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

The Defendants were involved in building an addition to the church building owned by the Plaintiff society. The Defendants were alleged to have caused a fire during the course of the building project which burned the church down. The Plaintiff society settled with its insurer for indemnity for the damage caused by the fire, and the insurer commenced a subrogated action in the name of the Plaintiff society against the Defendants. The Defendants then applied for a declaration that they were insureds under the contract of insurance between the Plaintiff society and its insurers, pursuant to the Commercial Policy and Builders Rider, and thus entitled to indemnification against subrogation.

The Court held that there were three stages to the Defendants' application: the first was the determination of whether the insurers bore a duty to defend the Defendant; the second and third were the indemnification and subrogation issues, the determination of which the Court held would require a trial. The duty to defend, however, could be determined on the application. The Court found that the duty to defend and to indemnify against the costs of an action does not depend upon the judgment obtained in the action. Accordingly, the duty to defend is much broader than the duty to indemnify against a judgment. The Court held that there was a reasonable probability that the Defendants would be found to be insureds under the Plaintiff society's insurance policy, and therefore the insurer was compelled to provide the Defendants with a defence.

This was an appeal by a Third Party from a motion judge's decision. The Plaintiff operated a Pharmacy in premises leased from the Defendants. The lease agreement provided that all of the lessee's policies of insurance were to contain a waiver of subrogation for the benefit of the lessor. The Plaintiff sustained water damage to its inventory and office equipment when water escaped from one of the pipes in the leased premises' sprinkler system.

The Plaintiff filed with its insurer, which paid out in full settlement of the claims. The insurer then commenced a subrogated action in the name of the Plaintiff against the Defendants. The Defendants raised the lease provision as a complete defence to the claim and issued a third party notice to the law firm that had prepared the lease agreement, claiming indemnity in the event that the lease failed to protect the Defendants from the claims advanced in the underlying action. The Defendants then applied, under Rule 23 of the New Brunswick Rules of Court for a judicial determination as to whether, by virtue of the lease agreement, the Plaintiff could pursue its claims. The motion judge held that the lease agreement did not preclude the subrogated action. The Third Party law firm appealed.

In interpreting the lease clause purportedly barring the subrogated action, the Court was mindful of the fact that the clause was taken verbatim from a New Brunswick statute, which is enacted in both English and French. As a result, the Court had to take a nuanced approach in interpreting the contract, as some of the traditional principles of contractual interpretation, such as the contra preferentum rule, could not apply. The Court found that the motion judge had erred in finding that the lease agreement did not preclude the subrogated action. Rather, the Court held that the lease operated to “effectuate a loss-bearing scheme that bars the underlying subrogated action in nuisance and negligence.”

The Plaintiff, a Brampton, Ontario resident, was an owner/operator for an American trucking company located in Texas. As is common with trucks that travel through various jurisdictions, his tractor was insured by double policies of insurance. Clarendon National Insurance provided the physical damage coverage and American Home Assurance provided the liability coverage.

The Plaintiff was involved in a collision on Highway 401 in Toronto. His tractor suffered physical damage and Clarendon, subject to the policy’s deductible, paid for that damage. The Plaintiff and Clarendon commenced an action in Ontario, alleging that the collision was caused by the Defendant’s negligence and sought reimbursement of the amounts paid to repair the tractor, together with interest and costs. The Defendants filed a Statement of Defence claiming that the Plaintiff’s action was barred by s. 263 of the Insurance Act, which replaced the tort system that resolved automobile damage claims prior to its enactment. In the new statutory scheme, insureds can no longer sue the driver whose negligence has caused damage to their vehicles. Rather, their own liability Insurers pay for the damage to the extent that they were not at fault under the third-party liability section of their motor vehicle liability policies. Insureds can recover the at-fault portion of their damage by purchasing collision coverage. Insurers have no right of subrogation for payments to their own insureds but do not have to pay the subrogated claims previously brought by other insurers in the tort system. The net result is that the statutory regime eliminates the transaction costs that were inherent in the tort system.

Two questions arose in this appeal. First, is the Plaintiff entitled to maintain a tort action in negligence against the individual tortfeasor? Second, does the Insurer have a subrogated claim against the individual tortfeasor? In this case, the Plaintiff’s liability Insurer was statutorily required to provide coverage for his property damage. The three criteria of s. 263(1) were met: the Plaintiff’s vehicle suffered damage from an accident in Ontario, his vehicle was insured by an Insurer that had filed an undertaking with the Superintendent, and another vehicle involved in the accident was insured by a domestic Insurer licensed to undertake automobile insurance in Ontario. Consequently, the Plaintiff was entitled to recover for the physical damage to his tractor from his liability Insurer. Because the statutory regime applied, the Plaintiff’s ability to sue in tort was restricted by the provisions of s. 263. The Plaintiff could not maintain a tort action in negligence against the Defendant. The only exception to this general rule permits a right of action where an action is brought “under an agreement, other than a contract of automobile insurance”. It permits an action in contract and does not permit an action in tort. This exception will apply, for example, where a provision of a lease agreement requires that the lessee return the vehicle to the lessor in an undamaged state. Where the lessee failed to do so, the lessor can bring an action against the lessee in contract.

An Insurer’s right to bring a subrogated action is dependent on the existence of a cause of action by the Insured. This is so both under the common law and pursuant to statute. The Court found that s. 263 does not disturb this common law and statutory principle.

The insured, a young boy on his bicycle was injured when a vehicle driven and owned by non-Manitoba residents struck him. The Manitoba Public Insurance Corp (“MPIC”) paid the insured compensation pursuant to the amounts prescribed in the Manitoba Public Insurance Act. MPIC wanted to recover the amounts paid and the future amounts payable from the non-resident defendants without the restraints of tort principles like remoteness, foreseeablity and causation. The non-resident defendants argued that MPIC could not recover more than it could in a tort action, since the recovery was to be based on the principle of subrogation.

The Appellate Court accepted the argument of the non-resident defendants and found that since the governing provision used the term “subrogated”, the Legislature must have intended that the Insurer could acquire the rights of the injured party, but no more. The Appellate Court held that the right of MPIC to recover from the non-resident defendants was subject to the usual common law principles of remoteness, foreseeability, and causation.

A condominium development was being built in four stages: A, B, C, and D. The Insured was the developer, controller, manager, and interim board of Stage C. The Insured also owned one residential unit and one parking space of that stage.

The condominium development was damaged in a fire allegedly started by a subcontractor, for whom the Insurer argued the Insured was vicariously liable. The Insurer paid out the full fire loss, and then sued the Insured to recover over $25,000,000 of that payment.

The Court noted that the type of insurance at issue was fire or all risk. This type of insurance is no-fault. The Court also noted that the law is well settled that the Insurer has no subrogation rights against an Insured no matter how negligent the Insured was. The Court found that departure from the usual rule against subrogation was unwarranted and would open a floodgate to excess litigation.

This was a motion by the Plaintiff, Mr. Lange, for a determination of a question of law pursuant to Rule 21.01(a). The question was whether the Plaintiff had a right of subrogation against the Defendant, Mr. Mann, for damages sustained to his camper trailer (the "Camper Trailer") and its contents. The parties were involved in a motor vehicle accident in which the Defendant collided with the Plaintiff who was towing his Camper Trailer.

The damage to the Plaintiff’s truck was paid under a motor vehicle liability policy; however, the damage to the Camper Trailer and its contents was paid under a Holiday Trailer/Park Model policy which is not a motor vehicle liability policy within the meaning of the Insurance Act (the "Act"). Section 278 of the Act provides that if an insurer makes any payment under a contract of insurance, it is subrogated to all rights of recovery of the insured against any person and may bring an action in the name of the insured to enforce those rights. The Camper Trailer was an "automobile" as defined by the Act and as such, the direct compensation provisions of the Act applied. Section 263(5)(b) of the Act eliminates the right of subrogation for payments made to a party insured under the direct compensation section but does not eliminate the right of subrogation for payments made to an insured pursuant to a policy of insurance other than a motor vehicle liability policy.

 The Court found that because the Holiday Trailer/Park policy under which the damage to the contents of Mr. Lange’s Camper Trailer was paid, was not a motor vehicle liability policy, the Plaintiff’s Insurer was not barred by s. 263 of the Act from advancing a subrogated claim arising out of such damages.

In this case, the Court was asked to determine a preliminary issue regarding the interpretation of two insurance policies. The Applicants, Condominium Corp. 981 and Condominium Corp. 001 were two of the Plaintiffs in an action brought against the developer and general contractor of the Waterford Buildings, Statesman Corporation (“Statesman”). It was alleged that a fire which damaged the Waterford Buildings was caused by the negligence of an employee of a company subcontracted by Statesman to provide construction services. The Applicants were required by the Alberta Condominium Property Act to place and maintain insurance against loss resulting from destruction or damage caused by a variety of perils including fire. The applicable bylaws required that they each obtain and maintain “all risks” insurance, including fire, and that a waiver of subrogation be provided against various entities including the unit owners. At the time Statesman acted as a developer, it also owned units in the buildings damaged by fire. 

The Insurers who paid out the full amount of the loss sought to recover approximately $25 million, standing in the shoes of the Applicants by way of a subrogated action.

The first issue was whether Statesman was entitled to the benefit of the waiver of subrogation. The Court found that because the subrogation provision did not include Statesman in its capacity as a contractor, the policies were not intended to cover the business activities of the unit owners, and Statesman was not entitled to the benefit of the waiver of subrogation.

The second issue was whether Statesman could be subrogated against, as an Insured under the policy. The Court stated that s. 25(3) of the Condominium Property Act expressly provided that a condominium corporation may bring an action against an owner. Because the condominium corporations are capable of bringing the action, so too are their insurers and Statesman could therefore be subrogated against as an Insured under the policy.

The third issue was whether the risk of loss or damage by fire was transferred from Statesman to the Plaintiff corporations pursuant to a covenant in the bylaws to provide and obtain insurance coverage. The Court found that in its capacity as the general contractor, Statesman was not a party to the bylaws and the covenant to insure therefore did not extend to Statesman in its role as general contractor. Accordingly, Statesman qua contractor was barred from relying on the covenant.

In the result, the Court found that the provisions of the Act, the Bylaws, and the policies did not bar the Applicants’ claim against Statesman and the Applicants were entitled to subrogate against Statesman.

The Landlord of an industrial warehouse structure entered into a commercial lease agreement with a Tenant. A fire started in the premises leased by the Tenant causing substantial damage to the building. The Tenant admitted negligence in the handling and storage of flammable chemicals. The Landlord carried insurance on the leased premises and passed the pro-rated cost of this insurance on to the Tenant. Much of the damage and loss resulting from the fire was covered by the Landlord’s insurance. The Landlord’s Insurers commenced an action against the Tenant.

The Court noted that it was a well-established principle that the question of whether or not a subrogated claim against a tenant can proceed is determined by the lease, and not by the insurance policies: see Ross Southward Tire Limited v. Pyrotech Products Limited, [1976] 2 S.C.R. 35. In Pyrotech, the majority of the Supreme Court of Canada decided that the subrogated Insurer was in the same position as the Landlord with respect to its rights to sue the Tenant. The decision is based upon the interpretation of the lease as to the allocation of risk between those two parties.

The Court set out the following principles extracted from the Supreme Court of Canada’s decision:

1)   Where a landlord covenants to insure, the tenant gains the benefit of that insurance unless there is an explanation to the contrary in the lease. If the covenant is not specific in describing the insurance, the court will consider what a standard policy covers. If the landlord obtains insurance beyond what is required by the lease, the tenant does not obtain the benefit of that extra insurance.

2)   Where a tenant covenants to pay for insurance to be purchased by the landlord and the landlord presents a bill to the tenant listing the amounts owing for insurance premiums and the tenant pays the bill, the tenant receives the benefit of whatever insurance policies the tenant reimbursed the landlord for, unless the lease should be taken as denying the tenant any benefits from those obligatory outlays.

In this case, the Court found that the Tenant had agreed to pay for insurance to be placed by the Landlord, including fire insurance. The Tenant was presented with a bill for the premiums and paid for the insurance pursuant to the lease. In these circumstances, the Court held that a subrogated claim against the Tenant could not proceed. The Court rejected the argument by the Landlord’s Insurers that the lease requirement that the Tenant obtain general liability coverage for the property including the Landlord as a named Insured on the policy altered the finding with respect to the allocation of risk as between the parties.

In the result, the subrogated action commenced by the Insurer of the Landlord was barred from proceeding.

At trial, a police officer and an unidentified driver of another vehicle were found to be equally responsible for an accident that killed an auxiliary police officer and injured the Plaintiffs. The police officer and the Attorney General of Canada (the "RCMP Defendants") and ICBC were each held to be 50% jointly and severally liable. ICBC had been named as a nominal defendant in the tort action by virtue of s. 24 of the Insurance (Motor Vehicle) Act, which applies to hit and run situations when a driver or vehicle is unidentified.

In this proceeding, the RCMP Defendants brought an application for contribution and indemnity from ICBC based on s. 4(2)(b) of Negligence Act, after they had paid the entire amount of the Plaintiffs’ damages. ICBC took the position that, as a matter of social welfare policy, s. 24 provides limited and specific statutory relief to injured victims of hit and run drivers. ICBC submitted that participating in the action as a nominal defendant and the subsequent finding that it was jointly and severally responsible for the Plaintiffs’ damages, did not render ICBC "at fault" within the meaning of s. 4(2)(b) of the Negligence Act.

The Court concluded that the phrase "nominal" defendant meant that ICBC was named in place of the real or actual party in order for the fault of that person to be determined. Further, ICBC’s involvement under this section was said to stand in "entire contrast to something real or substantial" and was simply to provide an injured victim of an unidentified driver the means to statutory compensation. As such, the RCMP Defendants were not entitled to contribution and indemnity from ICBC under the Negligence Act.

The Defendants argued that the Ministry knowingly participated in a trial fraught with risk and was a full participant in the litigation. The Court noted that the Ministry did no more than forward a few pieces of correspondence and did not attend or participate in the trial in any way. Accordingly, the Trial Judge could not have found that the Ministry was an equal partner in the litigation and to assess costs against the Ministry in the manner requested by the Defendants would be unfair and unreasonable. The Court of Appeal therefore dismissed the appeal.

This was an appeal by the Defendant, Wawanesa Mutual Insurance Co. ("Wawanesa") from a cost award after a jury dismissed the Plaintiff’s claim. The Plaintiff had claimed against its insurer, Wawanesa, for negligent, unfair and deceptive acts and practices in the adjustment of their insurance claim following a fire that destroyed their home. The Ministry of Health and Long-term Care (the "Ministry") had brought a subrogated claim against the Defendants for the cost of insured services received by the Plaintiffs following the fire; however, the claim was withdrawn half-way through the trial. The trial judge fixed Wawanesa’s costs at $565,000 and those of the remaining Defendants at $490,000. While the Defendants had sought to have costs awarded jointly and severally against the Plaintiffs and the Ministry, the trial judge held that only the adult Plaintiffs were liable for the Defendants’ costs.

The issue was whether the Ministry should pay the costs of the successful Defendants. The Ministry had joined the action to pursue their subrogated interest for $8,057 that represented health benefits received by the Plaintiffs following the fire. The Ministry did not attend at trial nor did it participate in any way.