COURT FILE NO.: CV-19-00613653

DATE: 20191218

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SVIA Homes Limited

Applicant

– and –

Northbridge General Insurance Corporation

Respondent

T. Donnelly and J. Tam, for the Applicant

J. Norton and J. Tausendfreund, for the Respondent

HEARD: October 1, 2019

Chalmers J.

reasons for decision

OVERVIEW

1SVIA Homes Limited (“SVIA”) was the owner and developer of a nine-townhouse subdivision project located at 117 Nelson Road, Oakville. 1390348 Ontario Ltd. (“139 Ltd.”) was retained to supply and install the sewer system at the project. Following completion, it was determined that the sewers were not working properly.

2In 2008, SVIA brought an action against 139 Ltd. and others for the cost to repair the sewer and for damages caused by the faulty sewer (the “2008 Action”). SVIA claimed damages in the amount of $3,000,000. The 2008 Action was served on 139 Ltd. on April 5, 2008.

3139 Ltd. was insured by Lombard General Insurance Company, the predecessor of Northbridge General Insurance Corporation (“Northbridge”), pursuant to a General Commercial Liability Policy; policy no.: CBC063001500 (the “Policy”). 139 Ltd. did not provide notice of the claim to Northbridge. Instead, it retained its own counsel and defended the 2008 Action. In 2011, 139 Ltd. ceased operations. Counsel for 139 Ltd. was removed as solicitor of record, and its defence was struck.

4Northbridge was first provided with notice of the claim on April 13, 2017. Counsel for SVIA wrote to Northbridge and provided a copy of the Statement of Claim. By letter dated July 18, 2017, Northbridge denied coverage. Northbridge took the position that 139 Ltd. was in breach of the Policy because it failed to provide prompt notice of the 2008 Action.

5In November 2017, SVIA settled the 2008 Action against all Defendants except the general contractor, 2065410 Ontario Inc. (“206 Inc.”) and 139 Ltd. On April 20, 2018, Dietrich J. granted default judgment against 206 Inc. and 139 Ltd. in the amount of $1,979,555.38, plus pre-judgement interest and costs (the “Judgment”). On December 4, 2018, Dietrich J. amended the Judgment. The amount was reduced to $1,864,619.87 as the result of a mathematical error. The Judgment was also amended to set out a breakdown of the damages; $69,505.16 for the repair of the sewer system and $1,795,114.71 for resultant and consequential damages. SVIA took steps to enforce the Judgment as against 139 Ltd. but was unsuccessful.

6SVIA brings this Application against Northbridge pursuant to s. 132 of the Insurance Act, R.S.O 1990, c. I.8 (the “Act”), which allows a judgment-creditor to bring a direct action against the insurer of the judgment-debtor to recover the amount of an unsatisfied judgment. In a s. 132 proceeding, the judgment-creditor is in no better position than the insured and is subject to the same policy terms and conditions. Northbridge argues that coverage is forfeited because 139 Ltd. breached the policy condition to provide prompt notice of the claim. SVIA argues that it is entitled to relief from forfeiture.

7For the reasons that follow, I dismiss the Application.

BACKGROUND FACTS

The Policy

8The Policy provides liability coverage for 139 Ltd. for those sums the insured becomes obligated to pay as damages because of property damage which occurs during the policy period. The effective date of the Policy is from March 18, 2006 to March 18, 2007. The liability limits are $5,000,000 for each occurrence.

9The Policy includes Statutory Conditions and Commercial General Liability Conditions.

Statutory Conditions

10The preamble to the Statutory Conditions provides as follows:

The Statutory Conditions apply with respect to all perils insured by this Policy and to liability coverage, where provided, except where these conditions may be modified or supplemented by riders or endorsements attached.

11Statutory Condition 8 sets who may provide notice of a claim:

Who May Give Notice and Proof

Notice of loss may be given and proof of loss may be made by the agent of the Insured named in the contract in case of absence or inability of the Insured to give notice or make the proof, and absence of inability being satisfactorily accounted for, or in the like case, or if the Insured refuses to do so, by a person to whom any part of the insurance money is payable.

Liability Conditions

12The Commercial General Liability Conditions are set out at Section IV of the Policy. Condition 5 sets out the notice requirements:

Duties in the Event of Occurrence, Claim or Action

(a) You must see to it that we are notified promptly of an “occurrence” which may result in a claim. Notice should include:

i. How, when and where the “occurrence” took place;

ii. The names and addresses of any injured persons and of witnesses; and

iii. The nature and location of any injury or damage arising out of the “occurrence”.

Notice of an “occurrence” is not notice of a claim.

(b) If a claim is made or “action” is brought against any Insured, you must see to it that we receive prompt written notice of the claim or “action”.

(c) You and any other involved Insured must:

i. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “action”;

ii. Authorize us to obtain records and other information;

iii. Cooperate with us in the investigation, settlement or defence of a claim or “action”;

iv. Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

13The Policy provides that no claim can be brought against the insurer unless all terms of the Policy have been complied with.

Notice of the Actions Brought Against 139 Ltd.

The 2006 Action

14In addition to the 2008 Action, SVIA brought an earlier action in 2006 against 139 Ltd. and others with respect to the same project (the “2006 Action”). The 2006 Action was issued on November 14, 2006. SVIA claimed damages in the amount of $50,000 for the sewer deficiencies.

15On February 2, 2007, 139 Ltd. reported the 2006 Action to Northbridge. Northbridge took the position that the claim was excluded and denied coverage to 139 Ltd. Although the denial letter from Northbridge is not in evidence on the Application, there is reference to the reasons for the denial in the letter from Northbridge dated July 18, 2017. It was the position of Northbridge that the 2006 Action was for the cost of repairing the defective work, if any, of 139 Ltd. and therefore was not covered by the Policy.

16Northbridge did not receive a response to its letter and sent a follow-up to counsel for 139 Ltd. on May 23, 2007. Again, there was no response. 139 Ltd. did not pursue Northbridge for coverage for the 2006 Action.

The 2008 Action

17The 2008 Action was issued on March 25, 2008. It was served on 139 Ltd. on April 5, 2008. It is alleged that 139 Ltd. was engaged to supply and install the sewers, and that its installation was defective.

18139 Ltd. did not report the 2008 Action to Northbridge. 139 Ltd. retained its own counsel and defended the action. Northbridge did not receive notice of the 2008 Action until April 13, 2017 when SVIA’s lawyer wrote to Northbridge and provided a copy of the Statement of Claim.

19After receiving the letter from counsel for SVIA, Northbridge contacted the principal of 139 Ltd., Michael Poce. He executed a Non-Waiver Agreement dated May 19, 2017 and provided a statement. The statement of Mr. Poce is not in evidence.

Northbridge’s Denial of Coverage

20Northbridge denied coverage for the 2008 Action by letter to Mr. Poce dated July 18, 2017. In the letter, the adjuster, Andrej Lackovic, listed the reasons why coverage was denied. The letter concluded as follows:

Considering the facts of this case in light of the policy terms and conditions set out above, we have concluded:

1. There has never been a claim by Poce, the insured, for coverage under the policy in connection with the 2008 Action. A claim in respect of the 2008 Action was first reported to us on April 13, 2017, by e-mail from lawyers representing Svia Homes Ltd., 9 years later;

2. Poce breached the condition to report under the policy, as it never reported any claim arising from the 2008 Action to Lombard;

3. As a consequence of this, Poce is precluded from bring[ing] any action for coverage under the policy;

4. Poce is also precluded from bring[ing] any action for coverage under the policy now because the 2-year limitation period prescribed by the Limitations Act, 2002 has long expired. In our view, it started to run when Poce was aware of the 2008 Action, which at the very latest was April 5, 2008. Also, Poce had known since February 8, 2007 that Lombard had denied claims to recover the costs of replacing the defective sewer pipe in the development under exactly same policy wording;

5. If such a claim had been made in a timely way, there would have been no coverage provided under the policy. This is because the claims in the 2008 Action are to recover the cost to replace the entire sewer system, the installation of which was the precise work contractually undertaken by Poce. Based on exclusion 2(j) and related definitions set out above, such claims are excluded from coverage under the policy; and

6. To the extent there are what appears to be minor claims for resultant damage in the form of extra costs allegedly paid to Skira, Poce is barred by the limitation period from now suing under the policy to recover these.

21There is no record of a response from 139 Ltd. or Mr. Poce to the denial letter. 139 Ltd. did not pursue a claim against Northbridge for coverage for the 2008 Action. There is no evidence or explanation provided as to why 139 Ltd. did not make a claim for coverage.

Default Judgment

22In early 2011, counsel for 139 Ltd. brought a motion to be removed as solicitor of record. In his affidavit, he stated that 139 Ltd. had ceased operations and he could not get a retainer going forward. On February 1, 2011, Master Haberman granted the order removing Mr. Barrett as 139 Ltd.’s lawyer of record. On May 11, 2011, Master Sproat granted an order striking 139 Ltd.’s Statement of Defence and Crossclaim. 139 Ltd. did not provide notice to Northbridge that it ceased operations, or that its lawyer had been removed as solicitor of record.

23After 139 Ltd.’s pleading was struck, the action continued as against the other defendants. Discoveries took place in the fall of 2011. 139 Ltd. was not represented and did not participate in the discoveries. On June 21, 2013, SVIA noted 139 Ltd. in default. SVIA filed a trial record in the underlying action. The trial was scheduled for March 2018.

24On April 13, 2017 SVIA provided notice of the 2008 Action to Northbridge. In November 2017, SVIA settled its claim against Ontario Hydro-Electric Commission and Skira & Associates Ltd. On March 1, 2018, SVIA obtained an order dismissing the action against Skira and Ontario Hydro. At that time, SVIA amended the Statement of Claim to plead that the sewage back-up and noxious odours caused “resultant damage”. SVIA did not serve the Amended Statement of Claim on Northbridge.

25SVIA brought a motion for default Judgment which was heard on April 20, 2018. SVIA did not serve Northbridge with the motion. Madam Justice Dietrich granted default Judgment against 206 Inc. and 139 Ltd. in the amount of $1,979,555.38, plus interest and costs fixed in the amount of $23,500.

26On April 25, 2018, counsel for SVIA wrote to 139 Ltd. and Mr. Poce and provided a copy of the default Judgment. 139 Ltd. and Mr. Poce did not forward the letter or default Judgment to Northbridge. On May 25, 2018, counsel for SVIA wrote to Northbridge and provided a copy of the default Judgment.

27On May 9, 2018, counsel for SVIA wrote to 139 Ltd. to arrange a judgment debtor examination. No representative of 139 Ltd. attended the examination. SVIA obtained a Certificate of Non-Attendance dated June 20, 2018.

28SVIA brought a motion to amend the default Judgment. The motion was served on 139 Ltd. SVIA did not serve Northbridge with the motion. On December 4, 2018, Dietrich J. amended the original default Judgment. The amount of the Judgment was reduced to $1,864,619.87 as a result of a mathematical error. The amended Judgment also provided a breakdown of the damages. The damages for repairing the sewer system were quantified at $69,505.16 and the resultant and consequential damages were quantified at $1,795,114.71.

29SVIA asked the Sheriff to execute the amended Judgment against 139 Ltd. The Sherriff was not successful and returned a certificate of nulla bona.

Application Against Northbridge

30SVIA commenced this Application on February 1, 2019, seeking an order that Northbridge pay the amount of the Judgment pursuant to s. 132 of the Act.

31In response to the Application, Northbridge filed the affidavit of John Westland, forensic engineer. He stated that due to the late notice, Northbridge was unable to conduct a proper investigation of the underlying incident. He also deposed that there were potentially liable entities who were not parties to the action. Mr. Westland was not cross-examined on his affidavit. Northbridge also filed the affidavit of Steven Stieber, a construction litigation lawyer. He deposed that as a result of the late notice, Northbridge was unable to take the investigative steps necessary in a complex construction claim. Mr. Stieber was not cross-examined on the substance of his affidavit.

THE ISSUES

32The following issues are to be decided on this Application:

(i) Did 139 Ltd. breach the conditions of the Policy by failing to provide timely notice of the 2008 Action? and

(ii) If 139 Ltd. breached the notice provisions of the Policy, should relief from forfeiture be granted?

ANALYSIS

Breach of Condition

33SVIA brings this Application pursuant to s. 132 of the Act, which permits a judgment-creditor to bring a direct action against the judgment-debtor’s insurer to recover the amount of an unsatisfied judgment. In a s. 132 proceeding, the insurer has no right to re-litigate the issues of liability and damages. The Plaintiff in the s. 132 proceeding is subject to the same equities as the insurer would have against its insured: Stoyka v. General Accident Assurance Co. (2000), 2000 CanLII 26948 (ON CA), 47 O.R. (3d) 407, at paras. 21-23 (C.A.).

34As stated in The Sovereign General Insurance Company v. Walker:

The concluding words of s. 132(1) – “subject to the same equities as the insurer would have if the judgment had been satisfied” – are important. Persons, such as the Walkers, seeking recovery under s. 132 can stand in no better position than the insured. So, if the insurer, Sovereign, had a defence against its insured, Sun Shelters, that defence would apply to the Walkers’ claim: The Sovereign General Insurance Company v. Walker, 2011 ONCA 597, 107 O.R. (3d) 225, at para. 13.

35SVIA is subject to the same terms and conditions in the Policy as the insured 139 Ltd. SVIA must establish that the damages awarded in the Judgment are covered by the Policy. If the claims are covered, the onus shifts to Northbridge to establish that an exclusion applies. Northbridge also has the onus of establishing that coverage is forfeited as a result of a breach of condition.

36In the amended Judgment, damages are awarded for the cost to repair or replace the sewer system in the amount of $69,505.16. The Judgment awards damages for resultant damage such as the loss of use and the cost to repair water damage in the amount of $1,795,114.71. The parties agree that the Policy excludes coverage for the cost to repair or replace the insured’s own defective work or product. Although there is no coverage for the repair of the insured’s own work or product, there is coverage for the consequential damage resulting from the insured’s defective work: Progressive Homes Ltd. v. Lombard General Insurance. Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R 245, at paras. 59-63.

37Northbridge argues that although there may be coverage for resultant and consequential damages, coverage is forfeited as a result of the insured’s failure to provide timely notice of the 2008 Action.

38Liability Condition 5 provides that the insured must give prompt written notice of a claim and immediately send to the insurer copies of any legal papers received in connection with the claim. 139 Ltd. did not provide any notice of the claim to Northbridge and did not ask Northbridge to defend or indemnify it with respect to the 2008 Action. 139 Ltd. did not immediately send any legal papers with respect to the 2008 Action. SVIA provided notice to Northbridge nine years after the claim was served on 139 Ltd.

39I am satisfied the insured is in breach of the policy condition which requires prompt written notice of a claim.

Relief from Forfeiture

40The insured is in breach of the notice provisions of the Policy and as a result coverage is forfeited. SVIA is seeking relief from forfeiture. The power to grant relief from forfeiture is a discretionary one. In considering a request for relief from forfeiture, the court must first determine whether the remedy is available and then apply the appropriate test: Ruddell v. Gore Mutual Insurance Company, 2019 ONCA 328, 42 M.V.R. (7th) 14, at para. 28.

Is the Remedy of Relief from Forfeiture Available to SVIA

41The remedy of relief from forfeiture is available if there has been imperfect compliance with the policy conditions: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778, at p. 785.

42Relief from forfeiture is set out in s. 129 of the Act:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just. [Emphasis added.]

43Northbridge argues that there was a complete absence of compliance rather than imperfect compliance. The insured 139 Ltd. is required to provide notice of the claim. 139 Ltd. did not provide notice and did not request coverage for the 2008 Action. SVIA argues that notice may be provided by a judgment-creditor and therefore there was imperfect, rather than a complete absence of, compliance.

44The preamble to the Statutory Conditions provides that the conditions apply to liability coverage. Statutory Condition 8 states that if the insured fails or refuses to provide notice, “a person to whom any part of the insurance money is payable” may provide notice. SVIA argues that 139 Ltd. failed or refused to provide notice of the claim to Northbridge and because part of the insurance money is payable to SVIA pursuant to s. 132 of the Act, it is a party who may give notice of a claim.

45The Policy, including the Statutory Conditions, was drafted by the insurer. Northbridge specifically used the words “liability coverage” in the preamble to the Statutory Conditions. Therefore, it must have been the insurer’s intention that the Statutory Conditions apply to liability coverage. In any event, if the Policy is ambiguous, the ambiguity will be resolved in favour of the insured.

46I am satisfied that the wording of the Statutory Conditions allows notice of a claim for liability coverage to be provided by a judgment-creditor who has a direct action against the insurer pursuant to s. 132 of the Act. I therefore find that SVIA is a proper party to provide notice and did so when its counsel wrote to Northbridge on April 17, 2017. There was imperfect compliance with the condition to provide prompt notice of a claim. As a result, the remedy of relief from forfeiture may be available to the insured.

The “Liscumb” Test

47To obtain relief from forfeiture, the insured must satisfy the court with respect to the three-element test which is referred to as the “Liscumb” test. The elements which must be considered are as follows:

(1) The insured’s conduct was reasonable;

(2) The breach was not grave; and

(3) There is a disparity between the value of the property forfeited and the damage caused by the breach: Monk v. Farmers’ Mutual Insurance Company (Lindsay), 2019 ONCA 616, 92 C.C.L.I. (5th) 84, at para 79, leave to appeal to SCC requested.

48Failure to satisfy one element of the test is not fatal to the Application. The three-element test requires the court to consider and balance all three elements to determine whether relief from forfeiture will be granted: Monk, at para. 93.

Reasonableness of Conduct

49The first part of the test – the reasonableness of the insured’s conduct – is the most important. As stated by the Court of Appeal for Ontario:

[T]he examination of the reasonableness of the breaching party’s conduct lies at the heart of the relief from forfeiture analysis. A party whose conduct is not seen as reasonable will face great difficulty in obtaining relief from forfeiture: Monk, at para. 93.

50The Court of Appeal described how the reasonableness analysis is to be conducted:

The reasonableness part of the test requires a court to consider the nature of the breach, what caused it and what, if anything, the insured attempted to do about it. One circumstance is whether the conduct of the defaulting party was “willful”. All of the circumstances, including those that go to explain the act or omission that caused the lapse or forfeiture of the policy, should be taken into account. It is only by considering the relevant background that the reasonableness of the insured’s conduct can be realistically considered: Monk, at para. 82. [Citations omitted.]

51No evidence has been put forward to explain why 139 Ltd. failed to provide timely notice of the underlying action. Counsel for SVIA argues that 139 Ltd. may not have provided notice because Northbridge had previously denied coverage for the 2006 Action. He argues that 139 Ltd. probably thought the 2008 Action, which is based on similar facts, would also be denied, and therefore did not report the claim.

52I am unable to come to this conclusion. The 2006 Action is separate and distinct from the 2008 Action and is not in issue in this Application. The 2006 denial letter from Northbridge is not in evidence. There is no evidence from 139 Ltd. that it did not give notice of the 2008 Action because of the denial of coverage for the 2006 Action. As a result, there is insufficient evidence to allow me to conclude that the insured acted reasonably in not providing prompt notice of the 2008 Action to Northbridge.

53The evidence before me is that 139 Ltd. willfully decided to not pursue coverage for the 2008 Action. 139 Ltd. did not give notice of the 2008 Action to Northbridge. Instead it retained its own counsel to defend the 2008 Action. 139 Ltd. did not advise Northbridge that in early 2011 it stopped defending the action. There is no evidence before me as to why 139 Ltd. proceeded in this manner.

54Although SVIA provided notice of the 2008 Action, it did not do so until April 2017. This was six years after 139 Ltd.’s defence was struck in 2011. No explanation was provided as to why there was a delay on the part of SVIA in providing notice of the claim to Northbridge.

55Based on the evidence before me, I am of the view that the conduct of 139 Ltd. does not meet the reasonableness test. There is no reasonable explanation for the insured’s failure to give prompt and immediate notice of the 2008 Action.

Gravity of Breach

56In assessing the gravity of the breach, it is necessary to look at both the nature of the breach, and whether the impact of the breach prejudiced the insurer: Kozel v. The Personal Insurance Company, 2014 ONCA 130, 119 O.R. (3d) 55, at para. 67. The onus is on the insured, or in the case of a s. 132 proceeding, the judgment-creditor, to prove that the insurer was not prejudiced: Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 1996 CanLII 2482 (ON CA), 30 O.R. (3d) 257 (C.A.), at p. 284.

57In this case, the delay in providing notice was nine years from when the insured was served with the claim, which, on its face, is a substantial breach. Northbridge argues that the breach resulted in prejudice. Northbridge has put forward evidence that if timely notice had been provided, it would have carried out an investigation into liability and damages, and its right to pursue an action in contribution and indemnity would not have been barred.

58Northbridge relies on the affidavit evidence of Mr. Westland. Mr. Westland was not cross-examined on his affidavit. He identified potential tortfeasors including the project architect, the geotechnical engineer, the sewer installation surveyor, the pipe manufacturer and supplier. The 2008 Action was not brought against these entities. Northbridge argues that because of 139 Ltd.’s delay in providing notice, any claim for contribution and indemnity it may have wanted to bring against these entities is barred as a result of the expiry of the limitation period.

59Section 18(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B, s. 18(1) provides that the limitation period for bringing a claim for contribution and indemnity is two years from the date the first wrongdoer was served with the Statement of Claim. 139 Ltd. was served with the Statement of Claim on April 5, 2008. The limitation period for any claim for contribution and indemnity expired on April 5, 2010. In Monk, the court found that a delay in providing notice until after the expiry of the limitation period to bring a subrogated action results in prejudice to the insurer:

An insurer’s subrogated claim is subject to the same defences that the third party could have raised in an action brought by the insured. Ms. Monk’s lengthy delay in reporting her loss, which led to Pleasantview asserting a limitations defence, undermined the ability of Farmers’ to advance a subrogated claim in the event it indemnified her for the loss. Accordingly, the trial judge’s finding on this point was reasonable and based on the evidence.

As a result, notwithstanding the trial judge’s error in overlooking the report of Mr. South, his conclusion that Ms. Monk’s delay caused prejudice to Farmers’ ability to subrogate was reasonable: Monk, at paras. 102-103. [Citations omitted.]

60Northbridge also relies on the affidavit evidence of Mr. Stieber. He provided his opinion that as a result of the failure to provide prompt notice, Northbridge was unable to investigate the circumstances of the claim in a timely fashion. By the time Northbridge received notice of the claim, the discoveries had been completed. Northbridge did not have the opportunity to retain an expert or participate in the discovery process.

61SVIA argues that Northbridge was not prejudiced because it concluded that the claim was excluded and therefore would not have investigated or defended the action even if timely notice had been provided. SVIA relies on Canadian Equipment Sales & Service Co. Ltd. v. Continental Insurance Co. (1975), 1975 CanLII 670 (ON CA), 9 O.R. (2d) 7 (C.A.). In that case, the insured was retained to connect a new water pipeline to an existing pipeline. While carrying out this work, the insured’s subcontractor allowed a portion of the wall of the pipe called a “coupon” to fall inside the pipe instead of extracting it. The insured became aware of the incident on June 9, 1971. Notice was provided to its insurer approximately three months later, on September 1, 1971.

62The insurer argued that there was no coverage because the dropped coupon did not result in property damage. The insurer also argued that the insured did not comply with the notice provisions in the policy. The claims supervisor testified on discovery that even if the insurer had been informed promptly of the claim, it would have denied coverage and would not have carried out an investigation. The court held that if the insurer was going to deny the claim on the basis that there is no coverage, then the lack of timely notice had no effect on the insurer:

The defendant repudiated liability in its defence by pleading that the damages awarded to Great Lakes “were not within the ambit of the coverage of the policy.” It is true that in the letter of December 8, 1971, the representative of the defendant did not refer to this but stated that the insurer was not going to defend because of alleged breaches of policy conditions. However, it is clear from the transcript, and from Mr. Griffen’s answers … that the defendant felt that the accident did not come within the insurance coverage …

[T]he common-sense principle that seems to be recognized by these authorities is that if the insurer is going to deny liability on the basis that there is no insurance or that the accident is not covered by the insurance, then imperfect or indeed non-compliance with some conditions of the policy do not prejudice the insurer in any way: Canadian Equipment, at p. 15.

63The Court of Appeal stated that the issue of prejudice is a question of fact:

In the instant case, the evidence of Mr. Griffen makes the lack of prejudice plain. If the onus is on the insured to satisfy the Court that there has been no prejudice to the insurer by the late filing of the notice of claim, then I am of the opinion that the insured has satisfied that onus. This is basically a question of fact and the [insurer] did not suggest in the evidence that it was prejudiced in any way by the failure of the plaintiff to file the notice of accident or occurrence “as soon as practicable”: Canadian Equipment, at pp. 15-16.

64SVIA relies on Northbridge’s denial letter to 139 Ltd. dated July 18, 2017. SVIA argues that Northbridge wrongfully decided that all claims were excluded. Mr. Lackovic on his cross-examination testified that if a claim is excluded, Northbridge would not hire a lawyer to defend the action. SVIA takes the position that as a result, Northbridge would not have conducted itself any differently if timely notice had been given.

65SVIA’s argument is based on the premise that Northbridge decided that the entirety of the claim was excluded. In the denial letter, Mr. Lackovic states that the claim for the cost to repair the sewer system was excluded by the “your work” exclusion of the Policy. However, he does not state that the resultant damage claim is excluded. He states that with respect to the claim for resultant damage, the insured is barred by the limitation period from now suing under the Policy.

66Mr. Lackovic in his denial letter did not state that the claim in its entirety was excluded. He made a distinction between the claim to repair the sewer system which was excluded and the resultant damage claim which now could not be pursued because of the passage of time. Presumably, if prompt notice of the claim had been provided Northbridge would not have taken the position that the insured could not pursue the claim for resultant damage. There is no evidence in the record that if prompt notice had been provided Northbridge would have taken the position that there was no coverage for resultant damage claim.

67I am unable to conclude that SVIA has proven that Northbridge would not have taken any different actions and it would not have suffered any prejudice as a result of the insured’s failure to provide prompt notice of the 2008 Action. Northbridge was denied the opportunity to carry out a timely investigation into the claim for resultant damages, and to participate in the discovery process. By the time it received notice, the limitation period for bringing an action for contribution and indemnity had expired.

68I conclude that the breach of the condition to provide prompt notice of the claim was substantial and resulted in prejudice to Northbridge.

Disparity Between Value of the Property Forfeited and the Breach

69The third element of the Liscumb test requires the court to consider the disparity between the value of the property forfeited and the damage caused by the breach. This is a proportionality analysis which compares the effect on the insured of the loss of coverage, to the damage caused to the insurer by the breach of condition: Monk, at para. 104.

70In this case, the coverage forfeited is significant. The insurance policy limits are $5,000,000. Based on the amended default judgment, the resultant damages were assessed at $1,795,114.71. On the other hand, if timely notice had been provided to Northbridge, it would have had the opportunity to carry out an investigation and could have pursued defences with respect to liability and damages. By the time notice had been provided, the limitation period for commencing a claim for contribution and indemnity had expired.

71Although the forfeiture of insurance coverage is significant, the loss of Northbridge’s ability to defend the action is also significant. I find there is no disparity between the insured’s loss of coverage and the damage caused to the insurer by the breach of condition.

Summary

72I conclude that the insured breached Liability Condition 5, in that prompt notice of the 2008 Action was not provided to Northbridge. Northbridge did not receive notice until nine years after the 2008 Action was served on 139 Ltd. There is no evidence that the insured’s failure to provide timely notice was reasonable. The breach was significant and resulted in prejudice to the insurer because it lost the opportunity to carry out a timely investigation and pursue a claim for contribution and indemnity within the limitation period. I conclude that SVIA is not entitled to relief from forfeiture.

DISPOSITION

73I dismiss the Application.

74The Respondent is presumptively entitled to its costs of the Application. If the parties are unable to agree on costs, the Respondent may file written submissions of no more than 3 pages in length excluding bills of costs and caselaw within 21 days of the date of this endorsement. The Applicant may file written submissions in response on the same basis, within 21 days of receiving the Respondent’s submissions.

Chalmers J.