COURT FILE NO.: 15-64063
DATE: 2015/11/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jennie Hill, Mary A. Hill and Robert A. Hill
Applicants
– and –
Intact Insurance Company
Respondent
Ines Jelic, counsel for the Applicants
W. Colin Empke, counsel for the Respondent
HEARD: October 23, 2015 at Ottawa
REASONS FOR DECISION
ROGER J.
Factual Overview
[1] The Applicants seek a declaration pursuant to the wording of a homeowner’s contract of insurance that the Respondent has a duty to defend them and should allow them to select counsel.
[2] The Applicant, Jennie Hill, has a homeowner’s policy of insurance, bearing policy number T00000872 (the “Policy”) with the Respondent, Intact Insurance Company (“Intact”), with respect to a residential property located at 31 Harvard Avenue in the City of Ottawa (“insured property” or “Ottawa home”).
[3] The Policy was, at all relevant times, in full force and effect with a policy period of March 24, 2012 to March 24, 2013.
[4] The Applicants own two recreational properties at 3812 and 3814 McGahey Lane in the City of Kemptville, Ontario (“Rideau River properties”). Intact provided coverage for the Rideau River properties between 2006 and March of 2010. On or about March 9, 2010, following an exchange of correspondence, the Applicant, Jennie Hill, was advised that the Respondent deemed the Rideau River properties uninsurable and that the Policy for the Rideau River properties would not be renewed.
[5] The dwellings on the Rideau River properties were old and were not occupied by the Applicants at the relevant times; there was no policy in effect on these properties after March 24, 2010 and it is not disputed that this was known by the Applicant, Jennie Hill.
[6] The parties disagree about the applicability of the personal liability section of the Policy with respect to the incident which occurred on the property that was not insured (the Rideau River properties). They disagree as to whether the allegations of negligence arise from the insured’s “actions” or the insured’s “ownership of the properties”.
[7] It is well‑established law in Canada that the determination of a duty to defend requires reconciliation between the pleadings and the insurance policy.
[8] The Applicants were named as defendants in an action bearing Court File No: 14-61671 (“Underlying Action or Statement of Claim or Kirst Plaintiffs”). The Underlying Action includes a claim for damages, including compensatory damages, arising from personal injuries allegedly suffered by the Plaintiff on or about August 16, 2012.
[9] In the pleadings it is alleged that, in or about July or August 2012, the Applicants hired a contractor to remove trees from one of the Rideau River properties and that in the course of that work, a man was seriously injured by a falling tree.
[10] The Kirst Plaintiffs allege, at para. 10 of the Statement of Claim, that the Applicants are the owners of the Rideau River properties. They describe in detail a number of Orders issued by the municipality that the property is not in conformity with the standards of maintenance and occupancy of the municipality (see para. 21) and that the Hills refused or neglected to remove the offending trees. It is alleged that the Hills hired Upton to remove the trees in or about July or August 2012, but that Upton was a driveway sealer and not an arborist (see para. 48) and that Upton hired Vlug or ArborXpert.
[11] The Kirst Plaintiffs allege:
[86] The Plaintiffs state that the Hills were negligent and/or grossly negligent for failing to remove the trees on the Property between 1998 and 2002, as ordered by the Municipality. The Plaintiffs state that the Hills knew that the tree that fell on Dylan was damaged and dangerous. The Hills failed to take steps that a reasonable land owner would have taken to eliminate the danger. The Plaintiffs state that the Hills’ failure to act was in violation of the Municipality’s By-Laws and the Building Code Act. Had the Hills complied with any of the Municipality’s numerous Orders, the accident would not have occurred.
[87] The Plaintiffs further state that the Hills are liable as occupiers of the Property. The Plaintiffs state that a property owner must take steps to ensure that trees located on their property are not hazardous to others.
[88] The Plaintiffs state that the Hills were negligent by failing to hire a competent contractor to remove the tree involved in the accident. Instead of hiring an arborist, the Hills hired Upton, a driveway sealer, to remove the tree. Upton then hired an incompetent and non-certified arborist, Vlug and ArborXpert. The Plaintiffs state that the Hills ought to have hired a competent and Certified Arborist; had they done so, the accident would not have occurred. A Certified Arborist would not have used the grossly negligent and reckless method to fell the tree that was used by Vlug and ArborXpert.
[12] It is not disputed that in August 2012 there was liability insurance coverage in place only for the Ottawa home (also defined above as the insured property).
[13] The Ottawa home’s liability coverage insuring agreement provides that:
We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional bodily injury or property damage arising out of:
your personal actions anywhere in the world
your ownership, use or occupancy of the premises defined in Section II.
[14] The Ottawa home’s liability coverage defines “premises” as those premises specifically described on the Coverage Summary page (the remainder of the definition is not relevant in this case).
[15] The only premises listed on the Coverage Summary page in August 2012 was the Ottawa home.
[16] The second part of the Ottawa home’s liability coverage (paragraph 13 (2) above), relates to occupier’s liability. However, it only provides coverage for premises listed on the Coverage Summary page of the Policy. The Coverage Summary page of the Ottawa home only lists the Ottawa home. Therefore, there is no coverage under the second part (your ownership, use or occupancy of the premises defined in Section II) of the Ottawa home policy for the Rideau River properties (this is not disputed by the Applicants).
[17] The Policy contains no relevant exclusion.
Issues
[18] The issue is whether or not Intact has a duty to defend the Applicants against the Kirst Plaintiffs. The answer to this question depends on whether the allegations in the Kirst lawsuit fall within the Ottawa home’s liability coverage available under the Policy. If such a duty is found to exist, the Applicants seek the right to select counsel.
The Law
[19] The law on the duty to defend is well established. The general rule is that if the pleadings against the insured allege facts which, if proven, would fall within coverage, the insurer is obliged to provide a defence regardless of the truth or falsity of such allegations; (see Non‑Marine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, at para. 80 [Scalera], citing Bacon v. McBride (1984), 6 D.L.R. (4th) 96 (B.C.S.C.), at para. 10).
[20] According to the Supreme Court of Canada, a determination of whether a lawsuit falls within coverage is based on the “true nature of the claim”:
… However, these bare assertions alone cannot be determinative. Otherwise, the parties to an insurance contract would always be at the mercy of the third-party pleader. What really matters is not the labels used by the plaintiff, but the true nature of the claim; (see Scalera at para. 79).
[21] Labels must be ignored in favour of the substance of the allegations:
… [W]hen ascertaining the scope of the duty to defend, a court must look beyond the choice of labels, and examine the substance of the allegations contained in the pleadings. (See Scalera at para. 50.)
[22] The onus is on the insured (the Applicants) to show that the Kirst lawsuit falls within the insuring agreement of the Ottawa home’s liability coverage; (see Model Jewellery Manufacturing Co. v. Western Assurance Co., [1962] O.R. 293 (Ont. H.C.) at para. 47).
[23] In the Kirst lawsuit, the Applicants are alleged to have been responsible for the conditions of the trees located on the Rideau River properties. It alleges that they failed to take steps that a reasonable land owner would have taken, that they acted in violation of municipal by‑laws and orders and that they are liable as occupiers of the property. The Occupiers’ Liability Act, R.S.O. 1990, c. O.2 defines “occupier” as anyone in physical possession of the premises or who has responsibility for the condition of the premises. “Premises” is defined as “lands and structures”. These allegations are contained at paragraphs 86 and 87 of the Statement of Claim.
[24] The Kirst Plaintiffs have also alleged that the Applicants were negligent by “failing to hire a competent contractor” to remove the trees on the premises of the Rideau River properties, that they ought to have hired an arborist. The Applicants argue that this is “personal actions anywhere in the world”. The Respondent on the other hand argues that this supports their position that the action is about the ownership, use or occupancy of the premises since, in response to this allegation, if the Applicants can prove that they acted reasonably in entrusting the work to the contractor, they are provided with a full defence under the provisions of the Occupiers Liability Act.
[25] The Applicants assert that there is coverage for the Kirst lawsuit under the first branch of personal liability coverage of the Ottawa home policy, “personal actions anywhere in the world”. They allege that this results from paragraph 88 of the Statement of Claim which alleges that the Applicants were negligent: (1) by failing to hire a competent contractor; (2) by hiring a driveway sealer who hired an incompetent arborist; and (3) by failing to hire a competent arborist.
[26] The Applicants cite Ottewell v. Pilot Insurance Co. in support of their assertion that the claim against the Applicants is for their negligent conduct and not related to occupier’s liability; (see Ottewell v. Pilot Insurance Co., 16 O.R. (3d) 92 (Ont. S.C.J.), [1993] O.J. 4572 [Pilot]). In Pilot, the claim against the insured was that “he failed to take proper care for the safety of his [7‑year‑old] daughter” who was injured while the insured was constructing a hunting platform. The court held that the insured was being sued in relation to his negligent conduct. What is interesting in that case is that the policy contained an exclusion for liability arising out of premises other than the one insured. The court found that liability arose not out of the premises but out of the applicant’s conduct.
[27] I note that in our case the Policy does not contain an exclusion for liability or damages arising out of the ownership, use or occupancy of premises not listed on the coverage summary page of the policy or arising out of the ownership, use or occupancy of premises other than the one insured.
[28] In Woodside v. Gibraltar General Insurance Co. (1988), 66 O.R. (2d) 630 (H.C.) [Woodside Trial Decision], rev’d (1991), 1 O.R. (3d) 474 (C.A.) [Woodside Appeal Decision], the insureds lived at 57 Carlton (the “old home”). They then purchased a new home at 10 Padget Place (the “new home”). They purchased liability insurance for the new home and let the liability insurance on the old home lapse. However, they still lived at the old home while they were in the process of selling it. A prospective purchaser fell and injured himself at the old home. A staircase he was descending gave way as it was not properly secured to the deck of the old home. The prospective purchaser sued the insured. The insurer denied coverage based on the fact that the old home did not have liability coverage. At issue was whether the liability insurance for the new home extended coverage to liability for the old home.
[29] The insureds in Woodside, at trial, argued that the injured party (the party suing the insureds in the underlying action) had not pleaded that the negligence of the insureds arose out of occupier’s liability. Therefore, the argument continued, even if the premises liability portion of the policy was not applicable, the portion relating to other liability (equivalent of the “personal actions anywhere in the world” coverage) should apply. The Court rejected this argument:
Mr. Hubble, on behalf of the plaintiffs, argued in the alternative, that liability coverage applied because the plaintiffs did not plead that the negligence arose out of occupier’s liability. I reject that argument. Clearly, Woodside’s negligence and [the injured party’s] injuries were related to the [insureds’] premises, occurring on the property and specifically on a building on that property. (See Woodside Trial Decision, at para. 40.)
[30] In Woodside, the Court considered the substance of the allegations and found that they did not relate to personal actions but to ownership issues. Moreover, in Woodside, the policy provided that it did “not apply to liability arising out of premises other than as herein-before defined”; (see para. 31).
[31] The Applicants cite the case of Lee v. Townsend for the proposition that “your personal actions anywhere in the world” encompass all actions of the insured; (see Lee v. Townsend, 43 C.C.L.I. (3d) 261 (Ont. S.C.), [2002] O.J. No. 4304 [Townsend]). In Townsend, the insured was sued for the tort of malicious prosecution. The insurer denied coverage based on an exclusion for intentionally caused bodily injury. The insured argued that the exclusion did not apply because there were allegations in the statement of claim that the insured had negligently made certain statements and negligently failed to make other statements to the police which then led to criminal charges against the plaintiff. The Court, in rejecting this argument, held that the negligence allegations were a derivative claim within the intentional tort of malicious prosecution and must be subsumed into the intentional tort of malicious prosecution for the purposes of the intentionally caused bodily injury exclusion. Again, the Court looked at the substance of the allegations.
[32] The applicable test is well laid out at paragraphs 50-52 of Scalera. Firstly, the court determines the true nature of the claims, looking beyond the choice of labels to examine the substance of the allegations. Secondly, it looks to determine if any claims are entirely derivative in nature (such as a claim of negligence in an intentional tort). If the alleged negligence is based on the same harm as what is excluded by an exclusion clause (such as an exclusion for intentional tort), it will not avoid the exclusion clause despite the label. Thirdly, the court decides whether any of the properly pleaded, non‑derivative claims could potentially trigger the insurer’s duty to defend. Stated otherwise, the court must assess the pleadings to determine the substance and true nature of the claims – consider the factual allegations in their entirety to determine if they could possibly require the insurer to indemnify the insured.
[33] The Kirst Plaintiffs have alleged against the Applicant: (1) negligence for failing to remove the trees; (2) liability as occupiers of the Rideau River properties; and (3) negligence for failing to hire a competent contractor. The contentious allegation on this Application is the latter, negligence for failing to hire a competent contractor.
[34] In Manning v. 3980 Investments Ltd., 2003 ONSC 2906, the issue was whether the actions of the landlord, who had hired a contractor to provide maintenance of the premises, satisfied the requirements of section 6 of the Occupiers’ Liability Act thus allowing it to escape liability. Ultimately the court held that the landlord’s instruction and supervision were inadequate and thus the landlord was unable to benefit from section 6 of the Occupiers’ Liability Act. In coming to that conclusion, Justice Belleghem made the following comments:
61 Under s. 6(1) of the Act, the defendant “acted reasonably in entrusting the work to the independent contractor”, but failed to take “such steps . . . as the occupier reasonably ought in order to be satisfied that the contractor was competent, and that the work had been properly done . . .”
65 The principle was recently reiterated in the Supreme Court of Canada in Lewis v British Columbia, [1997] 3 S.C.R. 1145 (S.C.C.). At paragraph 19 the court says this:
In some circumstances, the duty to take reasonable care may well be discharged by hiring and, if required, supervising a competent contractor to perform the particular work. The standard of reasonable care is met by exercising reasonable care in the selection and, in some situations, the supervision of an independent contractor qualified to undertake the work. If this is done, then the principal will usually not be held liable for injury caused by the negligence of the independent contractor. This long standing principle of the common law is today reflected in many of the occupiers’ liability statutes enacted by the provinces. These Acts generally protect the occupier from negligence of an independent contractor qualified to perform the work… [Underlining added].
66 The Ontario Occupiers Liability Act, s. 6(1) incorporates this principle as a defence. The defence, however, is only available if the evidence supports it….
[35] Clearly a failure to hire a competent contractor falls within the ambit of the Ontario Occupier’s Liability Act. However, does it necessarily follow, as is argued by the Respondent, that such a claim does not relate to the Applicants’ personal actions anywhere in the world?
[36] The words in the Policy are clear and unambiguous. They provide that the insurer will pay all sums that you become legally liable to pay as compensatory damages because of unintentional bodily injury arising out of your personal actions anywhere in the world. “Personal” refers to “affecting or belonging to a particular person” or “involving the presence or action of a particular individual”; (see: the Concise Oxford English Dictionary, twelfth edition, 2011 at p. 1070). The true nature of the claim that the Applicants were negligent for failing to hire a competent contractor is a claim arising out of the actions of an individual: it alleges that the Plaintiffs were negligent in doing so – in hiring an incompetent arborist. The Policy does not exclude claims for personal actions arising out of your ownership, use or occupancy of an uninsured premise. Consequently, at the third stage of the test in Scalera, such a claim could potentially fall within coverage and therefore trigger the insurer’s duty to defend.
[37] The fact that the claim also falls within the ambit of the Ontario Occupier’s Liability Act does not make or transform such a claim into one that does not relate to the Applicants’ personal actions anywhere in the world. This case can be distinguished from the decision in Townsend as coverage, in this case, is not excluded if the claims fall within the ambit of the Occupier’s Liability Act.
[38] When the motion was argued, counsel for the Applicants indicated that, at this point, they did not seek an order allowing the Applicants to retain counsel of their choice but rather that they would, for the moment, be satisfied with an order in the form found at paragraph 60 of the Respondent’s factum. I agree that it would, at this stage and on the evidence presented, be premature to make any finding that the issues raised on this Application create a reasonable apprehension of conflict. Rather, at this point, the safeguards suggested by the Respondent should be sufficient. This could be reviewed if and when required.
Disposition
[39] This motion is granted in part. The Respondent has a duty to defend the Applicants as sought at paragraph 1 (a) of the Application. The Respondent shall institute and maintain appropriate safeguards to avoid any conflict of interest with its insureds, including: retaining a different firm to defend the Underlying Action; ensuring that there will be no communication between counsel defending the Underlying Action and coverage counsel; ensuring that all reports from counsel defending the Underlying Action are provided concurrently to the insurer (the Respondent) and to the insureds (Applicants); and ensuring that steps are taken such that different claims examiners deal with coverage and liability issues in isolation from one another.
[40] Paragraphs 1 (b) to (d) are premature and, consequently, are not dealt with at this point. Any of these may be revisited if and when appropriate.
[41] If the parties cannot agree on costs of this motion within the next 15 days then brief written submissions of no more than three pages, excluding a costs outline, may be submitted by the Applicants within the next 20 days and by the Respondent within the next 30 days.
Mr. Justice Pierre E. Roger
Released: November 10, 2015
COURT FILE NO.: 15-64063
DATE: 2015/11/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jennie Hill, Mary A. Hill and Robert A. Hill
Applicants
– and –
Intact Insurance Company
Respondent
REASONS FOR DECISION
Roger J.
Released: November 10, 2015