COURT FILE NO.: CV-13-0304-00 DATE: 2018/08/10
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JOHN VAN HUIZEN and HASTINGS APPRAISAL SERVICES Plaintiffs – and – TRISURA GUARANTEE INSURANCE COMPANY Defendant
COUNSEL: R. Steven Baldwin, for the Plaintiffs Heather Gray, for the Defendant
HEARD at Belleville: June 29, 2018
HURLEY, J.
REASONS FOR DECISION
Introduction
[1] This is a motion for summary judgment by the defendant Trisura Guarantee Insurance Company (“Trisura”). It is the insurer of the plaintiff John Van Huizen who is a real estate appraiser by profession. He commenced a lawsuit against Trisura in November 2013 seeking a declaration that it had a duty to defend and indemnify him in three lawsuits, all of which arose out of a single residential appraisal prepared by David Barkley, who was also a real estate appraiser and had purchased the same insurance coverage as Mr. Van Huizen [1]. The underlying litigation appears to have been resolved, with the only outstanding issue being legal costs.
[2] Thus, I need only consider the duty to defend in this motion. Trisura contends that it has no obligation to defend Mr. Van Huizen and there is no genuine issue for trial. Although Mr. Van Huizen has not brought a cross-motion, he too asserts that there is no genuine issue for trial but in his favour and that I should therefore find that Trisura has a duty to defend him.
The applicable legal principles
[3] The duty to defend is commonly determined by way of application in which the only evidence is the insurance policy. The Court of Appeal has repeatedly observed that this is an issue which “must be determined expeditiously on the basis of the allegations in the underlying litigation, read with the insurance coverage”: Carneiro v Durham (Regional Municipality), 2015 ONCA 909, at para. 29. It can also be decided by way of a summary judgment motion but it is still the policy and the pleadings that remain the focus of the legal analysis: Daverne v John Switzer Fuels et al. v. Aon Reed et al., 2015 ONSC 1803, appeal allowed for other reasons: 2015 ONCA 919.
[4] A helpful summary of the governing jurisprudence on the duty to defend is found in Daverne at paras. 58 to 61:
An insurer’s duty to defend its insured is determined by reference to the pleadings in the underlying claims made against an insured, documents referred to in the pleadings, and the terms of the policy. A court generally cannot consider facts that are not contained in the pleadings: R.W. Hope Ltd. v. Dominion of Canada General Ins. Co. (2001), 57 O.R. (3d) 425 (C.A.), at para. 22; Halifax Ins. Co. v. Innopex Ltd. (2004), 72 O.R. (3d) 522 at paras 32, 35-37.
The duty to defend is not dependent on the insured ultimately being liable and the insurer actually being required to indemnify the insured under the policy. What is required is the “mere possibility” that a claim falls within the coverage provided by the insurance policy: Progressive Homes Ltd. v. Lombard General Insurance Co., 2010 SCC 33 at para 19.
The parties to an insurance contract are not necessarily bound by a plaintiff’s choice of labels. When determining the scope of the duty to defend the court must look beyond the labels chosen by the pleader and examine the substance of the allegations against the insured. Allegations that are entirely derivative of uncovered allegations will not trigger a duty to defend: Lloyd’s Underwriters v. Scalera, 2000 SCC 24 at paras 50-52.
However, where pleadings are not framed with sufficient precision to readily determine whether the allegations made against an insured would be covered by a policy, a duty to defend may nevertheless arise if, on a reasonable reading of the pleadings, a claim within coverage can be inferred: Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699 per Iacobucci J. at para 31.
[5] In Coast Capital Equipment Finance Ltd v Old Republic, 2018 ONCA 540, Pardu, J. A. approved the application judge’s statement of the law on the interpretation of insurance contracts at para. 19:
The application judge accurately summarized the law related to interpretation of insurance contracts at paragraphs 21 and 23 of his reasons:
[21] The courts have recognized that insurance contracts are subject to particular rules of interpretation. In Brissette Estate v. Westbury Life Insurance Co., Sopinka J. identified the following rules of construction in relation to insurance contracts:
(1) The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract. (2) Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected. (3) Ambiguities will be construed against the insurer. (4) An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided.
[23] These principles were recently refined and clarified in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. Wagner J. for the majority of the Supreme Court noted that the primary interpretive principle governing the interpretation of insurance policies is that where the language of the insurance policy is unambiguous, reading the contract as a whole, effect should be given to that clear language. Where, however, the policy’s language is ambiguous, general rules of contract construction must be employed to resolve that ambiguity. These rules include that the interpretation should be consistent with the reasonable expectations of the parties and should not give rise to results that are unrealistic or that the parties would not have contemplated in the commercial atmosphere in which the policy was contracted. Only if ambiguity still remains after the above principles are applied should the contra proferentem rule be employed to construe the policy against the insurer.
The facts
[6] Both parties filed evidence in addition to the relevant insurance documents. While some of this evidence simply provided context for the coverage dispute, Trisura objected to Mr. Van Huizen’s introduction of extrinsic evidence about the appraisal in question, the organization of his business and details of his relationship with Mr. Barkley. For the purposes of this motion, I will ignore this evidence and focus solely on the pleadings and the insurance policy. The following facts come from the pleadings.
[7] The first statement of claim was issued April 23, 2013. The plaintiff is Sandra Behlok Insurance Agency Ltd. (“Behlok”) and the named defendants are Mr. Barkley and Hastings Appraisal Services (“Hastings”). According to the statement of claim, Behlok hired Mr. Barkley to do an appraisal of a residential property known municipally as 385A Highway 620, Coe Hill in March 2008.
[8] Mr. Barkley valued the property at $225,000. On the strength of this appraisal, Behlok loaned $146,500 to the property owner in May 2008, secured by a mortgage. It alleged that Mr. Barkley was negligent in the preparation of the appraisal, that the property was worth only $170,000 and it would not have made the loan had it known the true value of the property. The mortgagor defaulted on the mortgage in April 2009. Behlok took possession of the property in June 2009 but did not sell it until May 2012. The sale price was $155,000. Behlok claimed that it suffered a loss of approximately $100,000. It alleged that Hastings was vicariously liable because Mr. Barkley was an employee or agent of it.
[9] Behlok commenced a second action in August 2013 against Mr. Van Huizen. The same facts were pleaded but alleged that Mr. Van Huizen operated Hastings and that Mr. Barkley was his employee or agent. As such, Mr. Van Huizen was vicariously liable for the actions of Mr. Barkley. Mr. Van Huizen, as noted above, is also an appraiser and both he and Mr. Barkley were members of the Appraisal Institute of Canada.
[10] In September 2013, Mr. Barkley made a third party claim against Mr. Van Huizen carrying on business as Hastings seeking contribution and indemnity for any amount found owing by him to Behlok in the main action. He pleaded that he was an employee or agent of Mr. Van Huizen who carried on a sole proprietorship under the name of Hastings and therefore Mr. Van Huizen was vicariously liable for his negligent acts or omissions.
[11] Mr. Van Huizen reported the claims to Trisura but, before it formally denied coverage, he commenced an action against Trisura seeking a declaration that it had a duty to defend and indemnify him and “compensatory, aggravated and punitive” damages of $200,000. He also delivered statements of defence in the two lawsuits by Behlok and in the third party claim.
[12] At the hearing of the motion, I asked counsel to provide me with information about the current status of the underlying litigation and whether or not the insurer had denied coverage to Mr. Barkley. I did so for two reasons. One was that, if the underlying litigation was at an advanced stage, it might be preferable to defer this motion to a date after the resolution or trial of that litigation because I could deal then with both the duty to defend and the duty to indemnify. The second was my puzzlement over why, if both Mr. Barkley and Mr. Van Huizen had purchased the same insurance policy from Trisura, neither had coverage for what would be the most common legal claim made against an appraiser.
[13] Mr. Baldwin, on behalf of Mr. Van Huizen, subsequently advised me that a pre-trial conference date had been scheduled for the underlying litigation in 2016 but cancelled on the basis that it was settled with the exception of a potential claim for costs by Behlok against Mr. Barkley if Mr. Van Huizen did not recover his costs of defending that litigation from Trisura and pursued a claim for costs against Behlok.
[14] Ms. Gray, on behalf of Trisura, advised me that Mr. Barkley did not report the claim to her client but did to the insurer who preceded Trisura. She did not know what that insurer’s position was. Although both insurers share the same claims administrator, Centra Claims Management Inc., this company is not permitted to disclose any information related to Mr. Barkley’s claim other than the prior insurer assigned a claim number to it.
The insurance policy
[15] Trisura issued a professional liability insurance policy to the Appraisal Institute of Canada which covered the period December 31, 2012 to December 31, 2013. Certificates of insurance were issued to Mr. Barkley and Mr. Van Huizen. The coverage is $2 million per claim. The deductible is $7500.
[16] The relevant provisions, with the bold type as used in the policy, are:
I INSURING AGREEMENT The Insurer shall pay on behalf of the Insured all Claim Expenses and Damages, in excess of the Deductible, which the Insured is legally obligated to pay on account of a Claim first made against the Insured during the Policy Period or Discovery Period, if exercised, and reported to the Insurer during the Policy Period or Discovery Period, if exercised, for a Wrongful Act in rendering, or failing to render, Professional Services for others.
II DEFINITIONS Claim means: (i) any demand for monetary damages, services, non-monetary relief or injunctive relief; (ii) a civil proceeding commenced by the issuance of a notice of action, statement of claim, writ of summons, complaint or similar pleading; or (iii) an arbitration proceeding commenced by receipt of a notice to appoint an arbitrator, an arbitration petition or similar document, against any Insured for a Wrongful Act, including any appeal therefrom. A Claim shall be deemed to have been first made at the earliest date upon which written notice thereof, or a copy of the Claim, was personally received by any Insured by any means including personal delivery, facsimile transmission or email.
Damages means a compensatory judgment, award or settlement (including prejudgment and post-judgment interest). Damages shall not include, and this policy shall not cover, fines, penalties, the multiplied portion of any multiplied damage award, the return of all or part of the fees, deposits, commissions, expenses, costs or payments for Professional Services rendered or to be rendered by the Insured, or any matter, sum or award that is uninsurable under the law pursuant to which the policy shall be construed; provided, however, that Damages shall include punitive or exemplary damages that an Insured is legally obligated to pay if such damages are insurable under the law pursuant to which this Policy shall be construed.
Employer means any partnership, corporation or sole proprietorship in which a Member was or now is an employee
Insured means: (i) any Member; (ii) any Personal Corporation; (iii) an Employer, but solely for its for vicarious liability arising out of Professional Services rendered, or alleged to have been rendered, by a Member, but only if a Claim is initially made and continuously maintained against such Employer and the Member; and (iv) the Sponsoring Entity, but solely for its vicarious liability arising out of Professional Services rendered, or alleged to have been rendered, by a Member.
Member means any natural person named in item 3 of the declarations who is: (i) a designated Member holding the AACI; (ii) a designated Member holding the CRA; or (iii) a Candidate, and who is in good standing with the Sponsoring Entity. Member shall not include any student members of the Sponsoring Entity.
Professional Services means real property appraisal and valuation services which were rendered, or which should have been rendered, by a Member, and for which such Member was, at the time of providing said services, qualified and authorized under the Rules, By-laws, Regulations and the Canadian Uniform Standards of Professional Appraisal Practices (CUSPAP) of the Sponsoring Entity to undertake.
Sponsoring Entity means the entity named in item 1 of the declarations.
Wrongful Act means any actual or alleged negligent act, error or omission, misstatement or misleading statement committed solely by the Member in the performance of Professional Services while a Member in good standing with the Sponsoring Entity.
VI DEFENCE AND SETTLEMENT (A) The Insurer shall have the right and the duty to defend, with respect to such insurance as is afforded by this policy, any Claim made against an Insured, even if such Claim is groundless, false or fraudulent; provided, however, that the Insurer shall not be obligated to defend or to continue to defend any Claim after the Certificate of Insurance Per Claim Limit of Liability, Certificate of Insurance Aggregate Limit of Liability and/or Program Aggregate Limit of Liability under this Policy has been exhausted by payment of Damages and Claim Expenses.
[17] The Sponsoring Entity referred to in the policy is the Appraisal Institute of Canada. Both Mr. Van Huizen and Mr. Barkley are identified as an “Insured” in the certificates of insurance.
Positions of the parties
[18] Trisura submits that Mr. Van Huizen has coverage only for a negligent act or omission committed by him personally. Because it was Mr. Barkley who prepared the appraisal, he could have coverage under the certificate of insurance issued to him but not Mr. Van Huizen. Although the policy includes coverage for the vicarious liability of an employer, it requires that the negligent act or omission be committed by the member to whom the certificate of insurance was issued. In the alternative, if an employer is entitled to coverage for the vicarious liability that arose out of the professional services rendered by a member other than the one named in the certificate, Mr. Barkley was not an employee of Mr. Van Huizen or Hastings because both have denied in their respective statements of defence that he was.
[19] Mr. Van Huizen views the case in simpler terms. In the main action and the third party claim, he is alleged to have been Mr. Barkley’s employer and therefore vicariously liable for his negligent acts or omissions. He is insured both for legal claims arising from his personal actions and from his status as an employer. His denial that he was Mr. Barkley’s employer in his statements of defence or that he was vicariously liable do not have an impact on the duty to defend because it is the allegations in the statement of claim and third party claim that matter, not a defendant’s “kitchen sink” denial of liability.
Analysis
[20] I need only decide if there is a “mere possibility” of coverage based on the allegations made in the main action and third party claim. I agree with Mr. Van Huizen that his denial in the statements of defence that he was an employer of Mr. Barkley at the relevant time or that he was vicariously liable is irrelevant for the purposes of this analysis.
[21] Applying the interpretive principles recently summarized in Coast Capital Equipment Finance Ltd, I find that, viewing the insurance contract as a whole, Mr. Van Huizen has coverage for a legal claim arising from his own actions and also when it flows from his legal status as an employer of the alleged wrongdoer.
[22] If this was not the case, there would be no need for the vicarious liability provision in the contract. Such liability attaches in the absence of any negligence or other fault on the part of the employer. If it was the intent of the parties that an insured would only have coverage when he or she personally committed the negligent act or omission, the vicarious liability protection would be superfluous.
[23] While the definition of “wrongful act” uses the definite article “the” in referring to “member”, it must be interpreted in a manner consistent with the definitions of “claim” and “insured”. Under the policy, an insured does not have to be an appraiser; but he or she has to be an employer of someone who is and, if they are, the policy grants them coverage if they are alleged to be vicariously liable for the negligent acts or omissions of that member. As a result, Trisura has a duty to defend Mr. Van Huizen.
Conclusion
[24] A plethora of litigation has sprung from what appears to be a modest and routine claim. It is within the simplified procedure jurisdiction. At its core, the liability issue is simple: did Mr. Barkley fall below the standard of care in preparation of the appraisal? Both he and Mr. Van Huizen carried insurance coverage for just this type of claim and yet, 10 years after that appraisal was done, litigation over coverage persists. I make this comment not in criticism of counsel but to affirm why, as the Court of Appeal has opined, these types of disputes need to be resolved expeditiously to avoid unnecessary costs and delay.
[25] In his factum, Mr. Van Huizen asked, in addition to an order dismissing the motion, partial summary judgment on the issue of the duty to defend. Because the underlying litigation has been resolved and the duty to indemnify is no longer in dispute, I find that he is entitled to summary judgment. There is no procedural unfairness to Trisura and an order granting summary judgment on this issue is a “proportionate, more expeditious and less expensive means to achieve a just result” than simply dismissing the motion: Hryniak v. Maudlin, 2014 SCC 7 at para. 4. See also Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922.
[26] If the parties cannot agree on the costs of the motion, they can file brief written submissions. Mr. Van Huizen’s are to be delivered within 20 days of the date of the release of this decision and Trisura’s within 10 days after the receipt of Mr. Van Huizen’s submissions.
Hurley, J. Released: August 10, 2018
Footnotes
[1] Unfortunately Mr. Barkley passed away after the commencement of the litigation. The plaintiff’s lawyer sent him and Hastings Appraisal Services a demand letter dated October 26, 2012. The identity of his insurer at that point in time was not disclosed to me. As of December 31, 2012, both he and Mr. Van Huizen were insured by Trisura.
