ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 14-61570
DATE: 2014-12-19
BETWEEN:
SHARIF VIRANI
Applicant
– and –
INTACT INSURANCE COMPANY
Respondent
David Sheriff-Scott, for the Applicant
Christopher Reil, for the Respondent
AND BETWEEN
SPENCER KEYS
Applicant
– and –
INTACT INSURANCE COMPANY
Respondent
COURT FILE NO.: 14-61570
Owen Bourns, for the Applicant
Christopher Reil, for the Respondent
HEARD: December 18, 2014
T.D. RAY, J
[1] The applicants seek a declaration that the respondent must respond to a commercial policy #501241009 in force with CASA (Canadian Alliance of Student Associations) as insured and defend the applicants in Court File No. CV-09-394256 in which the applicants are named defendants, against whom damages are sought for defamation arising out of a video published by the applicants on the internet. The plaintiff is the Canadian Federation of Students.
[2] While the applications were framed separately, they were argued together. The factual and legal issues are the same.
[3] The respondent admits the policy, admits its terms, and admits that it was in force at the relevant time, but denies that the claim comes within the insuring agreement so as to trigger the obligation to defend.
[4] The issue is whether the defendant has a duty to defend the applicants, in the sense in this case, of paying their defence costs.
[5] The relevant portions of the claims in the Statement of Claim are described in the following terms:
a. Paragraph 3. The defendants, Ararti Shaima and Sharif Virani are residents of Ontario, and according to Ms. Mitchell and Mr. Keys, were involved in the creation and posting of the video.
b. Paragraph 4 to 11. Description of the video, the defamation and how the identity of the defendants was discovered.
c. Paragraph 12. On February 11, 2011, Ms. Mitchell, in response to the Plaintiffs demand for particulars, identified Ms. Sharma and Mr. Virani as being involved in the creation and posting of the video. Ms. Sharma and Mr. Virani were served with a Notice of Intended Action pursuant to the Libel and Slander Act on February 24, 2011.
d. Paragraphs 13-22. Further description of the damages and the conduct alleged in support of the claims.
[6] The relevant portion of the insuring portion of the relevant CASA Commercial Liability Policy is as follows:
a. COVERAGE B – PERSONAL INJURY AND ADVERTISING INJURY LIABILITY
The Insurer will pay those sums that the Insured becomes legally obligated to pay as “compensatory damages” because of “personal injury”…The insurer will have the right and duty to defend the insured against any such action…..
b. SECTION II – WHO IS AN INSURED.
c. 2. Each of the following is also an Insured:
a)The Named Insured’s “volunteer workers” or “employees”, other than the Named Insured’s “executive officers” only while performing duties related to the conduct of the Named Insured’s business”……
[7] There are no relevant exclusions.
[8] As a matter of law, it is the Statement of Claim that defines the cause of action, and consequently, the alleged relevant facts. It is the Statement of Claim that is the starting point to determine if the applicants are insureds under the policy. The specific words, labels, or phrases are not determinative, rather, it is the ‘true nature or substance’ that is important.[^1]
[9] The test is whether there exists “the mere possibility that a claim falls within the insurance policy. Where it is dear that the claim falls outside the policy, either because it does not come within the initial grant of coverage or is excluded by an exclusion clause, there will be no duty to defend.”[^2] This is not to be confused with the duty to indemnify which may arise from proven findings or facts.[^3] The duty to defend test being a ‘mere possibility’ has been held to be broader than the duty to indemnify.
[10] The rules governing the interpretation of an insurance policy have been the subject of considerable scrutiny and comment. In general, the words of a policy are to be given their ordinary meaning. If the words are unclear or ambiguous, then the contra proferentum rule requires that the interpretation least favourable to the insurer be adopted.
[11] The applicants seek to introduce on this application all of the pleadings plus the examinations for discovery as being relevant to consideration of whether the claim falls within the respondent’s coverage agreement. The main reason is that the terms of coverage are limited to a claim against an employee of CASA that arose in the course of their employment. As noted above, the Statement of Claim is silent on both of these issues, and the applicants seek to have it determined on this application. The respondent takes issue with the applicant introducing anything other than the Statement of Claim and the insurance policy; and in any event, says that there is no evidence that the video, which is at the heart of the defamation claim, was in any way connected to CASA, its insured. While it agrees there was an employment relationship between CASA, its insured, and the applicants, it says not only that it is not pleaded, but it is immaterial.
[12] On an application to determine the obligation to defend, the Statement of Claim has generally been the determining document since it frames the cause of action and by definition must plead the facts that are material and necessary to the cause of action. The Statement of Defence of the party seeking coverage is immaterial and of no assistance in determining the scope of the cause of action.^4 Examinations for discovery are evidence and unless there are admissions by the plaintiff which expand, restrict or otherwise redefine the cause of action as pleaded, they are immaterial to determining the cause of action. A demand for particulars may be relevant; however there was no demand for particulars.
[13] It is clear that any pleading, other than a Statement of Claim against the party seeking coverage, is relevant to define the claim or cause of action in order to conclude whether the party is an insured within the language of the policy. For example a cross-claim or third party claim against the party may be relevant. There is no cross-claim or third party claim against either of the applicants.
[14] The applicants contend that the “mere possibility” test is met when one considers that the applicants were employees at the time of the video, and it is a reasonable inference that the video was made while they were in the course of their employment. The argument is that the claim against the applicants is so vague and general that the inference is not foreclosed. Furthermore, they point to a Statement of Defence of CASA, prepared by the insurer, to the Third Party Claim of the applicant Virani as admissions that at the material times, the applicants were employees of CASA, their insured, and that having regard to the plaintiff and CASA being competing student organizations, it is a sufficient reasonable inference to bring it within in a ‘mere possibility’ that the claim can be interpreted as coming within the policy definition of insured, so as to require the respondent to defend this action, or pay the defence costs.
[15] For the applicants to succeed, they not only have to expand the extrinsic evidence that may be considered, but also the scope of ‘mere possibility’. Extrinsic evidence has been canvassed in a number of authorities.[^5] These authorities confirm that it is only the pleadings against the party seeking coverage that is relevant in order to determine the scope of the cause of action. However, the Court of Appeal in the Farmer’s Mutual Insurance[^6] case suggests that other extrinsic evidence may be considered. But on the facts of that case, the court held it was not relevant since even if it were considered, the extrinsic evidence in no way changed the substance of the claims. I take that to mean that for a coverage question, if after viewing the Statement of Claim there is some doubt about the substance of the claims, that the extrinsic evidence may be examined in order to better define the substance of the claim.
[16] From the Statement of Claim, it appears that the substance of the claim is for damages for defamation from words used in a video posted on the internet by the defendants – including the applicants. The other pleadings in the action do not change the substance of the claim against the applicants. I find that, in any event, the substance of the claim is clear; and in no way implicates the applicants as employees of CASA making a video in the course of their employment. The extrinsic evidence is of no assistance and should not be considered. I cannot expand the ‘mere possibility’ to include that the videos were made in the course of their employment. There is simply nothing on which that inference can be based.
[17] While I have a good deal of sympathy with the applicants’ dilemma in defending a lawsuit of this kind, I am satisfied that, if as suggested, the applicants are found not liable, or alternatively found to have made the video in the course of their employment, that they will have recourse to recover their costs, including the costs of this motion.
[18] The parties filed their costs outlines at the conclusion of submissions. If they cannot agree on costs, they may make submissions of two pages or less within 14 days, and a further 5 days for reply. The parties may wish to address the type of costs order that could be made having regard to my comments in paragraph 17.
Honourable Justice Timothy Ray
Released: December 19, 2014
COURT FILE NO.: 14-61570
DATE: 2014-12-19
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SHARIF VIRANI
Applicant
– and –
INTACT INSURANCE COMPANY
Respondent
AND BETWEEN
SPENCER KEYS
Applicant
– and –
INTACT INSURANCE COMPANY
Respondent
REASONS FOR decision
Honourable Justice Timothy Ray
Released: December 19, 2014
[^1]: NonMarine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551 (S.C.C.), (paras. 79 and 81)
[^2]: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada 2010 SCC 33, 2010 CarswellBC 2501, 2010 CarswellBC 2502, [2010] 10 W.W.R. 573. (Para 19)(SCC)
[^3]: Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, 1990 CarswellOnt 619,1990 CarswellOnt 994(SCC).
[^5]: Eg: Monenco Ltd, v. Commonwealth Insurance Co. 2001 SCC 49; Aviva Insurance v. Regional Hose, 2010 ONSC 1228, 2010 ONSC1228 ; Dave’s K&K Sandblasting (1988) Ltd. v. Aviva Insurance Co. of Canada (2007) BCSC 791;Hamel Construction Inc. v. Lombard Canada Ltd. (2005) N.S.C.A.; 1540039 Ontario Ltd v. Farmers’ Mutual Insurance Co., 2012 ONCA 210
[^6]: Note 6.