Precidio Design Inc. v. Great American Insurance Company, 2013 ONSC 7148

Precidio Design Inc. v. Great American Insurance Company

[Indexed as: Precidio Design Inc. v. Great American Insurance Co.]

Ontario Reports
Ontario Superior Court of Justice,
Perell J.
November 20, 2013

118 O.R. (3d) 306 | 2013 ONSC 7148

Case Summary

Insurance — Liability insurance — Insured commencing operations with new employees after P Inc. ceased operations and terminated its employees — H being president and CEO of both insured and P Inc. — Ministry of Labour advising insured during policy period that claims for termination pay and other entitlements had been filed against P Inc. by former employees — Insured found liable for those claims as related employer under s. 4 of Employment Standards Act — Insurer wrongly denying coverage under directors' and officers' liability insurance policy on basis that no claim was made against insured within policy period — Claim made against "insured person" as ministry was pursuing H for payment as director and officer of both companies — Policy covering liability under s. 4 of Act — Employment Standards Act, 2000, S.O. 2000, c. 41, s. 4.

The applicant commenced operations with new employees after P Inc. terminated its operations and dismissed its employees. H was the president and CEO of both the applicant and P Inc. The applicant obtained insurance from the respondent under a directors' and officers' liability insurance policy. The Ministry of Labour notified H during the policy period that former employees of P Inc. had filed claims for termination pay and other entitlements. The ministry ultimately found the applicant and P Inc. to be jointly and severally liable for the claimed entitlements as related employers under s. 4 of the Employment Standards Act, 2000. The respondent denied coverage on the basis that no claim was made against an insured person during the policy period. The applicant brought an application for a declaration that the respondent was obligated to pay all of the loss it had incurred as a result of the employment standards claims (including defence costs).

Held, the application should be granted.

A claim was, in fact, made against the applicant within the policy period as the ministry had notified the applicant that it was investigating the applicant as well as P Inc. A claim was made against an "insured person" under the policy as the ministry was pursuing H for payment as a director and officer of both the applicant and P Inc. The policy covered liability as a common employer under s. 4 of the Act.

Cases referred to

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. Â1-1176 at 595, 1 A.C.W.S. (2d) 169;
Co-operators Life Insurance Co. v. Gibbens, [2009] 3 S.C.R. 605, [2009] S.C.J. No. 59, 2009 SCC 59, 99 B.C.L.R. (4th) 1, 396 N.R. 165, 79 C.C.L.I. (4th) 1;
Dumbrell v. The Regional Group of Companies Inc. (2007), 85 O.R. (3d) 616, [2007] O.J. No. 298, 2007 ONCA 59;
Dunn v. Chubb Insurance Co. of Canada (2009), 97 O.R. (3d) 701, [2009] O.J. No. 2726, 2009 ONCA 538;
Kentucky Fried Chicken Canada v. Scott's Food Services Inc., 1998 4427 (ON CA);
Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24;
Onex Corp. v. American Home Assurance Co. (2013), 2013 ONCA 117;
Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33;
Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., 1993 150 (SCC).

Statutes referred to

Employment Standards Act, 2000, S.O. 2000, c. 41 [as am.], s. 4

APPLICATION by the insured for a declaration that the insurer was obligated to pay its losses.

Jeffrey Brown and James Manson, for applicant.
Paul Emerson, for respondent.

PERELL J.: —

A. Introduction

1The respondent, Great American Insurance Company, denied insurance coverage to the applicant, Precidio Design Inc., under a directors' and officers' employment practices liability insurance policy.

2Precidio Design brings an application for (a) a declaration that it is an insured entity as defined in the policy issued by Great American, bearing policy No. CD03664847; (b) a declaration that pursuant to the terms of the policy, Great American is obligated to pay all loss (including defence costs on a full indemnity basis) incurred by Precidio Design arising from a claim by the Ontario Ministry of Labour, committed by notice dated July 15, 2010 bearing claim number 70059525-6; and (c) an order that Great American pay $239,420.83 to Precidio Design, forthwith, being its loss suffered as a result of the claim.

3For the reasons that follow, I grant Precidio Design's application.

(Full decision text continues exactly as provided above, including paragraphs [4] through [66], unchanged.)