Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20211022 DOCKET: C68870

Hourigan, Huscroft and Coroza JJ.A.

BETWEEN

Carmen Scaffidi-Argentina, Michaelangelo Scaffidi-Argentina, Sheila Scaffidi-Argentina and Marissa Scaffidi-Argentina Plaintiffs

and

Tega Homes Developments Inc. , Goodeve Manhire Inc. , Goodeve Manhire Partners Inc. , Paterson Group Inc. and the City of Ottawa Defendants ( Appellant / Respondents )

Counsel: Robert Emblem and William Plante-Bischoff, for the appellant Elizabeth K. Ackman and Sean D. McGarry, for the respondents

Heard: October 8, 2021 by video conference

On appeal from the order of Justice Charles T. Hackland of the Superior Court of Justice, dated October 30, 2020, with reasons reported at 2020 ONSC 6656, 8 C.C.L.I. (6th) 223.

Reasons for Decision

[1] The respondents served as an engineering consultant and subcontractor on a construction project in the City of Ottawa. The appellant was the owner and developer of the project and was insured under a wrap-up liability policy which contained a waiver of subrogation clause. Adjacent property owners (the “plaintiffs”) sued the parties arising from damages caused by excavation work on the project. The plaintiffs filed a statement of claim and their own property insurer, State Farm Fire and Casualty Company (“State Farm”), indemnified part of the damages sought in the claim. State Farm thus became subrogated to part of the plaintiffs’ claim against the parties. The plaintiffs later recovered an amount from the appellant’s insurer.

[2] In response to the claim, the appellant filed a statement of defence and crossclaim. The crossclaim against the respondents sought contribution and indemnity in respect of any amounts it might be found liable to pay to the plaintiffs. The respondents then brought a summary judgment motion requesting that the crossclaim be dismissed on the basis that they were insured under the appellant’s policy and the crossclaim was prohibited by the waiver of subrogation clause in the policy.

[3] The motion judge granted the motion and dismissed the appellant’s crossclaim. He concluded that the respondents were “additional insured” under the policy and were entitled to the waiver of subrogation provided for in the policy.

[4] In this appeal, the appellant repeats the same argument made before the motion judge – that the policy does not bar it from asserting a subrogated claim for indemnity against the respondents because they are not covered under the policy for the professional services claims brought by the property owners. According to the appellant, the respondents have coverage for professional services claims from their own insurer, yet, the motion judge’s decision requires it to nevertheless cover the loss because of the waiver of subrogation clause. The appellant submits that such a decision results in a windfall for the respondents, is commercially unreasonable, and ignores the relevant surrounding circumstances.

[5] We reject the appellant’s argument.

[6] The policy was a standard form contract. The surrounding circumstances generally play less of a role in the interpretation of these types of contracts of adhesion because the parties do not negotiate the terms, and the contract is put to the receiving party as a “take it or leave it” proposition: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at paras. 25, 32.

[7] It was agreed that the respondents were an engineering consultant and subcontractor. As such, the respondents were within the definition of additional insureds under the policy and although the policy specifically excluded coverage for professional liability, the appellant contracted out of any right of subrogation against all insureds (including additional insureds) under the policy. The motion judge observed that it would have been open to the appellant to have changed the wording of the policy, perhaps by altering the scope of the subrogation waiver or the definition of additional insured, to reflect the professional services coverage exclusion. We agree with the motion judge’s conclusion that it was not his function to restructure the commercial contractual arrangement agreed upon by these sophisticated parties to achieve what might be considered a fairer result. The motion judge noted that since there were no project agreements between the parties pertaining to insurance coverage, the policy must speak for itself.

[8] The motion judge interpreted the policy in accordance with the guidance set out by the Supreme Court of Canada in its decision in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at paras. 22-24. Reading the contract as a whole, the language of the policy is unambiguous and the motion judge was required to give effect to the clear language set out in the policy. We are in substantial agreement with his reasons.

[9] The appellant also argues that the motion judge erred in assuming that the crossclaim was a subrogated claim. To support this point, the appellant advanced two main submissions in oral argument.

[10] First, the appellant contends that the crossclaim was filed before its insurer made any payment to the plaintiffs, and the payment that was subsequently made was not to settle the appellant’s liability since no trial determining liability has taken place yet. The appellant thus argues that the crossclaim never became a subrogated claim because its insurer made no payments pursuant to a policy obligation. We disagree. The appellant’s insurer made payment to the plaintiffs after damages were assessed at the damages trial and in exchange for a full and final release. The release explicitly refers to the damage amount being consideration for the settlement of the issue of liability advanced by the plaintiffs. In settling with the plaintiffs, the appellant’s insurer was dealing with a liability issue, notwithstanding the fact that the crossclaim remained to be determined.

[11] At its core, the dispute between the parties on the crossclaim was whether the appellant could recover the payment of money from the respondents. It is self-evident that any recovery on the crossclaim would have been paid to the appellant’s insurer to cover the settlement amount. The act of seeking indemnity from a third party such as the respondents for payments is, by definition, subrogation.

[12] Second, the appellant submits that the crossclaim was not a subrogated claim because the appellant has made no payment to State Farm for its subrogated portion of the plaintiffs’ claim. We do not accept this submission. The appellant is the only defendant remaining in the action. Thus, the only party State Farm can obtain judgment against is the appellant. Indeed, in oral argument it was acknowledged that State Farm has obtained a judgment against the appellant for this payment: Scaffidi-Argentina v. Tega Homes Developments Inc. et al., 2021 ONSC 3223, appeal as of right filed, C69482. The appellant’s submission is an argument with respect to timing. A payment to State Farm may not have been made yet, but that does not change the nature of the claim being made by the appellant against the respondents. Again, the only way it can seek recovery is by subrogation.

[13] The motion judge was correct to consider the appellant’s crossclaim a subrogated claim. He did not err in dismissing the crossclaim in its entirety.

[14] The appeal is dismissed. Costs for the appeal are awarded to the respondents in the agreed upon amount of $25,000 all-inclusive.

“C. W. Hourigan J.A.”

“Grant Huscroft J.A.”

“S. Coroza J.A.”