Court File No. CV-22-00679952-0000

SUPERIOR COURT OF JUSTICE

B E T W E E N:

A-AARON PROTECTION SERVICES INC.

Applicant

• And -

NORTHBRIDGE GENERAL INSURANCE CORPORATION

Respondent

R E A S O N S F O R J U D G M E N T

BEFORE THE HONOURABLE JUSTICE M. KOEHNEN

on July 18, 2023, at TORONTO, Ontario

APPEARANCES:

R. Squires, Esq.

Counsel for the Applicant

T. Boro, Ms.

Counsel for the Applicant

J. Norton, Esq.

Counsel for the Respondent

J. Tausendfreund, Esq.

Counsel for the Respondent

SUPERIOR COURT OF JUSTICE

T A B L E O F C O N T E N T S

Transcript Ordered: ....................... July 18, 2023

Transcript Completed: ..................... July 19, 2023

Ordering Party Notified: .................. July 19, 2023

TUESDAY, JULY 18, 2023

R E A S O N S F O R J U D G M E N T

Koehnen, J. (Orally)

This is an application about the interpretation of an insurance policy.

The applicant A-Aaron Protection Services Inc. (“Aaron”) is a provider of security services including security guards. In October 2020, Aaron entered into an oral agreement with Garritano Bros. Ltd. to provide security services at a site on which Garritano was constructing an elementary school at 250 Michael Boulevard in Whitby, Ontario.

The terms of the oral contract included the following:

A) Aaron would provide a single security guard to guard the premises overnight.

B) The security guard was not permitted to have a key to the building or to enter the building.

C) The security guard was to patrol the perimeter of the property each hour.

D) When the security guard was not patrolling the property, she was required to stay in her patrol car.

On the night of November 24, 2020, the school under construction was broken into by vandals and set on fire. As a result of the fire, Garritano sued Aaron for $5 million in damages alleging that Aaron and/or its employees were negligent in the provision of security services.

The fundamental issue arising out of these circumstances is whether Aaron is an additional insured under Garritano’s Builder’s Risk Policy with the respondent, Northbridge General Insurance Corporation. The applicant says it is an additional insured. The respondent says the applicant is not an additional insured.

Principles of Interpretation

The principles of interpretation, as they pertain to insurance policies, are not in dispute.

It is well-accepted that ordinary principles of contractual interpretation apply to the interpretation of insurance policies. Where the language of a policy is unambiguous, the court should give effect to that language, reading the contract as a whole: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 3 at paragraph 22; Sabean v. Portage La Prairie Mutual Insurance Co., 2017 SCC 7 at paragraph 12.

Where policy language is ambiguous, the court should have resort to the general rules of contractual construction to resolve such ambiguity. Those general rules include considering the reasonable expectations of the parties provided such an interpretation as supported by the language of a policy: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 at paragraph 50.

Where words can bear two interpretations, the more reasonable one must be taken as the interpretation that promotes the intention of the parties: Consolidated-Bathurst v. Mutual Boiler, 1979 CanLII 10.

If the rules of construction do not resolve any ambiguity, the courts may have resort to the contra proferentem principle and interpret the policy against the insurer: Ledcor at paragraph 51.

As a general rule, coverage provisions in an insurance policy are to be interpreted broadly and exclusion clauses are to be interpreted narrowly: Ledcor at paragraph 51.

As with any other contracts, the terms of an insurance policy must be examined and interpreted in light of the surrounding circumstances to determine the nature and extent of the parties’ agreement: Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, at paragraph 27.

Words of the Policy

The provision in dispute in this application is found in s.2 of Part I of the Garritano policy issued by Northbridge. It provides as follows:

All contractors and all subcontractors are added as Additional Insureds. This does not include suppliers who perform no construction or installation work at the “project site”, consulting engineers or consulting architects.

The applicant says that the term “suppliers” in s.2 of Part I of the policy is ambiguous. The applicant notes that Part I of the policy does not define supplier. The applicant focuses on the first sentence in s.2 of Part I and submits that it must be interpreted broadly. When addressing the second sentence of s.2 of Part I, the applicant submits that it should be interpreted narrowly because it amounts to an exclusionary clause.

The applicant develops its argument concerning the alleged ambiguity of the word “supplier” by drawing my attention to Part III of the policy. Section 2(a) of Part III reads as follows:

Each of the following is also an insured:

a. All contractors, subcontractors, consulting architects and engineers, but only with respect to liability arising out of the construction of the “insured project”. However, any suppliers of material or property who are not obliged under their contract to perform construction or installation operations at the “insured project” site are not insureds under this policy.

The applicant argues that because Part I of the policy does not define the term “supplier”, the court should look to Part III of the policy and in particular s.2(a) thereof for a definition of “supplier”. The applicant underscores that under s.2(a) of Part III of the policy, a supplier is not referred to as a supplier of services, but is only referred to as a supplier of material or property. The applicant concludes from that, that Part III tells us that the meaning of “supplier” in the policy is restricted to a supplier of materials. I do not agree.

Part III of the policy to which the applicant draws my attention is not, in fact, part of the policy that Garritano purchased from Northbridge. The cover page of the policy is found at Caselines page A20. It sets out four parts to the policy as follows:

Part I Builder’s risk

Part II Project Interruption Costs

Part III Wrap-Up Liability (Occurrence Basis)

Part IV Non-Owned Automobile Liability

Each of these four parts listed on the cover page of the policy is a different insurance product that an insured has the option to either purchase or not purchase. Each of the four types of coverage has its own set of definitions. Supplier is not defined in any of them. The parties agree that Garritano purchased Part I coverage, Builder’s Risk, but did not purchase Part III coverage, the Wrap-Up Liability Coverage.

The applicant argues that a supplier under Part I of the policy cannot be a supplier of services because Part I does not define supplier in that manner and because s.2(a) of Part III “defines” supplier as a supplier of materials. I do not agree with that submission.

First, as noted, Part III is not part of the Garritano policy. Second, even if s.2(a) of Part III were relevant to the interpretive exercise here, that provision is not a definition of supplier so much as a specific application of the concept of supplier in a specific context. The context in which s.2(a) of Part III refers to supplier is irrelevant because it is contained in a form of coverage that Garritano never purchased.

Moreover, there is no ambiguity in the use of the word “supplier”. Both Parts I and III of the policy provide coverage for suppliers only in respect of construction work that those suppliers carry out. Both Parts I and III exclude from coverage those suppliers who do not perform construction. It is agreed that the applicant never performed construction on the premises in question.

In the absence of a specific definition of a term in a contract, the courts are to have resort to the plain, ordinary meaning of the term. The plain ordinary meaning of the word “supplier” is someone who provides or makes available goods or services. The plain ordinary meaning of “supplier” does not restrict the word to the provision of goods.

The respondent points out that the Google definition of “supplier” is “a person or organization that provides something needed such as a product or service”. The respondent also notes that the definitions for Google are provided by Oxford Languages, the publisher of the Oxford English Dictionary.

In my view, there is no ambiguity in the use of the word “supplier” in s.2 of Part I of the policy. The plain ordinary meaning of the word “supplier” would include a supplier of services like the applicant as well as a supplier of goods.

Even if there were ambiguity in the use of the word “supplier”, s.2(a) of Part III does not assist the applicant because that provision only reinforces the concept that an additional insureds are restricted to suppliers who provide construction as part of their contractual arrangements.

Finally, the applicant submits that I must look to the factual matrix out of which the policy arises and interpret the policy in light of the surrounding circumstances.

I do not see how the factual matrix assists the applicant in its position. I note in this regard that the applicant does not suggest that Garritano Bros. had told the applicant or suggested that the applicant would be an additional insured under the policy.

The applicant has taken me to evidence about the expectations of the parties, and in particular to the affidavit of the respondent whose deponent spoke about the standard form coverage documents published by the Insurance Bureau of Canada. The description of that document or the purpose behind it does not, in my view, assist the applicant in its argument, nor does it affect my findings about the meaning of the word “supplier” in either Parts I or III of the policy.

Finally, the applicant took me to the cross-examination of the respondent’s deponent, Mr. Rolfe. The portions of the cross-examination of Mr. Rolfe the applicant took me to were ones where Mr. Rolfe stated that the wording in a policy should be clear and understandable; that the insurer and insured should understand the bargain; that it was even more important to understand the bargain when dealing with exclusions; that Northbridge defines terms that it feels are necessary to define, and that the words “goods and services” are not used in the policy. I do not see how any of that assists the applicant. As noted, I have found that the meaning of the word “supplier” in s.2 of Part I of the policy is clear and understandable. As a result the insurer and the insured can easily understand the bargain they made in s.2 of Part I.

The respondent advanced one additional argument to support its position that the applicant is not an additional insured under the policy. It points in this regard to an exclusion clause found in s.7(k)(iii) of the policy which states as follows:

vii. EXCLUDED PERILS

This form does not insure against loss or damage caused directly or indirectly:

(iii) By any dishonest or criminal act committed by anyone, except as stated in (k)(ii), when you or your agent knew or ought to have known prior to the loss or damage, of the dishonest or criminal act.

The respondent submits that this provision applies because it argues that the applicant’s security guard knew or ought to have known of the vandalism and arson before the loss or damage occurred.

I do not accept the respondent’s argument in this regard. In relying on this exclusion, the respondent is in effect asking me to make a final determination that the security guard knew or ought to have known of the damage prior to the destruction of the property. That is an issue for the underlying action. It would be an issue in the underlying action regardless of the circumstances. Here, however, the circumstances make me even more reluctant to make a finding of that nature. Recall that the contract between Garritano and the applicant obliged the security guard to remain in her vehicle at all times other than during the once per hour perimeter walk around the property. In those circumstances, it would be inappropriate for the court to wade into that issue without a full evidentiary record.

For the reasons set out above, I dismiss the application.

FORM 3

ELECTRONIC CERTIFICATE OF TRANSCRIPT (SUBSECTION 5(2))

Evidence Act

I, Gregory Chan, certify that this document is a true and accurate transcript of the recording of A-Aaron Protection Services Inc. v. Northbridge General Insurance Corporation in the Superior Court of Justice, held at Toronto, Ontario, taken from Recording File No: 4899_1-6_20230718_084306_10_KOEHNEM.dcr, which has been certified in Form 1.

Wednesday, July 19, 2023

(Signature)

5884408851, Ontario, Canada

A certificate in Form 3 is admissible in evidence and is proof, in the absence of evidence to the contrary, that the transcript is a transcript of the certified recording of evidence and proceedings in the proceeding that is identified in the certificate.