COURT FILE NO.: CV-12-447618-00A1

DATE: 20140910

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Peggy Jean Sinclair / Plaintiff

AND:

The Corporation of the Town of Markham and 1517706 Ontario Limited, operating as De Ferrari Construction Ltd. / Defendants

AND:

Lombard General Insurance Company (now operating as Northbridge General Insurance Corporation) / Third Party

BEFORE: Justice Edward P. Belobaba

COUNSEL:
David W. Powrie for Northbridge General Insurance / Moving Party

Shaneka Taylor for the Town of Markham / Responding Party

HEARD: February 21 and August 29, 2014

ENDORSEMENT

Rule 21 Question of Law re Duty to Defend

[1] This case stands for two unremarkable propositions: one, a duty to defend can be triggered if the particulars bring the claim within coverage, even if the statement of claim itself does not; and two, if the true nature of every claim advanced in the action against the insured falls within coverage, then the insurer has a duty to defend or fund the defence in full.

Background

[2] Peggy Jean Sinclair alleges that she slipped and fell on an icy Markham sidewalk in March 2012 and sustained serious injuries. She sued the Town of Markham (now the City of Markham) and De Ferrari Construction, the town’s sidewalk winter maintenance contractor. Markham third-partied De Ferrari’s insurer, Northbridge General Insurance, because Markham was an additional named insured under the De Ferrari policy.

[3] I will refer to the parties as the plaintiff, the city, the contractor and the insurer.

[4] The sidewalk winter maintenance agreement between the city and the contractor provided, in essence, as follows: the city would monitor winter weather conditions, patrol the roads, determine what plowing, sanding or salting had to be done and contact and direct the contractor accordingly; the contractor would be ready to respond at any time within one hour of being called.

[5] The agreement also provided that the contractor would employ a “contract co-ordinator” who would be responsible for “the supervision of snow and ice control on [the] sidewalks and walkways” in the contractor’s designated area of the city. The contract co-ordinator was to “be aware of sidewalk conditions at all times” so that “if conditions occur which require direction from the [city]” the contract co-ordinator was obliged to notify the city representative to get this direction.

[6] Thus, under the sidewalk winter maintenance agreement, the city controlled and directed the actions of the contractor (when, where and what to do) but the contractor, through its contract co-ordinator, also had to be aware of sidewalk conditions. If the latter concluded that conditions were such that city direction was needed, he or she had to contact the city and get these directions. This ongoing inspection and reporting responsibility of the contract co-ordinator assumes some significance in the duty to defend analysis.

[7] The insurance policy issued by the insurer to the contractor named the city as an additional insured “but only with respect to the legal liability arising out of the operations of the first named insured” [i.e. the contractor]. Given the contractual responsibilities of the contractor and its contract co-ordinator, the legal liability arising out of the contractor’s operations could potentially include not only acts or omissions relating to any winter maintenance activities (sidewalk plowing, sanding and salting) requested by the city, but also any acts or omissions relating to the inspection and reporting obligations.

The question of law

[8] The insurer says it has no duty to defend the plaintiff’s claims against the city and brings this Rule 21.01(1)(a) motion for a determination of the following question of law:

Does Northbridge General Insurance have a duty to defend the City of Markham, and if so, what is the extent of this duty?

[9] The insurer makes two arguments: first, that it has no duty to defend because it was not alleged anywhere in the statement of claim that the plaintiff’s fall was caused by snow or ice, or that the plaintiff fell on a sidewalk, an area for which the contractor was responsible. The pleadings state that the plaintiff slipped and fell on “the property located on or near the north side of 16th Avenue and east of Markham Road in the Town of Markham”. No mention of snow, or ice, or sidewalk. Thus, under the ‘pleadings rule,’[^1] says the insurer, there is no duty to defend.

[10] Second, if there is a duty to defend, the insurer argues that it is limited to the defence of the claims that fall within coverage, i.e. those that relate to the legal liability arising out of the operations of the contractor, such as any negligence in fulfilling the city’s plowing, sanding or salting requests.

[11] The city responds that even if the statement of claim failed to mention snow, ice or sidewalks, the particulars provided by the plaintiff make clear that she slipped on an icy sidewalk within the city’s jurisdiction, and a response to a demand for particulars becomes part of the pleadings. As for the coverage issue, the city says that all of the claims made in the action come within coverage and that the insurer should defend or fund the city’s defence in full.

Analysis

[12] In my view, for the reasons that follow, the city prevails on both points. The duty to defend is triggered by the particulars that have been provided; the extent of this duty is limited to claims that fall within coverage, but here, given the language of the sidewalk winter maintenance agreement, I find that every one of the claims made against the city comes within coverage. I will explain each point in turn.

(1) Particulars trigger duty to defend

[13] It is true that there is no allegation in the statement of claim that the plaintiff slipped and fell on a snow-covered or icy city sidewalk. However, in her response to a demand for particulars, the plaintiff stated that her fall was caused by an “ice and snow build up” on city property. She then marked the location of the fall with an “x” on a photograph of the area in question, clearly showing that she fell on what was obviously a sidewalk. Indeed, at the hearing, counsel for the insurer agreed that it “looks like a sidewalk to me.”

[14] The law is clear that particulars form part of the pleadings.[^2] Once delivered, a response to a demand for particulars is deemed to form a part of the statement of claim, and together with the statement of claim form the background for the action.[^3] In the context of a duty to defend motion, appellate courts have specifically held that the “pleadings” to be considered on such a motion are the statement of claim and any response to a demand for particulars.[^4]

[15] I therefore agree with the city that the plaintiff’s response to the demand for particulars, alleging the location and cause of her fall, forms part of the pleadings to be considered in assessing whether a duty to defend is owed to the city by the insurer in this case. And here it is clearly alleged in the particulars provided that the plaintiff slipped and fell because of a snow and ice buildup on a sidewalk within the city’s jurisdiction.

[16] The duty to defend is therefore engaged. The next question is the extent of this duty.

(2) Extent of the duty to defend

[17] The law is now settled that the insurer’s defence obligation only extends to the claims that fall within coverage.[^5] Here, the insurance coverage that was provided to the city as an additional named insured under the policy issued to the contractor was limited to legal liability “arising out of the operations” of the contractor. The task for the court in this case is to examine the “true nature” of each claim made by the plaintiff against the city and to determine if it falls within coverage.[^6]

[18] The plaintiff makes nine identical claims against both the city and the contractor, grounded essentially in negligence and occupier’s liability. Six of the claims [paras. 6 (a), (b), (c), (d), (e) and (i)] allege various manifestations of negligence in failing to provide a safe walking area, failing to warn about unsafe conditions in this area and hiring incompetent employees. Each of the six claims clearly falls within coverage because it could potentially arise out of or relate to the acts or omissions (i.e. “the operations”) of the contractor.

[19] The remaining three claims [paras. 6 (f), (g) and (h)] allege negligence in the inspection and reporting of unsafe conditions. Here, as I have already noted,[^7] the sidewalk winter maintenance agreement required the contractor to employ a contract co-ordinator who had specific inspection and reporting obligations. Therefore, these last three claims also fall within coverage because they could potentially arise out of or relate to the acts or omissions (i.e. “the operations”) of the contractor.

[20] In sum, I have no difficulty concluding that every one of the nine claims made against the city comes within the coverage of the policy issued to the contractor.[^8]

Disposition

[21] The insurer is obliged to defend the action against the city in full, or more pragmatically in this case, to fund the defence of the action against the city in full. The question of law posed herein is answered completely in favour of the city.

[22] The insurer suggests a costs award in the range of $7,500. The city is seeking $14,000. In my view, it is fair and reasonable to fix costs of $10,000 payable forthwith by the insurer to the city.

[23] I am grateful to counsel for their supplementary written submissions.

Belobaba J.

Date: September 10, 2014

[^1]: Whether or not an insurer has a duty to defend depends on the claims that are made in the pleadings. An insurer is obliged to provide a defence if the pleadings allege facts which, if true, could potentially require the insurer to indemnify the insured for the claim: Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801 at para. 21; Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699, at para. 28.

[^2]: Gaur v. Datta, 2014 ONSC 3923, at para. 20; Ottawa (City) v. Cole and Associates Architects Inc., 2012 ONSC 3360, [2012] O.J. No. 2607 at para. 29; and Janssen-Ortho Inc. v. Amgen Canada Inc., 2005 19660 (ON CA), [2005] O.J. No. 2265 (C.A.) at paras. 89-90.

[^3]: Perth Insurance Co. v. Osler Rehabilitation Centre Inc., 2013 ONSC 7033 (S.C.J.), at para. 8; and Steiner v. Lindzon, (1977) 1976 760 (ON SC), 14 O.R. (2d) 122, at 7.

[^4]: Co-operators General Insurance C. v. Richard, 2002 NBCA 98, at para. 30; Hamel Construction Inc. v. Lombard Canada Ltd., 2005 NSCA 69, at para. 29. I agree with the insurer that the court must be vigilant about attempts to manipulate pleadings in order to gain coverage that would otherwise not exist, but I am satisfied that there is no such manipulation in this case.

[^5]: The case law is discussed in Papapetrou v. 1054422 Ontario Limited, 2012 ONCA 506, at paras. 41-51. See especially paras. 41 and 46.

[^6]: Ibid. at para. 44.

[^7]: See above at para. 6.

[^8]: I have reviewed this court’s decision in a similar case, Zhou v Markham (Town), 2014 ONSC 435, and I agree with both the analysis and the result. I note, in particular, the significance of the court’s assessment of the contract co-ordinator’s role and responsibility: see para. 9.