Court File and Parties
COURT FILE NO.: CV-21-668621 DATE: 20230414 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: LIVE NATION ONTARIO CONCERTS GP, INC. and ONTARIO PLACE CORPORATION, Applicants AND: AVIVA INSURANCE COMPANY OF CANADA and AVIVA CANADA INC., Respondents
BEFORE: Koehnen J.
COUNSEL: Kurt K. Pereira and Avi Sharabi, for the Applicants Dennis Ong, for the Respondents
HEARD: January 24, 2023
Endorsement
Overview
[1] This application arises out of a dispute between the parties about which of two insurance policies should govern the applicants’ defence costs in a related claim. The applicant argues that a policy issued by the respondents should apply. The respondents argue that their policy should be responsible for one half of the defence costs while the remaining half should be covered by the applicants’ insurance policy.
[2] The respondents take this position based on language in their policy that they say makes their policy an excess policy which only applies when the applicants’ policy is exhausted. The respondents note that the applicants’ policy contains similar language. In those circumstances, the respondents submit that courts have applied principles of equitable contribution to divide responsibility between the two policies.
[3] I disagree with the respondents’ position and find that it is their policy that is initially responsible for defence costs in the related action, subject to the respondents’ right to apply for a specific apportionment based on the results of a trial or settlement. Principles of equitable allocation do not apply here. The policies of the parties do not exclude each other. The precise language of the respondents’ policy and the commercial reason underlying such policies makes clear that the respondents’ policy is to respond to the claim, at least initially. I therefore grant the application.
Factual Background
[4] The applicant, Live Nation Ontario Concerts GP Inc. is the operator of a concert stage known as the Budweiser Stage at Ontario Place in the city of Toronto. Ontario Place is owned by the Crown in right of Ontario which has designated administration of Ontario Place to the respondent Ontario Place Corporation.
[5] A concert occurred at the Budweiser Stage on September 1, 2016. Live Nation had contracted security for the concert to Northwest Protection Services LTD (“NWP”).
[6] It appears that during the course of the concert, personnel of NWP removed an unruly patron from the event. In doing so they are alleged to have struck and injured another concertgoer named Tara Nimmo.
[7] As a result of those events, Ms. Nimmo commenced a separate action against Live Nation, NWP, and others. Although the statement of claim in that action contains a long list of allegations, including over-crowding the venue and over-serving alcohol, it is clear that the essence of the claim relates to Ms. Nimmo being struck by NWP personnel while they were removing the unruly patron.
The Contractual Arrangements
[8] The contract between Live Nation and NWP (the “Live Nation contract”) required NWP to have liability insurance in which Live Nation was named as an additional insured. Section 5 a of the Live Nation contract provides:
Supplier shall procure and maintain, as applicable, during the Term, all customary and prudent insurance coverage naming the LN Parties as Additional Insured with respect to the operations of the Named Insured, including: …
(ii) Commercial General Liability insurance subject to limits of not less than $1,000,000 per occurrence for any bodily injury and/ or property damage claims, ….
Policy (ii) shall cover assault and battery and does not expressly exclude abuse and molestation. Coverage naming the Additional Insured shall be on a primary basis irrespective of any other insurance, whether collectible or not, to the extent of Supplier's liability as described in this Agreement. …
[9] Three salient points emerge from this provision:
i. NWP will carry insurance which covers its liability, for among other things, assault and battery.
ii. That insurance shall name Live Nation as an additional insured with respect to NWP’s operations.
iii. The policy naming Live Nation as an additional insured shall cover Live Nation on a primary basis regardless of any other insurance.
[10] As required by the Live Nation contract, NWP had a Commercial General liability insurance policy. That policy was issued by the respondents, Aviva Insurance Co. of Canada and Aviva Canada Inc. (collectively “Aviva”). Section II.5 of that policy, includes as an insured under the policy:
Any person or organization with whom you have entered into an "Insured contract" where it is a condition of that Insured contract" that you purchase and or maintain insurance such as is afforded by this Coverage Form that will protect such person or organization, but only with respect to liability arising out of operations performed by you or on your behalf under the "Insured contract". …
[11] Live Nation is an additional insured under the Aviva policy because, just as this passage from the Aviva policy requires, it is a condition of the Live Nation contract that NWP purchase insurance that will protect Live Nation against liability arising out of NWP’s conduct under the Live Nation contract.
[12] The term “Insured contract” is defined under section VI.20 (g) of the Aviva policy as:
That part of any other contract or agreement pertaining to your business … under which you assume the tort liability of another party to pay for "compensatory damages" because of "bodily injury" or "property damage" to a third person or organization, provided the "bodily injury" or "property damage" is caused, in whole or in part, by you or by those acting on your behalf.
[13] The Live Nation contract falls within this definition because it is a contract under which NWP agrees to assume the tort liability of Live Nation to pay damages for bodily injury to Ms. Nimmo if her bodily injury is caused in whole or in part by NWP. NWP’s obligation arises from the indemnity provision in section 6.A of the Live Nation contract which provides:
To the fullest extent permitted by law, Supplier expressly agrees to indemnify, defend and hold harmless LN Parties from and against any and all claims or loss arising out of any violation of any law, rule, regulation or order, and from any and all claims or liabilities, including reasonable attorneys fees, for loss, damage or injury to persons or property of whatever kind or nature arising from the acts or omissions of Supplier, its parents, partners, affiliates, subsidiaries, successors or assigns and each of their respective agents, employees, representatives and contractors.
[14] As a result of the foregoing language in the Live Nation contract and the Aviva policy, Live Nation is an additional insured under the Aviva policy and is owed a defence under that policy for Ms. Nimmo’s claim.
Arguments and Analysis
[15] Aviva submits that it should be responsible for only 50% of Live Nation’s defence costs. It bases its argument on the fact that Live Nation has its own insurance policy with Starr Indemnity and Liability Company which Aviva submits should also provide coverage.
[16] Live Nation submits that there is no other insurance policy because the Starr policy has a self-insured retention of $1 million. A self-insured retention is, in effect, a deductible. As a result, the Starr policy does not become active until Live Nation has paid the first $1 million in costs and/or damages. I do not accept that argument. It is clear that courts have found that self-insured retentions do not mean that an insured has no coverage but merely that, as a matter of contract, the insured has agreed to assume a certain amount of the insured risk. [1]
[17] Next, Live Nation notes that section IV. B of the Starr policy provides that the policy “is excess over any of the other insurance whether primary, excess, contingent or on any other basis.” In other words, the Starr policy would not kick in until the Aviva policy has been exhausted.
[18] Aviva submits that its own policy has a similar provision in section V.9(b). Aviva then argues that courts have dealt with situations where two competing policies purport to be excess by applying the concept of equitable contribution and requiring that both policies bear the risk equally until the lower policy limit is exhausted, at which point the policy with the higher limit will be liable for any remaining amounts up to the limit of the higher policy. [2]
[19] I do not agree that principles of equitable contribution are applicable here. Both the language of the Aviva policy and the general commercial concept of adding parties as additional insureds militate against such a finding.
[20] Turning to the language of the Aviva policy, Aviva, as noted, relies on section V.9(b). I will address that language momentarily. That language must, however, be read in the context of the policy as a whole. The section on which Aviva relies is preceded by section V.9 (a) which provides:
- Other Insurance
If other valid and collectible insurance is available to the Insured for a loss we cover under Coverages A, B, D or F of Section III, our obligations are limited as follows:
a) Primary Insurance
This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. below.
[21] The starting point in section V.9(a) is that the Aviva policy is a primary policy. It only becomes an excess policy if the conditions in section V.9(b) come into play.
[22] Section V.9(b) provides that the Aviva policy is excess over:
- Any other primary insurance available to you covering liability for "compensatory damages" arising out of the premises or operations or products completed operations for which you have been added as an additional Insured by attachment of an endorsement. (emphasis added)
[23] The “you” in this provision refers to NWP. [3] In other words, if NWP has been added as an additional insured in another policy, then Aviva’s policy is excess to the other policy in which NWP has been added as an additional insured. NWP has not been added as an additional insured to the Starr policy. The Live Nation contract did not require Live Nation to add NWP as an additional insured to Live Nation’s insurance. It required NWP to add Live Nation as an additional insured to NWP’s policy. As a result, section V.9(b) does not even come into play in the circumstances of this case.
[24] The equitable contribution cases on which Aviva relies do not involve situations where one party has contractually agreed to provide insurance for the other. Nor would adopting equitable contribution in these situations be consistent with the commercial concept of adding parties as additional insureds.
[25] In most cases, contracts that call for one party to be added as an additional insured to the other party’s insurance do so because the additional insured is retaining the insured to do work which has the potential to create liability for the additional insured. That was the very case here. Live Nation hired NWP to carry out security work. Carrying out security work has the potential to create liability. It is NWP that has the most control over how it carries out its operations and whether it carries out its operations in a manner that reduces the risk of liability. Live Nation has little, if any, control over that risk. It therefore makes commercial sense for NWP to assume that risk and to protect Live Nation from the risks arising out of NWP’s operations, just as NWP protects itself from those risks by carrying commercial general liability insurance.
[26] Section 5 of the Live Nation contract required that the additional insured coverage NWP was to provide Live Nation “shall be on a primary basis irrespective of any other insurance…” The contractual intentions of Live Nation and NWP were therefore clear. NWP’s insurance would provide primary coverage to Live Nation.
[27] The Aviva policy reflects these fundamental principles. Recall that section V.9(b)(2) provides that the Aviva policy is excess over
any other primary insurance available to you covering liability for "compensatory damages" arising out of the premises or operations or products completed operations for which you have been added as an additional Insured by attachment of an endorsement. (emphasis added)
[28] In other words, if NWP is added as an additional insured to another policy, then the Aviva policy becomes an excess policy for NWP. That makes commercial sense. If NWP has been named as an additional insured under the policy of another, it is because NWP wanted to shift risk from itself to the other party with whom it was contracting; presumably because the other party was better able to control that risk than was NWP.
[29] This was the commercial context in which Aviva provided additional insured coverage under the NWP policy. It knew, or ought to have known, that NWP conducts the sort of business operations in which NWP’s clients would demand insurance and indemnification from NWP. Aviva expressly provides that coverage. If courts were to accede to Aviva’s request and adopt principles of equitable contribution in these circumstances, Aviva would be relieved of the contractual bargain it made with NWP. It would no longer be liable for additional insured contracts. It would be liable only for one half of the additional insured’s liability. That is not what the Aviva policy says and that is not consistent with the commercial concept underlying the inclusion of additional insureds in commercial general liability policies.
[30] This court reached a similar result in Dufferin Construction v The Dominion of Canada, 2015 ONSC 6311 at para. 26, where the insurer of the party in NWP’s situation made a similar argument. The court dismissed that argument noting:
However, the project-specific Dominion contract, which Downsview was required to obtain pursuant to the subcontract with Dufferin and under which Downsview was to have Dufferin named as an added insured with respect to liability arising from Downsview's operations, was stipulated to be primary. It is commercially reasonable to assume that the parties, both sophisticated in the industry, intended by incorporation of that provision adding Dufferin as an added insured in the Downsview subcontract, that Dufferin would be insured under the Downsview project-specific policy for all operations arising from Downsview's work on the project covered by the insurance policy. Moreover, if in the circumstances of this case, the respondent’s arguments were to succeed, this would render the added insured provision in the Dominion policy of little value.
[31] As noted earlier, Ms. Nimmo’s claim makes allegations that go beyond the strict conduct of NWP although it is clear that the claim is based on the allegation that she was struck by NWP personnel who were removing an unruly patron.
[32] In those circumstances, it is most appropriate to require Aviva to pay 100% of past and future defence costs subject to Aviva’s right to apply to re-apportion those costs at the end of a trial or settlement. That claim to re-apportionment would ensure that the Aviva policy is not responsible for costs that are attributable solely to issues that do not relate to NWP’s conduct. [5]
Quantum of Defence Costs
[33] Live Nation claims past defence costs in Ms. Nimmo’s action which, at the time the notice of application in this matter was issued stood at $67,908.93. Aviva contests this amount and submits that reasonable costs should come to $30,000. Aviva does not explain why its figure is appropriate and Live Nation’s is not.
[34] It is generally accepted that legal fees in circumstances such as this should be indemnified fully. [6] Live Nation was entitled to a defence without expense to it. Aviva had the opportunity to provide that defence from an early stage. It declined to do so. Having declined to do so, it would not be appropriate to allow Aviva to start second-guessing the costs Live Nation incurred. Especially not in circumstances where Aviva submits that the fee should be reduced but provides no basis for the reduction.
Live Nation Counsel Going Forward
[35] Aviva submits that if it is required to provide defence and indemnity, it asks that Live Nation’s current counsel be removed and be replaced with counsel of Aviva’s choice. Although Aviva raised the spectre of conflict on the part of Live Nation’s counsel in argument before me, Aviva was content to have Live Nation’s current counsel continue if Live Nation had agreed to a 50-50 sharing of defence costs. In those circumstances, I am not satisfied that there is good reason to remove Live Nation’s counsel.
[36] It may, however, be appropriate to implement some or all of the elements of the “split file protocol” that the Court of Appeal set out in Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239. [7] If the parties cannot agree on that, I will make myself available to resolve any such issues by way of a case conference.
Costs of this Application
[37] I was given no reason that costs should not follow the event. The general principle in coverage disputes is that the party who obtains an order entitling it to defence costs should receive full indemnity costs. The whole point of the exercise is to have the applicant defended at no expense to itself. [8]
[38] The applicant seeks full indemnity costs of this application which it asks me to fix at $20,078.30. The respondents’ substantial indemnity costs came to $25,628.40. In those circumstances there can be no issue about the reasonableness of the applicants’ costs. Costs are fixed at $20,078.30 including disbursements and HST payable by the respondents to the applicants.
Koehnen J. Released: April 14, 2023
