Rajesh Kumar Datt

The Court of Appeal for Ontario dismissed Surefire Dividend Capture, LP’s appeal from the Superior Court’s decision denying insurance coverage for losses suffered in a Ponzi scheme perpetrated by Brenda Smith, CEO of Broad Reach Capital, LP.

The court held that the fidelity bond did not cover losses caused by fraudulent acts of a sub-advisor’s directing mind, as the bond’s language did not extend “Employee” status to such individuals.

The court also found no coverage for “Theft of Customer Property” because SDC no longer had a property interest in the funds once invested in BRC.

The trial judge’s interpretation of the bond was entitled to deference, and no reversible error was found.

SureFire Dividend Capture LP (SDC) sought indemnification from Berkshire Hathaway Specialty Insurance under a fidelity bond for losses incurred due to a Ponzi scheme perpetrated by Brenda Smith, manager of Broad Reach Capital, LP (BRC), in which SDC had invested.

SDC claimed coverage under three insuring agreements (A)(1), (A)(4), and (B)(1)(b) of the Bond.

The court found that SDC failed to establish that its loss fell within the initial grant of coverage under any of the agreements, primarily because the stolen funds belonged to BRC, not SDC or its investors, and Brenda Smith was not an "Employee" of SDC as defined by the Bond for the purposes of SDC's direct claim.

The court also noted that SDC failed to disclose a material "in-kind" transfer of interests from other funds to SDC, which would have excluded coverage for that portion of the loss.

SDC's claim for punitive damages for bad faith was also dismissed.

The defendant insurance broker brought a motion for security for costs against the plaintiff, a Delaware limited partnership with no assets in Ontario.

The plaintiff was seeking over $46 million in damages for denied coverage under a fidelity bond.

The court found that the plaintiff was a foreign resident, a nominal plaintiff, and had insufficient assets to satisfy a costs award.

Applying a holistic approach, the court ordered the plaintiff to post security for costs in the amount of $525,000.

The plaintiffs' home was severely damaged by a fire while undergoing renovations.

The plaintiffs alleged the fire was caused by the spontaneous combustion of stain-soaked rags left by the defendant painting subcontractor, and sought to hold the general contractor vicariously liable.

The court found that the plaintiffs failed to prove the cause of the fire on a balance of probabilities, accepting the painter's evidence that he did not leave rags in the home and noting that electrical arcing could not be ruled out as a cause.

The court declined to draw an adverse inference against the defendants for failing to call another fire investigator.

The action was dismissed, though damages were assessed at $1,348,939.91 in the alternative.

The appellant tenants suffered $7,000,000 in water damage after a vandal opened a fire hose in an area used by the respondent independent contractor.

The tenants sued the contractor for negligence.

The contractor moved for summary judgment, arguing it was protected by a waiver of subrogation clause in the commercial lease between the tenants and the landlord, which extended to those for whom the landlord was 'in law responsible'.

The Court of Appeal upheld the summary judgment, finding that the landlord was in law responsible for the contractor due to an indemnity provision in the lease, and that the contractor met the Fraser River test to benefit from the clause as a third party.

A contractor brought a motion for summary judgment seeking dismissal of a tenant’s subrogated claim for water damage caused by vandalism in a shopping mall.

The tenant argued the contractor negligently failed to secure a construction area that allowed a trespasser to access a fire hose, causing flooding.

The contractor relied on a lease clause containing a mutual release and waiver of subrogation between landlord and tenant extending to parties “for whom the landlord is responsible in law.” Applying the principles from Fraser River and London Drugs, the court held the parties intended the waiver to extend to contractors performing renovation work for the landlord.

The court concluded the contractor fell within the protected class and that the claim was barred, making a trial unnecessary.

The defendant, Terex Corporation, sought leave to appeal an order dismissing its motion for summary judgment.

The plaintiffs sued for injuries sustained in a forklift accident, alleging that Terex assumed the product liabilities of the original manufacturer through an asset contribution agreement and a share purchase agreement.

Terex argued that the doctrine of privity of contract prevented the plaintiffs from relying on the agreements and that successor liability did not apply.

The Divisional Court found no reason to doubt the correctness of the motion judge's conclusion that there was a genuine issue for trial regarding successor liability, particularly under the express assumption theory.

The motion for leave to appeal was dismissed.

The appellant appealed a Small Claims Court decision granting judgment to her insurance broker for an unpaid retained premium.

The appellant had cancelled a policy placed by the broker after finding significantly cheaper coverage through another broker.

She alleged the original broker was negligent in failing to investigate or advise her of the cheaper alternative.

The Divisional Court allowed the appeal, finding the trial judge made palpable and overriding errors of fact regarding the broker's efforts to contact the alternative insurer.

Applying Fletcher v. Manitoba Public Insurance Co., the court held the broker breached her stringent duty to provide information and advice.

The action for the unpaid premium was dismissed.

The defendant Terex Corporation sought leave to appeal to the Divisional Court from an order dismissing its appeal of a Master's order.

The Master had granted the plaintiffs leave to amend their statement of claim to add Terex as a defendant after the presumptive limitation period had expired, leaving the issue of discoverability for trial.

The court found no reason to doubt the correctness of the order below and dismissed the application for leave to appeal, awarding agreed costs of $3,500 to the plaintiffs.

The insured was securing a boat to a trailer attached to his van using a bungee cord.

The cord snapped and injured his friend's eye.

The friend sued the insured.

The insured had three insurance policies: an automobile policy with Axa, a boat liability policy with Dominion, and a homeowner's policy with Co-Operators.

Axa and Dominion appealed the application judge's decision regarding coverage.

The Court of Appeal dismissed the appeals, holding that the Axa automobile policy must respond because securing the boat was an ordinary activity related to the use of the vehicle.

The Court also upheld the finding that Dominion's policy provided only excess coverage for both indemnity and defence costs, and that the Co-Operators policy explicitly excluded the claim.