Court File and Parties

COURT FILE NO.: CV-19-00-618560-0000 DATE: 2021-11-02

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: YORK REGION DISTRICT SCHOOL BOARD, Applicant – and – TRAVELERS CANADA, Respondent

BEFORE: E.M. Morgan J.

COUNSEL: Bruce Hutchison, for the Applicant Deborah Berlach, for the Respondent

HEARD: November 1, 2021

Decision

duty to defend AND INDEMNIFY

[1] The Applicant seeks an Order requiring the Respondent to defend and indemnify it in respect of an underlying action, Court File No. CV-15-541230, against the Applicant by a former student alleging sexual abuse by one of its former employees, Gordon Stuckless (the “Underlying Action”). The abuse is alleged to have taken place during the 1979-1980 school year.

[2] The plaintiff in the Underlying Action claims that the Applicant is vicariously liable for Mr. Stuckless’ conduct and that it breached its fiduciary duty and duty of care it owed the plaintiff. This is one of several claims in respect of abuse perpetrated by Mr. Stuckless over the years. Aviva Insurance and Intact Insurance Co. are partially responding to other claims.

[3] The Respondent purchased part of Aetna Life and Casualty Co.’s Canadian book of business in the 1990s. Zurich Insurance Co. and Chubb Insurance Co. own other parts of Aetna’s former Canadian book of business. The policy in issue appears to have been issued by Aetna to the Applicant’s predecessor, the York County Board of Education, by Policy No. RC8002858ZCC with limits of $1 million to defend and indemnify the Board against actions brought against it.

[4] To make a somewhat long story short, both parties to this Application have conducted thorough searches of their records and neither has been able to locate a copy of the insurance policy in question. The two documents that the Applicant has managed to unearth that shed light on the policy are: a) a proposal for Board of Education indemnity which identifies a primary policy with Aetna Casualty with limits of $1,000,000 and an excess policy with limits of $9,000,000, and b) an excess insurance policy issued by Gerling Global Reinsurance Co. (“Gerling”), now Royal & Sun Alliance Insurance Co. (“RSA”), identifying Policy No. RC8002858ZCC with Aetna as the Board’s primary policy for comprehensive general liability insurance.

[5] The Respondent has likewise been unable to locate the insurance policy in issue. It has, however, found a number of documents that relate to the policy or to Aetna’s and the Board’s insurer-client relationship at the relevant time: a) an underwriting file from 1975 showing a workers’ compensation policy; b) two liability policies dated 1976 with policy numbers 98LG26976CCA and 98LG762697CCA; c) claims registered against these two liability policies.

[6] In addition, the Respondent has located a policy manual which identifies “RC” and “LG” as being codes unique to Aetna policies. As indicated above, “RC” is used in the policy under which the Applicant seeks coverage. For its part, the Respondent has acknowledged that “RC” is an Aetna code used for commercial account policies. The Respondent has also produced a sample of Aetna’s standard policy terms in force from 1975-1981.

[7] The Excess Policy issued by Gerling contains a Follow Form endorsement for personal injury, as follows:

Notwithstanding anything contained in this policy to the contrary, it is agreed that such insurance as is afforded by this policy shall not apply to any liability arising out of false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution, discrimination, humiliation, libel, slander, defamation of character or invasion of right of privacy unless such liability be covered under valid or collectible underlying insurance as set out in the Schedule of Underlying Assurances, and then only for such hazards for which coverage is afforded under said underlying insurance.

[8] The Excess Policy contains a Schedule of Underlying Insurances that describes policy 275LG32076 as a “comprehensive general liability, including tenants’ legal liability”. It describes policy RC8002858ZCC as “comprehensive general liability including tenants’ legal liability, products/completed operations, blanket written contractual, personal injury, contingent employers’ liability, occurrence property damage, broad form property damage, employees as named insured, incidental medical malpractice and corporal punishment”. The allegations made against the Board in the Underlying Action would generally be covered by these policies.

[9] The standard policy for Aetna general liability comprehensive coverage from 1975 to 1981 provided:

1. Bodily Injury Liability Coverage

Property Damage Liability Coverage

The company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.

[10] The Standard Policy wording also includes the following definitions:

‘Insured’ means any person or organization qualifying as an Insured in the ‘Persons Insured’ provision of the Insuring Agreements. The insurance afforded applies separately to each Insured against whom claim is made or suit is brought, except with respect to the limits of the Insurer's liability.

‘Named Insured’ means the person or organization named in the declarations of this policy.

‘bodily injury’ means bodily m1ury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.

‘occurrence’ means an accident, including continuous or repeated exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the Insured.

[21] The Aetna standard wording includes the following obligation regarding defence:

II. Defence - Settlement - Supplementary Payments

As respects insurance afforded by this policy, the Insurer shall:

(1) defend in the name and on behalf of the Insured and at the cost of the Insurer any civil action which may at any time be brought against the Insured on account of such bodily injury or property damage, but the Insurer shall have the right to make such investigation, negotiation and settlement of any claim as may be deemed expedient by the Insurer.

[22] The Gerling excess policy includes similar coverage for bodily injury. The insuring agreements provide:

Insuring Agreements

I. COVERAGE

The Company hereby agrees, subject to the limitations, terms, and conditions hereinafter mentioned, to pay on behalf of the Insured all sums which the Insured shall be obligated to pay by reason of the liability:

(a) imposed upon the Insured by law,

(b) assumed under contract or agreement by the Named Insured and/or any officer, director, stockholder, partner or employee of the Named Insured, while acting in his capacity as such, for damages, direct or consequential, and expenses, all as more fully defined by the term ‘Ultimate Net Loss’ on account of:

(i) Personal Injuries, including death at any time resulting therefrom,

(ii) Property Damage,

(iii) Advertising Liability, caused by or arising out of each occurrence happening anywhere in the world.

[23] These provisions, taken together, serve to indicate the terms of the policy identified by the Applicant as being applicable in the case at bar.

[24] The burden of proof to establish that a contract of insurance exists is on the insured – in this case, the Applicant – to be proved on the balance of probabilities: Catholic Children’s Aid Society v. Dominion of Canada Insurance Co., 1998 31633 (ON CJ), [1998] OJ No 3720, at para 16. Where a policy is not available, secondary evidence is admissible to establish that it existed and that a diligent search has been made: Ibid., at para 3. Here, it is clear that neither the Applicant nor the Respondent can produce the relevant policy because of Aetna’s and the Board’s predecessor’s incomplete record keeping. I am satisfied that both sides have made a diligent search but to no avail.

[25] Applicants’ counsel submits that in these circumstances, the burden of proof that would otherwise fall on the Applicant must be reduced. This point has been made by this court on previous occasions, citing equivalent principles articulated by the courts in the U.K.: Ibid., at para 13, citing Bond Air Services Ltd. v. Hill, [1955] 2 QB 417, at 423:

The question then arises, given that neither party can find the subject 1966 policy, whether the insurer, being in the business of writing and administering contracts of insurance and acting under its contractual obligations, including that of defence and indemnity of insureds, there may be some lessening to the insured in the standard of proof analogous to ‘contra preferentum’ on an inferenced that an insurer is in a better position to maintain record systems for the preservation and location of its own policies and that of its insureds.

[26] Respondents’ counsel is of the view that there is insufficient evidence to come to any conclusion about coverage for this matter. Respondent’s position is that without a policy in hand the coverage issue is uncertain and the Applicant has not discharged its burden.

[27] Although the policy itself is missing in action, the lack of a physical policy does not demonstrate that no policy ever existed. In fact, the evidence in the record supports the fact that a valid policy of insurance existed; the schedule accompanying the Excess Policy makes it more than clear that an underlying primary liability policy was in place. Furthermore, the evidence unearthed by the Applicant in its archives shows that there was a course of dealings between the Applicant and Aetna at the relevant time, and the “LG” and “LR” coding practices point to Aetna as being the company that issued the subject policy.

[28] The Applicant has produced an insurance policy number which by all indicators is a valid Aetna policy number. While the Respondent has not confirmed that is the case, it has equally not denied it. It is only logical that an Aetna policy for the 1979-1980 school year existed on the standard terms that are in the record. While the evidence is sparse, it all suggests that this is the case and nothing has been produced that suggests otherwise.

[29] The Aetna standard wording is reinforced by the language of the Gerling excess policy and the availability of excess coverage, which underscores the conclusion that the standard wording produced by the Respondent is in fact the wording of the missing policy. Similar wording is found in Aetna’s successor policy to the one at issue here. As the Alberta Court of Queens Bench indicated in Synod of the Diocese of Edmonton v. Lombard General Insurance Co., [2004] AJ No 1287, at para 34: “I see no principled reason why the terms of a policy of insurance cannot be established by reference to another policy of insurance provided that the burden of proof is met by all of the evidence proffered on the subject.”

[30] The Applicant shall have an Order that it is entitled to a defense and indemnity of the Underlying Action from the Respondent under policy of insurance RC800285ZCC with terms as described in the Aetna wording produced by the Respondent and as supported by the Follow Form excess policy.

[31] The parties may make written submissions with respect to costs. I would ask counsel for the Applicant to email brief submissions to my assistant within two weeks of today, and for counsel for the Respondent to email equally brief submissions to my assistant within two weeks thereafter.

Morgan J.

Date: November 2, 2021