The National Gallery of Canada v. Lafleur de la Capitale Inc. et al.

[Indexed as: National Gallery of Canada v. Lafleur de la Capitale Inc.]

Ontario Reports

Court of Appeal for Ontario

Rouleau, van Rensburg and L.B. Roberts JJ.A.

September 6, 2017

137 O.R. (3d) 481 | 2017 ONCA 688

Case Summary

Insurance — Insurer's duty to defend — Applicant applying for declaration that insurer had duty to defend actions against applicant — Application judge granting application in brief reasons which failed to address exclusion clauses or nature of allegations made against applicant in statement of claim — Application judge's reasons inadequate and not permitting meaningful appellate review.

The applicant retained the respondent Lafleur for landscaping and maintenance services and required Lafleur to add it as a named insured under its comprehensive general liability policy with the respondent Intact. The applicant was added as an additional insured, but only insofar as its legal liability arose vicariously out of Lafleur's operations in connection with its landscaping and snow removal services. The policy contained exclusions for workers' compensation claims and claims arising out of an employer's liability for injuries to employees incurred in the course of their employment. When an employee of Lafleur died while carrying out maintenance work at the applicant's premises, two actions were commenced against the applicant by the employee's spouse and other family members. The applicant applied successfully for a declaration that Intact had a duty to defend the actions. The respondents appealed.

Held, the appeal should be allowed.

In his brief reasons, the application judge did not conduct the necessary analysis of the pleadings, maintenance contract and policy. He failed to address the exclusion clauses, or the fact that the statements of claim did not explicitly plead fault or negligence on the part of Lafleur and vicarious liability of the applicant for such fault or negligence. His reasons were inadequate and did not permit meaningful appellate review.

Cases Referred To

• Carneiro v. Durham (Regional Municipality), 2015 ONCA 909
• G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Co., 2017 ONCA 298
• Heston-Cook v. Schneider, 2015 ONCA 10
• Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49
• Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33
• R. v. M. (R.E.), 2008 SCC 51
• R. v. Sheppard, 2002 SCC 26

Statutes Referred To

• Family Law Act, R.S.O. 1990, c. F.3

Procedural History

APPEAL from the judgment of C. MacLeod J. of the Superior Court of Justice dated October 13, 2016.

Counsel:

• Kelly Hart, for appellants
• Mark Charron and Stephanie Doucet, for respondent

Overview

[1] The appellants appeal from an order requiring the appellant Intact Insurance Company ("Intact") to assume and fund the respondent's defence to two actions.

[2] Under a contract between the respondent and Lafleur de la Capitale Inc. ("Lafleur") for landscaping and maintenance services at the respondent's premises (the "maintenance contract"), the appellant Lafleur was required to add the respondent as a named insured under its comprehensive general liability ("CGL") policy. Lafleur's CGL policy was with Intact. This policy provides for coverage of not less than $5 million per occurrence of bodily injury or property damage.

[3] A January 21, 2014 endorsement to the policy adds the respondent as an additional insured "but only insofar as [its] Legal Liability arises vicariously out of the operations of [Lafleur] in connection with [its landscaping and snow removal services]".

[4] The CGL policy contains numerous exclusions. Relevant to these proceedings are the exclusions for workers' compensation claims and claims arising out of an employer's liability for injuries to employees incurred in the course of employment.

[5] In August 2013, an employee of Lafleur, Conrad Lafrenière, tragically suffered fatal injuries in the course of his employment. He was carrying out maintenance work on a vehicle ramp located on the respondent's premises. When a vehicle approached to enter the underground garage, Mr. Lafrenière stepped back towards the ledge of the ramp and fell.

[6] The two underlying actions were commenced against the respondent by the spouse of the late Mr. Lafrenière (the "Arsenault action") and other family members bringing claims under the Family Law Act, R.S.O. 1990, c. F.3 (the "Lafrenière action").

[7] The respondent brought an application for an order and declaration that Intact and Lafleur are obliged to provide and fund its full defence in the underlying actions, relying on the terms of the maintenance contract and the CGL policy.

[8] While the application judge's reasons state that both appellants have a duty to defend, the order appealed from declares only that Intact has a duty to defend. It is trite law that an appeal is from the formal order and not the reasons: Heston-Cook v. Schneider, 2015 ONCA 10, at para. 12. The parties agree that the issue of whether Lafleur has a duty to defend is not before us.

[9] The appellants submit that the application judge's brief reasons do not permit meaningful appellate review. Further, they assert that the claims in the two actions are not covered when the pleadings, maintenance contract and policy are considered. Even if the plaintiffs' claims are covered under the initial insuring agreement, the appellants argue that the claims are nevertheless excluded because they are effectively workers' compensation claims brought on behalf of the late employee and his survivors against his employer, Lafleur.

[10] To dispose of this appeal, it is necessary to deal with only the first issue. For the reasons that follow, we agree that the application judge's reasons are inadequate and do not permit meaningful appellate review. In his brief reasons, the application judge did not conduct the necessary analysis of the pleadings, maintenance contract and policy, which were essential in this complex case, to address the coverage issue. We are also concerned that we did not have the benefit, in the appeal to this court, of full argument on all matters that are relevant to the disposition of the application. As a result, we allow the appeal and remit the application for a new hearing before a different judge.

Analysis

Adequacy of Reasons

General Principles

[11] It is well established that a judge is required to give reasons sufficient to permit meaningful appellate review of the correctness of the decision. This means that the judge's reasons must allow the parties and the appellate court to discern why the judge reached his or her conclusions on key issues in circumstances which require an explanation: R. v. Sheppard, 2002 SCC 26, at paras. 28 and 46.

[12] The critical question is whether what the judge has stated is sufficiently intelligible in the context of the record, the issues and the submissions of counsel, to show that the judge has seized the substance of the matter and has addressed the critical issues that he was required to decide: R. v. M. (R.E.), 2008 SCC 51, at paras. 37, 43 and 57.

Application

[13] In the present case, the application judge was required to decide whether or not Intact owed the respondent a duty to defend the Arsenault and Lafrenière actions. To determine this issue, the application judge had to undertake a detailed analysis of the pleadings, the insurance policy, including the endorsement, and the maintenance contract, in the context of the following questions:

(i) whether the plaintiffs showed that the loss at issue is covered under the terms of the policy;

(ii) if the loss is covered, whether Intact demonstrated that an exclusion applies; and

(iii) if an exclusion applies, whether the plaintiffs established that there is an exception to the exclusion.

See G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Co., 2017 ONCA 298, at paras. 13-14.

[14] The application judge's reasons for finding that a duty to defend the respondent is invoked are contained in the following paragraphs:

I am of the view that the duty to defend is engaged because at least some of the allegations in these pleadings if proven could relate to issues of maintenance or of measures that should have been taken in the cause of maintenance. Accordingly there will be a finding that the duty to defend is engaged and that the respondents must fund the defence in the first instance.

This is subject to a right to seek to recover costs if ultimately liability is found only for aspects of the claim that are outside the scope of coverage. This issue is a live issue in the third party proceeding.

[15] The respondent submits that although brief, the application judge's reasons reveal that he was alert to the relevant legal principles to be applied in his consideration of whether Intact owed the respondent a duty to defend.

[16] First, the application judge alludes in his reasons to the leading test for determining whether there is a duty to defend, namely, that if at least some of the allegations in the pleadings were proven to be true and relate to issues of maintenance under the maintenance contract between Lafleur and the respondent, they could fall within the applicable insurance coverage and Intact would be required to defend those claims: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, at para. 19; Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, at paras. 28-29.

[17] Further, the application judge's reasons also reference the following principles: coverage is not excluded for an entire action where only some of the claims in the pleadings are covered; and Intact could be required to defend the Arsenault and Lafrenière actions in their entirety and then seek an apportionment of its defence costs at the end of the proceedings to the extent that they deal solely with any uninsured claims: Carneiro v. Durham (Regional Municipality), 2015 ONCA 909, at para. 28.

[18] The difficulty with the respondent's submissions is that, while the application judge's reasons advert to the relevant principles, he did not engage in any analysis of the critical issues that had to be addressed and resolved in the application of these principles to the present case. The conclusion that "some of the allegations . . . could relate to issues of maintenance" did not address the following, which in our view (and without suggesting in any way how the application should be determined) are relevant and material to the determination of coverage in this case:

• The allegations in the Arsenault and Lafrenière actions, while similar, are not identical. For example, the Arsenault statement of claim specifically frames the context of Mr. Lafrenière's accident as a workplace accident, which on its face invokes the relevance of the exclusion clauses in the policy for workers' compensation and employer's liability.

• The statements of claim do not explicitly plead fault or negligence on the part of Lafleur and vicarious liability of the respondent for such fault or negligence. The allegations in both actions could be read as allegations directly against the respondent for negligence in relation to structural or design defects, which appear to have nothing to do with its vicarious liability for the acts and omission of Lafleur under the maintenance contract for which coverage is provided under the policy. The analysis should consider the relevant provisions of the maintenance contract, the policy and the endorsement in determining the true nature of the claims and the scope of coverage.

• The CGL policy contains exclusions, in particular for "any obligation of the Named Insured under a workers' compensation . . . law" and for "bodily injury" to an "employee" of the insured arising out of and in the course of employment. The potential application of either or both of these exclusions should be considered.

Disposition

[19] In our view, it is not appropriate for this court to determine whether Intact has a duty to defend the respondent. We lack a full argument on all of the essential points. Important issues relevant to the duty to defend, which may have far-reaching effect beyond the interests of the parties to these proceedings, were not fully argued.

[20] Accordingly, we allow the appeal, set aside the order of the application judge and order the rehearing of the application by a different judge.

[21] The appellants, as the successful parties, are entitled to their partial indemnity costs of the appeal in the agreed-upon amount of $5,000, inclusive of disbursements and HST. We reserve the costs of the original hearing of the application to the judge rehearing the application.

Appeal allowed.

Notes

1 As the statement of claim notes, the action is brought as a subrogated action in the name of the plaintiff by the Workplace Safety and Insurance Board.

End of Document