Richard H. Krempulec

The appellants, former directors and officers, sought a declaration that their insurer was obligated to pay 90 or 100 per cent of their defence costs for civil and regulatory proceedings arising from conduct in 2001 and 2003.

The insurer had been paying 50 per cent, arguing the policy only covered the 2001 conduct.

The application judge dismissed the application.

On appeal, the Court of Appeal found the policy's allocation provisions ambiguous when read with the definition of 'Loss'.

Because the factual record was insufficient to resolve the ambiguity or determine if the doctrine of contra proferentem applied, the Court allowed the appeal and directed a new hearing on the allocation issue.

The respondent sought costs on a substantial indemnity basis following the appellant's unsuccessful appeal.

The Court of Appeal awarded costs on a partial indemnity basis, fixed at $14,000.

The Court also adjusted the motion judge's costs award, reducing the hourly rate from $350 to $225, because the respondent's counsel had a special fee arrangement with the client that was not disclosed to the motion judge.

The Court noted that counsel operating under a special fee arrangement must disclose it, and costs cannot exceed the amounts actually charged to the client.

Following the dismissal of the appellant insurer's appeal regarding its duty to defend the respondent insured, the Court of Appeal determined the scale and quantum of costs.

The court declined to award costs on a substantial indemnity basis, noting that the significant issue of insurance coverage remained to be determined at trial.

Costs were awarded on a partial indemnity basis, fixed at $11,500 for the respondent insured and $10,000 for the respondent co-insurer, inclusive of disbursements and GST.

TransCanada Pipelines Limited sued Potter Station Power Limited Partnership for damages to its compressor station caused by land subsidence, relying on an indemnity provision in their agreement.

Potter Power's insurer, Commonwealth Insurance Company, brought a summary judgment motion arguing the indemnity only covered third-party claims, not first-party losses.

The motion judge dismissed the motion, finding the indemnity language covered direct damages.

On appeal, Commonwealth argued the judge failed to apply contra proferentem and failed to find the indemnity ambiguous.

The Court of Appeal dismissed the appeal, holding that the indemnity was unambiguous and clearly extended to direct damages suffered by TransCanada, making contra proferentem inapplicable.

The appellant insurer appealed an order dismissing its motion for summary judgment to dismiss a third-party claim for indemnification and a declaration of a duty to defend.

The Court of Appeal upheld the motion judge's finding that the insurance coverage issues were not ripe for determination because the 'Completed Operations Hazard' clause was ambiguous and extrinsic evidence might be required.

The Court also upheld the declaration that the insurer had a duty to defend, as the claim was not clearly excluded from coverage.