CITATION: Carneiro et al and Regional Municipality of Durham et al and Zurich Insurance Company Ltd., 2015 ONSC 2427
COURT FILE NO.: CV-13-4679-00 A1
DATE: 2015-04-15
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN: LEENA CARNEIRO and JESSICA CARNEIRO
AND:
REGIONAL MUNICIPALITY OF DURHAM, MILLER MAINTENANCE LIMITED o/a THE MILLER GROUP, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, BRANDON LEE and JUDSON ALEXANDER MOORE
AND:
ZURICH INSURANCE COMPANY LTD.
BEFORE: Lemon, J.
COUNSEL:
David G. Boghosian, for the Defendant Regional Municipality of Durham
Van Krkachovski, for the Third Party
No one appearing for the Plaintiffs
No one appearing, for the Defendants Miller Maintenance Limited, Her Majesty the Queen, Brandon Lee, Judson Alexander Moore
HEARD: February 11, 2015
ENDORSEMENT
The Issue
[1] The defendant, Regional Municipality of Durham, seeks an order that the third party, Zurich Insurance Company Ltd, defend Durham with respect to all claims made against Durham by the plaintiffs. If that order is granted, Durham seeks an order that Zurich pay for counsel as appointed by Durham. Finally, Durham seeks Zurich’s reimbursement of Durham’s costs to date of defending the action.
[2] For reasons that follow, that motion is dismissed. Zurich need only defend Durham with respect to the claims insured for Miller Maintenance Limited.
Background
[3] On February 8, 2013, Antonio Carneiro Jr. died on Brock Road at the intersection with Whitevale Road in the Regional Municipality of Durham. This was as a result of a motor vehicle accident in the midst of heavy snowfall. The plaintiffs are family members of the deceased.
[4] The plaintiffs plead the same particulars of negligence against Miller and Durham. They are set out at paragraph 14 of the Statement of Claim as follows:
AS AGAINST DEFENDANTS THE MILLER GROUP, DURHAM AND HMQ:
a. They, their officers, servants, agents, contractors and/or employees designed or caused others to design an unsafe road;
b. They, their officers, servants, agents, contractors and/or employees built or caused others to build an unsafe road;
c. They, their officers, servants, agents, contractors and/or employees failed to warn the public, including the Plaintiff of the dangerous conditions of Brock Roadway in a timely fashion;
d. They, their officers, servants, agents, contractors and/or employees failed to close Brock Roadway;
e. They, their officers, servants, agents, contractors and/or employees failed to properly inspect, monitor, maintain and/or plow, sand and/or salt the road to ensure that it was free of snow and ice, or other defect, slippery substance or hazard;
f. They, their officers, servants, agents, contractors and/or employees created and/or allowed to exist an unsafe road;
g. They, their officers, servants, agents, contractors and/or employees failed to employ and/or have in place a reasonable system of notices, monitoring, warning, inspection and/or maintenance of the road on which drivers travel;
h. They, their officers, servants, agents, contractors and/or employees failed to ensure that their employees followed their own rules and/or reasonable inspection and/or maintenance practices concerning the inspection and maintenance of the road;
i. They, their officers, servants, agents, contractors and/or employees created a situation of danger and emergency, from which Mr. Carneiro Jr. could not extricate himself despite all reasonable care and diligence;
j. They, their officers, servants, agents, contractors and/or employees failed to employ, install and/or utilize visual cues such as warning, signs, or any other cues to warn that the road was not safe for use by the public;
k. They, their officers, servants, agents, contractors and/or employees created an emergency and a situation of danger;
l. They, their officers, servants, agents, contractors and/or employees failed to ensure that the road was free from ice or snow, or other slippery substance or hazard;
m. They, their officers, servants, agents, contractors and/or employees knew or ought to have known from specific previous experience and/or notification and/or claims and/or litigation and/or inspections that the road was not safe and did not comply with acceptable municipality practices, standards and/or that such ice or snow, or other slippery substance or hazard on the road created a danger to drivers thereon. Further having acquired such knowledge as is described herein, the Defendants failed to warn Mr. Carneiro Jr. of the said dangers and/or to take appropriate, necessary, prudent and/or reasonable measures in regard thereto;
n. They, their officers, servants, agents, contractors and/or employees employed persons who were incompetent or who had insufficient or inadequate equipment available to keep the road free of ice and snow, or other defect, slippery substance or hazard;
o. They, their officers, servants, agents, contractors and/or employees failed to adequately monitor available weather reports and warn the public;
p. They, their officers, servants, agents, contractors and/or employees employed incompetent officers, servants, agents and employees;
q. They, their officers, servants, agents, contractors and/or employees operated, owned, occupied and exercised care and control over the road which they knew or ought to have known was unsafe;
r. They, their officers, servants, agents, contractors and/or employees failed to take such care as in the case was reasonable to see that persons using said road were reasonably safe;
s. They, their officers, servants, agents, contractors and/or employees failed to obtain appropriate professional advice regarding maintenance and/or the operation of the road described herein; and
t. They, their officers, servants, agents, contractors and/or employees did not warn the Plaintiff of the dangerous weather conditions and/or did not ensure that the road was closed to drivers due to the dangerous weather conditions.
[5] Durham contracted out the plowing, sanding and salting of that portion of the road to Miller Maintenance Limited. Miller had been called out by Durham on February 7, 2013. The storm lasted from February 7 to 9, 2013.
[6] Miller’s contract with Durham required Miller to obtain a comprehensive policy of insurance for public liability and property damage and to name Durham as an additional insured. Zurich issued that policy to Miller and it was in effect at the date of the accident.
[7] The terms of the contract between Miller and Durham required Miller to obtain liability insurance coverage for Durham in the amount of $5,000,000 as an additional insured but only “in respect of all operations performed by or on behalf of” Miller.
[8] Section 24 of the contract states:
Section 24 – INSURANCE
[Miller]shall maintain and pay for Comprehensive General Liability insurance including premises and all operations. This insurance coverage shall be subject to limits of not less than $5,000,000 inclusive per occurrence for third party Bodily Injury and Property Damage or such other coverage or amount as may be requested.
The policy shall include [Durham] as an additional insured in respect of all operations performed by or on behalf of [Miller]. A certified copy of such policy or certificate shall be provided to [Durham] prior to commencement of the work.
[9] The terms of the contract further limited Miller’s indemnity obligations to Durham by excluding indemnity for damages caused by the negligence of Durham or its employees. Clause 25 of the contract states:
Clause 25. LIABILITY
[Miller] agrees to defend, fully indemnity and save harmless Durham from all actions, suits, claims, demands, losses, costs, charges and expenses whatsoever for all damage or injury including death to any person and all damage to any property which may arise directly or indirectly by reason of a requirement of the contract, save and except for damage caused by the negligence of Durham or its employees. [emphasis added].
[10] The policy contains an additional insured endorsement limiting coverage to Durham for:
…liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by:
[Miller’s] acts or omissions; or
The acts or omissions of those acting on [Miller’s] behalf and resulting directly from:
a. [Miller’s] ongoing operations; or
b. [Miller’s] work performed for [Durham] which is the subject of the written contract or written agreement.
[11] Further, that endorsement confirms that Zurich “will not extend any insurance coverage to any additional insured person or organization that is not provided to you in this policy or that is any broader coverage than you are required to provide to the additional insured person or organization in the written contract or written agreement”.
Positions of the Parties
[12] Durham submits that the plaintiffs’ claims essentially allege a failure on the part of Durham to remove snow and/or ice from Brock Road. That relates to the essence of the contract between Durham and Miller and forms the basis of the policy of insurance with Zurich.
[13] It is the position of Durham that the true nature of the claim pertains to winter maintenance. Miller was Durham’s winter maintenance contractor and was properly insured to do so. Durham therefore submits that it is entitled to a defence by Zurich.
[14] Alternatively, if there are any uncovered claims, Durham submits that the allegations of negligence against it are so intertwined with the allegations of negligence against Miller that it would be impossible to partition out the cost of defending the covered versus uncovered claims.
[15] Since there is no agreement between Durham and Zurich with respect to indemnification, Zurich would have an interest in establishing that the plaintiffs’ damages were caused by Durham as opposed to Miller. Zurich would therefore be in a conflict and Durham requires its own counsel to defend the main action.
[16] In response, Zurich states that the Statement of Claim alleges negligent design on Brock Road and other allegations of negligence against Durham which do not relate to Miller’s operations and fall outside of the scope of the insurance policy. It points to the particulars such as the design of the road, the building of the road and Durham’s failure to close, inspect, monitor and provide warnings to the public for use of the road.
[17] Zurich submits that Durham was also carrying out a supervisory role over Miller’s performance of the snow and ice removal. The contract between the parties requires that Miller shall indemnify and hold harmless Durham against all claims arising out of the performance of or the failure to perform the work specified in the contract, but only for claims that are caused by Miller’s negligent acts or omissions or anyone for whose acts Miller may be liable and not the negligence of Durham or its employees.
[18] Accordingly, Zurich submits that the allegations of negligence of the plaintiff against Durham do not fall within the contract terms and coverage giving rise to a duty to defend.
Authorities
[19] In UPS Supply Chain Solutions Inc. v. Airon HVAC Service Limited, 2015 ONSC 1734, Justice W. Matheson, sets out the legal principles with respect to duty to defend cases. There she said:
[15] There is no issue about the general principles that apply to determine whether or not there is a duty to defend arising from an insurance policy. The Supreme Court of Canada has summarized the circumstances in which there will be a duty to defend in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, and Nichols v. American Home Assurance Co. as follows:
(a) An insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured for the claim.
(b) The onus is on the insured to establish that the pleadings fall within the initial grant of coverage.
(c) The pleadings govern the duty to defend. However, in examining the pleadings, the parties are not bound by the labels selected by the plaintiff. It is the true nature or substance of the claim that is determinative.
(d) It is irrelevant whether the allegations in the pleadings can be proven in evidence. That is to say, the duty to defend is not dependent on the insured actually being liable and the insurer actually being required to indemnify. What is required is the mere possibility that a claim falls within the insurance policy.
(e) Where it is clear that the claim falls outside the policy, either because it does not come within the initial grant of coverage or because it is excluded by an exclusion clause, there will be no duty to defend.
[16] Further, where the 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.
[17] The widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy.
[26] The duty to defend is limited to defending claims that – if proven to be true – would fall within coverage under the policy. It does not extend to the defence of independent claims. The court is required to assess the substance or the “true nature” of each claim contained within the pleadings to see if it falls within the scope of coverage.
[27] Assessing the true nature of a particular claim is not an exercise to be undertaken in the abstract. It should be approached with a view to the specific limitations of the insurance coverage at issue.
[28] Where there is an unqualified obligation to pay for the defence of claims covered by the policy, the insurer is required to pay all reasonable costs associated with the defence of those claims even if those costs further the defence of uncovered claims. The insurer is not, however, obliged to pay costs related solely to the defence of uncovered claims.
[29] As is illustrated by a series of “slip and fall” cases that confront this issue, the question of whether the duty to defend extends to the whole claim depends on the specific pleadings at issue and resulting determination of the true nature of the claims.[References removed]
[20] In Nichols, McLachlin J., (as she then was), said:
It is in the insurer's interest that if liability is found, it be on a basis other than one falling under the policy. Requiring the insurer to defend claims which cannot fall within the policy puts the insurer in the position of having to defend claims which it is in its interest should succeed. The respondent suggested that this potential conflict could be avoided if the insured was able to retain his own lawyer, with the cost to be borne by the insurer. However, this would not end the difficulty. An insurer would be understandably reluctant to sign a "blank cheque", and cover whatever costs are borne by whatever lawyer is retained, no matter how expensive. Yet the insurer could not challenge any of these expenses without raising precisely the same conflict. For this reason, the practice is for the insurer to defend only those claims which potentially fall under the policy, while calling upon the insured to obtain independent counsel with respect to those which clearly fall outside its terms.
I conclude that considerations related to insurance law and practice, as well as the authorities, overwhelmingly support the view that the duty to defend should, unless the contract of insurance indicates otherwise, be confined to the defence of claims which may be argued to fall under the policy. That said, the widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy.
Analysis
[21] The principles with respect to these kinds of claims are relatively settled. Each case however differs according to what is pled in the Statement of Claim, what is insured under the policy in issue and whether the true nature of the claim can be determined. The cases also differ between determining the obligation to defend at the outset of the action or determining costs that should be paid at the end of the action.
[22] I do not propose to compare and contrast the various cases referred to me by counsel, however Durham particularly relies upon the cases of Hanis v. Teevan, [2008] ONCA 678, and Daher v. Economical Mutual Insurance Co., 1996 CanLII 639 (ON CA), [1996] O.J. No. 4394. Durham says that these are determinative of this issue. I do not find that to be accurate. Those cases dealt with costs at the end of trial that had already been incurred. In this case, we are at the early stages of the action. We are dealing with representation, not costs.
[23] In my view, the plaintiffs have pled different causes of action and I cannot tell, from the pleadings, and at this stage of the litigation, what is the “true nature” of the action. The materials do not provide me with anything from the plaintiffs to suggest any issue has been withdrawn. While I appreciate that I must be guided by the pleadings, I can imagine a more practical answer if the plaintiffs formally removed issues from the pleadings. That is not the case here.
[24] The plaintiffs claim against Durham for, among other things, road design, building an unsafe road, failing to warn the public and failing to close the road. The plaintiffs claim that Durham failed to comply with acceptable municipal practices and created a situation of danger. Those are clearly not something for which Zurich insured Miller. Some causes of action, if they existed, pre-date Miller’s involvement. They are independent claims.
[25] To the extent that the claims overlap, Zurich ought not be put in the position of defending where it would not be in their best interests to do so.
[26] Counsel for Zurich acknowledged during argument that if Miller were found liable and Durham were not, then Zurich would be required to indemnify Durham for the complete defence cost of the action. If the issues are as clear as Durham suggests, they will have that protection in the end.
[27] Accordingly, Zurich should only be required to defend Durham with respect to the claims as insured by Miller. Durham will continue with its own counsel to defend with respect to all other causes as alleged in the claim. The motion is therefore dismissed.
Amendment
[28] Durham also seeks an order granting leave to amend its third party claim. That request went on consent. If necessary, a draft order can be forwarded to me for my execution.
Costs
[29] If the parties cannot otherwise agree upon costs, Zurich shall provide its cost submissions within the next 15 days. Durham shall respond within 15 days of receipt of those cost submissions. Each cost submission will be no more than three pages, not including any bills of costs or offers to settle.
Lemon J.
Date: April 15, 2015
CITATION: Carneiro et al and Regional Municipality of Durham et al and Zurich Insurance Company Ltd., 2015 ONSC 2427
COURT FILE NO.: CV-13-4679-00 A1
DATE: 2015-04-15
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: LEENA CARNEIRO AND JESSICA CARNEIRO
AND:
REGIONAL MUNICIPALITY OF DURHAM ET AL
AND:
ZURICH INSURANCE COMPANY LTD.
BEFORE: Lemon, J
COUNSEL:
David G. Boghosian, for the Defendant Regional Municipality of Durham
Van Krkachovski, for Zurich Insurance Company Ltd.
ENDORSEMENT
Lemon J.
DATE: April 15, 2015