COURT FILE NO.: CV-19-628204-0000
DATE: 20211125
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Her Majesty the Queen in Right of Ontario
Applicant
– and –
St. Paul Fire and Marine Insurance Company
Respondent
Clarence Lui and Ryan Tinney, for the Applicant
Andrew Evangelista and Avi Cole, for the Respondent
HEARD: November 12, 2021
J.T. Akbarali J.
Overview
[1] The question that arises on this application is whether the respondent insurer has a duty to defend the applicant insured in an underlying putative class proceeding brought against the applicant. The parties join issue on whether the defendant is estopped from denying coverage, and whether a duty to defend arises in the circumstances.
Brief Factual Background
[2] The applicant, Her Majesty the Queen in Right of Ontario (“Ontario”) held insurance coverage with the respondent, St. Paul Fire and Marine Insurance Company (“St. Paul”) under a comprehensive general and road liability insurance policy for successive one-year periods between March 31, 1998 and March 31, 2003. This policy provided a limit of liability of $20,000,000 for each occurrence.
[3] Between March 31, 2003 and March 31, 2005, Ontario held excess insurance coverage with St. Paul under a commercial general and road liability insurance policy. The excess policy provided a limit of liability of $15,000,000 for each occurrence, in excess of an ultimate net loss of $5,000,000. In other words, Ontario self-insured for the first $5,000,000 of losses that would otherwise be covered under the policy.
[4] On June 29, 2017, a proposed class action was commenced by Robin Cirillo against Ontario. The statement of claim was amended on September 28, 2017. The claim proposed to certify a class of persons who were arrested and detained for a period of more than 24 hours prior to any bail hearing being available as a result of administrative issues, such as their matter not being reached on the court schedule, transportation to the bail hearing not being available, interpretative services not being available, the accused having no opportunity to speak with counsel, or the Crown not being willing to proceed with a hearing. The class period begins on January 1, 2000 and runs to present.
[5] The claim alleges that the class members’ bail hearings were delayed as a result of Ontario’s mismanagement, and that the delay caused class members to suffer harm. It alleges that the problems in the bail system, and the harms suffered by accused who were unable to have timely bail hearings, were known to Ontario, and Ontario not only failed to address the problems, but deliberately adopted policies and procedures that it knew would exacerbate the problems. The claim alleges Ontario knowingly underfunded the bail system.
[6] The claim alleges harms including that class members served longer in custody than they should have, that they were coerced into agreeing to overly restrictive bail terms to secure their release, and that they have wasted money on lawyers’ fees for hearings that did not take place because no court was ready to deal with their case. The claim alleges that class members suffered significant mental, emotional, psychological, and spiritual harm which adversely affected their relationship with the community at large. Damages alleged include impairment of class members’ mental and emotional health and well-being, impairment of their ability to trust others, depression, anxiety, emotional distress and mental anguish, loss of self-esteem, and a sense of isolation and separateness from their community, among others. The claim pleads that Ontario knew, ought to have known, and continues to know, that its ongoing delay in failing to rectify the institutional failures in the bail system would continue to aggravate class members’ injuries and damages.
[7] The claims against Ontario are structured in negligence, breach of the proposed class members’ Charter rights, and breaches of fiduciary duty. In addition, there is a claim for punitive damages based on Ontario’s “wanton and callous disregard” for the class members’ interests, and its “wilfully irresponsible and tortious behaviour.”
[8] Ontario retained Crown Law Office – Civil (“CLOC”), a branch of the Ministry of the Attorney General, to defend the class action. In September 2017, over six months after becoming aware of the claim (earlier notice having been given to the province prior to the issuance of the original claim), Ontario advised St. Paul of the action, and the identity of defence counsel.
[9] St. Paul retained coverage counsel. By the time coverage counsel became involved, the pleadings in the class action had closed, and the certification motion had been timetabled. St. Paul’s involvement was, for the most part, limited to receiving information and updates. It was not asked to contribute to defence costs and received no bills. There is disagreement between the parties as to whether St. Paul ever provided instructions on the defence of the claim.
[10] Later, in 2019, the certification motion was dismissed. The motion judge accepted Ontario’s argument that its policy decisions were neither justiciable nor actionable. The decision was upheld on appeal. At the time of the application before me, leave had been sought to the Supreme Court of Canada.
[11] On June 5, 2019, shortly after the motion judge’s decision on certification was released, St. Paul denied coverage under the policy. It advised Ontario that it had concluded that there was no coverage under the policy for the allegations advanced in the underlying class proceeding. Subsequent to the denial of coverage, Ontario sent its first bill relating to the underlying action to St. Paul.
Issues
[12] This application raises the following issues:
a. Is St. Paul estopped from denying coverage under the policy? This issue requires me to consider whether St. Paul made a representation to Ontario on which Ontario relied to its detriment.
b. If St. Paul is not estopped from denying coverage, does St. Paul owe Ontario a duty to defend the underlying action? This requires me to consider the true nature of the claims in the pleading, and whether any of them could potentially trigger the duty to defend in the policy.
c. If the claims trigger the duty to defend, is Ontario’s application with respect to the excess policy premature because (i) Ontario has not properly made a claim, or (ii) Ontario has not paid the $5,000,000 ultimate net loss for any one occurrence in the underlying action?
d. If a duty to defend is triggered, what percentage of Ontario’s costs must St. Paul reimburse in the underlying action?
Preliminary Matters
[13] The application also seeks a hearing in camera, and a sealing order and publication ban. I noted at the outset of the hearing that notice to the media of the motion for that relief is required by the court’s Consolidated Provincial Practice Direction, Part VI, section (F). Ontario confirmed it did not deliver notice of the request for a publication ban as required by the practice direction.
[14] Rather than adjourn the hearing to allow for the proper notice to the media to be given, Ontario decided to withdraw its request for relief in the form of an in camera hearing, a sealing order, and a publication ban. Accordingly, the application proceeded and these reasons deal only with the merits of the duty to defend application.
Estoppel
[15] The parties agree that, to establish estoppel, Ontario must prove that:
a. St. Paul made a representation to Ontario; and
b. Ontario relied on the representation and acted to its potential detriment as a consequence.
[16] The representation must be one of an existing fact. It may be written, oral, or implied from conduct. It can arise from silence if the party said to have made the representation has a legal duty to make a disclosure, or take steps, the omission of which is relied upon as creating an estoppel: Ryan v. Moore, 2005 SCC 38, at para. 76.
[17] In my view, none of the elements of the test for estoppel are made out here.
[18] First, I accept that an insurer has a duty to tell an insured if there is no coverage and to have nothing further to do with the claim if it wishes to maintain an off-coverage position: Rosenblood Estate v. Law Society of Upper Canada, 1989 CanLII 10413 (ON SC), 1989 CarswellOnt 642 (H.C.), aff’d 1992 CanLII 15594 (ON CA), [1992] O.J. No. 3030 (C.A.). I also accept that there is a duty on the insurer to be clear about its position and not to leave an insured with a false belief that the insured’s interests are protected: The Commonwell Mutual Assurance Group v. Campbell, 2018 ONSC 5899, at para. 30, aff’d 2019 ONCA 668. I accept that an insurer’s silence on coverage issues in its communication with its insured may give rise to an insured’s reasonable assumption that coverage is available to it under the applicable policy: Lombard General Insurance Company of Canada v. Crosbie Industrial Services Ltd., 2006 NLCA 55, at paras. 60-66.
[19] However, on the facts of this case, I do not accept that Ontario was left with a false belief that St. Paul accepted that it was obliged to provide coverage or that St. Paul was protecting Ontario’s interests. Nor do I accept that St. Paul had anything to do with the defence of the claim. For example:
a. Ontario has always retained total control over its defence of the underlying action. It appointed CLOC as counsel before notifying St. Paul of the claim. While the appointment of CLOC was an inevitability given the terms of the policy, the identity of the specific lawyers at CLOC was chosen by Ontario. Ontario decided the defence strategy without input from St. Paul.
b. St. Paul’s involvement in the file was almost entirely limited to receiving documents, sometimes at its request, and receiving updates, all of which is consistent with considering its coverage position. The fact that St. Paul retained coverage counsel was a clear signal to Ontario, a sophisticated insured, that coverage was in issue.
c. In one instance, on March 1, 2019, Ontario alleges that St. Paul actively provided instructions to CLOC. Ontario had received a settlement offer in the underlying proceeding. Counsel at CLOC recommended rejecting it. He sent an email advising of the offer and his recommendation to a number of people, including three at the Ministry of the Attorney General, and one at St. Paul, which was subsequently redirected to coverage counsel. Coverage counsel indicated St. Paul had no objection to proceeding as counsel recommended. Ontario’s affiant was also an addressee of the email, and he deposed on cross-examination that he provided instructions to counsel. In my view, a single instance of saying “no objection,” prompted by an email from Ontario’s counsel asking the question, cannot be characterized as St. Paul actively directing, or even participating in, Ontario’s defence, especially given the number of important decisions that were made without Ontario seeking any input from St. Paul whatsoever.
d. After St. Paul denied coverage, Ontario wrote to provide its coverage position to St. Paul. In that letter, delivered shortly after the coverage denial, it made no reference to estoppel and no claim that St. Paul’s conduct had left Ontario with the sense that there was coverage under the policy. Ontario’s affiant agreed that this letter was Ontario’s comprehensive position on coverage.
e. Ontario never sent a single bill to St. Paul relating to defence costs until after St. Paul denied coverage.
f. Ontario’s affiant deposed on cross-examination that he was expecting St. Paul to provide a coverage position one way or the other. He acknowledged, however, that there was never any written or oral communication from St. Paul indicating that it would provide coverage. He also agreed that he never followed up with St. Paul or coverage counsel with respect to whether a position on coverage had been reached.
[20] Ontario asks me to draw an adverse inference against St. Paul because the only affidavit evidence it offered on the application was from an associate lawyer at the firm of its coverage counsel, and not from any St. Paul’s representatives. It also points to St. Paul’s refusal to produce its internal notes and correspondence, or information regarding any reserves St. Paul took, in respect of the underlying litigation, and suggests that failure to do so warrants drawing an adverse inference.
[21] I cannot see how St. Paul’s internal communications about the litigation or coverage, or any reserve that it took, is relevant to whether St. Paul made a representation to Ontario on which Ontario relied to its detriment. Nor was counsel able to explain how a different affiant would have made a difference in the estoppel argument, especially when coverage counsel was involved in the file over many months and is the one alleged to have given the instructions to Ontario’s counsel. I decline to draw any adverse inference.
[22] On the evidence before me, Ontario cannot even establish that it understood St. Paul would provide coverage. To find a representation by silence, I would have to ignore the facts of what actually transpired between an insurer and an extremely sophisticated insured. As a matter of fact, I find that there was no representation made that St. Paul was extending coverage, and Ontario never understood there to be one.
[23] If I am wrong, and there was a representation, Ontario has failed to establish that it relied upon it to its detriment.
[24] Detrimental reliance requires, first, a finding that the party seeking to establish the estoppel changed his or her course of conduct by acting, or abstaining from acting, in reliance on the assumption; and, second, a finding that, should the other party be allowed to abandon the assumption, detriment will be suffered because of the change in the assumed position: Ryan, at para. 69.
[25] In this case, Ontario can establish no reliance. As noted, the evidence indicates that Ontario was in total control of its litigation strategy throughout. There is not a shred of evidence in the record to establish that Ontario relied on St. Paul for anything at any time. Even the single incident when St. Paul indicated it had no objection to Ontario proceeding in accordance with its counsel’s recommendations reveals no advice being offered by St. Paul.
[26] And even if there were reliance, Ontario has not established any detriment. Ontario makes no argument of actual prejudice. It cannot; there is none. Not only has Ontario directed its own defence from the outset of the claim, but its strategy has, thus far at least, proven successful. The claim has been dismissed, and will remain so unless leave is granted and the decision is reversed by the Supreme Court of Canada.
[27] To establish detrimental reliance, in its written argument, Ontario relies on what it describes as a “presumption of prejudice” arising by virtue of the time that has passed – nearly 20 months – before St. Paul denied coverage. In oral argument, counsel clarified that he meant I can infer prejudice from the passage of time.
[28] In Commonwell, at para. 10, the Court of Appeal considered an application judge’s determination that a denial of coverage after litigation was “well advanced” permitted him to draw an inference of prejudice. The Court of Appeal held that there is no presumption of law that there is prejudice to an insured when a coverage denial comes after litigation is “well-advanced.” Rather, the application judge was “simply explaining why prejudice could be inferred in the case before him. Whether to infer or find prejudice or detriment from the circumstances of a case is a factual determination.”
[29] The jurisprudence thus establishes that delay may be a factor – perhaps even an important factor – grounding an inference of prejudice to an insured after an insurer declines coverage. Here, however, the evidence clearly establishes that Ontario has suffered no detriment from St. Paul advising of its coverage position 20 months after being notified of the claim. It ran its own litigation strategy. It funded its own litigation strategy. It was successful in its litigation strategy.
[30] For these reasons, I find that Ontario has not established that St. Paul is estopped from denying coverage. I thus turn to the substantive coverage dispute.
Does St. Paul owe Ontario a duty to defend the underlying action?
[31] An insurance company’s duty to defend is related to its duty to indemnify: Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, at para. 49. If an insurer must indemnify liability falling within the policy’s terms, the insurance company has the duty to conduct the defence of the claim. The duty to defend extends only to claims that could potentially trigger indemnity under the policy: Non-Marine Underwriters, at para. 49.
[32] As described in Non-Marine Underwriters, at paras. 50-52, determining whether a claim could trigger indemnity is a three-step process:
a. First, a court determines which of the plaintiff’s legal allegations are properly pleaded. A court is not bound by the legal labels chosen by the plaintiff. A court must look beyond the choice of labels and examine the substance of the allegations contained in the pleadings. The court does not determine whether the claims have any merit; the court decides, based on the pleadings, what the true nature of the claims is.
b. Second, the court determines whether any properly pleaded claims are entirely derivative in nature. That is, the duty to defend will not be triggered simply because the claim can be cast in terms of both negligence and intentional tort. If the alleged negligence is based on the same harm as the intentional tort, it will not allow the insured to avoid an exclusion clause for intentionally caused injuries.
c. Third, the court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend.
The True Nature of the Claims Made
[33] The parties disagree on the true nature of the claims being advanced in the underlying litigation. Ontario argues that the claims being advanced are claims in negligence, breach of fiduciary duty, and breach of certain Charter rights. It argues that these claims all relate to the alleged unjustified and unreasonable detention of class members by Ontario that caused injuries and damages. It notes that the claim does not plead that Ontario intended to cause the injury and damages allegedly suffered by the class; rather, the litigation may point to intentional acts carried out by Ontario, but Ontario argues that the true nature of the claim is that the consequences of the acts were unintended.
[34] St. Paul argues that the true nature of the claim is based upon Ontario’s allocation of budgetary and other resources for the bail system from 2000 to present. It observes that Ontario defended based on this characterization of the claims, pleading in its defence that funding and resourcing decisions with respect to provincial courts, Crown Attorney’s offices, and bail hearings are policy decisions which are neither justiciable nor actionable. This is the same basis on which it successfully defended the certification motion.
[35] St. Paul also argues that the true substance of the claim is that Ontario has known about the delays in the bail hearing system caused by insufficient resources and staffing for years, and has failed to correct these problems.
[36] I described the underlying claim in general terms at paras. 4-7, above. I accept that the underlying claim does not plead that Ontario intended to cause the injury and damages the representative plaintiff alleges the class suffered. Ontario is correct when it says there is no pleading that it intended to cause the damages, and that the acts it is pleaded to have engaged in include intentional acts.
[37] But the enquiry does not stop there. Ontario’s characterization of the claim glosses over the allegations, scattered throughout the claim, that Ontario knew of the harms that would arise as a result of its budgetary and policy choices and ignored them. By way of example only, the claim pleads:
a. “Ontario has for many years been aware that neither its judicial system nor its prosecution service are organized or resourced in a manner that would permit it to honour its constitutional and statutory obligation to the Class.” It goes on to plead that, as a result, class members have spent longer in custody than they should have, been coerced into agreeing to overly restrictive bail terms, and thrown money away on lawyers attending for hearings that no court is ready to deal with: para. 3.
b. For many years, Ontario has mismanaged and starved the bail system of resources, and has done so notwithstanding repeated reports that have identified the lack of capacity in the bail system to discharge the duties of the province and respect the rights of the class: para. 15.
c. Ontario has failed to respond to repeated recommendations for reform to address structural delays in the bail system: para. 17.
d. Ontario promulgated policies and directives to Crown Attorneys which have had the effect of knowingly increasing the number of persons held in remand. Notwithstanding this knowledge, Ontario has taken no steps to correct the problem: para. 30.
e. Bail hearing delays have been identified and condemned in multiple independent reviews. The claim pleads multiple reports, dating as early as 1999, that recognized the growing problems of the bail system. For example, the 1999 report identified the harm suffered by a person who was unnecessarily detained to include loss of income and employment, dislocation from family and friends, and physical and psychological harm[^1]: paras. 31-36.
f. Ontario knew, or ought to have known, that as a consequence of acquiescing to the breakdown of the bail hearings system, class members would suffer significant harm. The violation of the statutory, common law and Charter rights of the plaintiff and class members was “entirely predictable”: para. 70.
g. Ontario knew, ought to have known, and continues to know, that ongoing delay in failing to rectify the institutional failures in the bail system would continue to aggravate and contribute to the class’s injuries: para. 72.
h. Ontario conducted its affairs with wanton and callous disregard for the class members’ interests, safety, and well-being: para. 73.
i. The plaintiff and class members were treated in a manner that could only result in aggravated and increased mental stress and anxiety: para. 74.
[38] In my view, the true nature of the claims pleaded has to be understood to include not only that Ontario engaged in intentional acts that caused harm, but that it had knowledge of the harms that would flow from those intentional acts. This is distinct from a pleading that Ontario intended to cause the harm, which as I have noted, is not alleged. Put another way, the claim does not plead that Ontario engaged in the intentional acts because it wanted to produce the harm; rather, it engaged in the intentional acts notwithstanding that those acts “could only result” in the harm to the class.
[39] The claim also pleads that the risk of the harm suffered by the class members is reasonably foreseeable. This pleading arises under the heading “negligence,” and in my view, does not detract from the allegations of knowledge pleaded against Ontario. Rather, this pleading is required to ensure that all elements of the tort of negligence are properly pleaded. It does not change the character of the allegations made against Ontario, that it knew its decisions caused specific harms to the class but took no steps to address those harms, and indeed, adopted policies that exacerbated the problems.
[40] It is also apparent, from Ontario’s statement of defence and the reasons dismissing the plaintiff certification motion in the underlying litigation, that Ontario joined issue with the claim arguing that it was based upon pure policy decisions that were not justiciable. I thus conclude that the true nature of the claims made arise out of Ontario’s alleged policy and budgetary choices.
Are any properly pleaded claims derivative in nature?
[41] The next stage of the analysis requires me to determine if any of the claims are derivative. I note that the plaintiff in the underlying action structured her claim in negligence, breach of fiduciary duty, and breach of certain Charter rights. However, as I have just reviewed, the true nature of the claim pleads more than mere reasonable foreseeability. It pleads a degree of knowledge of the harms that would result from Ontario’s policy and budgetary choices. While it stops short of pleading that Ontario set out to cause the harms suffered, the true nature of the claim is that Ontario was, at the very least, knowingly indifferent to those harms.
[42] In the circumstances, the claim in negligence is derivative in nature from the intentional acts Ontario is alleged to have engaged in. While it is possible to ground a claim in negligence without proving the degree of knowledge that the plaintiff pleads against Ontario, in these circumstances, given the nature of the allegations made against Ontario, it is an integral part of the plaintiff’s case that Ontario’s knowledge was greater than is required to establish mere negligence, or, more specifically, reasonable foreseeability.
[43] Thus, when considering whether the claims could potentially trigger the insurer’s duty to defend, I must consider the claims as they are truly pleaded, which include the characterization of Ontario’s knowledge of the harm as being more than would be required in a negligence analysis.
Could the claims potentially trigger the insurer’s duty to defend?
[44] Whether the claims alleged could potentially trigger the insurer’s duty to defend requires a review of the policy.
[45] The policy provides that St. Paul will pay on behalf of Ontario, or indemnify, all sums that Ontario becomes obligated to pay by reason of, among other things, liability imposed by law upon Ontario for compensatory damage because of “bodily injury” or “personal injury,” caused by an “accident” or “occurrence.”
[46] To understand the coverage, it is necessary to consider the definitions of the terms “bodily injury,” “personal injury,” “accident,” and “occurrence.”
[47] First, it is plain that the harm alleged by the plaintiff in the underlying action falls within the definition of both, “bodily injury” and “personal injury.” “Bodily injury” includes “mental suffering, mental injury” and “mental anguish.” “Personal injury” includes “false arrest, malicious prosecution, willful or wrongful detention or imprisonment.”
[48] Moreover, given the definition of “personal injury” in particular, it is apparent that the policy insures against intentional acts.
[49] “Occurrence” is defined to mean “a continuous or repeated exposure to conditions which results in injury and/or damage neither expected nor intended from the standpoint of the Insured.” Similarly, “accident” is defined to include “a continuous or repeated exposure to conditions which results in property damage or bodily injury neither expected nor intended by the Insured.”
[50] Thus, to fall within the coverage provision, the injury for which the plaintiff seeks redress in the underlying litigation cannot be injury that was expected or intended from Ontario’s standpoint.
[51] Ontario argued forcefully that, in the absence of any pleading that Ontario intended to cause the harm the plaintiff claims she and the class suffered, the pleaded injury was neither expected nor intended. Ontario urged me to find that, in the context of the definitions of “occurrence” and “accident,” “intended” means intended, and “expected” also means intended.
[52] The insurance contract provides for two circumstances which remove an “exposure to conditions” from being an “accident” or an “occurrence,” yet Ontario asks me to treat those two circumstances as if they are one and the same. In effect, Ontario asks me to rewrite the phrase to define “occurrence” and “accident” as “a continuous or repeated exposure to conditions…not intended from the standpoint of the Insured.”
[53] It is not for the court to rewrite the parties’ contract. Where a contract is unambiguous, as this one is, a court should give effect to the clear language, reading the contract as a whole: Non-Marine Underwriters, at para. 71.
[54] To be either an “accident” or an “occurrence,” it is clear that the resulting damage must be neither expected nor intended. I accept that the alleged harms in the underlying litigation are not pleaded to have been intended by Ontario, because Ontario is not alleged to have engaged in intentional acts with the goal of bringing about those harms. However, the true nature of the claims in the underlying litigation include the repeated allegation that Ontario knew that the class members would suffer the pleaded harms as a result of Ontario’s policy and budgetary choices, and not only did it fail to take steps to repair the problem, it adopted policies that it knew would aggravate the problem. The true nature of the claims in the underlying litigation are intrinsically tied to the allegation that the harms that resulted were, from Ontario’s standpoint, expected.
[55] In this context, “expected” is not the same thing as “reasonably foreseeable.” It requires a degree of certainty that mere reasonable foreseeability does not import.
[56] Because the harms are alleged to have been expected, they were not caused by an “accident” or “occurrence.” As a result, and keeping in mind the requirement that coverage provisions be construed broadly (Non-Marine Underwriters, at paras. 70-71), I find that the coverage provision plainly and unambiguously does not extend coverage to the underlying litigation.
[57] Although my analysis above relates to the policy in effect from March 31, 1998 to March 31, 2003, it applies equally to the excess insurance policy, which covers liability for “bodily injury” and “personal injury,” among other things, caused by an “occurrence.” (In other words, the excess insurance does not provide coverage for “accidents” as the earlier policy did.) However, “occurrence,” with respect to “bodily injury or property damage” continues to require that the resultant injury or damage must be “neither expected nor intended from the standpoint of the Insured.” Thus, for the reasons above, I conclude that the excess policy does not respond to the claim either.
[58] St. Paul also argued that there is no duty to defend under either policy based on the fortuity principle. Given my conclusion on the interpretation of the policy, it is not necessary to address this argument.
[59] Moreover, it is not necessary to determine what percentage of defence costs St. Paul should reimburse to Ontario in view of my conclusion regarding coverage.
Is the excess policy engaged?
[60] Although the analysis above concludes that the claims fall outside the scope of the excess insurance policy, I briefly address St. Paul’s prematurity argument.
[61] I agree with St. Paul that any claim to coverage under the excess policy would, in any event, be premature at this stage. The excess policy only responds once there has been a covered claim in excess of the “ultimate net loss,” which the policy defines to be $5,000,000 per occurrence.
[62] The evidence does not establish that Ontario has paid the $5,000,000 ultimate net loss for any one occurrence in the underlying action. To date, Ontario has incurred defence costs of approximately $300,000. That is a long way from $5,000,000.
[63] Moreover, the detailed claim submission process required under the excess policy has not occurred. I note that the first indication that Ontario was seeking coverage under the excess policy came with the Notice of Application herein. The coverage denial letter and response refer only to the policy in effect from March 31, 1998 to March 31, 2003.
[64] Accordingly, even if I were to find that St. Paul was obliged to provide coverage under that policy, I would have dismissed the application for coverage under the excess policy on the basis that it is premature.
Costs
[65] Counsel have agreed that costs of $20,000, all inclusive, should be awarded to the successful party. St. Paul is the successful party. I thus order that Ontario shall pay St. Paul’s costs of $20,000 all inclusive within 30 days.
J.T. Akbarali J.
Released: November 25, 2021
COURT FILE NO.: CV-19-628204-0000
DATE: 20211125
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Her Majesty the Queen in Right of Ontario
Applicant
– and –
St. Paul Fire and Marine Insurance Company
Respondent
REASONS FOR JUDGMENT
J. T. Akbarali, J.
Released: November 25, 2021
[^1]: Ontario, in its written argument, makes reference to the prohibition against considering extrinsic evidence when evaluating the true nature of the underlying claim. This prohibition does not extend to extrinsic evidence that is referred to in the pleadings: Moneco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, at paras. 37-40. Accordingly, the reports that are pleaded in the claim may be reviewed to assist in determining the substance and true nature of the underlying claim.