right of subrogation by the Plaintiff against the Defendants.

The issue arose because the main Defendant's contract with the Plaintiff related to an expansion of the Plaintiff's existing facilities. All other authorities cited to the Court dealing with the issue of coverage under a builder's risk policy involved a new construction project and not a situation involving an expansion and/or addition to an existing structure. Nevertheless, the Court found these situations to be analogous. It found that in a situation where there is an addition to an existing structure (as opposed to when a new stand-alone building is being constructed on the same property), the negligence of a trade or sub-trade employed to do the work could cause damage to all, or at least a portion of the existing structure. In this case, there was no question that the new construction caused damage to the existing building.

The Supreme Court of Canada in Commonwealth Construction Co. v. Imperial Oil Ltd., [1978] 1 S.C.R. 317 recognised that each trade and sub-trade on a project has an insurable interest in the entire project. In this case, the Court expanded that principle to the situation where there is an expansion or addition to an existing structure and as such, found that trades and sub-trades involved in the expansion work have an insurable interest in the entire interconnected structure and not merely the new addition that they are working on.

In the result, the Court found that all parties involved in the construction of this project had an insurable interest not only in the addition to the existing structure, but the existing structure itself. To hold otherwise would defeat the reasonable expectations of the parties and would require a clear language of exclusion, which was absent in this case. As such, the loss in question was covered by the builder's risk policy.

The Insurer appealed a decision dismissing its counter-claim against the Respondents, Leanne Giilck and Discount Auto Appraisals, in which it was found that it had no right to compel the Respondent, Rehman Baig (the "Insured"), to attend for an examination under oath pursuant to Statutory Condition 6(4) of the Insurance Act.

The Ontario Court of Appeal allowed the appeal based on the finding that the Statutory Condition does not cease to operate once litigation is commenced and that the scope of examination extends to all matters material to the Insurer's liability, and extent thereof, which the Insurer has an objective and reasonable basis to explore.

The Insurer insured the Insured's 1999 BMW M3 convertible beginning in 2002. The insurance included an endorsement that insured the vehicle for a specified value. To obtain that coverage, the Insured submitted an appraisal report signed by Giilck of Discount Auto Appraisals. Upon receiving the appraisal, the Insurer provided the Insured with an endorsement on the vehicle in the amount of $71,300.

The vehicle was damaged in a collision on December 10, 2004 and the Insured submitted a Proof of Loss to the Insurer claiming the full amount specified in the endorsement. The Proof of Loss indicated that the vehicle had been purchased on February 23, 2002 for $12,500 U.S. "as per salvage price". The Insurer had also learned that Giilck was the common law partner of the Insured and that together they operated Discount Auto Appraisals.

The Insurer required the Insured to attend an examination under oath pursuant to Statutory Condition 6(4). The Insured attended with counsel who refused to allow the Insurer to ask any questions about how the amount of the appraisal had been determined. He took the position that the examination was restricted to the particulars of the claim and did not extend to the appraisal report, which he regarded as a prior underwriting event.

The Insured later commenced an action against the Insurer claiming damages for loss of the automobile, together with punitive, exemplary and aggravated damages of $100,000 each. The Insurer then filed a Statement of Defence alleging that the appraisal prepared by Discount Auto Appraisals had been greatly overstated due to the poor condition of the BMW at the time and that the Insured, Giilck and Discount Auto Appraisals had misrepresented the value of the BMW. The Insurer counter-claimed against the Insured, Giilck and Discount Auto Appraisals for misrepresentation and detrimental reliance.

The Insurer brought a motion for an order compelling the Insured to attend to be examined under oath pursuant to Statutory Condition 6(4) and to answer questions relating to the initial valuation of his vehicle. In response, the Insured, Giilck, and Discount Auto Appraisals sought summary judgment dismissing the counter-claim.

The Motions Judge found that the statutory examination under oath was redundant because the Insurer had a right to examine the Insured for discovery in the lawsuit. The Motions Judge took the view that once the relationship between an insurer and insured becomes adversarial, or at least once a lawsuit is commenced, the examination under Statutory Condition 6(4) is no longer available to the insurer.

The Court of Appeal disagreed finding that there are no words in the provision to indicate that an insurer's right to examine an insured is limited to the situation in which the relationship is not adversarial. The Court of Appeal held that the statutory condition must be applied according to its plain terms. An insured cannot evade the plain requirement to submit to an examination by simply commencing an action. The Court of Appeal found that the potential for redundancy can be eliminated because the Court, in controlling its own procedures, is able to consider questions that have already been asked and answered on a statutory examination improper on a subsequent examination for discovery.

The parties agreed that the scope of the examination is defined by the term "the matters in question", though those words are used in Statutory Condition 6(4) to refer to the Insured's obligation to produce relevant documents in the examination. The Motions Judge took the view that the scope of the statutory examination was limited to the Insured's claim for insurance benefits. In the Motions Judge's view, the Insurer had agreed to the value of the vehicle when the policy was issued; accordingly, its value was not a "matter in question" in respect of the Insured's claim for benefits when the vehicle was damaged two years later.

The Court of Appeal found that the purpose of the statutory examination is to provide insurers with the opportunity to obtain the knowledge of facts necessary to enable them to determine their obligations and to protect them against false claims. Questions that are material to the Insurer's liability and the extent thereof are within the scope of the statutory examination. Whether the initial appraisal of the vehicle was fraudulent is a matter that is relevant to the Insurer's defence to the Insured's action. Therefore, as the Insurer had an objective and reasonable basis for suspecting that the initial appraisal was fraudulent, the Insured was obligated to submit to examination about it.

The Insureds, Ontario residents, were driving along the Interstate 95 in North Carolina when their vehicle was struck by a large boulder dropped from an overpass by two “local thrill seekers…who were high on alcohol and drugs.” One of the Insureds received catastrophic injuries as a result of this crime, and his mother and sister suffered serious psychological harm. The tortfeasors were prosecuted, convicted, and received substantial prison sentences. The Insureds received “no-fault” benefits exceeding $1,000,000 from their Insurer. The issue before the Court was whether, in addition to no-fault statutory benefits, the tortfeasors’ use of a vehicle to transport both themselves and the boulders to the scene of the crime was sufficient to require the Insurer to pay out under the inadequately insured motorist coverage.

The Supreme Court of Canada determined that the appeal turned on: (1) whether the Insureds’ claim was in respect of a tort committed by the tortfeasors in using their motor vehicle as a motor vehicle and not for some other purpose and (2) whether there was an unbroken chain of causation linking the Insureds’ injuries to the use and operation of the tortfeasors’ motor vehicle. 

The Courts below held the Insurer liable on the basis of their interpretation of Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405. The Supreme Court of Canada found the reasons of Amos somewhat helpful but concluded that the decision is not a template to resolve indemnity coverage because the type of insurance and the coverage requirements in Amos did not require the presence of an at-fault motorist.

In Amos, the Insurer contested no-fault liability to its own Insured for statutory benefits payable “in respect of death or injury caused by an accident that arises out of the ownership, use or operation of a vehicle”. The Insured had been attacked by a gang of strangers while he was motoring along an urban street in California. He was shot and seriously injured as he fled in his van away from the assailants, who were on foot.

In this appeal, the Court was not concerned with no-fault statutory benefits payable to an Insured. Moreover, in Amos, the focus was on the use of the Insured’s vehicle; the focus here was on the use of the tortfeasors’ vehicle. The Insurer was liable in Amos because entry into the Insured’s vehicle was the objective of the attackers and the Insured driving in his van was engaged in an “ordinary and well known” activity to which his vehicle could be put.

The Supreme Court of Canada affirmed that “the ordinary and well known activities to which automobiles are put” limits coverage to motor vehicles being used as motor vehicles. Thus, for example, someone who uses his car as a diving platform cannot expect to recover for his injuries under his motor vehicle insurance policy. In this case, the Court found that transporting rocks across the countryside was not the effective cause of the Insureds’ injuries.

The Supreme Court of Canada found that the Courts below erred in transferring, without modification, the discussion of causation in Amos into the different context of determining whether the liability established here on the part of the tortfeasors arose directly or indirectly out of the use of their vehicle. For coverage to exist, there must be an unbroken chain of causation linking the conduct of the motorist as a motorist to the injuries in respect of which the claim is made. While the use of the tortfeasors’ vehicle “in some manner” contributed to their ability to commit the tort that caused the Insureds’ injuries, such contribution does not mean that the tort was committed in their capacity as at-fault motorists.

In Chan v. Insurance Corp. of British Columbia, [1996] 4 W.W.R. 734 (B.C.C.A.), a very similar case to Vytlingam, the Insured was injured while riding as a passenger in her boyfriend’s car when she was struck by a brick thrown from an oncoming vehicle that left the scene and was never identified. The British Columbia Court of Appeal considered whether the brick throwing could be “isolated” from the act of driving the tortfeasor’s car along a highway and accepted the trial judge’s view that it was not possible to do so.

Here, the Supreme Court of Canada suggested that if the analysis had focused on the elements of the tort that gave rise to the tortfeasor’s liability, the fact that the brick was thrown from a car rather than a horse does not qualify it as a motoring activity. The brick throwing was an intervening act. Here, the rock throwing was an intervening act. Thus, neither the tortfeasor in Chan nor the tortfeasors in the present appeal were at fault as motorists.

A hunter was driving to his designated hunting stand when he thought he saw a deer. It was before sunrise. He stopped and got out of his truck, removed his rifle, loaded it and, seeing a flash of white in the headlights - which he concluded was the tail of a deer about to take flight - he shot. Unfortunately, he hit another member of his hunting party, the Respondent to this appeal (the "Insured"). The Respondent sued the shooter’s motor vehicle Insurer, seeking it to satisfy his judgment against the shooter.

The Supreme Court of Canada determined that the appeal turned on: (1) whether the Insured's claim was in respect of a tort committed by the tortfeasor in using his motor vehicle as a motor vehicle and not for some other purpose and (2) whether there was an unbroken chain of causation linking the Insured's injuries to the use and operation of the tortfeasor's motor vehicle.

The Courts below held the Insurer liable relying on Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405. The Supreme Court of Canada found the reasons of Amos somewhat helpful but concluded that the decision is not a template to resolve indemnity coverage because the type of insurance and the coverage requirements in Amos did not require the presence of an at-fault motorist.

In Amos, the Insurer contested no-fault liability to its Insured for statutory benefits payable “in respect of death or injury caused by an accident that arises out of the ownership, use or operation of a vehicle”.  The Insured had been attacked by a gang of strangers while he was motoring along an urban street in California. He was shot and seriously injured as he fled in his van away from the assailants, who were on foot.

In this appeal, the Court was not concerned with no-fault statutory benefits payable to an Insured. Moreover, in Amos, the focus was on the use of the Insured’s vehicle; the focus here was on the use of the tortfeasor's vehicle. The Insurer was liable in Amos because entry into the Insured’s vehicle was the objective of the attackers and the Insured driving in his van was engaged in an “ordinary and well known” activity to which his vehicle could be put.

The Supreme Court of Canada affirmed that “the ordinary and well known activities to which automobiles are put” limits coverage to motor vehicles being used as motor vehicles. Thus, for example, someone who uses his car as a diving platform cannot expect to recover for his injuries under his motor vehicle insurance policy. The tortfeasor’s use of his motor vehicle to transport him to his hunting stand was not the effective cause of the Insured’s injuries.

The Supreme Court of Canada found that the Court below erred in transferring, without modification, the discussion of causation in Amos into the different context of determining whether the liability established here on the part of the tortfeasor arose directly or indirectly out of the use of his vehicle. For coverage to exist, there must be an unbroken chain of causation linking the conduct of the motorist as a motorist to the injuries in respect of which the claim is made. While the use of the tortfeasor's vehicle “in some manner” contributed to his ability to commit the tort that caused the Insured's injuries, such contribution does not mean that the tort was committed in his capacity as an at-fault motorist.

In Chan v. Insurance Corp. of British Columbia, [1996] 4 W.W.R. 734 (B.C.C.A.), a case very similar to Vytlingam, a case decided concurrently with this one, the Insured was injured while riding as a passenger in her boyfriend’s car when she was struck by a brick thrown from an oncoming vehicle that left the scene and was never identified. The British Columbia Court of Appeal considered whether the brick throwing could be “isolated” from the act of driving the tortfeasor’s car along a highway and accepted the trial judge’s view that it was not possible to do so.

The Supreme Court of Canada suggested that if the analysis had focused on the elements of the tort that gave rise to the tortfeasor’s liability, the fact that the brick was thrown from a car rather than a horse does not qualify it as a motoring activity. The brick throwing was an intervening act. In the present case the tortfeasor “interrupted his motoring to start hunting.” Thus, neither the tortfeasor in Chan, nor the tortfeasor in the present appeal were at fault as motorists.

This was an Application by the Insured, Mr. Graham, who sought a Declaration of Coverage under the terms of his comprehensive Homeowner’s Insurance Policy (the “Policy”) with Canadian Direct Insurance Inc. (“Canadian”).

 The Insured went on a vacation and left his outdoor sprinkler system operating, assuming it was on automatic and would shut off. Earlier in the day, he had turned it to manual. By failing to reinstate the system to automatic, the sprinkler continued to operate in his absence. When the Insured returned home after the vacation, he found significant damage to the foundation of his house caused by the resulting flooding. Canadian Direct denied his request for coverage under the Policy. 

The central issue in this Application involved the interpretation of the Policy’s relevant coverage and exclusion provisions. The Policy did not provide coverage for loss or damage caused by water unless the loss or damage resulted from the sudden and accidental escape of water. The Policy contained an exclusion for loss or damage caused by continuous or repeated seepage or leakage of water. The Insured submitted that the manual escape of water was sudden and accidental. The Insurer submitted that there was no escape of water based on the Little Oxford English Dictionary which defines “escape” as to “break free from captivity or control” because the sprinkler and the control box did not malfunction so as to cause the water to “break free”. 

The Court found that the loss caused by the Insured’s mistake in failing to turn his sprinkler system to automatic before leaving on vacation did not fall within the coverage provisions of the Policy. There was no “sudden and accidental escape of water”. The water did not “escape”. Any negligence for the mishap had nothing to do with the operation of the sprinkler but with the Insured’s mistake in failing to switch the system back to automatic.  

In the result, the Court found that the Insured’s loss was not covered by the Policy. In the alternative, the Court found the loss was excluded by the Policy.

On July 10, 2006, Ms. Ibrahim, a resident of Alberta, rented a motor vehicle from a rental agency in Alberta and purchased insurance from Lloyd’s Underwriters which included benefit coverage on terms prescribed by the Alberta Standard Automobile Policy S.P.F. No. 1; which notes that:

when an Insured person suffers personal injuries of an accident occurring in a no-fault jurisdiction, the Insurer agrees to pay to the Insured person the amount that would be payable under the applicable laws of no-fault jurisdiction as if the Insured person were a resident of the no-fault jurisdiction.

No-fault jurisdiction is defined to include Saskatchewan, applicable laws were defined as follows:

when an Insured person suffers personal injuries with respect to a no-fault jurisdiction, the laws in force from time to time cover the system of no-fault automobile insurance in that jurisdiction.

On the date that the Policy came into effect and the date of the accident the limit on Saskatchewan’s no-fault insurance benefits was $500,000. After the accident amendments were made which increased Saskatchewan’s no-fault insurance benefits to $5,000,000. In addition, the legislation directed the Insurer to recalculate benefits owed to insureds using the new insurance scheme.  Lloyd’s Underwriters refused to recalculate the benefits owed to Ibrahim under the new scheme. 

Ibrahim commenced this Application for a declaration of a recalculation of the benefits owed to her under the new scheme. Klebuc C.J.S. noted that the Alberta Policy defined applicable law as “the laws in force from time to time”, which in his view, specifically contemplated that any law in place in Saskatchewan, at any relevant time, applies to the Alberta Policy, and not the laws that exist on the day the Policy was issued. If Alberta intended to fix the amount of coverage as of the date of the Policy, it should have specifically stated such an intention in the legislation or insurance Policy. Lloyd’s Underwriters was required to recalculate Ibrahim’s entitlement to benefits under Saskatchewan’s new regieme which provided a maximum entitlement of $5,000,000.

Weyerhaeuser Company Limited (“WCL”) negotiated terms and placed various insurance policies with the American International Group (“AIG”). The policies consisted of three layers: a primary layer, an umbrella layer, and an excess loss layer. The primary layer consisted of a commercial general liability Policy, which was the first insurance which would respond if there was a covered claim. The umbrella layer would respond if the claim exceeded the amount covered by the primary layer. The final coverage was an excess layer which consisted of five excess layers of insurance that would respond sequentially to claims that exceeded the umbrella layer. AIG provided WCL with the primary layer of insurance and the umbrella layer. AIG reinsured 50% of its liability under the umbrella layer with Camarin. Camarin then “retroceded” all of its 50% of share under the umbrella layer, with Swiss Re. Insurance would be paid out as follows: AIG was responsible to pay claims under the primary layer of insurance. If that was not sufficient, AIG was responsible to pay claims under the umbrella policy it issued to WCL. Once the umbrella layer was exhausted, Camarin was obliged to pay AIG 50% of what had been paid in the umbrella layer. In turn, Swiss Re, as the reinsurer of Camarin, was obligated to pay Camarin 100% of what Camarin had paid. Camarin retained no risk, and received no premiums for the relevant times. 

A class action was commenced against WCL in 1999 on the grounds that a roofing product failed and the failure caused damage to property. AIG agreed to make payments to the Plaintiff’s class action in the amount of $70,000,000. Swiss Re commenced an Action against Camarin for an Order rescinding the reinsurance policies issued to Camarin for the years 1993, 1995, and 1998 on the basis that Camarin had failed to disclose or misrepresented exposure to roofing and exterior side claims. Camarin counterclaimed against Swiss Re seeking a Declaration that the policies were valid and enforceable by Camarin. In addition, Camarin further plead that Swiss Re was obliged to follow the settlements of the underlying insurer. Camarin plead that a “follow the settlements clause” (“Clause”) was contained in a 1991 and 1992 policies and that Camarin and Swiss Re intended to include the Clause in the 1993 and 1995-1998 policies, but that this Clause was not included in those policies through a mutual mistake and the Clause should be read in - rectification of the policies. 

Camarin brought an application pursuant to Rule 18A for a determination as to whether the Clause should be written into the 1993 and 1995-1998 policies. If Swiss Re is not required to follow the settlements of AIG, then at the trial of the action, Camarin may be required to prove that each of the Plaintiff in the class action suffered damage from the roofing product and that such damage falls within the umbrella layer of insurance coverage. If Swiss Re is required to follow settlements arranged by AIG, which would happen if the Swiss Re policies are rectified to include the Clause, then the main issue remaining in the Action would be whether the Swiss Re policies are valid and enforceable, and where the settlement arranged by AIG was reasonable. 

The first policy of insurance that was issued by Swiss Re to Camarin was in 1991. Before the end of 1991, the parties agreed to renew for 1992. The offer to reinsure did not include the Clause in the wording of the policy. The renewal was noted as “as expiring”, which meant that the renewal policy would be on the same terms as the previous policy. The wording of the 1992 policy contained the Clause. As part of the 1992 renewal, Swiss Re agreed to an indefinite semi-automatic renewal of the Policy “as expiring”. The semi-automatic renewal meant that the Policy would be renewed “as expiring” unless either party cancelled within 90 days of the expiry of a particular policy term. 

The policy with Swiss Re was renewed for the 1993 Policy year, but the Clause was not contained within the wording of the policy provided for the renewal. For the 1994 Policy year, AIG offered to expand the pollution coverage in the umbrella policy. As Swiss Re did not wish to expand the pollution coverage, the excess layer was placed 100% with AIG with no reinsurance participation with Camarin or Swiss Re.

 For 1995, Swiss Re was approached to provide reinsurance. The parties negotiated a policy that was acceptable to both Swiss Re and Camarin. The policy was not a renewal, since there was no Swiss Re reinsurance policy in 1994. However, the 1993 policy was used as a precedent, therefore, the 1995 policy did not contain the Clause. Aon London reviewed the 1995 Policy to ensure it was correct, and identified several “minor” corrections that needed to be made. The absence of the Clause was not identified by either Aon London or Aon Vancouver as a mistake that needed to be corrected. The same Policy was essentially renewed “as expiring” each year until 1998. 

Burnyeat J. noted that the doctrine of rectification provides for the correction of documents where those documents inaccurately record the intention of the parties. Burnyeat J. cited with approval Hanbury & Maudsley’s Modern Equity, 15th ed., which provides the following explanation of rectification:

The crux of the remedy is proof of what the parties actually had decided at the time of reaching their agreement and not what they, or one of them, had thought at a later date, or what they might have thought if they had considered the matter in greater detail or in the light of more information than that available to them. (at p. 841)

Burnyeat J. noted that the remedy of rectification is available even where one of the parties to the instrument denies that there is a mistake. A claim for rectification based on common or mutual mistake requires the following to be established:

(a) existence and content of a prior agreement; 

(b)   a written instrument that does not reflect the true agreement of the parties; 

(c) …a common continuing intention up to the time of signature that the provision in question stand as agreed rather than as reflected in the instrument; and

(d)    the precise form in which the written instrument can be made to express the prior agreement.

Burnyeat J. noted that he could not conclude that there was a prior agreement to include the Clause in the 1993 policy. There was nothing in the negotiations leading up to the execution of the 1993 policy by Swiss Re that Swiss Re was agreeing that the policy would be renewed “as expiring”.  Once a slip or Offer to Reinsure is initialled by an Insurer, such as Swiss Re, the accepted offer to reinsure constitutes a final acceptance of the offer to reinsure. At that point, Swiss Re was bound to provide coverage in accordance with the terms of reinsurance that had been agreed to. The signed acceptance was the proof that the parties were then consensus ad idem. The signed acceptance was a requisite element of an outward expression of the common continuing intention of the parties. The Swiss Re Policies were checked carefully at Aon London, Aon Vancouver, Camarin, and WCL. No mistakes or omissions were identified during those examinations. Burnyeat J. was satisfied that there was no basis for which the rectification of the policies should be Ordered and dismissed the Application.

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.