COURT FILE NO.: CV-21-00663326-0000
DATE: 20211006
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BERKLEY INSURANCE COMPANY
Applicant
– and –
AVIVA INSURANCE COMPANY OF CANADA, TEMPLE INSURANCE COMPANY, EVEREST INSURANCE COMPANY OF CANADA, ARCH INSURANCE CANADA LTD., and XL REINSURANCE AMERICA INC.
Respondents
Sébastien A. Kamayah, lawyer for the Applicant
Elizbeth Bowker and Nabil Mahmood, lawyers for the Respondents
HEARD: September 27, 2021
ENDORSEMENT
DIAMOND J.:
Overview
[1] The non-party John Doe (“Doe”) is a member of the College of Nurses of Ontario (the “College”). In or around the summer of 2020, the College received a complaint about Doe’s “practice or conduct”.
[2] By letter dated October 30, 2020, the College advised Doe that its Complaints and Reports Committee approved an investigation into the complaint filed against Doe. The scope of the College’s investigation included but was not limited to his care of clients, response to changes in clients’ condition, and demonstration of knowledge, skill and judgment.
[3] The subject matter of the complaint against Doe included allegations that in checking a resident’s blood sugar levels, Doe was aware that the resident was hyperglycemic but was not concerned about the resident’s rising blood sugar level. The resident was ultimately found without vital signs and lying on the floor near a wheelchair, and later pronounced deceased.
[4] Doe was insured pursuant to two separate “claims made” professional liability insurance policies owned and administered by the applicant and the respondents respectively. Both policies were in force during the relevant time period, and there is no issue that Doe qualifies as an insured under both policies.
[5] The applicant seeks an order that since the respondents have a duty to defend, they also have an obligation under their policy to share on a 50/50 basis with the applicant to fund his legal costs responding to the College’s disciplinary proceeding until the exhaustion of the respondents’ policy limits.
[6] While the respondents acknowledge their duty to defend, they oppose the relief sought by the applicant and take the position that the priority dispute between the two policies should be resolved by requiring the applicant’s policy limits to first be exhausted before the respondents contribute any funds towards Doe’s legal expenses.
[7] At the conclusion of argument of the application, I took my decision under reserve.
The Applicant’s Policy
[8] In the applicant’s policy, issued to Service Employees International Union Local 1 Canada, a “claim” is defined as, inter alia, a written demand for money or services received by an insured resulting from a “professional incident”.
[9] A “professional incident” is defined as “a negligent act, error or omission in the rendering of or failure to render professional services by the insured or a person acting under the insured’s direction, control or supervision and for whose acts, errors, or omissions the insured is legally liable”.
[10] The applicant’s policy also contains a “Disciplinary Expense Endorsement” which provides as follows:
“We will pay on behalf of the Named Insured the claims expenses incurred by any insured, or the practice-specific professional association’s or college’s costs awarded against any insured, in the investigation and/or defence of a claim as defined above. No other loss arising out of such claim will be covered under this endorsement.”
[11] The Disciplinary Expense Endorsement also expands the definition of “claim” under the policy to include a disciplinary hearing or investigation brought by the insured’s relevant, practice-specific professional association or college arising from professional services.
[12] The term “claim expenses” refers to fees, costs and expenses resulting from the investigation, adjustment, settlement and defence of a claim (to a maximum limit of $50,000.00).
[13] Finally, the applicant’s policy includes an “other insurance” clause which provides as follows:
“This insurance shall be excess of and not contribute with other insurance, whether collectible or not, that affords coverage for a professional incident. If any insured has other insurance that provides coverage for their involvement in a professional incident, this policy shall be excess of this other insurance and no coverage is provided to that specific insured until the exhaustion of their other insurance.”
The Respondents’ Policy
[14] Under the respondents’ policy, issued to the Registered Practical Nurses Association of Ontario, a “claim” is defined as any written or oral allegation received by the insured resulting from an error, omission or negligent act in the rendering of the insured services.
[15] Insured services are defined as “services rendered by the insured while acting within the scope of the insured’s duties as a registered practical nurse and customary to that practice”.
[16] The respondents’ policy provides that the respondents will pay 100% of all costs incurred (to a maximum limit of $10,000.00) to obtain legal representation or advice when an insured receives a letter of complaint from the College. Endorsement #11 to the respondents’ policy confirms that the above situation is considered a “claim” for the purpose of the policy.
[17] In the respondents’ policy, there is also a section entitled “other insurance” which excludes “claims covered under another valid and collectable insurance policy. Any coverage provided by this policy shall be specifically excess of and shall not act in contribution with such other insurance policy”.
The Relevant Jurisprudence
[18] Both the applicant and the respondents have already acknowledged coverage under their respective policies. The dispute between them is focused upon the priority of both policies in responding to the complaint against Doe filed with the College. Both the applicant and the respondents acknowledge their respective duty to defend, as there is at least a “mere possibility” that the nature of the complaint filed against Doe, if proven at trial, falls within the coverage under both policies and thus would trigger the duty to indemnify.
[19] In my view, the sole issue for this Court’s determination is whether the terms of both policies result in an equitable contribution of legal costs by both the applicant and the respondents. Such an analysis requires an examination of the “other insurance” clauses in both policies.
[20] As held by the Supreme Court of Canada in Family Insurance Corp. v. Lombard Canada Ltd. 2002 SCC 48, the Court must ask itself the following questions:
(a) if the two “other insurance” clauses are irreconcilable and effectively cancel each other out, then both insurers are liable and must share the obligation rateably as between themselves; but,
(b) if the two “other insurance” clauses can be read as working together so that they do not effectively cancel each other out, then the policies apply as drafted with one primary and the other either excess or excluded as the case may be.
[21] The applicant submits that the two subject “other insurance” clauses are effectively irreconcilable, and thus both the applicant and the respondents must equally share in the funding of Doe’s legal costs.
[22] Not surprisingly, the respondents submit that the two subject “other insurance” clauses can be reconciled and are not mutually repugnant, thereby requiring the applicant to first fund Doe’s legal costs until the applicant’s policy limits are exhausted.
[23] As held in Family Insurance Corp., in interpretating insurance policies, the Court must determine the intent of each insurer by an examination of the policy language and not by otherwise attempting to determine the subjective intentions of the insurers.
Decision
[24] The respondents submit that the “other insurance” clause in the applicant’s policy is not triggered, as the respondents’ policy does not qualify as “other insurance” as that term is defined within the applicant’s policy. Specifically, the respondents argue that the “other insurance” clause in the applicant’s policy references the insured having other insurance providing for coverage for his/her involvement in a professional incident. As such, it is only if the respondents’ policy affords coverage for a professional incident that would render the policy to be excess coverage.
[25] In support of their position, the respondents argue that the applicant’s policy defines a “professional incident” as a negligent act, error or omission in the rendering of or failure to render professional services. One of the well-known components of negligence (whether by act, error or omission) is resulting, compensatory damages. It is trite to state that the complaint filed with the College does not seek any compensatory damages, and if found to be valid, the complaint would still not result in a finding of legal liability against Doe.
[26] The applicant argues that the definition of “professional incident” does not reference a negligent act, negligent error or negligent omission. The word “negligent” only informs the alleged act on the part of the insured, and not any error or omission. The applicant submits that an alleged “error or omission” relates to the insured’s conduct, and not a failure to act in accordance with a reasonable standard (i.e. negligence).
[27] The Disciplinary Expense Endorsement to the applicant’s policy expands coverage to legal expenses in response to a complaint filed with the College in the investigation of a claim as defined in the policy. The term “claim” references the necessity of a professional incident within the majority of the applicant’s policy. However, the Disciplinary Expense Endorsement (which affords defence costs coverage to Doe) explicitly excludes the term “professional incident”.
[28] The respondents argue that had the applicant drafted its “other insurance” clause to substitute the term “professional incident” with the word “claim”, then both policies’ “other insurance” clause would have effectively cancelled each other out.
[29] I agree with this reasoning. The respondents’ policy does not constitute “other insurance” for the purposes of the applicant’s policy, and thus the two policies do not effectively cancel each other out. They can be read as working together. The applicant’s policy treats certain claims (i.e, those seeking compensatory damages) as different than other types of claims (i.e. such as the complaint filed with the College against Doe). The applicant chose to use the term “professional incident” and not “claim” in its “other insurance” clause. In my view, this is evidence of an intention on the applicant’s part to respond as an excess insurer in only certain types of claims, i.e. those for compensatory damages. In dealing with claims such as a complaint filed with the College, the applicant effectively agreed to act as the primary insurer, and as such there is no requirement for an equitable contribution between the parties.
[30] For these reasons, the application is dismissed. As agreed between the parties, I am awarding costs of this application to the respondents as the successful parties in the all-inclusive amount of $10,000.00 and payable forthwith.
Diamond J.
Released: October 6, 2021
COURT FILE NO.: CV-21-00663326-0000
DATE: 20211006
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BERKLEY INSURANCE COMPANY
Applicant
– and –
AVIVA INSURANCE COMPANY OF CANADA, TEMPLE INSURANCE COMPANY, EVEREST INSURANCE COMPANY OF CANADA, ARCH INSURANCE CANADA LTD., and XL REINSURANCE AMERICA INC.
Respondents
ENDORSEMENT
Mr. Justice Diamond
Released: October 6, 2021