Court File and Parties
CITATION: Pagé v. Rogers Communications Inc., 2017 ONSC 2341 COURT FILE NO.: 15-63605A1 DATE: 2017/04/18
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CECILE PAGÉ, Plaintiff AND: ROGERS COMMUNICATIONS INC, Defendant AND: FOREFRONT CABLE SOLUTIONS LIMITED, Third Party
BEFORE: MR. JUSTICE CALUM MACLEOD
COUNSEL: Noah J. Shapiro, for the Defendant (Moving Party) Kelly Fitzpatrick, for the Third Party (Responding Party)
HEARD: March 7th, 2017
ENDORSEMENT
[1] The defendant is a provider of cable television, internet and telephone service. When a new customer subscribes for cable service, it is a fairly simple matter to install the service and to hook up a cable. Burying the cable frequently takes time and for a period of time after installation the cable may remain unburied hanging from a fence or crossing the homeowner’s property.
[2] That is what happened here. The plaintiff then tripped over the unburied cable and injured herself. She has commenced an action for personal injury against Rogers.
[3] Rogers cable installation services are sub-contracted. In this case the sub-contractor was the Third Party, Forefront Cable Solutions Limited which installed and placed the temporary cable but was not responsible for burying it.
[4] The motion before the court is a motion by Rogers to compel the third party to reimburse it for legal fees incurred to date, to pay the defence costs going forward and to provide indemnity for any damages. This is based on the indemnity and co-insurance provisions in the contract between Rogers and Forefront.
[5] Such litigation is common under an insurance policy or in instances where a contractor has breached the requirement to obtain insurance. The unusual feature of this motion is the fact that the third party is not in breach of the insurance obligation. It has an insurance policy that names the defendant but the defendant is not satisfied with a contribution towards its costs, it seeks full indemnity.
[6] For the reasons that follow, the motion regarding indemnity for damages is premature. It is indeed possible that Forefront will be required to indemnify Rogers for any damages but it is impossible to make that determination at this stage of the proceedings and summary judgment on the point is not appropriate.
[7] In regard to the duty to defend, although the third party is not an insurer, there is a contractual obligation to pay the reasonable costs of defending claims arising out of the performance of the contract. To the extent that an element of the claim relates to negligent placing of the cable, there is a duty to indemnify the defendant for its legal costs whether or not the plaintiff’s claim is successful. There are also aspects of the claim that are outside the contract.
[8] For the reasons that follow I grant summary judgment requiring the third party to cover 50% of the costs of Rogers’ defence.
The Contract between Rogers and Forefront
[9] Forefront provides “installation and service activities” on behalf of Rogers under a “Master Installation and Service Agreement” dated August 1st, 2010. One feature of this agreement is the intention that the subcontracting of installation and services is to be practically invisible to the customer. Forefront is expected to provide employees vetted by Rogers that adhere to standards set by Rogers. The installers are to wear Rogers branded uniforms and have magnetic Rogers signs on their vehicles. Most of the agreement is taken up with the minutiae of service delivery and protection of Rogers intellectual property and other rights. It need not concern the court for purposes of the motion.
[10] There are three provisions of the agreement that are pertinent. Under Articles 9.1 and 11.1 the Contractor is required to maintain general liability insurance in a specified minimum amount per occurrence for “bodily injury, death and damage to property”. The Contractor is required to add Rogers as a named insured and to provide a certificate of insurance. This has been complied with. There is a certificate of insurance indicating the existence of a valid Commercial General Policy with Economical Insurance. The certificate states that “Rogers Communications Partnership is added as additional insured, but solely with respect to liability arising out of the operations of the Named Insured.”
[11] This means that if Rogers is sued because of work done by Forefront, coverage will be available from Economical. Of course that coverage is subject to the terms of the Economical policy and any legal principle that requires recourse to other available insurance policies.[^1] The determination of Economical’s duty to Rogers as a named insured is not before me on this motion but it appears from the material that Economical was prepared to co-fund Rogers’ defence costs along with any other insurers though subject to a reservation of rights.
[12] Whether or not Economical’s position is correct in law, the defendant seeks to get around the rule of equitable contribution between insurers by suing Forefront under its separate obligation to hold harmless and indemnify it for any claims arising out of the services covered by the contract. The contractual right to indemnity is separate from the obligation to arrange insurance and distinct from the obligations of Economical as an insurer.
[13] Pursuant to Article 10.4 (2) of the agreement, the Contractor shall “… defend and hold Rogers … harmless from and against all claims, losses, costs, damages, expenses and liabilities (including reasonable legal fees and disbursements) which may be suffered or incurred by Rogers … arising out of or as a result or relating in any manner whatsoever to: … (2) any injury to Persons … which may be or be alleged to be caused by or suffered as a result of or in connection with the performance by Contractor … of all or any part of Contractor’s obligations under this Agreement.”
[14] This means that whether or not there is insurance coverage, Forefront is liable to indemnify Rogers in the case of a personal injury action arising from the work performed by the contractor and is also liable to pay the reasonable costs of the defence.
[15] The issue on the motion is whether the indemnity provision is engaged and summary judgment is appropriate. Should Forefront be ordered to reimburse Rogers’ costs incurred to date and to assume the costs going forward?
Analysis
[16] The law on the duty to defend under insurance policies receives frequent attention in our jurisprudence. There is far less clarity about whether or not a hold harmless and indemnity provision in an ordinary contract engages a duty to defend or only a right to recover damages. For purposes of this motion I need not definitively determine that question because the practical result will be the same. Due to a conflict of interest between Rogers, the Third Party and Economical, the defendant wishes to continue with its counsel of choice and not to surrender carriage of the action. If I grant summary judgment for costs incurred to date and a declaration for payment of costs going forward, it will have the same practical effect.
[17] Although a contractual indemnity agreement between parties that are not insurance companies does not make the contracting party an insurer, an indemnity clause such as this one may engage a duty to fund the defence in appropriate circumstances. If the allegations in the statement of claim fall squarely within the duty to indemnify (and that duty includes the obligation to pay defence costs) then a duty to fund the defence is engaged. On the other hand a pleading that clearly falls outside of the indemnity obligation does not do so.
[18] There is authority that where the pleading is broad and it is unclear whether or not indemnity may be engaged, it is premature to determine the question on a summary judgment motion.[^2] In other situations, in which there are mixed claims only some of which may fall within the duty and which are clearly separate claims, the courts have been prepared to order defence of only those portions of the claim that fall within the scope of the agreement.[^3] By contrast, where there are multiple claims but it is apparent the “true nature” of the claim is within the scope of the duty, the court has ordered the responding party to assume carriage of the entire defence.[^4]
[19] The Court of Appeal has spoken on this issue. In Papapetrou v. 1054422 Ontario Ltd. the court adopted the second approach and appeared to disapprove of the third.[^5] It is difficult to read that case as setting out principles of general application, however, because it is clear that each case depends on its particular facts and on the specific wording of the contract in question. Moreover, in Papapetrou the contractual duty to indemnify is muddled with the insurance obligation because the defendant in that case had failed to arrange insurance under the contract as it was obliged to do. In addition, the moving party did not argue that the defendant’s duty to defend arose from the indemnification clause in the service agreement. It was only argued on the basis of the failure to insure. In the final analysis, however, the Court of Appeal found that there was a duty to defend but it excluded any costs incurred exclusively to defend claims that did not arise from the performance or non-performance of the service contract.
[20] In Hanis v. Teevan[^6], a slightly earlier decision, the Court of Appeal accepts that allocation of defence costs may be appropriate where only some of the claims are covered by an insurance policy or other indemnity clause. But the court rejects a line of cases saying that defence costs must always be allocated where there are both covered and uncovered claims. In that regard, a distinction must be drawn between cases in which defence costs can be distinguished and situations in which the defence provided for uncovered claims is simply incidental. In other words where it costs nothing extra to defend the additional claims and a defence must be provided, certainly when it comes to insurance policies, the insurer will be responsible for the entire defence. By contrast if the primary cause of action asserted against the insured is outside the scope of coverage, requiring the insurer to bear the entire defence costs would be unfair.
[21] A determination that there is a duty to defend requires the defendant to fund the defence or a portion of the defence on an ongoing basis although in some instances that is subject to the possibility of readjustment. On the other hand, even if the court does not order the defence to be funded, this does not preclude recovery of damages under the indemnity agreement once the case is concluded. There is a difference between a duty to defend in real time and an order requiring the defendant to indemnify for defence costs. In Amello v. Bluewave Energy Limited Partnership[^7], Justice Perell gave judgment for 50% of the defence costs incurred to the date of the hearing and granted a declaration that the responding party be responsible for 50% of the future defence costs on an ongoing basis. Unlike a true duty to defend in which the insurer ordinarily has the right to take carriage of the matter, this order simply required the indemnifier to contribute to the costs actually incurred.[^8]
[22] Is there any justification for differentiating between different types of contract? Some distinctions can be drawn. Firstly, there is a difference between an insurance policy and a right to indemnity. An insurance policy is a contract involving a duty of good faith and is also contract for peace of mind. Where an insurer is involved, the right to be defended against even frivolous claims in real time is a central reason for purchasing insurance. It would be cold comfort to have to defend the action and then later sue the insurer for damages for breach of contract. Looked at in this manner, an order enforcing the duty to defend is a form of specific performance.
[23] A service contract in which the contracting parties agree to an indemnity provision in relation only to claims arising out of the services provided under the contract is not an insurance contract and the remedy of damages may be entirely appropriate. Most of the duty to defend cases are brought against insurers and are distinguishable.
[24] A second category of cases are the snow and ice cases. Those cases are decided against a statutory framework in which the normal rules of liability have been disrupted by statute. Under the Occupier’s Liability Act, an independent contractor retained to keep the premises clear of snow and ice or otherwise to be responsible for the condition of the premises is also an occupier. Moreover it is a complete defence for the owner to have contracted out that responsibility provided it was reasonable to contract the work and reasonable steps have been taken to ensure the contractor is competent and does the work it was contracted to do. One of the main purposes of such maintenance contracts is for the owner to divest itself of this responsibility.
[25] Absent a policy reason to impose a real time duty to defend regardless of the outcome of the litigation, the motion before me falls to be determined under the ordinary rules for summary judgment motions. The test therefore is to determine whether there is a genuine issue requiring a trial. In approaching that question it is wise to bear in mind the fact that this is a third party claim. It would be unreasonable to expect the defendant to have to prove the plaintiff’s case (which it is resisting in the main action). So the question for partial summary judgment on the duty to defend must be determined on the pleadings and on the available evidence. Is it plain and obvious that a duty to defend or to indemnify is engaged?
[26] What is the situation here? While one might surmise that the cable was installed by the contractor and left in an unsafe location, this cannot be determined with any precision from the statement of claim or the evidence to date. After alleging that the plaintiff “tripped over cable wire on the ground” outside of her premises, the statement of claim makes the following allegations:
“5. Shortly before the Plaintiff’s fall, the Defendant had attended at her residence to connect the cable wire to the Plaintiff’s Residence.
The Plaintiff pleads that the Defendant upon whom rests the duty of maintaining the area in a safe condition for the passage of pedestrian traffic, wrongfully permitted the continued presence of the cable wire in the material area, and in so doing, permitted the same to constitute an unusual danger and a trap, and was in breach of their duty to the Plaintiff.
The Plaintiff pleads and relies on the provisions of the Occupiers Liability Act, R.S.O. 1990, as amended.
The Plaintiff further states that the said condition was caused by the negligence, gross negligence, and/or a breach of the Occupiers Liability Act of the Defendant of their employees, servants and/or agents, for whom in law they are responsible, in that:
(a) they knowingly permitted a dangerous condition of cable wire to exist on the ground at the premises;
(b) they failed to inspect the premises for the existence of the dangerous loose cable wire, properly or at all;
(c) they failed to warn the Plaintiff, adequately or at all, of the presence of the said danger;
(d) they failed to secure the cable wire to the ground or move the cable wire to an area where it would not have posed a danger to the Plaintiff;
(e) they failed to have in operation at the time of the accident, and immediately before, a proper and efficient, or any system whereby patrolmen reported to them the existence of the loose cable wire;
(f) they knew or ought to have known that the loose cable wire on the occasion in question was unsafe for the passage of pedestrian traffic and constituted an unusual danger to the members of the public, and in particular to the Plaintiff; …”
[27] It is not at all clear under what theory Rogers could possibly be an “occupier” of the plaintiff’s premises or have assumed the duty of maintaining the area in a safe condition for the passage of pedestrian traffic. Regardless, it was not within the duties of the contractor to take possession of the property or to maintain the property or to control who could or could not enter the premises.[^9] Nor is the plaintiff a member of the public or a pedestrian. She is the property owner or the spouse of the owner.
[28] Regardless of whether or not there is merit to the plaintiff’s claim based on Occupier’s Liability, it is not a claim that falls within the scope of the subcontract. There is nothing in the pleadings or the evidence or the contract itself that would bring the temporary entry onto the premises by the contractor within the definition of occupier’s liability. Those portions of the claim do not engage any duty to indemnify for defence costs.
[29] The problem for the third party is the vaguely particularized claims in paragraph 8. In that paragraph occupier’s liability is pleaded but so too is ordinary negligence. Some of these allegations would fall within the scope of the indemnity provision if they are proven. The plaintiff alleges that it was negligent to fail to secure the cable to the ground or to fail to move the cable to an area where it would not have posed a danger or to permit a dangerous condition to exist and to fail to warn the homeowner of the location of the cable. These aspects of the pleading could conceivably fall within the scope of the contract. This cannot be determined simply by examining the contract because the services to be provided under the contract require examination of external documents including the curriculum of the mandatory “Rogers Cable College”, assigned task codes and work orders.
[30] According to the evidence, the installer was responsible for connecting a temporary cable from the Rogers box to the home and was expected to lay the temporary cable along the lot line, at the edges of the property and to show the customer where the cable was located. The installer was then to notify Rogers which would in due course send a burial crew to install a permanent cable and bury it. Burying the cable was not within the scope of work of the installer. In fact the evidence in this case is that the work order specifically directed the installer (at the request of the customer) that the temporary cable was not to be buried and a permanent cable would be installed and buried once all construction was complete.
[31] It appears the situation is this. While Rogers has no reason to believe the installer placed the cable other than in the manner instructed by Rogers, on the basis of the pleading it is part of the claim by the plaintiff that the cable was placed in a dangerous location and not drawn to the plaintiff’s attention. As to the latter, the plaintiff or her husband had apparently placed a piece of wood over the cable so it is difficult to see that there is any reality to liability arising from that allegation. Nevertheless there is a component of the claim that is based on an allegation of negligent placement of the cable. If proven, that is an allegation that would arise out of the services provided by the contractor and it is therefore an allegation that triggers a duty to defend. On the other hand if the cable was installed in accordance with Rogers’ instructions and negligence (if proven) arises only from failing to bury the cable, that was not within the scope of the contract and therefore not within the duty to indemnify for defence costs.
[32] This case is somewhat similar to the situation in Amello v. Bluewave Energy Limited Partnership referred to above. In that case Justice Perell carefully analyzed the manner in which insurance would have operated had it been in place. He then ordered indemnity for 50% of the defence costs which is the amount the insurer would have covered.
[33] Amello was another case in which the sub-contractor had failed to arrange the insurance coverage required by the contract. In addition, the specific terms of the insurance contracts were before the court. Nevertheless, the analysis of the duty to defend, how the allocation of defence costs would have worked between insurers and the merit of granting an immediate remedy in damages is instructive. I am of the view that a similar disposition is appropriate in this case.
[34] In the case at bar, the third party complied with its obligation to put insurance in place and that coverage is available. What the defendant is trying to accomplish here is to convert the separate contractual indemnity provision into a duty to defend requiring the third party to fund the entire defence. In a circumstance such as this in which the third party complied with the obligation to arrange insurance, it would be perverse to hold that the third party should be worse off than in similar cases where no insurance was in place. As set out in Amello and in Papapetrou the remedy for breach of the insurance requirement is damages and not a duty to defend as such. But here, as was the case in Amello, it is clear that a portion of the pleading falls within the scope of the right to indemnity. The appropriate disposition is to give judgment for 50% of the defence costs to date and to declare that the third party is to pay 50% of the future costs as they are incurred.
[35] It is premature to give judgment on the question of indemnity for damages as it remains to be seen whether there will be any damages and if so whether they arise from the work done by the sub-contractor.
[36] I will hear submissions on the costs of the motion should that be necessary.
Conclusion
[37] In conclusion, partial summary judgment is granted. The third party is to pay 50% of the defence costs incurred by Rogers to date. There will be a declaration that it is also obliged to pay 50% of the defence costs incurred in future.
[38] It is premature to determine the question of indemnity for damages. The motion is otherwise dismissed.
[39] The parties shall have 30 days to agree on costs of the motion or to arrange to speak to costs.
Mr. Justice Calum MacLeod
Date: April 18, 2017
CITATION: Pagé v. Rogers Communications Inc., 2017 ONSC 2341 COURT FILE NO.: 15-63605A1 DATE: 2017/04/18
ONTARIO SUPERIOR COURT OF JUSTICE
RE: CECILE PAGÉ, Plaintiff AND ROGERS COMMUNICATIONS INC., Defendant AND FOREFRONT CABLE SOLUTIONS LIMITED, Third Party
BEFORE: Mr. Justice Calum MacLeod
COUNSEL: Noah J. Shapiro, for the Defendant (Moving Party) Kelly Fitzpatrick, for the Third Party (Responding Party)
ENDORSEMENT
Mr. Justice Calum MacLeod
Released: April 18, 2017
[^1]: See Family Insurance Corp. v. Lombard Canada Ltd. 2002 SCC 48; [2002] 2 SCR 695 [^2]: Cadillac Fairview Corp. v. Olympia Sanitation Products Inc., 2010 ONSC 4309 [^3]: Atlific Hotels & Resorts Ltd. v. Aviva Insurance Co. of Canada, (2009) 2009 CanLII 24634 (ON SC), 97 OR (3d) 233 (SCJ) [^4]: Riocan Real Estate Investment Trust v. Lombard General Insurance Co. (2008) 2008 CanLII 16073 (ON SC), 91 OR (3d) 63 (SCJ), Gustanar v. Minto et. al., 2016 ONSC 2341. [^5]: Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506. See para. 50 in which the court disagrees with the result in Riocan. [^6]: (2008) 2008 ONCA 678, 92 OR (3d 594 (C.A.) [^7]: 2014 ONSC 4040 [^8]: Subject presumably to a right to challenge the quantum through assessment. [^9]: See section 1, Occupier’s Liability Act, RSO 1990-, c. O.2 as amended