ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 76477/12
DATE: 20120830
BETWEEN:
David J. Gillespie Professional Corporation Applicant – and – Frank Cowan Company Limited, Abraham Top and United Foster Parents of Canada Corporation c.o.b. as “The Legal Defence Fund” Respondents
Kenneth J. Peacocke, for the Applicant
Sheila C. Handler, for Frank Cowan, Respondent
Keith Lee-Whiting, for United Foster Parents, Respondent
HEARD: August 9, 2012
COURT FILE NO.: 77092/12
DATE: 20120830
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Heather Lyons Applicant – and – The Frank Cowan Company as managing general agent for the Guarantee Company of North America, Lombard General Insurance Company of Canada and Temple Insurance Company and United Foster Parents of Canada Corporation c.o.b. as “The Legal Defence Fund ” Respondents
Christian J. Guerette, for the Applicant
Sheila C. Handler, for Frank Cowan the Respondent
Keith Lee-Whiting, for United Foster Parents, Respondent
HEARD: August 9, 2012
REASONS FOR DECISION
Edwards j.
[ 1 ] There are two applications before this court to interpret an insurance policy issued by the respondent The Frank Cowan Company (hereinafter “Cowan”). Effectively both applications seek to determine the extent of available insurance coverage under the aggregate coverage provisions of the relevant policy or policies.
The Facts
[ 2 ] The Durham Children’s Aid Society (the “DAS”) purchased a public entity casualty policy under policy number CP99730 with Cowan. Separate policies were issued with respect to policy terms March 31, 2008 to March 31, 2009; March 31, 2009 to March 31, 2010; March 31, 2010 to March 31, 2011; and March 31, 2011 to March 31, 2012. These policies shall hereinafter be referred to as (the “policies”).
[ 3 ] Part I of the policies purchased by the DAS is entitled “legal expense – Children’s Aid Society.” I will refer to Part I as the (“Legal Expense Rider”). The entirety of the Legal Expense Rider is reproduced as Schedule “A” to these reasons.
[ 4 ] Amongst the various duties of the DAS is the responsibility to provide foster care for foster children. David Lyons and his wife Heather Lyons were foster parents and as such fell within the definition of insured as set forth in Part II (a) of the Legal Expense Rider.
[ 5 ] The Lyons’ were charged with a number of Criminal Code offences in October of 2008. At the time they were charged they were foster parents with the DAS. The charges against them related to the operation of their foster home. Almost immediately after being charged the Lyons’ were terminated as foster parents as of October 31, 2008.
[ 6 ] The Lyons’ retained separate counsel to represent them with respect to the charges laid against them. David Gillespie (“Gillespie”) was one of the lawyers representing the Lyons’. Abraham Top (“Top”) was the other lawyer. Gillespie and Top provided legal defence services to Mr. and Mrs. Lyons’ ultimately culminating in an acquittal on all charges in June 2011.
[ 7 ] Gillespie and Top submitted various interim accounts the total of which came to approximately $750,000.00 inclusive of fees and disbursements. In the policy period of March 2008 through March 2009 interim accounts were submitted by both Gillespie and Top totalling approximately $84,000.00. During the policy period of March 31, 2009 thru March 31, 2010 Top and Gillespie submitted interim accounts totalling approximately $96,000.00. During the policy period of March 31, 2010 and March 31, 2011 Top submitted an interim account totalling approximately $35,000.00. During the policy period of March 31, 2010 through March 31, 2011 Gillespie submitted a final account in the amount of approximately $246,000.00 while Top submitted a final account totalling approximately $287,000.00.
[ 8 ] Cowan and the defendant insurers have acknowledged that there is an entitlement on the part of the Lyons’ to legal expense indemnity crystallized under the March 31, 2008 through March 31, 2009 policy and that in light of the number of charges laid against each of them in October of 2008 that the Lyons’ are collectively entitled to indemnity up to the $500,000.00 aggregate limit of the policy.
[ 9 ] There is no dispute between the parties that the policy in effect between March 31, 2008, through March 31, 2009 has been triggered. What is in dispute between the parties is whether any of the subsequent policies have also been triggered. To date Gillespie has been paid interim accounts totalling approximately $115,000.00 while Top has been paid approximately $100,000.00. During the course of argument I was advised that Cowan has recently served a Notice of Assessment requiring that the accounts of both solicitors be assessed.
Position of the Parties
[ 10 ] The applicants take the position that the proper interpretation of the Legal Expense Rider in the policy is that there is a $500,000.00 limit available in the aggregate per year and that the coverage is not limited to a onetime $500,000.00 cap. It is submitted that the $500,000.00 limit is not applicable where the legal expenses incurred by Gillespie and Top were incurred over successive policy periods.
[ 11 ] Cowan takes the position that the insurance coverage in respect of the Lyons defence by Gillespie and Top is limited to an aggregate of $500,000.00.
[ 12 ] Cowan takes the position that the Legal Expense Rider is a claims made policy which only covers claims arising during the currency of the policy term. It’s argued that the insuring agreement specifically covers only those legal fees and disbursements which are in respect of proceedings commenced after the effective date of policy. On the facts of this case, the proceedings commenced in October of 2008 and therefore fall within the currency of the March 31, 2008 through March 31, 2009 policy term. Given that the subsequent policies which the applicant seek to trigger came into effect in March of 2009, 2010 and 2011 respectively and taking into account that the proceedings in respect of which the legal fees and disbursements were incurred had commenced before and not after the effective dates of these policies, Cowan submits that they therefore do not fall within the insuring agreement.
[ 13 ] As a secondary argument Cowan takes the position that as the Lyons’ were terminated as foster parents on October 31, 2008 the Lyons’ do not fall within the definition of “insured” under the March 31, 2009 policy nor any of the subsequent policies. If the Lyons’ do not fall within the definition of insured they have no claim under any of the subsequent policies.
The Law
[ 14 ] The general principles of interpretation relating to an insurance policy are well understood and not seriously in dispute between the parties. Where an insurance policy is unambiguous the court should give effect to the clear language of the policy, reading the contract as a whole, see Non-Marine Underwriters, Lloyd’s of London v. Scalera 2000 SCC 24 , [2000] 1 S.C.R. 551 at paragraph 71 . In reading the contract as a whole this court cannot ignore other provisions in the policy that address the question of whether the policy limits are cumulative from year to year as argued by the applicants. In that regard I refer to page 64 of the policy where under paragraph 11 limits of liability the following is set forth:
Regardless of the number of years this Rider shall continue in force and the number of premiums which shall be payable or paid, the limit of the Company’s liability as specified in the Table of Limits of Liability shall not be cumulative from year to year or period to period (emphasis added).
[ 15 ] It is to be noted that the Legal Expense Rider contains no similar provision.
[ 16 ] Any analysis of an insurance contract should begin with the insuring agreement. In the Legal Expense Rider the insuring agreement provides:
To pay on behalf of any Insured (as defined herein), legal fees including disbursement incurred by any Insured in defence of a charge laid for an alleged offence under any ACT (as defined herein) but only until such time as:
(i) a finding of guilt under said Act; or
(ii) a pleading of guilt under said Act.
[ 17 ] The Limit of Liability clause in the Legal Expense Rider provides:
Regardless of the number of Insured’s under this policy or the number of claims made, the Insurer’s liability is limited to the amount stated in Item 1 of the Schedule of Coverage and in no event will the total liability in the policy period exceed the Aggregate amount stated in Item 1(b) of Part 1 of the Schedule of Coverage.
[ 18 ] Nowhere in the limit of liability is there any provision to the affect that the limit of the insurer’s liability as specified in the Table of Limits of Liability should not be cumulative from year to year or period to period. If there is any ambiguity with respect to the limit of liability clause the law is very clear that such ambiguity should be resolved on a contra proferentum basis as against the insurer.
[ 19 ] While it may seem an anomaly that the applicant should be effectively entitled to stack the aggregate limits from policy period to policy period it would have been a relatively simple task for the insurer in this case to have inserted words similar to those set forth at page 64 of the policy. For whatever reason the insurer did not do so. The anomaly may not in fact be an anomaly taking into account the fact that while the charges were laid in 2008 the reasonable expectation of the parties would have been such that no one would have been surprised to learn that the legal expenses incurred in the defence of the charges laid against the Lyons’ would be substantial and would be incurred over a fairly lengthy period of time. A period of time that would have gone from policy period to policy period.
[ 20 ] Under the circumstances this court is of the conclusion that the aggregate coverage for legal costs incurred is $2,000,000.00 spanning all policy periods from 2008 through 2011 and not the $500,000.00 stated by the respondents.
[ 21 ] Having reached this conclusion, however, the issue still before this court is one of whether or not the applicants are entitled to recover legal fees in an aggregate amount in excess of $500,000.00. In order to recover the excess legal fees now sought beyond the $500,000.00 aggregate during the policy period March 2008 through March 2009 the applicants, specifically the Lyons’, must fall within the definition of insured. The Legal Expense Rider provides a definition of insured as follows:
(a) INSURED means the Named Insured stated in the DECLARATIONS and also the following Additional Insured’s while performing their duties for or in association with the Named Insured:
(i) Any Board Member, Officer, Employee, Foster Parent or Volunteer.
[ 22 ] The facts are beyond dispute that almost immediately after the charges were laid in October of 2008 the Lyons’ were terminated as foster parents. As such in the policies that were renewed in 2009, 2010 and 2011 the Lyons’ cannot fall within the definition of insured. Thus, while any other insured would have had access to the aggregate policy limits of $2,000,000.00 the Lyons’, because they do not fall within the definition of insured, are not entitled to recover anything more than the aggregate policy limits of $500,000.00 set forth in the Legal Expense Rider of the policy March 2008 through March 2009.
[ 23 ] While this result may seem to be unjust the fact remains that this court is called upon to determine whether or not there is coverage under a given policy. It is fundamental to the right of recovery that someone seeking such indemnity fall within the definition of insured. The Lyons’ do not fall within that definition under any other policy other than the March 2008 through March 2009 policy. In the event the totality of the legal fees after assessment of Mr. Gillespie and Mr. Top’s accounts exceeds $500,000.00 any recourse that the Lyons’ may have given their acquittal may be against some other party but not against any of the respondents.
[ 24 ] If the parties are unable to resolve the issue of the costs of these applications arrangements can be made with the trial coordinator to argue the issue of costs. In advance of such oral submissions written submissions are to be received limited to five pages in length.
Justice M. Edwards
Released: August 30, 2012
SCHEDULE “A”
SCHEDULE OF COVERAGE
PART I
LEGAL EXPENSE – CHILDREN’S AID SOCIETY
Item 1 Limits of Liability applicable to this Part
(a) 100% of legal fees and disbursements actually incurred in respect of each $100,000.00
(b) Aggregate amount payable in any policy period $500,000.00
Item 2 Forms Applicable
Name Form No.
Legal Expense Children’s Aid Society CWCX3250-1008
PART I – LEGAL EXPENSE
CHILDREN’S AID SOCIETY
The Insurer agrees with the Insured, named in the DECLARATIONS made a part hereof, in consideration of the payment of the premium and subject to the limitations, terms and conditions of this part of the policy and any endorsements attached hereto:
INSURING AGREEMENTS
I. INSURING AGREEMENT:
To pay on behalf of any Insured (as defined herein), legal fees including disbursements incurred by any Insured in defence of a charge laid for an alleged office under any ACT (ad defined herein) but only until such time as:
(i) a finding of guilt under said Act; or
(ii) a pleading of guilt under said Act.
This insurance shall apply only if the proceedings commence after the effective date of the policy and only in respect of proceedings against an Insured, arising directly out of the performance of his/her duties.
II. DEFINITIONS:
(a) INSURED means the Named Insured stated in the DECLARATIONS and also the following Additional Insured’s while performing their duties for or in association with the Named Insured:
(i) Any Board Member, Officer, Employee, Foster Parent or Volunteer.
(b) CLAIM is defined as all legal fees including disbursements arising out of the initial and subsequent proceedings pertaining thereto.
(c) ACT: The word ACT contained in the Insuring Agreements means:
(A) Criminal Code of Canada
(B) Any Provincial Statute
With the Exception of:
The Highway Traffic Act (or similar legislation)
III . EXCLUSION :
This insurance does not apply to any fines or penalties.
CONDITIONS
1. LIMIT OF LIABILITY:
Regardless of the number of Insureds under this policy or the number of claims made, the Insurer’s liability is limited to the amount stated in Item 1 of the Schedule of Coverage and in no event will the total liability in the policy period exceed the Aggregate amount stated in Item 1(b) of Part I of the Schedule of Coverage.
2. NOTICE OF CLAIM:
Any claim for payment of legal fees including disbursements shall be forwarded in writing to the Frank Cowan Company Limited, Princeton, Ontario, N0J 1V0, within thirty days following receipt by the Insured of a detailed account for professional services rendered.
3. CANCELLATION CLAUSE:
(a) The policy may be cancelled at any time at the request of the Insured named therein, and the Insurer shall, upon surrender of the policy, refund the excess of paid premium above the customary short rate premium for the time the policy has been in force and computed in accordance with the Insurer’s short rate cancellation table.
(b) This policy may be cancelled at any time by the Insurer giving to the insured sixty (60) days’ notice of termination by Registered Mail and refunding the excess of premium actually paid by the Insured over the pro rata premium for the expired time but in no event shall the pro rata premium for the expired time be deemed to be less than any minimum retained premium specified.
(c) In this condition, the expression “paid premium” means premium actually paid by the Insured.
4. OTHER INSURANCE :
If other valid and collectible insurance with any other Insurer is available to the Insured covering a loss also covered by this policy, other than insurance that is specifically stated to be in excess of this policy, the insurance afforded by this policy shall be in excess of and shall not contribute with such other insurance. Nothing herein shall be construed to make this policy subject to the terms, conditions and limitations of other insurance.
5. PRECEDENCE OF PAYMENTS:
Any indemnity payable under this policy shall be applied, first to the protection of the Named Insured and the remainder, if any, to the protection of any other Insured, as the Named Insured shall direct.
6. ACTION AGAINST INSURER:
No action shall lie against the Insurer for reimbursement under this policy unless, as a condition precedent thereto, the Insured shall have furnished the Insurer with a final statement of account for professional services rendered, together with an Order or Judgment dismissing the proceedings. Every action against the Insurer shall be commenced within one year next after such obligation to pay has been finally determined as set out herein.