In the Courts

Court Decisions

 

James Dick Construction v. Courtice Auto Wreckers, 2015 ONSC 5377

The insurer of a commercial tenant brought a summary judgment motion to dismiss a landlord’s claim arising from a fire that caused damage to an Ontario industrial building. The tenant had disabled the building’s fire suppression system prior to the fire and the landlord, our client, brought an action to recover for the value of its building. The tenant’s insurer sought to avoid liability on the basis of a covenant to insure in the commercial lease agreement. Despite the recent trend in favour of summary judgment, our firm succeeded in having the motion dismissed and the full case referred for trial. This case is significant in that the Court declined to exercise the fact-finding powers newly provided by our Rules for the summary judgment procedure because, among other reasons, the number of parties and claims involved rendered it imprudent to exercise these fact-finding powers. This result was achieved despite the Supreme Court of Canada’s urging the expanded use of these powers to invigorate the summary judgment procedure (see Hryniak v. Mauldin).

 

 

B&M insurer v. Property insurer, unpublished 2015

In a significant arbitration fight, our firm represented a boiler and machinery insurer in a dispute with a fire insurer over the scope of the relative coverages of the two policies and the border between them. As is becoming more typical, the insurers decided to submit the dispute to intra-industry arbitration before a senior insurance arbitrator, rather than litigating in the courts. In a private written decision, we were successful in obtaining a ruling in favour of our client’s interpretation of the coverages and the interaction between them.

 

AIG v. Canjam, 2015 ONSC 149

We successfully acted for an insurer in enforcing an arbitration clause over the policy-holder’s objection. Such clauses, requiring arbitration over litigation of insurance disputes, have become more common and the scope for escaping application of these clauses has become a hot-button issue; here, the circumstances and dispute were unusual (involving a dispute over recovery and subrogation rights after settlement of the first-party claim), but we were able to convince the court to enforce the policy arbitration clause nonetheless.

 

PCL Constructors v. Allianz Global, 2014 ONSC 7480

Our firm acted for the policy-holders in pursuing coverage for damage to metal components of a major Toronto construction project (a Maple Leaf Square building), arising from exposure to corrosive liquids. The insurer defended based primarily on exclusions. In an innovative Rule 22 (Special Case) motion, the court ruled in favour of coverage, subject to further proof with respect to the cost of making good. The case represents a precedent on new industry wording on the faulty workmanship exclusion. The insurer has appealed from the ruling in our client’s favour, to the Court of Appeal (not heard yet).

 

Lilydale v. Meyn, 2013 ONSC 5313, aff’d 2015 ONCA 281

In another instalment in a long war of attrition, the defendants attempted to knock out our clients’ subrogated and unsubrogated claims in a large fire case, this time on the basis of applicable law in tort and contract (see prior notes for comments on earlier motion fights over formal jurisdiction and then forum conveniens). The real fight was on the applicable law of the contract in a products liability context, and was brought via a major Rule 22 motion (point of law). The Motions Judge upheld our position that Ontario law was the applicable law; that finding was upheld on appeal to the Court of Appeal. Our clients’ claims are now proceeding on the merits.

 

Durling v. Sunrise Propane, 2012 ONSC 4196

Our firm successfully defended two tort defendants in a major class action arising out of a propane explosion, fire and resulting evacuation of population in Toronto, occurring on August 10, 2008. The action was certified but subsequently settled by the target defendants who were at risk.

 

Autoworkers (Ajax) Credit Union Ltd. (Liquidator of) v. CUMIS General Insurance Co., 2012 ONSC 172

Our firm successfully resisted the plaintiff’s motion for partial summary judgment in this action, in which the plaintiff was seeking coverage under its fidelity insurance bond for an off-book deposit scheme allegedly engaged in by the general manager of the plaintiff. The Court found that the factual underpinnings of the case were very complex and, to a considerable extent, obscured by the actions of the alleged fraudster. The Court noted that the parties had provided competing forensic accounting reports on the cause of the plaintiff’s alleged loss and whether it was covered under the “Dishonesty” or “Forgery” provisions of the bond (some of the issues being whether the fraudulent activities caused a “direct loss”, and whether the alleged fraudster had the “manifest intent” required for bond coverage). Based on this, the Court determined that the evidence could not be fairly evaluated on a summary judgment motion, but rather required a detailed review through viva voce testimony and cross-examination at trial. Notably, the Court relied on the decision in Iroquois Falls Community Credit Union Ltd. v. Co-operators General Insurance Co. (2009), 73 C.C.L.I. (4th) 157 (Ont. C.A.), a case in which our firm successfully represented the appellant, in denying the plaintiff’s summary judgment motion.


PCL Constructors Canada Inc. v. Encon Group, 2010 ONSC 5911

In this duty-to-defend application arising in a Toronto 'leaky condo' case, we acted for the insured general contractor (largest in Canada) in successfully requiring the CGL insurer to pay for the defence to date, and for future defence costs. The case involved a notable dispute over the scope of coverage under modern CGL wording involving damage to an insured's own work, damage due to faulty workmanship and damage to the project during the competed operations period.

This was one of the first subsequent cases to discuss and apply the leading Supreme Court of Canada case of Progressive Homes v. Lombard, 2010 SCC 33.


Portuguese Canadian Credit Union Ltd. v. CUMIS General Insurance Co., 2010 ONSC 6107

Our firm represented the defendant fidelity insurer in successfully challenging the plaintiff`s motion to have a number of questions of law determined before trial under Rule 21 of the Rules of Civil Procedure. This case involved a claim by the plaintiff for indemnity under its fidelity insurance bond, which was denied by the insurer on the basis that the bond was void ab initio because of material misrepresentations in the bond application.

The Court accepted all of our arguments that a motion to determine the questions posed by the plaintiff was inappropriate, holding that: (i) the motion was premature, given that the insurer had yet to file a statement of defence and therefore the scope of the dispute between the parties was yet to be defined; (ii) the plaintiff was inappropriately asking the Court to validate its cause of action based on hypothetical or disputed facts; (iii) the determination of the motion would not end the litigation or a substantial part of it, given that the lis between the parties had yet to be defined; and, (iv) unsettled matters of law (in this case, regarding a fraud exception to the imputed knowledge rule regarding agents and principals) should not be decided at the interlocutory stage of a proceeding.


Aviva Insurance Co. of Canada v. Regional Hose Toronto Ltd., 2010 ONSC 1228

Our firm successfully represented a Commercial General Liability (CGL) insurer on an application for a declaration that the insurer had no duty to defend Regional Hose. In the underlying action, the plaintiff alleged that Regional Hose supplied defectively-manufactured components for gearbox housing for a windmill project. The insurer successfully relied on jurisprudence establishing that defective manufacture does not constitute an “occurrence” within the meaning of CGL coverage. We overcame several creative arguments by the insured, which sought to distinguish between damage caused by the original defective manufacture of the components and damage resulting from the subsequent failure of those components, once incorporated into the gearbox.

The decision is also notable for two procedural rulings, both of assistance to insurers. First, the insured attempted to introduce an affidavit from its president purporting to explain the “true facts” relating to the components. We successfully brought a preliminary motion to have this affidavit struck out on the basis that it was not proper evidence on a duty to defend application. Secondly, the Court rejected the insured’s attempt to rely on its statement of defence in the underlying action as “clarifying” the allegations in the statement of claim. The Court held that only the statement of claim was relevant in determining the duty to defend.


Iroquois Falls Community Credit Union Ltd. v. Co-operators General Insurance Co.(2009), 73 C.C.L.I. (4th) 157 (Ont. C.A.)

Our firm successfully represented the appellant fidelity insurers on an appeal from a summary judgment granted to the Deposit Insurance Corporation of Ontario (DICO) under a failed credit union’s fidelity bond. DICO, as liquidator of the credit union, alleged that the credit union’s general manager had engaged in a decade-long fraudulent scheme to remove money from the credit union and to make improper loans and other extensions of credit to credit union members. On DICO’s summary judgment motion, the motions judge held that the manager and employees had engaged in a single collusive scheme over that period and that all losses alleged by DICO were therefore covered. The motions court did not address the insurers’ contention that the credit union’s board had notice of the losses through a series of government inspection reports throughout the 1990s. The motions judge also held, relying on his own characterization of the manager’s conduct as a single collusive scheme, that it was unnecessary for DICO to prove the manager’s manifest intent with respect to each individual transaction. This effectively relieved DICO of the requirement of demonstrating manifest intent with respect to each loss claimed under the fidelity bond.

 

Our firm was retained to conduct the appeal. On appeal, we successfully argued that (i) it was inappropriate for the motions court to make a finding of a single collusive scheme on a summary judgment motion; (ii) the state of the directors’ knowledge, and whether they had notice of any of the alleged losses, should only be determined at a trial; (iii) in applying the manifest intent requirement of the fidelity bond, the focus must be on the defaulter’s intent in doing the very act(s) that cause each alleged loss.

 

The decision of the Court of Appeal also provided guidance with respect to the interpretation and application of the Direct Loss requirement for coverage; the requirement of a Dishonest Act; the Termination condition; the Notice of Loss condition; and the Unfaithful Performance exclusion. As a result of the insurers’ successful appeal, the whole case was ordered on for trial.


PCL Constructors Canada Inc. v. Lumbermens Mutual Casualty Co., 2009 CanLII 32915 (Ont. S.C.)

Acting for a large commercial insured, we successfully applied for a declaration that the insurer had a duty to defend the insured in an underlying action, which alleged construction deficiencies. Our firm successfully invoked the Products-Completed Operations Hazard exception to the “insured’s own work” exclusion to successfully demonstrate that there was a possibility of coverage for property damage alleged to have occurred after the insured’s completion of its work.

 

We also sought and obtained an order that the insurer fund defence counsel mutually agreeable to the insured and insurer, on the basis that some of the allegations in the underlying action might fall outside of coverage. The Court provided a protocol for defence counsel and for insurance claims personnel with respect to the handling of a defence in these circumstances. This type of order is believed to be the first of its kind in Canadian common law jurisdictions.


Lilydale Cooperative Limited v. Meyn Canada Inc. (2007), 84 O.R. (3d) 621 (S.C.J.), aff'd 2008 ONCA 126

Our firm acts for the plaintiff, which is seeking approximately $18,000,000 in damages resulting from a catastrophic fire that occurred at its chicken processing facility in Edmonton, Alberta. We have brought a recovery action against the European manufacturers and the Ontario supplier of a large gas-fired thermic oil heater, which is alleged to have malfunctioned and caused the fire. Although the fire occurred in Alberta, we commenced suit in Ontario (where the supplier is located) because of the harsh Alberta Limitations Act scheme, which may have applied to bar a lawsuit on the basis that the cause of action was proscribed before the fire even occurred. One of the defendants brought a motion to stay the Ontario action on the basis that Alberta, not Ontario, was the forum conveniens. We successfully blocked this defence strategy both before the Superior Court of Justice and the Court of Appeal.

 

This decision is at the cutting edge of inter-jurisdictional limitations law – in its new and revised form – in Canada. This case also involves significant issues of fire causation, proof and calculation of damages, and conflict of laws - all typical of large, multi-jurisdictional products liability litigation.


Radvar v. Canada (Attorney General), et al, 2007 ONCA 137

Our firm was successful in securing the dismissal of a $3 million action for punitive damages launched against our client Chubb Insurance by an insured who alleged breaches of his privacy rights in connection with the investigation of an earlier theft loss claim. The insurer had settled litigation arising from the theft claim, obtaining execution of a standard form of release. In a subsequent action commenced by the insured against the insurer, the insurer’s investigator and the federal government (the source of the private information alleged to have been illegally acquired), the insured sought unsuccessfully to avoid the implications of his release by arguing that “new facts” had come to light subsequent to execution of the release. On a summary judgment motion, and through effective cross-examination of the insured on his responding affidavit, we were successful in securing a dismissal of the action, with a substantial costs award being made in favour of our client. The dismissal was upheld by the Court of Appeal, which recognized that the insured was seeking “to ignore a bargain he made with full knowledge of the very same circumstances that existed when he agreed to and entered into the bargain”.


Somerset Specialties Ltd. v. Keith Strub Construction Ltd., 2006 CarswellOnt 4336 (S.C.J.)

Our firm successfully represented the plaintiff in a subrogated action through a two-week trial, ultimately obtaining a judgment totaling $1.25 million, based on a finding of negligence by the defendant. A fire had substantially destroyed premises owned by the plaintiff, a magazine distribution facility. The defendant, a construction company and tenant in the building, had been sawing wood on its premises earlier that day. The defendant’s liability insurer denied any causal relationship between that work and the fire. The favourable decision by the trial judge turned on two points:

1) The evidence presented on the activities and events immediately surrounding the fire was crucial to the evaluation of the competing liability theories advanced by the parties;

2) In a classic “battle of the experts” involving the effective presentation of complex expert evidence, the liability theory advanced by our client was ruled to be the best explanation of, and the most consistent with, the findings of fact made by the judge concerning the activities and events at the time of the fire.


Royal Bank v. Société Générale (Canada) (2006),31 B.L.R. (4th) 63 (Ont. C.A.), leave to appeal ref'd (2005), 376 N.R. 400n (S.C.C.)

The largest fidelity insurance claim ever litigated in Canada, this case involves a notorious $100 million loss caused by an equipment leasing fraud perpetrated by Roman and Loren Koval and involving their King’s Health Centre in Toronto. A recovery action between banks operating in Canada proceeded together with the insurance claim. The proceeding under appeal was a marathon summary judgment effort brought by the defendant banks who lent the money that was stolen; it consumed 9 days of argument at the motions court level, plus another 2 days before the Court of Appeal. We acted for two of Canada’s major insurers, defending a coverage denial to Royal Bank of Canada under its financial institution bond; as such, we have participated in the banking issues on a sort of “intervenor” basis, largely supporting RBC’s position.

 

At the motions court level, there was mixed success as the defendant banks managed to get some of RBC’s claims struck out. The entire argument was repeated before the Court of Appeal in October, 2006 and decision was reserved.

 

On December 21, 2006, the Court of Appeal rendered its decision, dismissing in their entirety the summary judgment motions brought by the defendant banks; the practical effect of this decision was to allow Royal Bank of Canada a full opportunity to argue all aspects of its case at trial.

 

The decision was also an important statement on summary-judgment practice in the Ontario courts (prior to the 2010 revisions to the summary judgment rules), essentially confining the proper scope of such motions significantly.


Workers' Compensation Board v. Lettroy (2006), 272 D.L.R. (4th) 125 (Ont. C.A.)

Our firm pursued subrogation recovery arising out of an employee fidelity loss, obtaining judgment and execution against various parties. In the course of the recovery effort, we obtained the somewhat unusual order for “equitable execution” against the defaulter’s pension monies, once payable. Before the pension monies became payable, the defaulter died and his beneficiaries laid claim to the funds. In a major proceeding before Justice Day, we obtained an order that directed the pension monies – by then approximately $500,000 – to our client. The beneficiaries appealed and the Court of Appeal established new law in the relevant areas, to redirect the monies to the beneficiaries.


Alavie v. Chubb Insurance Co. of Canada (2005), 195 O.A.C. 7 (C.A.)

Through motions to compel full disclosure and a well-focused investigation, our firm developed evidence of forged documents and false statements by the insured. On a summary judgment motion, we were successful in obtaining the dismissal of the plaintiff’s $1 million claim (plus punitive damages) and secured the first clear declaration from the Ontario Court of Appeal affirming the common law principle that any fraud on the part of an insured will result in forfeiture of the entire claim.


Commonwealth Insurance Co. v. Intercon Security Ltd. (2005), 78 O.R. (3d) 159 (S.C.J.)

On a summary judgment motion, our firm was successful on behalf of a CGL insurer in obtaining the dismissal of defence and indemnity claims of approx. $2 million based on a finding that thefts of cash from an ATM did not constitute “damage to or destruction of or loss of use of tangible property.”


Torchia v. Royal Insurance Co. of Canada (2003), 49 C.C.L.I. (3d) 202 (Ont. S.C.J.), aff'd (2004), 10 C.C.L.I. (4th) 16 (Ont. C.A.), leave to appeal ref'd (2005), 334 N.R. 191n (S.C.C.)

Our firm successfully obtained summary judgment dismissing an insured’s claim on the basis of an arson defence. Our firm then successfully maintained the result before the Court of Appeal. This case raised the issue of whether an insured (in this case, the wife, who was also the named insured) could recover under property insurance despite a criminal act - arson - by another insured (the husband) that caused the fire. In discussing the innocent insured's claim, both courts reaffirm the enforceability of the intentional-act exclusion dealt with in the leading case of Scott v. Wawanesa, [1989] 1 S.C.R. 1445.


Alie v. Bertrand & Frere Construction Co., Lafarge (2002), 62 O.R. (3d) 345 (C.A.)

Our firm acted for the only insurer that was entirely successful in this appeal, arising from a claim for coverage for indemnity and defence expense for a company that supplied defective concrete used in the construction of over 140 homes in Eastern Ontario in the 1980s. This is a leading appellate court statement on the issues of trigger of CGL coverage and allocation of defence expense.


 

 

 

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