Cusack v. The Lawyers' Professional Indemnity Company

[Indexed as: Cusack v. Lawyers' Professional Indemnity Co.]

Ontario Reports

Ontario Superior Court of Justice,

E.M. Morgan J.

August 28, 2013

116 O.R. (3d) 659 | 2013 ONSC 5511

Case Summary

Insurance — Insurer's duty to defend — Applicant lawyer sued in mortgage fraud litigation based on his signing of certificate of independent legal advice without meeting with or advising one of mortgagors — Professional liability insurance policy excluding coverage for dishonest, fraudulent, criminal or malicious acts — Applicant essentially facing claim of professional negligence — Pleadings not alleging that applicant was conscious participant in fraudulent plan or that he profited from his conduct — Fact that alleged negligence involved intentional act not changing true nature of claim — Insurer's duty to defend triggered.

Professions — Barristers and solicitors — Negligence — Lawyer's professional liability insurer not acting improperly in sending reporting letter to Law Society regarding allegations made against lawyer in professional negligence action — Insurer exempt from operation of Personal Information Protection and Electronic Documents Act — Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5.

In an alleged attempt to defraud the mortgagee and possibly his wife, L, J placed a mortgage on their jointly owned home without advising the mortgagee that he was separated from L and apparently without L's consent. The applicant lawyer was retained to provide L and J with independent legal advice. He met with J but did not meet with L. He signed the certificate of independent legal advice indicating that he had met with and verified the identity of both L and J. [page660] He asserted that he intended to hold on to the certificate until he had had a chance to meet L personally but the document was forwarded to the mortgagee's solicitor without his knowledge. L and J later defaulted, and the mortgagee commenced a mortgage enforcement proceeding. L and J counterclaimed against the applicant and others, and the mortgagee cross-claimed against the applicant. LawPro, the applicant's professional liability insurer, refused to defend the applicant, relying on a policy exclusion for claims relating to or arising out of any dishonest, fraudulent, criminal or malicious act. The applicant brought an application for declarations that LawPro had a duty to defend him and that LawPro owed him a duty of confidentiality, which it breached by disclosing matters relating to the action to the Law Society.

Held, the application should be granted in part.

The claims against the applicant were essentially for professional negligence. The pleadings did not assert that the applicant was a conscious participant in the fraudulent scheme or that he profited personally from his conduct. The fact that the alleged negligence involved an intentional act did not change the essential nature of the claim. This triggered the insurer's duty to defend.

The insurer did not act improperly in sending the Law Society a reporting letter regarding the negligence allegations that were made against the applicant. LawPro was exempt from the operation of the Personal Information Protection and Electronic Documents Act. Section 4(1)(a) of the Act provides that the legislation "applies to every organization in respect of personal information that . . . the organization collects, uses or discloses in the course of commercial activities". The providing of mandatory professional liability insurance to Ontario lawyers is not a commercial activity within the meaning of s. 4(1)(a) of the Act. In any event, there is a prevailing duty to report allegations of professional misconduct to the regulatory body which governs the profession. This did not mean that the applicant was vulnerable to having his privileged communications and documents exposed to his adversary in the underlying litigation. Section 49.8(3) of the Act makes it clear that the Law Society itself becomes the repository of the client's privilege and that the Law Society is mandated to preserve any existing privilege vis-à-vis third parties.

Cases referred to

Bacon v. McBride, 1984 692 (BC SC), [1984] B.C.J. No. 2813, 6 D.L.R. (4th) 96, 51 B.C.L.R. 228, 5 C.C.L.I. 146, [1984] I.L.R. Â1-1776 at 6844, 25 A.C.W.S. (2d) 13 (S.C.); Canada (Privacy Commissioner) v. Blood Tribe Department of Health, [2008] 2 S.C.R. 574, [2008] S.C.J. No. 45, 2008 SCC 44, EYB 2008-137487, J.E. 2008-1398, [2008] CLLC Â210-030, 376 N.R. 327, 294 D.L.R. (4th) 385, 67 C.P.R. (4th) 1, 74 Admin. L.R. (4th) 38, 168 A.C.W.S. (3d) 411; Chersinoff v. Allstate Insurance Co., 1969 700 (BC CA), [1969] B.C.J. No. 405, 3 D.L.R. (3d) 560, 67 W.W.R. 750, [1969] I.L.R. Â1-285 at 752 (C.A.); Cummings v. Budget Car Rentals Toronto Ltd. (1996), 1996 1629 (ON CA), 29 O.R. (3d) 1, [1996] O.J. No. 2179, 136 D.L.R. (4th) 330, 91 O.A.C. 174, 35 C.C.L.I. (2d) 219, [1996] I.L.R. I-3349, 22 M.V.R. (3d) 182, 63 A.C.W.S. (3d) 1146 (C.A.); Dagago v. Lawyers' Professional Indemnity Co., [2011] O.J. No. 3770, 2011 ONSC 4951 (S.C.J.); Descôteaux v. Mierzwinski, 1982 22 (SCC), [1982] 1 S.C.R. 860, [1982] S.C.J. No. 43, 141 D.L.R. (3d) 590, 44 N.R. 462, J.E. 82-659, 70 C.C.C. (2d) 385, 28 C.R. (3d) 289, 1 C.R.R. 318; Foss v. Foss, [2013] O.J. No. 977, 2013 ONSC 1345 (S.C.J.); Halifax Insurance Co. of Canada v. Innopex Ltd. (2004), 2004 33465 (ON CA), 72 O.R. (3d) 522, [2004] O.J. No. 4178, 190 O.A.C. 356, 15 C.C.L.I. (4th) 159, [2004] I.L.R. I-4338, 134 A.C.W.S. (3d) 501 (C.A.); Jon Picken Ltd. v. Guardian Insurance Co. of Canada, 1993 17702 (ON CA), [1993] O.J. No. 1952, 66 O.A.C. 39, 17 C.C.L.I. (2d) 167, [1993] I.L.R. Â1-2973 at 2460, 42 A.C.W.S. (3d) 506 (C.A.); [page661] Knapman v. Deweerd, [2011] O.J. No. 3364, 2011 ONSC 4269, [2011] I.L.R. I-5183, 337 D.L.R. (4th) 280, 8 R.P.R. (5th) 301, 100 C.C.L.I. (4th) 134, 206 A.C.W.S. (3d) 401 (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; Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, 185 D.L.R. (4th) 1, 253 N.R. 1, [2000] 5 W.W.R. 465, J.E. 2000-935, 135 B.C.A.C. 161, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 50 C.C.L.T. (2d) 1, [2000] I.L.R. I-3810, 96 A.C.W.S. (3d) 479; Pritchard v. Ontario (Human Rights Commission), [2004] 1 S.C.R. 809, [2004] S.C.J. No. 16, 2004 SCC 31, 238 D.L.R. (4th) 1, 319 N.R. 322, J.E. 2004-1087, 187 O.A.C. 1, 12 Admin. L.R. (4th) 171, 33 C.C.E.L. (3d) 1, [2004] CLLC Â230-021, 47 C.P.C. (5th) 203, 19 C.R. (6th) 203, 130 A.C.W.S. (3d) 816; R. v. Dixon, [2012] O.J. No. 50, 2012 ONSC 181 (S.C.J.); RioCan Real Estate Investment Trust v. Lombard General Insurance Co. of Canada (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.); Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522, [2002] S.C.J. No. 42, 2002 SCC 41, 211 D.L.R. (4th) 193, 287 N.R. 203, J.E. 2002-803, 40 Admin. L.R. (3d) 1, 44 C.E.L.R. (N.S.) 161, 20 C.P.C. (5th) 1, 18 C.P.R. (4th) 1, 93 C.R.R. (2d) 219, 113 A.C.W.S. (3d) 36; Ward v. Manufacturers Life Insurance Co., [2007] O.J. No. 4882, 2007 ONCA 881, 235 O.A.C. 325, 37 B.L.R. (4th) 26, 37 E.T.R. (3d) 1, 288 D.L.R. (4th) 733, 56 C.C.L.I. (4th) 2, 162 A.C.W.S. (3d) 867; Zemelman v. Feder (2001), 2001 38742 (ON SCDC), 54 O.R. (3d) 15, [2001] O.J. No. 1857, 148 O.A.C. 356, 13 C.L.R. (3d) 84, 11 C.P.C. (5th) 170, 105 A.C.W.S. (3d) 372 (Div. Ct.)

Statutes referred to

Law Society Act, R.S.O. 1990, c. L.8, s. 49.8, (1), (3)

Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5 [as am.], s. 4(1)(a)

Authorities referred to

Canadian Judicial Counsel, Use of Personal Information in Judgments and Recommended Protocol (Canadian Judicial Counsel, 2005), online: <http://www.cjc -ccm.gc.ca/cmslib/general/news_pub_techissues_UseProtocol_ 2005_en.pdf>

Dodek, A., "Reconceiving Solicitor-Client Privilege" (2010), 35 Queen's L.J. 493

LawPro, Our Story: 15 Years of Making a Difference (Lawyers' Professional Indemnity Company, 2010), online: <http://www.practicepro.ca/LawPROmag/ 15AnniversaryBooklet.pdf>

Mackenzie, Gavin, Lawyers and Ethics: Professional Responsibility and Discipline (Toronto: Carswell, 1993)

APPLICATION for declarations that the insurer had a duty to defend the applicant and that it breached its duty of confidentiality.

Wayne Cusack, in person.

Gavin J. Tighe and Anna Husa, for respondent.

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