Court File and Parties

Court File No.: CV-16-0041-00A1 Date: 2017 May 15 Ontario Superior Court of Justice

Between: Katie Bentley, Plaintiff And: Corporation of the County of Hastings, Hastings Local Housing Corporation, and Steve Walt Property Maintenance, Defendants And: Economical Mutual Insurance Company, Third Party

And Between: Court File No.: CV-16-0040-00A1 Kimberly Caul, Plaintiff And: Corporation of the County of Hastings, Hastings Local Housing Corporation, and Steve Walt Property Maintenance, Defendants And: Economical Mutual Insurance Company, Third Party

Counsel: Angela James, for the Plaintiffs (Katie Bentley and Kimberly Caul) Shaneka M. Taylor, for the Defendant/Moving Parties, Corporation of the County of Hastings and Hastings Local Housing Corporation Dawn Searle, for the Defendant, Steve Walt Property Maintenance and the Third Party, Economical Mutual Insurance Company

Heard at Belleville: April 24, 2017

Before: MacLeod-Beliveau J.

[1] These are two similar Rule 21.01(1)(a) motions for the determination before trial, of a question of law in relation to the duty to defend as between the Corporation of the County of Hastings, Hastings Local Housing Corporation, (hereinafter, collectively “the County”), and the third party, Economical Mutual Insurance Company, (hereinafter, “Economical”), raised by a pleading in an action where the determination of the question of law may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs. Counsel have agreed that the motions can be argued together as the issues are identical save and except for the date of loss.

[2] The County brings these motions for a declaration that the defendant, Steve Walt Property Maintenance, (hereinafter, “Steve Walt”), is in breach of his contract with the County for failing to procure insurance naming the County as an additional insured on his policy of insurance as required in his contract with the County, and for an order awarding damages to the County equivalent to the amount that the County has incurred and will incur in defending the main actions. Steve Walt was the County’s winter maintenance contractor for the residential parking lot where both plaintiffs claim they fell and were injured. He signed a contract for the delivery of winter maintenance services with the County (hereinafter, “the contract”).

[3] In addition, the County seeks an order that the County is entitled to appoint and instruct counsel of its choice, at the expense of Steve Walt, to defend it in the main actions due to a conflict of interest, and for costs.

[4] Economical asks that the motions be dismissed. It is the third party’s position that there is a disagreement about the nature of the contract between the County and Steve Walt and therefore a material fact is in dispute. As such, Economical submits that a Rule 21 motion is inappropriate to determine the issue as extrinsic evidence is required with a full evidentiary record, and that the motion is premature and more properly brought as a summary judgment motion under Rule 20.

The Issues:

[5] Are the issues in the case appropriately determined in a Rule 21 (1) (a) motion?

[6] Is the County entitled to damages arising from Steve Walt’s breach of contract in failing to procure insurance naming the County as an additional insured?

[7] If so, what is the measure of those damages?

[8] Is the County entitled to appoint and instruct counsel of its choosing to defend the main actions at Steve Walt’s expense?

[9] Costs.

The Result:

[10] These are proper Rule 21 motions. The questions of law are answered in favour of the County, as set out herein. Costs are reserved for written submissions.

Analysis:

[11] The plaintiff Bentley alleges that on February 3, 2014 she slipped and fell on ice while walking through the parking lot of 46 Tracey Park Drive, a community housing location in Belleville, Ontario. The plaintiff Coul alleges that on February 27, 2014 she slipped and fell on ice in the same parking lot at the same residential location.

[12] Statements of claim were issued in both actions naming the County and Steve Walt as defendants, alleging negligence by the defendants for failure to remove ice from the parking lot. The negligence claims against both defendants are identical and were issued by the same lawyer representing both plaintiffs.

[13] The County and Steve Walt entered into the contract for winter maintenance activities, including snow clearing and de-icing services, for the lot in question on October 29, 2013. I find the contract’s terms are clear and unambiguous.

[14] The contract required Steve Walt to obtain third party liability insurance in the amount of two million dollars for himself which he did through Economical. The contract also required Steve Walt to obtain insurance naming the County as an additional insured, which Steve Walt failed to do.

[15] The third party, Economical, as the insurer of Steve Walt, has refused to take over the defence of the County, as Steve Walt did not obtain coverage naming the County an as additional insured as required by the contract. In addition, Steve Walt has refused to defend that County in the main actions.

[16] The County argues that Steve Walt and Economical have an interest in establishing that the sole responsibility for the plaintiffs’ injuries is that of the County, in showing that the cause of the plaintiffs’ injuries were not due to any failure on the part of Steve Walt for any of his responsibilities under the contract, but rather, the County’s own independent omissions, so as to avoid having to indemnify the County.

[17] The County further argues that Economical and Steve Walt would be in a conflict of interest position if allowed to appoint counsel to defend the County in the main actions. It is the County’s position that they are entitled to appoint counsel of its choice to defend itself, at the sole expense of Steve Walt.

[18] The parties, in their pleadings, have made claims and cross-claims against each other. The pleadings refer to the contract of October 29, 2013 and to the Certificate of Insurance dated November 7, 2013. Both Economical and Steve Walt have denied that they have a duty to defend and have taken off coverage positions.

[19] There are some potential uncovered claims only against the County, that the County was an occupier and a landlord of the property in question. However, if the insurance had been in place as required to cover all defence costs relating to a claim, those defence costs do not increase because they also assist the insured in the defence of an uncovered claim. (See Hanis v. Teevan, 2008 ONCA 678, 92 O.R. (3d) 594 (Ont. C.A.))

[20] I am satisfied that this is a proper matter to be determined by a Rule 21 motion. A duty to defend motion is best brought at the close of pleadings. Only the pleadings and documents referred to in the pleadings need be referred to. Economical acknowledges that there is a contract. There is no ambiguity in the contract between the County and Steve Walt. The terms of the contract are clear as to what the contract required Steve Walt to do. No alternative agreement has been put forward by Economical.

[21] I find that Steve Walt is in breach of his contract with the County on the plain reading of the contract and the Certificate of Insurance. Steve Walt failed to name the County as an additional insured on his policy of insurance with Economical. The County has suffered damages from Steve Walt’s failure to obtain insurance. Had the insurance been obtained, given the nature of the allegations of negligence by the plaintiffs, the insurer would have had a duty to defend. Had Steve Walt kept his contractual promise, the County would have a policy of insurance covering the costs of defending the claims made against the County by the plaintiffs.

[22] The purpose of damages is to put the County in funds and to restore them to the same financial position as if the contract had been complied with and performed. I find the County is entitled to damages and to be put in the same position as if the breach had not occurred and the insurance had been obtained. Steve Walt must pay the County’s costs of defence, past and ongoing, in the main actions. (See Amello v. Bluewave Energy Limited Partnership, 2014 ONSC 4040, Perrell, J.; Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506, Laskin, Simmons, Cronk JJ.A.)

[23] I agree with counsel for the County, and find that there is a clear conflict of interest between the parties and the coverage issues between the parties as demonstrated in the pleadings, the cross-claims and the off coverage positions taken by the parties. Where there is such a conflict of interest, the County is able to choose its own counsel and to have its costs for that counsel paid for by Steve Walt. There is no agreement in this case to defend or to indemnify. In these circumstances, separate counsel is required by the County at the expense of Steve Walt to defend itself in the main actions.

Conclusion:

[24] A declaration shall issue that Steve Walt is in breach of contract for failing to procure insurance naming the County as an additional insured.

[25] An order awarding damages to the County equivalent to the amount it has incurred in the past and will incur in defending the Main Actions in Court file No. CV-16-0041-00A1 (Bentley) and CV-16-0040-00A1 (Caul) shall issue.

[26] An order shall issue that the County is entitled to appoint and instruct counsel if its choice, at the expense of Steve Walt, to defend it in the Main Actions in Court file No. CV-16-0041-00A1 (Bentley) and CV-16-0040-00A1 (Caul).

Costs:

[27] If the parties are unable to agree on the issue of costs on or before June 1, 2017, I will receive brief written submissions on or before June 23, 2017, after which time I will determine the issue of costs, based upon the material filed.

Honourable Madam Justice H. MacLeod-Beliveau

Released: May 15, 2017