COURT FILE NO.: 12-53886

DATE: 20201030

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CARMEN SCAFFIDI-ARGENTINA, MICHAELANGELO SCAFFIDI-ARGENTINA, SHEILA SCAFFIDI-ARGENTINA and MARISSA SCAFFIDI-ARGENTINA

Plaintiffs

– and –

TEGA HOMES DEVELOPMENTS INC., GOODEVE MANHIRE INC., GOODEVE MANHIRE PARTNERS INC., PATERSON GROUP INC. and THE CITY OF OTTAWA

Defendants

no one appearing for the Plaintiffs

Brian C. Elkin and Stephanie Drisdelle for the Defendant Tega Homes Developments Inc.

Elizabeth K. Ackman and Sean D. McGarry for the Defendants/Moving Parties Goodeve Manhire Inc. and Goodeve Manhire Partners Inc.

J. Stephen Cavanagh for the Defendant Paterson Group Inc.

HEARD: September 22, 23, 25, 2020.

REASONS FOR decision (Summary judgment motion)

C.T. Hackland, J.

Overview

[1] This is a motion by the Defendants Goodeve Manhire Inc. and Goodeve Manhire Partners Inc. (“Goodeve”) for summary judgment dismissing the crossclaim brought by the Defendant Tega Homes Developments Inc. (“Tega”). Goodeve submits that Tega’s crossclaim is a subrogated claim being advanced by its insurer seeking to recover from Goodeve funds its insurer paid to the plaintiffs.

[2] Goodeve says that it is an insured under Tega’s insurance policy and is therefore entitled to rely on “the fundamental notion that insurers should not be permitted to subrogate against their own insured”. Moreover, Goodeve argues that Tega’s insurer is barred from asserting the cross-claim against Goodeve by a waiver of subrogation provision contained in the policy.

[3] In substance, this is a contest between two insurers to determine who will bear part or all of the losses in question arising from a construction project (“the project”), a residential condominium development, located on Gladstone Avenue, in the City of Ottawa. The plaintiffs were adjacent property owners who suffered significant property damage during the course of construction of the project.

[4] The parties agree that Goodeve was an engineering consultant and a subcontractor on the project. Goodeve carried Engineers Professional Indemnity Insurance underwritten by Lloyd’s. For its part, Tega, the owner and developer of the project, was insured by a policy of insurance titled “Project Specific Wrap up Liability Insurance” (“the policy”), issued by Encon Group, on behalf of Temple Insurance Company.

Terms of the Policy

[5] The question of whether Goodeve is an insured under Tega’s wrap up liability policy and whether it can therefore avail itself of the waiver of subrogation clause in that policy, is primarily a question of construing the terms of the policy in light of admissions made by Tega in response to a Request to Admit served by Goodeve and other facts which are not in dispute.

[6] As noted, Tega has admitted that Goodeve was an engineering consultant and a subcontractor on the project. Goodeve provided geotechnical engineering services. The declarations of the policy define additional insureds as follows: “additional insured: all contractors, subcontractors, engineering and architectural consultants.” Accordingly, there can be no doubt that Goodeve was an insured under the policy of insurance issued by Temple to Tega.

[7] The definition of “Insured” in the Policy is as follows:

The unqualified word Insured includes the Named Insured and:

(a) any additional Insureds so described in the Declarations, any partner, officer, director, employee or shareholder of any Insured while acting on behalf of such insured;

[8] In addition to being an "Insured" under the policy, Temple has waived its right to claim there was no privity of contract between it and any additional insured, such as Goodeve, under the Policy:

The insurance provided by this policy is obtained by the Named Insured on behalf of the Named Insured and as trustee for the benefit of additional insureds who heretofore and hereafter enter into a contract with the Named Insured relating to the construction of the Insured Project and further that the Insurer shall not use lack of privity of contract as reason for denial of liability to additional Insureds under this Contract.

[9] The Policy contains the following provision, in Condition 8, Part IX:

8. Subrogation

In the event of any payment under this policy the Insurer shall be subrogated to all the Insured’s rights of recovery therefore, and the Insured shall execute all papers required and shall do everything that may be necessary to secure such rights, but the Insurer shall have no right of subrogation against any Insured under this policy.” (emphasis added).

The Issue

[10] It can be seen on a plain reading of the policy that Goodeve, as Tega’s engineering consultant on the project, was an “additional insured” under the policy. Goodeve, as an insured under the policy, claims the right to avail itself of the waiver of subrogation provision referred to in the previous paragraph and on that basis asks the court to strike Tega’s crossclaim. However, for the reasons discussed below Tega submits that Goodeve was not an insured under the policy and even if it was, should not be entitled to rely on the waiver of subrogation because Goodeve fell within an exclusion of coverage in the policy applicable to professional services.

Background

[11] The excavation work on the project was carried out over the first 7 months of 2011. This action was commenced in March of 2012. The plaintiffs named as defendants Tega, Goodeve, Paterson Group Inc. (the geotechnical engineers on the project), and the City of Ottawa. The action as against Tega, Goodeve and Paterson Group was pleaded in negligence and nuisance. These defendants entered Statements of Defence and cross claimed against each other.

[12] On January 17, 2014 Justice Beaudoin, on consent of the parties, ordered that this action and an action brought for similar damages by another neighbouring landowner (“the Savasta Claim”) be placed in case management and there were to be “joint examinations for discovery, pre-trial conferences, and be heard together or one after another”.

[13] Master Roger (as he then was) at a case conference on March 4, 2014, set trial dates for a 6-week trial commencing May 11, 2015. In a further case conference on April 9, 2015 Master Roger ordered with agreement of the parties, that “the trial scheduled for May 11, 2015, is confirmed for that date however the trial is limited to an assessment of damages with liability to be resolved at a later date.”

[14] The damages trial did not proceed as scheduled due to a shortage of available judges; however, it ultimately did proceed before Justice Sheard in January of 2016. Her Honour’s reasons for judgment dated August 30, 2016, are reported at 2016 ONSC 5448.

[15] At the opening of the damages trial on January 11, 2016 Justice Sheard granted an order on consent of the parties dismissing this action against Goodeve, Paterson and the City of Ottawa. This order further provided that “all cross-claims by and against Goodeve and Paterson…be permitted to continue without further formality”.

[16] As a result of the January 11, 2016 order, Tega was the sole defendant remaining in the action and the plaintiffs no longer maintained any claim against Goodeve or Patterson. However, Tega maintained its cross-claims against Goodeve and Paterson for contribution and indemnity. It is this claim that Goodeve resists on the basis that it is an insured under Tega’s wrap-up liability policy provided by Temple Insurance and is accordingly entitled to resist Tega’s cross-claim because the policy contains a waiver of subrogation clause in favour of any party insured by the policy. Counsel for Paterson attended the argument of this motion and advised that Paterson supported the position of Goodeve.

[17] The liability portion of the trial was scheduled to commence on January 15, 2018, but due to a number of developments including amendments to the pleadings pertaining to the subrogation issues followed by the present motion and most recently the pandemic, has still not been scheduled.

[18] The following are facts admitted by Tega or are otherwise not contested:

• In November 2017, plaintiffs’ counsel advised Tega on what basis they would be prepared to settle the outstanding liability issue, which included that the damages award be paid out immediately. Those terms were accepted by Tega on December 12, 2017 (the “settlement”).

• The settlement was made with the agreement of Encon on behalf of Temple, and Encon instructed counsel for Tega to enter into the settlement.

• Neither Tega nor its counsel notified or consulted with Goodeve or Paterson or their counsel prior to entering into the settlement.

• By email dated December 14, 2017, counsel for Tega advised counsel for Goodeve and Paterson of the settlement and stated that the only terms were that the plaintiffs had agreed not to attend the pre-trial conference or the liability trial in exchange for payment of the damages awarded at the damages trial and advised that a cheque in the amount of $676,450.85 payable to Rasmussen Starr Ruddy LLP (plaintiff’s solicitors) in trust, had been requested.

• The payment to the plaintiffs was funded by Temple and made by means of Encon cheque no. TEM1-20003745 dated January 10, 2018 in the amount of $676,450.85 payable to Rasmussen Starr Ruddy LLP in trust (the “payment”).

• Encon made the payment pursuant to the policy.

• The plaintiffs executed a full and final release in favour of Tega as part of the settlement.

The Coverage Motion

[19] Another important development occurred in July 2015 when Goodeve brought an application against Encon and Temple seeking a declaration that it was entitled to defence and indemnity under the Temple policy as an additional insured. The application was heard by Justice Roger and was dismissed in reasons dated November 14, 2016, reported at 2016 ONSC 7005 (Goodeve Manhire and Partners Inc v. Encon Group Inc. and Temple Ins.co.).

[20] Temple Insurance successfully resisted the application on the basis of a professional services exclusion clause contained in the policy. Justice Roger held, at paras 36 and 37 of his reasons:

[36] In my opinion, the claims as pleaded in the statements of claim fall squarely and unambiguously within the language of the exclusion clause as a claim for “[l]iability arising out of the rendering or failure to render professional services, by or on behalf of any Insured, other than first aid or emergency medical services.” They are clearly excluded and, consequently, could not trigger the duty to defend.

[37] I note that this interpretation of the exclusion clause is not inconsistent with the main purpose of the insurance coverage. Although this was not argued, giving effect to the language of the exclusion clause does not virtually nullify coverage. Tega and other contractors, subcontractors, engineering and architectural consultants face the risk of a wide range of liability claims for bodily injury, damage to property, personal injury and others, that the policy will cover arising out of the insured’s work, that is essentially not covered by a professional liability policy.

[21] Justice Roger’s decision was not appealed. In my respectful opinion Justice Roger’s ruling on the coverage motion established two important matters relevant to the present motion. Firstly, Goodeve is an additional insured under the policy. As such they are entitled to certain coverages under the policy. However, the negligence/nuisance claims against Goodeve in the current action fall squarely within the professional services exclusion in the policy and therefore Temple Insurance had no obligation to provide a defence or indemnity in the current action. In other words, the court’s conclusions as to Goodeve being an additional insured, but nonetheless falling within the professional services coverage exclusion in the policy, are res judicata.

[22] Tega submits that Goodeve can not be considered an additional insured under the policy because its contract with Tega was not in writing. The relevant policy provisions relied on are:

The insurance provided by this policy is obtained by the Named Insured on behalf of the Named Insured and as trustee for the benefit of additional Insureds who heretofore and hereafter enter into a Contract with the Named Insured relating to the construction of the Insured Project and further that the Insurer shall not use lack of privity of Contract as reason for denial of liability to additional Insureds under this Contract.

“Contract” is defined at Part 8, Clause 6 as:

Means any contract in writing entered into by the Insured relating to the Insured Project and which is:

a) in writing; or

b) has been formalized in writing prior to the Bodily Injury, Property Damage or Personal injury.

[23] The evidence before the court shows that the contract was partially in writing or at least formalized in writing. There was a written offer and acceptance, the contract was performed and then invoiced in writing. The requirement of “any contract in writing” includes the phrase or “has been formalized in writing”. There are no other specific requirements.

[24] In my opinion, if this was a policy requirement, it was satisfied on the fairly rudimentary contractual documentation used by the parties. And this is so, notwithstanding that the contract did not deal with the issue of the provision of insurance coverage at all. Indeed Goodeve was unaware of the Temple policy or that they were an additional insured under that policy at the time Goodeve was engaged to work on the project. Neither party seems to have focused on that issue, prior to the litigation. Nevertheless, I find that Goodeve, as a consulting engineer and subcontractor was an additional insured under the policy.

Waiver of Subrogation

[25] Tega submits that even if Goodeve is an additional insured under the policy, by reason of the fact that Goodeve does not have the benefit of coverage under the Temple insurance policy issued to Tega (because the claims against it fall within the professional services exlusion, per Roger, J.), Goodeve should not be afforded the benefit of any waiver of subrogation at common law or under the waiver of subrogation clause in the policy.

[26] The proposition advanced is that commercial fairness dictates that coverage should define the scope of the subrogation waiver and not simply the question of whether the claimant is an insured or an additional insured under the policy. Stated otherwise, since Goodeve is not covered under the policy for the professional services claims being put forward in this action, Temple should not be precluded from asserting a subrogated claim for indemnity against Goodeve once Temple has paid out on Tega’s behalf, damages for which Tega has a right of indemnity from Goodeve. Arguably, if Temple can not recover funds paid to the plaintiffs pursuant to their insured’s policy, by way of a subrogated cross-claim against Goodeve, they are de facto providing coverage to Goodeve, resulting in the coverage exclusion (for professional services) in the policy being of no effect.

[27] Counsel for Goodeve submit that the applicability of a waiver of subrogation clause is a matter of interpreting the contract of insurance to determine the intention of the parties, using the well established principles of interpretation. In response to the commercial fairness argument, counsel for Goodeve submits that it can not be the case that subrogation waivers only apply when the insurer is providing coverage on a claim because an insurer would not provide coverage and then attempt to subrogate a claim against its own insured. The waiver of subrogation clause, restricted to situations where coverage was provided, would have no meaning in such circumstances.

Relevant Caselaw

[28] The general common law prohibition against an insurer being permitted to subrogate against its own insured is set out in the judgement of the Supreme Court of Canada in Commonwealth Construction Co. Ltd. v. Imperial Oil Ltd. et al., 1976 CanLII 138 (SCC), [1978] 1 SCR 317 page 326:

The courts have consistently held, in the builder’s risk cases, that the insurance company—having paid a loss to one insured—cannot, as subrogee, recover from another of the parties for whose benefit the insurance was written even though his negligence may have occasioned the loss, there being no design or fraud on his part.

[29] The Court of Appeal in Rochon v. Rochon, 2015 ONCA 746 addressed the limitations on an insurer’s entitlement to subrogate. In Rochon, a fire loss claim, the son of the homeowners caused a fire by his negligence while working on his automobile in the homeowners garage. The court held the waiver of subrogation in the homeowners policy to be valid and declared that the subrogated claim against the son was barred because he was found to be an insured under the policy. The court held that it was irrelevant that the son had other insurance under the automobile policy.

[30] The court in Rochon stated that the definition of insured was to be read broadly and construed against the insurer. The court went on to state at paragraphs 73 – 74:

[73] I start with the fundamental notion that insurers should not be permitted to subrogate against their own insured: Commonwealth Construction Co. Ltd. v. Imperial Oil Ltd. et al., 1976 CanLII 138 (SCC), [1978] 1 S.C.R. 317. The fact that an insured may have other insurance is, in my view, irrelevant. A suit by an insurer against its own insured does not fulfil the aims of subrogation, which is to avoid overpayment of the insured: Condominium Corporation No. 9813678 v. Statesman Corporation, 2007 ABCA 216, 409 A.R. 152, at paras. 26-28, leave to appeal refused, 454 A.R. 102 (note).

[74] Further, subrogation against an insured should be barred because the insurer has contracted to take onto itself the very risk at issue, thereby taking it away from the insured: Statesman, at para. 49.

[31] The court in Rochon followed the decision of the Alberta Court of Appeal in Condominium Corporation No. 9813678 v. Statesman Corporation, 2007 ABCA 216. A condominium in the course of construction was destroyed by fire caused by the negligence of a subcontractor. The corporation’s insurer paid the claim and then attempted to pursue a subrogated claim against the developer and a general contractor on the basis of vicarious liability for the subcontractor’s negligence. The court held that the waiver of subrogation provision in the policy protected the general contractor from the insurer’s claim.

[32] The court in Statesman recognized that an insurer was free to negotiate exceptions to a subrogation waiver clause before it issues a policy (at para 25):

I admit that the traditional rule barring an insurer from suing its own insured occasionally yields unpredictable results. But an insurer can negotiate exceptions to coverage or to subrogation waiver clauses before it issues a policy.

[33] The court in Statesman also observed that in multiparty situations such as a condominium development, there may be good commercial reasons for the owner to desire the waiver of subrogation to extend beyond the cover provided by the policy (para 35). The court went on to warn that coverage should not be confused with subrogation, at paragraphs 52 – 53:

[52] Counsel for the respondent insurer warns us not to confuse coverage with subrogation. In concept, they are different, and university courses and textbooks should explain them quite separately. But often legal doctrines are interlocked like a cat’s cradle, especially for practical purposes. That is so here. As just noted, a “no-fault” insurance policy which let the insurer claim back against an insured, would really be no policy, or not a no-fault policy, so far as that insured is concerned. The distinction between coverage and subrogation would then shrink to pure form without substance.

[53] Indeed that circular spectacle would be so ridiculous, that it is better to read an insurance policy as barring that. The court implies a term that the insurer will not attempt a subrogated claim which would merely have to be promptly repaid under the same policy, especially where the two insureds were contractually bound to take out insurance for the benefit of both.

[34] Goodeve also relies on the Australian case of GPS Power Pty v. Gardiner Willis, 2000 QCA 495 (Queensland Court of Appeal), decided on facts very similar to those in the present case. The defendant was an engineering firm engaged to provide design services to the plaintiff for construction of a power station. The insurance policy was described as a “construction works and liability blanket insurance policy” for that specific project. The definition of insured was sufficiently broad to include the defendant but the policy contained a clause excluding coverage in respect of professional services. The court concluded that the waiver of subrogation provision in the policy prevented the insurer from pursuing the engineers. The court rejected the insurer’s argument that the waiver of subrogation provision did not apply because the claim in question arose from the engineer’s breach of a professional duty which was excluded from coverage.

[35] The Court observed at paragraphs 47,49 and 51:

[47] To adopt the phraseology of senior counsel for the respondent, “if the waiver of subrogation is commensurate only with cover, all you are doing is stating the general law position.” … if the party against whom the insurer seeks to enforce rights of subrogation is insured under the policy the exercise of the right is pointless. The waiver must extend to parties described in the definition as “Insured” even though not issued against the particular loss in question (underlining added).

[49] (Citations omitted) … Those cases demonstrate that problems such as those here are to be resolved by construing the policy of insurance in question and applying the terms thereof to the proven facts. Those cases demonstrate that clauses providing for waiver of subrogation rights should be given their ordinary meaning and should not be read down to achieve what may be regarded as a more acceptable commercial result. I agree with Pincus JA that “in determining the scope of a clause waiving subrogation rights, it would seem sounder, as a matter of policy, to favour a construction enhancing, rather than restricting, the scope of the waiver.”

[51] Thus one comes back to the critical question whether or not the respondent is an “Insured” for purposes of the subrogation clause. For the reasons given above I am of the view that, properly construed, the definition of “the Insured” encompasses the respondent because it was insured against some risks, albeit limited ones, by the contract of insurance. If the insurer wished the definition of “the Insured” to encompass only the parties described therein in so far as they were insured against a particular risk it would have been easy for the definition to say so in express terms. Rather, in my view, the definition has defined “the Insured” by naming and describing certain persons and parties as constituting “the Insured” even though in certain circumstances they were insured against fewer risks than other persons and parties named and described therein.

[36] The Court in GPS Power observed that the literal meaning of the waiver of subrogation clause must be applied and had the parties wished to limit the scope of the waiver they could have done so expressly (at para 4).

[37] Counsel for Goodeve submits that the appellate decisions in Statesman, Rochon and GPS Power demonstrate that the established law of subrogation precludes an insured from subrogating a claim against a party who is found to be an insured, or an additional insured, under the policy of insurance. Contrary to the position taken by counsel for Tega, this rule applies even when the policy does not provide coverage for the loss in issue. Goodeve submits that the law recognizes this can on occasion create unpredictable or seemingly commercially inappropriate results and thus it is up to insurers to draft their policies appropriately to avoid unwanted results.

[38] Counsel for Tega responds that no reported case in Canada has applied a waiver of subrogation clause, to preclude a subrogated claim being advanced by an insurer against a party insured by the policy, in circumstances where there is no coverage under the policy due to a coverage exemption (such as the very common professional services exemption in the Temple policy). Elsewhere, it is submitted that there is a conflict in the authorities on this point and GPS Power is not universally followed.

[39] Tega relies on a decision of the Québec Superior Court, Intact, compagnie d'assurances c. Pétrifond Fondation compagnie ltée, 2010 QCCS 4916. This decision is factually very similar to the present case. During the construction of a condominium project, damages were caused to a neighbouring building. The insurer of the general contractor paid the damages and then sought to subrogate a claim for indemnification against the consulting engineers on the project. The consulting engineers were “additional insureds” under the wrap-up liability policy which insured the project and, as in the present case, the policy contained the usual professional services exclusion from coverage.

[40] The court held, at paras 37 – 39, (translation):

[37] Based on EBC’s contractual undertaking and the “Special Terms and Conditions” of the policy, which list the subcontractors and professionals as additional insureds, and considering that the Insurer admits that the defendants acted as either subcontractors or professionals[14], the Court concludes that EBC in fact waived its right to bring action in general civil liability against its co-insureds.

[38] That said, does this mean that EBC waived its right to bring action against them for their professional fault?

[39] The Court does not believe that it did.

[41] The court went on to comment that the wrap-up liability policy contained the usual professional services coverage exclusion, with the result that “the principle of non-subrogation cited by the defendants cannot apply in this case” (para 43). With due respect, I would decline to adopt the learned judge’s conclusions which are based on the observation that professional services exclusions are the norm in general liability policies. I would also distinguish this decision on the basis that there was no specific subrogation waiver in the policy and the judge’s reasoning appears to be based on Québec civil law principles.

[42] Tega has drawn to the Court’s attention a series of Australian and United Kingdom cases which depart from the GPS Power approach of denying to an insurer a right of subrogation against an insured who is not afforded coverage under the policy of insurance, see: Thiess Pty Ltd and John Holland Pty Ltd v. Parsons Brinckerhoff Australia Pty Ltd, [2016] NSWSC 173 (Supreme Court of New South Wales); Gard Marine and Energy Ltd v. China National Chartering Co. Ltd. [2017] 1 WLR 1793; National Oilwell (UK) Ltd. v. Davy Offshore Ltd., [1993] 2 Lloyd’s Rep 582 (Queen’s Bench Division (Commercial Court)); Haberdashers’ Aske’s Federation Trust Ltd. Lakehouse Contracts Ltd. & Ors, [2018] EWHC 558 (TCC) (England and Wales High Court); BP Exploration Operating Co Ltd v. Kvaerner Oilfield Products Ltd, [2005]1 Lloyd's Rep 307. These cases look to the insuring commitments which the parties undertook, pursuant to which the insurance policies were taken out. They generally support the notion that when no coverage for the loss is provided due to a professional services exemption, the professional services provider is not an insured under the policy and subrogation is permitted.

[43] In Thiess the plaintiff was a builder in charge of the construction of an underground traffic tunnel. There was a collapse and the plaintiffs Builder’s Risk policy indemnified the plaintiff for the loss and the insurer commenced a subrogated claim against several parties including the engineering consultant. The Builder’s Risk policy contained an exclusion of coverage for professional services performed on-site and the court ultimately found that “the duties for breach of which it is being sued, are properly characterized as design duties”, which occurred on site. Therefore, the engineering consultant was found not to be an insured and not entitled to take the benefit of the waiver of subrogation clause.

[44] In the present case there was no agreement between Tega and its subcontractors or engineering consultants such as Goodeve and Paterson as to who would maintain insurance coverage for this project. As Tega points out, the construction cases, including Commonwealth, are usually about the interpretation of Builder’s Risk policies which normally contemplate that the party seeking a waiver of subrogation have a contractual agreement with the named insured to insure against the risks for which it has been sued. In the present case the principal of Goodeve was unaware of the existence of the Temple policy obtained by Tega and was therefore unaware of the fact that Goodeve was insured under that policy and had the benefit of a waiver of subrogation. Goodeve’s expectation was that it was covered for the claims advanced in this proceeding by its own professional liability policy. Goodeve only became aware of the Temple policy when it was produced in March 2015, pursuant to undertakings provided in the discovery process.

[45] It may be that this is a somewhat unusual case and Goodeve or its professional liability insurer has found itself in the unexpectedly fortunate position of being an additional insured under Tega’s wrap-up liability policy with the added bonus that as an additional insured, it benefits from a waiver of subrogation provision in the policy. This good fortune was neither expected nor bargained for by Goodeve or its professional services insurer. The subrogation waiver in the Temple policy forecloses any access to Goodeve’s professional liability insurance to indemnify Temple for paying damages on behalf of its insured Tega for Goodeve’s alleged professional negligence on this project. Professional services constituted a coverage exclusion in the Temple policy, yet, if Goodeve’s position is correct Temple is in fact being compelled to cover this loss with no right of subrogated indemnification. Tega argues this is an anomalous result.

[46] However, in the court’s view and notwithstanding the capable submissions of Tega’s counsel, it is not the court’s function to restructure commercial contractual arrangements, particularly among sophisticated parties, in order to achieve what might be considered a fairer or more commercially reasonable result. It is the court’s function to interpret the policy of insurance in accordance with the principles set out in Progressive Homes Ltd. v. Lombard General Insurance Co., 2010 SCC 33, [2010] 2 S.C.R. 245, which holds that when the language of an insurance policy is unambiguous the court should give effect to the clear language, reading the contract as a whole. As noted, the court normally considers the insuring commitments or obligations the parties agreed to in the contractual documentation underlaying the project i.e.: which party was required to obtain what coverage? Here there were no project agreements pertaining to insurance coverage. Therefore, the wrap-up liability policy provided by Temple Insurance must speak for itself, according to its terms.

[47] It has been agreed that Goodeve was a consulting engineer and sub-contractor on this project. As such, I find that Goodeve qualifies as an additional insured under the policy. As an additional insured, I find that Goodeve is entitled to the benefit of the waiver of subrogation provision in the policy. It would have been open to Temple to have altered the wording of the definition of additional insured or the scope of the subrogation waiver, possibly to reflect the professional services coverage exclusion. However, the court does not have the power to do so. Rather the court’s obligation is to give effect to the words of the policy of insurance and in this case, they are clear and unambiguous. Accordingly, I have come to the conclusion that Tega (Temple Insurance) is not entitled to subrogate a claim for indemnity against Goodeve, because the policy waves the right to subrogate against other parties insured by the policy, including Goodeve.

Procedural Issues

Abuse of Process

[48] Tega argues that the conduct of Goodeve in this proceeding, so far as its reliance on the waiver of subrogation in the Temple policy is concerned, is an exercise in bad faith and is an abuse of process. The argument is put this way in Tega’s factum:

iii. Goodeve Was Waiting in the Tall Grass

143. Goodeve was waiting in the tall grass for this opportunity for a long time. Goodeve was silent before Justice Sheard when it was securing the Consent Order, and continued to be silent when Justice Sheard was encouraging a settlement between Tega and the plaintiffs. If this was not enough, Goodeve’s communications with Tega on a payment to the plaintiffs was strategically an attempt to encourage Tega in making a payment in order to raise the issue of waiver of subrogation. Immediately after Tega confirmed that it would pay the plaintiffs in order to shorten the liability trial and reduce costs, Goodeve sought permission to file a new Defence to Tega’s Crossclaim in order to raise the waiver of subrogation defence. This is why the January 15, 2018 trial did not proceed.

144. Goodeve had already consented in open court that the crossclaims would proceed without further formality, including Tega’s crossclaim. On that basis alone, based on how the litigation unfolded before Justice Sheard, Goodeve is now precluded from raising the waiver of subrogation privilege. Goodeve had a duty not mislead the Court even in an adversarial process.

[49] The point of this submission seems to be that once Goodeve obtained production of Temple’s wrap-up liability policy in March 2015, Goodeve should have made it known that it intended to rely on the waiver of subrogation provision in the policy and was no longer prepared to contribute to a settlement. Without that understanding, Tega settled the plaintiff’s claim and participated in a consent order, at Goodeve’s urging, that dismissed the plaintiff’s claims against the defendants Goodeve and Patterson, leaving Tega as the only remaining defendant in the action and allowing only the continuance of the crossclaims. Yet Goodeve had no intention of litigating the cross-claims on the merits. Instead, it planned to rely on the waiver of subrogation provision in the Temple policy to defeat Tega’s ability to maintain a cross-claim for contribution and indemnity for payments made to the plaintiffs.

[50] However, Tega does not claim that had it known that Goodeve and Paterson would assert the waiver of subrogation defence, they would not have paid out the plaintiff’s claim or agreed to the consent order dismissing the action against Goodeve and Paterson. In any event, Tega has never sought to have the consent order set aside. When Tega subsequently paid out to the plaintiff’s damages in the amount quantified by Sheard, J. in her judgement following the damages assessment trial (which payment was made shortly before the anticipated commencement of the liability trial), Tega was undoubtedly aware by that time of the intention of Goodeve to assert a waiver of subrogation defence. Subsequently, Tega unsuccessfully opposed Goodeve and Paterson’s amendments to their statements of defence to Tega’s crossclaim, to specifically plead reliance on the subrogation waiver in Temple’s policy.

[51] On the record before the court, I am unable to identify any undertaking or representation made by counsel for Goodeve or its representatives to the effect that they would not rely on the subrogation waiver, which they became aware of once the Temple policy was produced on discovery. This waiver is found in Temple’s own policy and Temple must be taken to have been aware of it and its possible significance. In the absence of such an undertaking or representation from Goodeve, Tega cannot be said to have detrimentally relied on Goodeve’s actions. In the coverage motion before Roger, J., Goodeve could, in addition to seeking a declaration of coverage under the Temple policy, have argued that in the alternative it was entitled to rely on the waiver of subrogation in the Temple policy, but chose not to do so. At the same time, Temple could have argued that Goodeve was not an insured under the Temple policy but chose not to advance that point. Strategic decisions were made by all parties.

[52] Doubtless this case has seen more than enough strategic maneuvering among the various insurers involved, positions have evolved over the undue length of the proceeding and much of the story is clouded in privileged negotiations and communications among counsel. Some strategies pursued by counsel might appear unwise or even disingenuous in retrospect. However, I will simply observe that the record before the court does not justify a finding of any impropriety or abuse of process and I decline to make any such finding.

Partial Summary Judgment

[53] Tega submits that there will likely need to be at trial of at least some issues arising out of this construction project, at least in certain companion actions, and the Court of Appeal has discouraged motions for partial summary judgement, see Butera v. Chown, Cairns LLP, 2017 ONCA 783. In Butera, the court stated that partial summary judgement should be a rare procedure to be reserved for an issue that may readily be bifurcated from those in the main action and must be capable of being dealt with expeditiously and in a cost-effective manner. The possibility of inconsistent findings of fact at trial would be a significant consideration weighing against granting partial summary judgement.

[54] In the present case the waiver of subrogation issue is essentially a point of law and turns on the interpretation of a policy of insurance requiring reliance on a very limited factual record which is largely the subject of admissions. These issues differ from the engineering and construction issues at the center of a possible liability trial based on allegations of negligence and nuisance. Moreover, there is a strong likelihood that the resolution of the waiver of subrogation issues will obviate the need for a trial and form the basis of a resolution of similar subrogation issues affecting the insured interests of parties in this and other pending proceedings arising from this project.

[55] I concur with and respectfully adopt the observations of MacLeod, R.S.J., who is case managing this action and related proceedings, who has previously ruled that bringing this summary judgement motion is appropriate in all the circumstances. Justice MacLeod stated:

[8] Under the circumstances, I cannot realistically schedule this trial in the latter part of 2020 or the first six months of 2021. In those circumstances, it is more efficient to test the legitimacy of the insurance defences through the mechanism of a summary judgment motion. If the motion is successful, it will shorten the trial and eliminate certain issues. If it is unsuccessful it may remove the issues from contention. I am not overlooking the possibility of an appeal, but it would be an appeal on a question of law. I am also not overlooking the possibility that the motions judge could refuse judgment because he or she is of the view that this a genuine issue requiring a trial, a result which would leave the question open for trial. Nevertheless, as the action is now at least a year away from trial, I am prepared to schedule the summary judgment motion.

Disposition

[56] For the reasons outlined previously, I would allow the motion for summary judgement brought by Goodeve and dismiss Tega’s cross-claim based on the court’s finding that Goodeve is an insured under the Temple policy and, as such, entitled to the waiver of subrogation provided in the policy.

[57] If Goodeve wishes to seek costs of this motion, they are to provide a written submission within 30 days of the release of these reasons and Tega may respond within 30 days of receipt of Goodeve’s submissions.

Released: October 30, 2020