Court of Appeal for Ontario

Date: 2019-11-01

Dockets: C66784 & C66777

Panel: MacPherson, Pepall and Lauwers JJ.A.

Docket C66784

Between

Ryan Reeb Applicant (Respondent)

and

The Guarantee Company of North America and The Co-operators General Insurance Company Respondents (Appellants)

Docket C66777

And Between

Royal & Sun Alliance Insurance Company of Canada Applicant (Respondent)

and

The Guarantee Company of North America and The Co-operators General Insurance Company Respondents (Appellants)

Counsel

David J. Strangio, for the appellants The Guarantee Company of North America and The Co-operators General Insurance Company

Mark M. O'Donnell, for the respondent Royal & Sun Alliance Insurance Company of Canada

Myron W. Shulgan, Q.C., for the respondent Ryan Reeb

Heard: October 23, 2019

On appeal from: the judgment of Regional Senior Judge Bruce G. Thomas of the Superior Court of Justice, dated March 14, 2019, with reasons reported at 2019 ONSC 1584.

Reasons for Decision

[1] The judgment under appeal comprises two matters that have a common set of reasons.

[2] The parties in court file C66784 are Ryan Reeb and The Guarantee Company of North America and The Co-operators General Insurance Company. The application judge's order declares that the respondent insurance companies "have a duty to defend the applicant, Ryan Reeb, in an action commenced by James Riley, as plaintiff, against Ryan Reeb and others as Court File 8882/12 in London, Ontario."

[3] The parties in court file C66777 are Royal & Sun Alliance Insurance Company of Canada ("RSA") as applicant, and Guarantee and Co-operators as respondents. The application judge's order repeats the duty to defend language from the companion application and adds that "the respondents will each pay to the applicant, Royal & Sun Alliance Insurance Company of Canada, an equal one-third of the defence costs and disbursements for the defence of Ryan Reeb in the action, Court File 8882/12 from the date of this judgment forward." Guarantee and Co-operators appeal both orders.

[4] We dismiss the appeals, because we agree substantially with the reasons of the application judge.

Extrinsic Evidence and Pleadings

[5] First, the application judge declined to consider extrinsic evidence about whether Mr. Reeb's conduct was intentional so as to bring it within the intentional act exclusion in the relevant insurance policies. His conduct is presented in the pleadings as negligence only. The application judge, at para. 31, properly applied Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699, on the basis that "[t]he extrinsic evidence sought by the respondents to be considered here is evidence created after delivery of the claim and extrinsic to its content." The application judge, at para. 34, properly distinguished Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, on the basis that on the bare facts the negligence allegation in the Scalera pleading was completely untenable. That is not true of this pleading in which the negligence claim is tenable.

[6] Second, we agree with the application judge that the assessment of the nature and quality of Mr. Reeb's conduct, which he described at para. 25 as occurring "in the context of a 'game' played by two 14-year old boys", is best left for trial. The application judge, at para. 28, was right to rely on Halifax Insurance Company of Canada v. Innopex Ltd., 72 O.R. (3d) 522, for the principle that an application should not be permitted to become "a trial within a trial".

RSA's Application and Cost-Sharing

[7] We turn to RSA's application, which was for declarations that Guarantee and Co-operators respectively have a duty to defend Mr. Reeb, and for a declaration that they are obligated to pay to RSA an equal one-third share of ongoing defence costs and disbursements incurred in Mr. Reeb's defence, going forward. The application judge found that Guarantee and Co-operators respectively have a duty to defend Mr. Reeb and ordered that the three insurance companies having a duty to defend were obliged to share the costs equally going forward.

Appellants' Arguments

[8] Guarantee and Co-operators make three arguments in the factum and in oral submissions. First, they argue that RSA's application for contribution to the defence costs is statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B because RSA's application was brought over two years after the insurers refused to defend Mr. Reeb.

[9] Among other things, RSA argues that the duty to defend is an ongoing obligation to be applied on a "rolling" basis: Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179, 395 D.L.R. (4th) 679, at para. 38. Since RSA only seeks contribution on a going forward basis, no limitation period attaches. We agree.

[10] Guarantee and Co-operators' second argument is that RSA's application also exceeds the specific contractual limitation periods found in their respective insurance policies. We reject this argument; the insurance policies at issue are not business agreements under s. 22(5) of the Limitations Act, because the policy holders are consumers: Daverne v. John Switzer Fuels Ltd., 2015 ONCA 919, 128 O.R. (3d) 188, at para. 21.

[11] Guarantee and Co-operators' third argument questions the need for an order identifying the share of costs to be paid by each insurer. We agree with RSA that the equal respective shares were properly set according to the principles in General Accident Assurance Co. of Canada v. Commissioner of Ontario Provincial Police Force et al., 64 O.R. (2d) 321, at para. 16, and in Broadhurst & Ball v. American Home Assurance Co., 1 O.R. (3d) 225, at paras. 28, 40. How the insurers decide to carry out their duties to defend is something for them to work out going forward.

Disposition and Costs

[12] The appeals are dismissed. Guarantee and Co-operators will pay costs to counsel for Mr. Reeb at the substantial indemnity scale in the amount of $14,800 all-inclusive, based on the principle in M.(E.) v. Reed, 49 C.C.L.I. (3d) 57, at para. 22. See also: Hanis v. University of Western Ontario, 42 C.C.L.I. (4th) 65. Guarantee and Co-operators will pay costs to RSA in the partial indemnity amount of $7,700, all-inclusive.

J.C. MacPherson J.A.

S.E. Pepall J.A.

P. Lauwers J.A.