Minto Developments Inc. v. Carlsbad Paving et al.

109 O.R. (3d) 711
2012 ONSC 1574

Ontario Superior Court of Justice,
Kershman J.

March 8, 2012

Insurance -- Insurer's duty to defend -- Applicant contracting with respondent to maintain applicant's property and to remove ice and snow from property -- Respondent contractually required to maintain liability insurance, to add applicant as additional insured and to indemnify applicant for costs incurred as result of respondent's operations -- Applicant sued by person who slipped and fell on ice -- Insurer having obligation to defend applicant as claim was essentially claim in negligence for damages for slip and fall on ice -- Respondent having duty to indemnify applicant.

Minto was being sued for damages for injuries sustained in a slip and fall caused by ice and slippery conditions on a parking lot near the applicant's property. Minto had a contract with Carlsbad requiring Carlsbad to maintain the premises. The contract specifically covered snow removal and ice control. Carlsbad was contractually required to indemnify Minto for all costs incurred by Minto arising out of or connected with Carlsbad's operations, to maintain a comprehensive general liability insurance policy and to add Minto as an additional insured. Carlsbad obtained liability insurance from Intact. Minto was added as an additional insured. Carlsbad and Intact refused to take over Minto's defence in the underlying action. They argued that there was no duty to defend because the statement of claim in the underlying action involved claims that did not fall within the coverage, and that those claims were equally formidable and stood on their own. Minto brought an application for a declaration that Intact and Carlsbad were obliged to defend and indemnify it.

Held, the application should be granted.

The true nature of the overall claim was a claim for negligence based on the plaintiff's slip and fall on ice in a parking lot. It was Carlsbad's responsibility under the contract to keep the parking lot clear and to deal with ice control issues. Intact had a duty to defend Minto, and Minto had a right to be indemnified by Carlsbad.

APPLICATION for a declaration that the respondents had a duty to defend and indemnify the applicant.

Cases referred to
Cadillac Fairview Corp. v. Jamesway Construction Ltd., [2011] O.J. No. 2182, 2011 ONSC 2633, [2011] I.L.R. I-5161;
RioCan Real Estate Investment Trust v. Lombard General Insurance Co. (2008), 2008 16073 (ON SC), 91 O.R. (3d) 63, [2008] O.J. No. 1449, [2008] I.L.R. I-4693, 62 C.C.L.I. (4th) 152, 166 A.C.W.S. (3d) 965 (S.C.J.), apld

Other cases referred to
Atlific Hotels and Resorts Ltd. v. Aviva Insurance Co. of Canada (2009), 2009 24634 (ON SC), 97 O.R. (3d) 233, [2009] O.J. No. 2005, 73 C.C.L.I. (4th) 294, [2009] I.L.R. I-4842 (S.C.J.);
Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, 68 D.L.R. (4th) 321, 107 N.R. 321, J.E. 90-643, 39 O.A.C. 63, 45 C.C.L.I. 153, [1990] I.L.R. Â1-2583 at 10058, 20 A.C.W.S. (3d) 699;
R.W. Hope Ltd. v. Dominion of Canada General Insurance Co., 2000 50991 (ON SC), [2000] O.J. No. 2143, [2000] O.T.C. 426, 20 C.C.L.I. (3d) 38, [2000] I.L.R. I-3845, 97 A.C.W.S. (3d) 766 (S.C.J.)

Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.01(1)

Kelly Fitzpatrick, for applicant.
Kelly P. Hart, for respondents.

KERSHMAN J.: -- Introduction

[1] An application was brought by Minto Developments Inc. ("Minto") for a declaration and order that the respondents, Carlsbad Paving ("Carlsbad") and Intact Insurance ("Intact"), are obliged to provide and fund the full defence of Minto in Ontario Superior Court action number 11-50631 (the "underlying action"). The application also seeks a declaration and order that Carlsbad and Intact are obliged to indemnify Minto for the liability attributable to Carlsbad in the underlying action.

Factual Background

[2] Minto owns a residential property at 1218 Meadowlands Drive, Ottawa, Ontario and is a defendant in the underlying action. The plaintiff in the underlying action, Jennifer Therkelsen ("Ms. Therkelsen"), is seeking damages for injuries that she sustained due to ice and slippery conditions on a parking lot near the residence. Carlsbad had a contract with Minto requiring it to maintain the premises, including but not limited to winter maintenance services ("contract").

[3] Carlsbad was required to perform snow clearing, snow removal and ice control on roadways and parking lots in accordance with the contract.

[4] Pursuant to clause 2.1 of Schedule "B" of the contract, Carlsbad was required to ensure that adequate plowing and clearing was done prior to salting so that roads, parking lots, ramps and driveways were maintained in a safe and open condition at all times.

[5] In relation to ice control, Carlsbad was to supply and apply salt, sand or pea stone to the roads, parking lots, ramps, entrances to the car ports and driveways whenever freezing conditions occurred in accordance with clause 4.1 of Schedule "B".

[6] All ice control materials, equipment and labour were to be supplied by Carlsbad in accordance with clause 4.4 of Schedule "B".

[7] Carlsbad agreed to indemnify and save harmless Minto for all actions, awards, judgments and proceedings for personal injury, expenses and costs, including legal fees, suffered or incurred by Minto arising out of or in any way connected with the operations of Carlsbad, in accordance with clause 1.5 of Schedule "A" to the contract.

[8] Carlsbad was required to keep in force for the duration of the contract, among other types of insurance, a comprehensive general liability insurance policy with limits not less than $2 million and Minto Developments Inc. and/or the landlord and/or the condominium corporation was to be added as additional insureds with respect to Carlsbad's operations under the contract, in accordance with clause 1.6 of Schedule "A". This insurance was to apply as primary and not excess insurance.

[9] A Commercial General Liability insurance policy ("CGL") was issued by Intact (previously known as ING Insurance Company) to Carlsbad bearing policy number 50110299 (the "Intact policy").

[10] The certificate of insurance in respect of the Intact policy indicates that Minto Management Ltd. was added as an additional insured on the certificate of insurance with respect to the operations performed by Carlsbad under the contract.

[11] On May 12, 2010, following the slip and fall in the parking lot involving Ms. Therkelsen on February 26, 2009, Margaret Crawford, an independent adjuster representing Minto, wrote to Michelle Frost of Intact advising that the contract between Minto and Carlsbad contained a hold harmless agreement by which Carlsbad agreed to hold Minto harmless with respect to incidents related to the operations of the contractor. Ms. Crawford further noted that Minto was an additional named insured under Carlsbad's policy with Intact. Ms. Crawford requested confirmation that Intact would defend Minto with respect to the underlying action involving Ms. Therkelsen and her fall.

[12] Ms. Frost of Intact responded by letter dated June 15, 2010 and confirmed

. . . that Intact will defend Minto in respect to the present allegations. If a Statement of Claim is issued, please be advised that we will not defend Minto for any allegations that are not related to our operations.

[13] On February 11, 2011, Ms. Therklesen commenced the underlying action against Minto and Carlsbad alleging that on or about February 26, 2009, she slipped and fell on ice that had accumulated in the parking lot. Ms. Therklesen alleges that her slip and fall was caused by the negligence of the defendants in the underlying action in, inter alia, failing to properly apply ice-removal material to the parking lots or to ensure that the parking lots were sanded, salted and/or cleared of ice and snow.

[14] Minto served a Statement of Defence in the underlying action on or about July 29, 2011.

[15] Carlsbad also defended the underlying action.

[16] The respondents have refused to take over Minto's defence in the underlying action and have not agreed to indemnify Minto for the costs it has incurred to date in defending the underlying action.

[17] At all material times, Minto was insured under a Commercial General Liability policy of insurance issued by the Commonwealth Insurance Company under policy number CRX60927 (the "Minto policy").

[18] The coverage provided by the Minto policy would only apply in excess of the $50,000 deductible, which is inclusive of legal fees and adjusting expenses. Accordingly, Minto has been responsible for funding the first $50,000 incurred for defending the underlying action.

Issues

Issue 1 -- Should leave be granted to admit the extrinsic evidence on the motion?

[19] At the commencement of the motion, the parties agreed that the court could look at the pleadings and the insurance policy in relation to the motion. Therefore, the court finds that this issue has been resolved by the parties on their own.

Issue 2 -- Should the respondents Carlsbad Paving and/or its insurer Intact Insurance provide a full defence and indemnity to the applicant Minto?

The applicant's position

[20] The applicant's position is that there is a distinction between the duty to defend and the duty to indemnify. It argues that it is not necessary to prove that an obligation to indemnify will in fact arise in order to trigger the duty to defend. The mere possibility that a claim under the policy may succeed is sufficient to impose the duty to defend: Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, at p. 812 S.C.R.

[21] McLachlin J. in Nichols, supra, at p. 812 S.C.R., says: "The widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy."

[22] The applicant also argues that if Minto establishes a mere possibility that one or more of the allegations made in a pleading, when assumed to be true, is/are covered, then the defence obligation is triggered (subject to its terms), unless the insurer establishes that the claim is outside of coverage by reason of one or more exclusionary clauses. R.W. Hope Ltd. v. Dominion of Canada General Insurance Co., 2000 50991 (ON SC), [2000] O.J. No. 2143, [2000] O.T.C. 426 (S.C.J.), at para. 5.

[23] The applicant relies on the case of RioCan Real Estate Investment Trust v. Lombard General Insurance Co. (2008), 2008 16073 (ON SC), 91 O.R. (3d) 63, [2008] O.J. No. 1449 (S.C.J.). In that case, the plaintiff sued RioCan, among others, after she slipped and fell on ice. RioCan had hired a snow removal contractor, Palmer Paving, to maintain the area in question. RioCan was added as an additional named insured to Palmer Paving's insurance policy. RioCan brought an application for a declaration that there was a valid insurance policy binding Lombard (Palmer Paving's insurer) in respect of the contract between RioCan and Palmer Paving. RioCan asserted that some of the allegations in the underlying action fell within the insurer's obligation to respond and defend. Hennessy J. held that Lombard owed a duty to defend to RioCan. At para. 38 of the decision, the court stated:

I am of the view that in most situations where there is a duty on an insurer to defend some, or only one, of the claims made against an insured and that claim embodies the true nature of the claim, a duty to defend the entire claim arises. This is so even where the pleadings include claims that may be outside the policy coverage. Conflict issues can be addressed in a number of ways. Counsel did not request me to deal with this issue.

[24] Minto's counsel also directs the court to the case of Cadillac Fairview Corp. v. Jamesway Construction Ltd., [2011] O.J. No. 2182, 2011 ONSC 2633, in which an application was brought by the owner of a shopping centre for an order that the insurer of its snow removal contractor assume its defence in an action brought by a woman for damages as a result of her slipping on ice at the mall. In that case, the court stated that even though the Statement of Claim included allegations that were not part of the snow removal contract (i.e., failing to have a proper reporting system of dangerous conditions in the area where she fell), the "true nature" of the plaintiff's claim was that she slipped and fell on ice on a sidewalk outside the entrance to the mall.

[25] At para. 15 of the Cadillac Fairview case, Hambly J. said in part:

However the "true nature" of the plaintiff's claim as it was in Rio is the allegation that she slipped and fell on ice on the sidewalk outside of the entrance to the mall. This is covered by the contract which places the obligation on Jamesway to keep the sidewalks of the mall free from ice.

[26] The court ultimately held that Jamesway was required to provide Cadillac Fairview with a defence reasoning that Cadillac Fairview had contracted with Jamesway to keep the sidewalk clear of ice. In turn, Jamesway agreed to indemnify Cadillac Fairview for work that it contracted to do where the failure of Jamesway to do the work may result in Cadillac Fairview being liable (para. 17).

[27] The court reasoned that it was Jamesway's responsibility under the snow removal contract to keep the sidewalk clear and safe where the plaintiff fell. Jamesway agreed to indemnify Cadillac Fairview from every claim in connection with the work being performed by it at the mall. In that case, a claim was being made in relation to work that Jamesway was required to perform under the snow removal contract (para. 16).

The respondents' position

[28] The respondents argue that there is no duty to defend because the Statement of Claim in the underlying action involves claims for the following: (1) negligence in snow and ice removal; (2) inspection and monitoring of the premises; (3) warning signs; (4) breach of lease agreement; and (5) occupier's liability generally.

[29] The respondents submit that a majority of these claims do not fall within the coverage, are equally "formidable" and also "stand on their own". As such, the applicant should be responsible for its own defence of this matter.

[30] The respondents argue that the court should follow the decision of Belobaba J. in the case of Atlific Hotels and Resorts Ltd. v. Aviva Insurance Co. of Canada (2009), 2009 24634 (ON SC), 97 O.R. (3d) 233, [2009] O.J. No. 2005 (S.C.J.). At para. 10, the court states:

Ontario courts have also made clear that in cases with mixed claims, where the plaintiff advances both covered and non-covered claims, the insured is obliged to defend only those claims that potentially fall within coverage: see Unger (Litigation Guardian of) v. Unger, 2003 57446 (ON CA), [2003] O.J. No. 4587 (C.A.) per Doherty J.A. at para. 10: "if there is a possibility that any of the claims are captured by [the insurer's] coverage, [the insurer] has a duty to defend those claims . . ." (emphasis added). Also see Ontario (Ministry of Transportation) v. Canadian Surety Co., 2008 60337 (ON SC), [2008] O.J. No. 4670, Tinkess v. N.M. Davis Corp., [2007] O.J. No. 1026 and Kocherkewych v. Greyhound Canada Transportation Corp., 2006 BCSC 534 (), [2006] B.C.J. No. 723.

[31] The respondents also argue that the RioCan case was distinguished by Belobaba J. in Atlific, at paras. 13-15:

RioCan Real Estate2 is also distinguishable. Madam Justice Hennessy concluded that in slip-and-fall incidents involving an occupier defendant and a snow removal contractor defendant, where there is a duty on an insurer to defend even one of the claims made by an insured, and that claim embodies the true nature of the claim, a duty to defend the entire claim arises. However, the important qualifier in this statement is the need for a judicial finding that a particular claim actually "embodies the true nature of the [overall] claim."

In other words, if after a careful examination of the entire pleading, a court finds that a particular claim that potentially falls within coverage captures "the true nature of the overall claim", i.e. the essence of the entire action, then the insurer is obliged to defend the entire action. This makes sense. It is also what the Supreme Court concluded in Non-Marine Underwriters, Lloyd's of London v. Scelara, 2000 SCC 24 (), [2000] 1 S.C.R. 551: "In determining if a claim falls within coverage, courts are not bound by the labels chosen by the plaintiff, but must determine the true nature of the claim stated in the pleadings." (at para. 138). That is, the true nature of the overall action.

Thus, in RioCan Real Estate, the court determined that even though multiple claims had been pleaded, "the true nature of the claim is that the defendant was negligent in failing to maintain an ice-free parking lot and as a result, the plaintiffs fell and sustained injuries" (at para. 16). This was an important finding. If this finding had not been made, and if Madam Justice Hennessy had been obliged to deal with covered and non-covered claims, none of which embodied the true nature of the pleading, the duty to defend the non-covered claim would not have been triggered (para. 15) because "where a claim is clearly outside the scope of the policy, there is no duty to defend." (para. 17). In sum, RioCan is a case where the court was able to determine that one particular claim that fell within coverage captured the true essence of the action and this in turn obliged the insurer to defend the entire action. This is completely consistent with Scelara.

[32] The respondents also argue that the insurer is not obliged to defend a claim that clearly falls outside the coverage provided by the policy. This principle was set out by McLachlin J. in the Supreme Court of Canada decision of Nichols v. American Home Assurance Co., supra, at p. 812 S.C.R., where she stated:

Requiring the insurer to defend claims which cannot fall within the policy puts the insurer in the position of having to defend claims which it is in its interest should succeed. . . . For this reason, the practice is for the insurer to defend only those claims which potentially fall under the policy, while calling upon the insured to obtain independent counsel with respect to those which clearly fall outside its terms.

Analysis

[33] The contract, including the schedules, between Minto and Carlsbad contained various clauses dealing with the work to be done. The snow clearing provisions were laid out at para. 2, the snow removal provisions were laid out at para. 3 and the ice control provisions were laid out at para. 4.

[34] In relation to snow clearing, clause 2.11 of Schedule "B" states:

The contractor shall ensure that adequate plowing and clearing is done prior to salting so that roads, parking lots, ramps and driveways are maintained in a safe, open condition at all times.

[35] As relates to ice control, pursuant to clause 4.1 of Schedule "B", the contract says:

Whenever freezing conditions occur regardless of the 254 cm limit (3.2), the Contractor will supply and apply rock salt, sand, or pea stone to suit weather conditions, to the roads, parking lots, ramps, entrances to car ports and driveways as outlined above.

[36] All of the ice control materials, equipment and labour were to be provided by Carlsbad pursuant to clause 4.4 of Schedule "B" of the contract.

[37] In the court's view, it is clear that, pursuant to the contract between Minto and Carlsbad, the responsibility for the work to the parking lot area and ensuring that it was clear and safe was that of the respondent Carlsbad.

[38] Looking at the Statement of Claim, as a whole, this court finds that the "true nature" of the Statement of Claim was that of a negligence case in which the plaintiff slipped and fell on ice in the parking lot near her home.

[39] It was Carlsbad's responsibility under the contract to keep the parking lot clear and to deal with the issue of ice control. The plaintiff fell in the parking lot, and therefore the conditions of the safety of the parking lot were the responsibility of Carlsbad.

[40] The court was directed to paras. 13 and 15 of the Atlific case, supra, in which Belobaba J. says that the RioCan case was distinguishable.

[41] In Atlific, Belobaba J. says that there are three categories of claims being advanced by the plaintiff, at para. 16.

[42] At para. 17, Belobaba J. says that he was not able to find that one particular claim or category of claims captured the true essence of the action. He says: "The snow and ice claims appear, at first glance, to be predominant but the claims alleging negligence in hotel operations and management are formidable and can stand on their own." The court found that the insurer was obliged to provide the applicants with defence coverage for the snow and ice claims only.

[43] Belobaba J. goes on further to state, at para. 18:

If I am wrong in this analysis and the true nature of the overall action is actually captured in the claims relating to the removal of the snow and ice, then I would have to conclude, as per the reasoning in RioCan Real Estate that Aviva would be obliged to defend the entire action. I hasten to add, however, that this argument -- true nature/entire action -- was not advanced by the applicants.

[44] After examining the pleadings in this case, in the court's view the true nature of the overall claim is one of a slip and fall incident which falls within the nature of the overall claim being in relation to snow and ice removal.

[45] Accordingly, this court follows the reasoning set out by Hennessy J. in RioCan, supra, and by Hambly J. in Cadillac Fairview, supra, to find that there is a duty of the respondent Intact Insurance to defend the applicant in the underlying action.

Issue 3 -- Should Carlsbad and/or Intact provide an indemnity to Minto pursuant to it being named an additional insured under the Carlsbad contract?

The applicant's position

[46] Minto argues that as an additional insured on the Intact policy, Minto is entitled to the same indemnification from the insurer of Carlsbad in the underlying action against Carlsbad.

The respondents' position

[47] The respondents argue against that position.

Analysis

[48] As part of its coverage, Minto required Carlsbad to name Minto as an additional insured on its CGL.

[49] The court sees no reason why, as an additional insured, Minto should not be indemnified by Carlsbad.

[50] In Cadillac Fairview Corp. v. Jamesway Construction Ltd., supra, Cadillac Fairview was not named as an additional insured under the Jamesway CGL policy. In that regard, at para. 17, the court stated that:

It is entirely possible, even likely, that a claim against Cadillac Fairview covered by the snow removal contract between it and Jamesway will succeed. This will mean that Jamesway will be required to indemnify Cadillac Fairview under section 5 of the contract. If Jamesway had obtained a CGL in the joint names of Jamesway and Cadillac Fairview as it contracted to do there would not be a difficulty. The insurer would be required to provide Cadillac Fairview with a defense. It did not do so. Jamesway will now have to provide Cadillac Fairview with a defense without the benefit of being insured. Jamesway did obtain a CGL covering itself with Dominion.

[51] The court looked at the issue and said that if Jamesway had obtained a CGL in the joint names of Jamesway and Cadillac Fairview, the insured would have been required to provide Cadillac Fairview with a defence. In this case, Carlsbad actually obtained a CGL insurance naming Minto as a co-insured. Accordingly, based on this fact, this court finds that Minto should be indemnified by Carlsbad and Intact.

Disposition

[52] There will be a declaration and order that Carlsbad and Intact are obliged to provide and fund a full defence to Minto in the underlying action.

[53] There will also be a declaration and order that Carlsbad and/or Intact shall indemnify Minto for liability attributable to Carlsbad in the underlying action.

Costs

[54] The applicant was successful on the application. It submitted a bill of costs on a partial indemnity basis of $3,584.80 and on a substantial basis of $5,384.80.

[55] This court is of the view that costs are payable on a partial indemnity basis. The court has reviewed the bill of costs submitted by the applicant and, having considered the factors set out in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, fixes the applicant's costs at $3,584.80, inclusive of disbursements and HST.

[56] Order accordingly.

Application granted.