Wal-Mart Canada Corp. v. Intact Insurance Company, 2016 ONSC 4971

Court File and Parties

COURT FILE NO.: CV-16-550281 DATE: 20160912 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

WAL-MART CANADA CORP. Applicant – and – INTACT INSURANCE COMPANY Respondent

Counsel: Andrew Yolles, for the Applicant Jonathan Heeney, for the Respondent

HEARD: July 5, 2016

G. DOW, J

Reasons for Judgment

1The applicant, Wal-Mart Canada Corp. (“Wal-Mart”) seeks a declaration that the respondent, Intact Insurance Company (“Intact”), has a duty to defend and indemnify it with regard to a claim for negligence and damages commenced against Wal-Mart in the Superior Court of Justice, Action No. CV-14-502266 (“the tort action”). Intact disputes that the policy it issued extends coverage given the nature of the claim described in the tort action and seeks dismissal of this application, with costs.

Facts

2On May 4, 2013, the plaintiff in the tort action (in paragraph 6 of that Statement of Claim) “was walking to her vehicle in the parking lot located on the subject premises when suddenly and without warning she tripped and fell over a cracked and uneven surface on the pavement”. The plaintiff alleges negligence on the part of Wal-Mart with 12 particulars of such negligence in paragraph 10 of the Statement of Claim including, at subparagraph (j) “it employed individuals, cleaners and maintenance companies who it knew or ought to have known were not qualified or competent to carry out the necessary inspection, maintenance and repairs”. The plaintiff in the tort action also relies on Section 3(1) of the Occupiers Liability Act, R.S.O. 1990, c. 0.2.

3Wal-Mart had entered into a contract with C.L. & Sons Property Maintenance and Landscaping Services Ltd. (“C.L. & Sons”) entitled “Outdoor Maintenance and Services Agreement”. The services to be performed is detailed in “Schedule ‘A’ - Litter Pick Scope of Work” with clause A.08 requiring C.L. & Sons to “communicate regularly any deficiency/condition that may be contributing to extraordinary maintenance (e.g. lack of garbage receptacles, curb damage, etc.), that would reduce debris, benefit vehicular and/or pedestrian safety, or enhance the appearance of the property”. The Agreement also required, at clause 7 of the Agreement for C.L. & Sons to keep in full force a commercial general liability insurance and include, amongst other things, coverage for personal injury liability. This clause also required Wal-Mart be named as an additional insured.

4The policy was obtained from Intact and renewed for one year on January 10, 2013 and identities Wal-Mart as a named insured and clearly provides coverage for the type of claim being advanced in the tort action subject to, as it relates to Wal-Mart and as stated in the Certificate of Insurance, the coverage being restricted to “liability arising out of the operations” of C.L. & Sons at Wal-Mart’s premises.

Issue – Duty to Defend

5Intact takes the position that the manner of the incident described in the tort action and the restriction of the coverage set out in the Certificate of Insurance compared to the scope of work C.L. & Sons was contracted to do excludes coverage. That is, the injuries and damages arise from uneven and/or cracked pavement and C.L. & Sons was hired only to clean and sweep the exterior area of Wal-Mart’s premises.

6In my view, all of the terms of the contract need to be considered and the usual rules of construction apply. Dealing first with the terms of the commercial general liability policy, it is clear it provides coverage. I agree that the coverage is subject to being restricted to what C.L. & Sons was contracted to perform.

7The next document to examine is the Outside Maintenance Services Agreement which uses Schedule ‘A’ to determine the “Scope of Work”. While Schedule ‘A’ is subtitled “Litter Pick Scope of Work”, the description of services goes beyond merely collecting garbage or litter. In the eight clauses set out in paragraphs A.05 to A.12 it directs C.L. & Sons to ensure a “clean & tidy appearance” and specifically requires communication to Wal-Mart (to parse the words of clause A.08) of “any deficiency/condition that may be contributing … to pedestrian safety”. That is, the contract provided for more than just collecting garbage or litter. It is clear the contract raises a potential finding that C.L. & Sons not only was required to clean and collect garbage in the parking lot but report any deficiency observed that could affect pedestrian safety.

8I am reinforced in this conclusion by the renewal form issued by Intact extending the policy from January 10, 2013 for one year where the “Insured’s Business Operation” is described as “Maintenance and inspection of shopping plazas, clean-up, lawn maintenance, etc.”.

9The particulars of negligence in the tort action against Wal-Mart, at paragraph 10 includes:

“f) it failed to take any reasonable or adequate steps to ensure that the parking lot was in a good state of repair;

h) it did not have an adequate or reasonable system of maintenance or inspection of the subject premises to detect such danger; and

k) it failed to properly supervise the individuals, cleaners and maintenance who it employed to take care of the necessary inspection, maintenance or repairs”.

10As a result, it is entirely possible that the findings of fact will result in the Intact policy affording coverage to Wal-Mart and Intact being required to indemnify Wal-Mart for any award made. The issue of the duty to indemnify remains open and awaits determination. As a result, I conclude from the relevant contracts and the pleadings as presently drafted that Intact owes Wal-Mart a duty to defend it in this action.

11The parties correctly submitted the duty to indemnify is different than the duty to defend and the general rule on the duty to defend is whether the pleadings against the insured make allegations that, if so found, would fall within the coverage. This principle is stated in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada 2010 SCC 33, 2010 S.C.C. 33 at paragraph 19.

12Counsel for Intact objected to Wal-Mart being entitled to use affidavit evidence and relied on the case law in support of same in Halifax Insurance Company of Canada v. Innopex Ltd., 2004 33465, [2004] O.J. No. 4178 (C.A.) at paragraph 32. My analysis and conclusion above used only the pleadings, contract and insurance policy documents.

Issue – Retaining Counsel and Providing Instructions

13Wal-Mart sought not only a Declaration that Intact was required to defend them pursuant to the terms of the contract and policy but also, given their prior refusal to do so, that Wal-Mart appoint and instruct counsel at Intact’s expense. The basis for this request includes the fact that the tort action against Wal-Mart (issued April 15, 2014) has been duplicated in a subsequent action against C.L. & Sons (issued March 24, 2015). There is also a Third Party Claim by Wal-Mart issued against C.L. & Sons in the original tort action for contribution and indemnity. Wal-Mart relies on the reasonable apprehension of conflict of interest and the principle described in Brockton (Municipality) v. Frank Cowan Co., 2002 7392, [2002] O.J. No. 20 (C.A.) by Justice Goudge, at paragraphs 41 and 43.

14The concern is that counsel appointed, paid and instructed by Intact pursuant to its duty to defend will somehow steer the factual matrix to a conclusion where there is no duty to indemnify. I disagree that the situation at hand is at the level where this is a valid concern. There is also the contrary concern that Wal-Mart would appoint and direct counsel to steer the factual matrix to the opposite conclusion. As the evidence about inspection and maintenance of the parking lot will emerge from employees or subcontractors of Wal-Mart, it is my view Intact should retain its right under the policy to choose, pay and instruct counsel. Wal-Mart is at liberty, at its own expense, to monitor the proceedings.

15The issue of the action between Wal-Mart and C.L. & Sons as contained in the Third Party Claim is remedied by Intact appointing counsel other than whomever it chose to defend C.L. & Sons. The usual standard insurer procedure will apply that the separate counsel appointed to defend Wal-Mart will report to a separate adjuster than the adjuster instructing counsel for C.L. & Sons and neither will have access to the other’s file. As a result, this aspect of the application is dismissed.

Costs

16Wal-Mart submitted a Costs Outline seeking $15,882.01 for substantial indemnity costs while the Costs Outline of Intact was in the amount of $7,229.81 for full indemnity costs. Wal-Mart acknowledged some duplication of the docketed time given one of the lawyers assigned to the matter was unable to continue. My conclusion is Wal-Mart had general but not complete success. Further, Wal-Mart was required to put forward greater effort in assembling the motion materials. As a result, Wal-Mart is entitled to recovery of a reduced portion of its claim for costs which I assess in the amount of $10,000, inclusive of fees, HST and disbursements. This is consistent with the principles set out in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579, [2004] O.J. No. 2634. The costs are payable by Intact to Wal-Mart forthwith.