SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: C-742-13

DATE: 2014-02-24

RE: University of Waterloo, Applicant

and

Scottish & York Insurance Co. Limited, Certain Lloyd’s Underwriters-
ESR201001C, The Sovereign General Insurance Company, Continental
Casualty Company and Economical Mutual Insurance Company, Respondents

BEFORE: The Honourable Mr. Justice D.J. Gordon

COUNSEL:
A.B. Paul, for the Applicant

C.L. Dickinson, for the Respondents

HEARD: February 2, 2014

ENDORSEMENT

[1] In its application, the University of Waterloo (“the university”) seeks a declaratory order obligating the respondent insurance companies to provide a defence for it in the underlying action. For the reasons that follow, the application is dismissed.

Factual Background

[2] The university owns a large tract of land in the City of Waterloo, where it operates as an educational institution with related activities. The university, in conjunction with the University of Waterloo Federation of Students, has hosted a Canada Day celebration for the past several years.

[3] Checkers Fun Factory (“Checkers”) contracted with the university to supply and operate inflatable amusement rides for the event on July 1, 2010, as it had done in prior years. Checkers provided the university with a certificate of insurance naming it as an additional insured.

[4] In the underlying action, a claim for damages arising out of an alleged trip and fall at the event is presented.

The Action

[5] Arlene Collins has sued the university and Checkers (Court File C-408-12). The following allegations are made in her statement of claim:

3. The Defendant, the University of Waterloo is duly incorporated pursuant to the laws of the Province of Ontario. At all material times, this Defendant had through its agents, employees and/or servants, the ownership, control, management and custody of design, construction, operation and maintenance of the area of Columbia Lake, in the City of Waterloo, in the Province of Ontario [hereinafter referred to as the “Premises”].

4. The Defendant, Checkers Fun Factory Inc. [hereinafter referred to as “Fun Factory”] is a corporation duly incorporated pursuant to the laws of the Province of Ontario. At all material times, this Defendant had an agreement to provide inflatable objects [hereinafter referred to as the “inflatables”] for Canada Day celebrations at the Premises, and therefore, it had, through its agents, employees and/or servants the control and management of day to day maintenance and repair of the Premises.

THE INCIDENT

5. On or about July 1, 2010 in the evening, the Plaintiff was walking on the Premises when she tripped and fell on a metal stake near one of the inflatables. As a result of this incident, the Plaintiff sustained serious and permanent injuries and damages.

DETAILS RELATING TO THE DEFENDANT’S NEGLIGENCE

6. The Plaintiff pleads that the aforesaid fall and resulting injuries were caused as a result of the negligence of the Defendants, acting jointly and severally, their employees, servants and/or agents, for whom they are in law responsible in that:

(a) they knowingly permitted a dangerous condition to exist in the Premises, consisting of a metal stake protruding from the ground in the material area at the Premises;

(b) they failed to inspect the Premises for the existence of a dangerous condition;

(c) they failed to have in operation at the time of the incident, and immediately before, a proper and efficient, or any system whereby the appropriate inspector or other subordinate, reported to it the existence of the dangerous condition of the Premises;

(d) they knew or ought to have known that the Premises on the occasion in question were unsafe; and therefore, constituted an unusual danger to the members of public and in particular to the Plaintiff;

(e) they failed to provide an adequate, or any, system of maintenance and inspection of the material area at the Premises;

(f) they hired incompetent employees, servants and/or agents;

(g) they failed to instruct properly, or at all, their servants, agents, and/or employees in proper methods and procedures for the adequate maintenance of the material area at the Premises; and,

(h) they failed to require and ensure that their employees, servants and/or agents were following all policies and/or procedures regarding the proper maintenance and inspection of the material area at the Premises.

7. The Defendants, acting jointly and severally were at all material times responsible for the ownership, care and control of the Premises and were therefore occupiers within the meaning of the Occupiers’ Liability Act, R.S.O. 1990, c. O.2, as amended. By virtue of this Act, the Defendants owe a statutory duty of care to the Plaintiff to take all reasonable steps required to see that the Plaintiff was safe while on the Premises.

8. The Defendants, acting jointly and severally negligently breached the aforesaid statutory duty under the Occupiers’ Liability Act and the general duty of care owed by the Defendants to the Plaintiff, the particulars of which are set out in the preceding paragraphs of this Statement of Claim.

[6] Checkers has delivered a statement of defence and a crossclaim against the university. The university has also served a statement of defence and a crossclaim against Checkers.

The Agreement

[7] The brief form agreement between the university and Checkers, dated November 30, 2009, provides as follows:

• Day and Date of Event: Thurs. July 1st, 2010.
• Time of Event: 2 – 8 p.m.
• Checkers will supply sufficient power.
• Checkers will bring between 10-15 rides of inflatables for amusement.
• All inflatable items will be set up on grass.
• Customer requires Checkers to bring sufficient # of generators.
• 20% of proceeds goes to U.W. Canada Celebrations.
• Security available “there is always somewhere [sic] there from June 30th 12 pm to July 1st.
• Conditions: There are inherent risks in the participation in or on any interactive device or inflatable attraction. The rentor agrees to read and sign all training agreements for rides listed above and inform all participants that they accept these risks by participation. An adult attendant or attendants must be appointed and posted to each device at all times.

[8] There is no mention of insurance in the agreement. It appears there was an oral agreement requiring Checkers to provide a certificate of insurance naming the university as an additional insured.

Certificate of Insurance

[9] The certificate of insurance, dated June 22, 2010, makes reference to a commercial general liability subscription policy. It is said to have been issued on behalf of the respondents, a pool of insurance companies.

[10] In this document, the “certificate holder” is stated to be “University of Waterloo Canada Day Celebrations”. The “description of operations” provides as follows:

Inflatables. July 1/10. It is hereby agreed that University of Waterloo Canada Day Celebrations, Student Life Centre and University of Waterloo Federation of Students are added as additional insured, but only with respect to liability arising out of operations of the named insured.

[11] The policy of insurance, identified in the certificate of insurance, provides coverage for bodily injury claims resulting from the negligence of Checkers. The policy, as confirmed in the certificate, does not provide coverage for the negligence of the university. The university has coverage under its insurance policy.

Principles of Law

[12] The general principles of law regarding the duty to defend were enunciated by the Supreme Court of Canada in Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, at paras. 16-21, expanded in Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699, at paras. 28-40.

[13] From Nichols, the following guideline is provided:

1. the pleadings govern the duty to defend (para. 16);
2. the duty to defend arises only when the pleadings raise claims which would be payable under the agreement to indemnify in the insurance contract (paras. 16 & 18);
3. conversely, where the pleadings raise claims that are clearly outside of the coverage of the insurance policy by reason of an exclusion clause, the duty to defend does not arise (para. 16);
4. the mere possibility that a claim within the policy may succeed is sufficient (para. 17);
5. the duty to defend is broader than the duty to indemnify (para. 17); and
6. while the duty to defend should be confined to the defence of claims which may be argued to fall under the policy, the widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy (para. 21).

[14] Moneco give us further direction, namely:

1. where pleadings are not framed with sufficient precision to determine whether the claims are covered by a policy, the insurer’s obligation to defend will be triggered where, on a reasonable reading of the pleadings, a claim within coverage can be inferred, with any doubt resolved in favour of the insured (para. 31);
2. what really matters is not the labels used by the plaintiff but the “true nature of the claim”, the analysis undertaken with a view to determining the true “substance” of the allegations (paras. 34-35); and
3. as a general rule, extrinsic evidence is not permitted, save reference to the insurance policy and documents referred to in the pleadings or relevant to the parties agreement (paras. 36-40).

[15] In support of the positions of their clients, counsel presented several motions court decisions to demonstrate the application of these principles. I will refer to only two of those decisions to indicate the analytical process, particularly as to identifying the true nature of the claim in the underlying action.

[16] RioCan Real Estate Investment Trust v. Lombard General Insurance Co., 2008 16073 (ON SC), [2008] O.J. No. 1449 (Ont. S.C.J.) is said by Mr. Paul to be comparable to the case at bar. RioCan, like many of the duty to defend cases, involves a slip and fall claim from ice in a parking lot. The owner of the property had an agreement with a contractor for snowplowing and winter maintenance of the parking lot. The agreement required the contractor to indemnity the owner for anything arising from its work and to name the owner as an additional insured.

[17] In the underlying action, the plaintiff sued the owner and others, but not the contractor. The owner issued a third party claim against the contractor. In the statement of claim, allegations were advanced as to the failure to properly maintain the parking lot and under the Occupiers’ Liability Act.

[18] Hennessy J. determined the claims could be attributable to the contractor’s failure to perform its obligations under the agreement and that the claims, if proven, would fall within coverage of the insurance policy. She went on to say that despite multiple theories pleaded by the plaintiff, the fundamental issue raised was the plaintiff’s slip and fall on the ice covered parking lot due to the owner’s failure to maintain. The true nature of the claim, she concluded, was the negligence in maintaining an ice free parking lot. Hence, Hennessy J. found a clear duty to defend was triggered.

[19] Ms. Dickinson refers to Cadillac Fairview Corp. v. Olympia Sanitation Products Inc., 2010 ONSC 3409, as more comparable on its facts. Cadillac Fairview involves a slip and fall in a shopping mall. Both the owner and contractor were sued. The owner had an agreement with the contractor involving cleaning and maintaining the floors in the mall. The agreement required the contractor, as in RioCan, to indemnify the owner and name it as an additional insured.

[20] The slip and fall was alleged to have occurred near one of the stores inside the mall. The plaintiff asserted she did not know what she slipped on but that there was definitely something on the floor. Multiple theories were advanced by the plaintiff, with allegations of negligence against both the owner and contractor, including under the Occupiers’ Liability Act.

[21] DiTomaso J. determined the true nature of the plaintiff’s claim could not be said to arise out of the contractor’s negligence in performing its duties under the contractor. Rather, he said there were no specific allegations as to a deficiency in cleaning and there were other allegations, such as negligent design and dangerous situation.

[22] Hence, DiTomaso J. concluded there were stand-alone claims against the owner and it was possible the plaintiff’s injuries were not connected to the contractor’s responsibilities. In result, the duty to defend did not arise.

Analysis

[23] The respondents are defending the underlying claim on behalf of Checkers and, in reality, the university, but only as it pertains to the allegations of negligence against Checkers.

[24] As in RioCan and Cadillac Fairview, multiple theories are advanced by the plaintiff in the underlying action. The provisions of the Occupiers’ Liability Act are also engaged.

[25] The “premises”, as defined in the statement of claim, involve the whole of the property owned by the university. The Checkers operation occupied only a part of the premises. This difference, in my view, is of critical importance when considering the duties of maintenance and inspection of an occupier and the allegations of negligence regarding same.

[26] The plaintiff alleges that “she tripped and fell on a metal stake near one of the inflatables” (emphasis added). The distance is not defined, nor is there any allegation as to ownership or installation of the metal stake.

[27] The allegations of negligence are joint and several. There are no separate allegations as to the acts of Checkers.

[28] On a careful review of the statement of claim, I cannot conclude the true nature of the claim arises out of the operations of Checkers. The pleading would have to be more specific to come within the RioCan logic and indicate a sufficient nexus to the activity. While the object is defined, unlike in Cadillac Fairview, it cannot be said, at this stage, that it is connected to the negligence of Checkers.

[29] I do not read Nichols as saying the mere possibility a claim within the policy may succeed is to ignore the allegations that it would not. Here, the claim alleges injuries resulting from a known cause, but the liability for same is unknown. On this pleading, it is impossible to determine the true nature and substance of the claim. Therefore, it is not appropriate to direct the respondents to defend the claim on behalf of the applicant.

[30] The university’s insurers will have to defend the allegations of negligence made against it. Should the ultimate finding determine Checkers is solely liable, the university will recover its costs on the crossclaim. Hence, there can be no prejudice to the university in denying the relief sought at this early stage.

[31] In result, the application is dismissed.

[32] I expect counsel will be able to resolve the issue of costs; failing which brief written submissions are to be delivered to my chambers in Cayuga within 30 days.

D.J. Gordon J.

Released: February 24, 2014