Court File and Parties

COURT FILE NO.: CV-16-555088 DATE: 20190610 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ROCKY HEIGHTS DEVELOPMENT LTD., Applicant AND: JUDITH BIBER, Respondent

BEFORE: J.E. Ferguson J.

COUNSEL: Eli Pullan, for the Applicant Michael Van Dusen and Jennifer Guth, for the Respondent

HEARD: May 29, 2019

Endorsement

[1] This is a subrogated proceeding for damages arising out of a residential fire that took place in a rental property on April 6, 2015 in Kenora, Ontario. The applicant corporation, Rocky Heights Development Ltd., is the landlord. The respondent, Judith Biber, with her spouse, Roland Biber, are the tenants. The cause of the fire was attributed to the respondent leaving a boiling pot of oil unattended.

[2] The respondent, who is also an officer of the applicant, submits that she is an insured on the applicant’s commercial general liability policy (“CGL”) with Optimum Insurance Company Inc. (“Optimum”) and further submits that the applicant cannot bring a subrogated claim against her. The applicant takes the position that the respondent is insured on the CGL policy only in respect of her duties as an officer and that a subrogated claim can be maintained in respect of negligence outside her duties as an officer.

[3] This application has been brought to determine whether the respondent’s coverage under the CGL policy is limited to her duties as an officer of the applicant.

[4] The procedure for interpreting insurance policies has been set out by the Supreme Court of Canada in Progressive Homes Limited v. Lombard General Insurance Co. of Canada, 2010 SCC 33, in which the Court states that the following steps should be taken in interpreting an insurance contract:

(i) the policy language should be followed if it is not ambiguous; (ii) if the policy language is ambiguous, the general rules of contract construction should be followed. This requires determining the reasonable expectations of the parties. Expectations are only reasonable if they are supported by the text of the contract; (iii) if the court cannot resolve the ambiguity, then contra proferentem will resolve the ambiguity in favour of the insured;

[5] The respondent relies on clause 11 of the Commercial Building, Equipment and Stock Broad Form of the CGL policy as a bar to any and all proceedings against the respondent. The relevant portion of the subrogation clause states:

The insurer, upon making payment or assuming liability therefore under this Form, shall be subrogated to all the rights of recovery of the Insured against others and may bring an action to enforce such rights. Notwithstanding the foregoing, all rights of subrogation are hereby waived against any corporation, firm, individual, or other interest with respect to which insurance is provided by this Form.

[6] The applicant relies on clause 1 (c) of the “who is an insured” section of the CGL policy. The relevant portion of the coverage clause states:

WHO IS AN INSURED?

1. IF THE INSURED IS DESIGNATED IN THE DECLARATION PAGE AS (c) An organization other than a partnership or joint venture, the said organization is an insured. The executive officers and directors are insureds, but only with respect to their duties as officers or directors.

[7] The applicant submits that the correct interpretation of the coverage clause read together with the subrogation clause is that the respondent is an “individual… with respect to which insurance is provided by this Form” but only with respect to her duties as an officer of the applicant.

[8] In interpreting the two clauses the respondent submits that insurance coverage is provided “by this form” for the personal property of officers of the insured, regardless of whether there is a claim being made for it under the Optimum policy.

[9] The respondent relies on Tony and Jim’s Holdings Limited v. Silva, [1999] O.J. No. 705 (“Silva”), in which the Court of Appeal for Ontario held that a landlord’s insurer was unable to maintain a subrogated claim against the individual president and directing mind of the corporate tenant, who was responsible for causing the fire when he left a boiling pot of butter unattended. While the lease did not contain an express covenant to insure, it did provide for any insurance premiums to be paid by the tenant. The lease also contained the usual covenant to repair on the part of the tenant.

[10] In Silva, the Court considered the landlord’s insurance policy which contained a waiver of subrogation virtually identical to the waiver of subrogation contained in the Optimum policy. It stated “notwithstanding the foregoing, all rights of subrogation are hereby waived against any corporation, firm, individual, or other interest with respect to which insurance is provided by this policy.” The court held that (at para. 32):

While the language used in this clause is certainly not the clearest, it would seem to me that, in a case such as this one where fire coverage is extended to leased premises for fire caused by the negligence of anyone, the scope of this waiver can reasonably be interpreted to extend to the tenant who, in the words of the clause, has an “interest with respect to which insurance is provided” by the policy… It is my view that the words used are also wide enough to include those individuals through which the corporate tenant, of necessity, must act.

[11] The Court also stated that (at para. 31):

[B]y including provisions in the lease giving rise to the landlord’s contractual obligation to insure for losses extending to those occasioned by the tenant’s negligence, the parties must be taken to have understood that the corporate tenant could only be guilty of negligence through its directors or employees. It is in this respect that there is an “identity of interest”. Whether Silva is regarded as an employee acting within the scope of his employment or is one of the directors and the operating mind of the corporate tenant, his alleged negligent conduct can only be regarded as that of the corporation in this context.

[12] I agree that at all material times the respondent was an officer of the applicant, and as such would fit the description of an insured person pursuant to the Optimum policy. I further agree that any ambiguity between these clauses should be interpreted in favour of the insured pursuant to the contra proferentem rule. Any subrogated action against the respondent is therefore prohibited.

[13] If the parties cannot agree on costs, I am prepared to receive brief submissions with respect to costs. They can be sent to my assistant by email at Lorie.Waltenbury@ontario.ca within 20 days.

J.E. Ferguson J. Date: June 10, 2019