Additional Insured Entitled to Defence, But Only A Limited One
May 27th, 2009Atlific Hotels and Resorts Ltd. v. Aviva Insurance Company of Canada is the latest chapter in the ongoing (and evolving) story of “additional insureds”. The latest installment was written by Mr. Justice Edward P. Belobaba.
In the underlying lawsuit, the plaintiff had slipped and fallen at the Deerhurst Resort one winter evening. She sued the resort and the contractor whom Deerhurst had hired to remove snow and ice from its premises.
The snow removal contractor was insured by Aviva. One of the terms of the agreement between the contractor and Deerhurst required that the contractor have the resort added to his policy with Aviva as an additional insured. This was done. Justice Belobaba’s reasons don’t provide much detail about the policy wording however they do say that Deerhurst was an additional insured “but only with respect to liability arising out of the contractor’s operations”. Presumably, this wording appeared in an additional insured endorsement to the CGL policy issued by Aviva but if so, it would have been preferable to have this spelled out in the reasons. The Canadian cases often don’t focus on where the grant of coverage languge comes from. (In the Riocan v. Lombard, for instance, the policy language was taken from certificates of insurance rather than from the policy itself. While discrepancies in wording between the two can give rise to its own set of issues, the wording of the actual policy should always be the starting point.)
We’ll return to the wording of the coverage grant later in this post.
Aviva was defending the underlying lawsuit for the named insured snow removal contractor but not on behalf of Deerhurst. In the application before Justice Belobaba, Deerhurst was seeking an declaration that Aviva was required to undertake its defence. Justice Belobaba ruled that Aviva was required to defend some, but not all of the allegations against Deerhurst.
His Honour said that the underlying claim really broke down into three types of allegations:
(i) negligence on the part of all of the defendants relating in various ways to the removal of snow and ice;
(ii) negligence on the part of the Deerhurst defendants in the operation and management of the hotel, including inadequate lighting and the lack of non-slip matting on the walkways, the failure by management to cancel the evening program at the conference centre so that the guests could have stayed in their rooms, the failure to cut the program short so that the participants could have returned to their lodgings sooner and more safely, and the failure to offer the plaintiff temporary overnight accommodations in the main lodge until the walkways were cleared of snow and ice and made safe for use;and
(iii) occupier’s liability.
(This is very typical of these types of cases, so Justice Belobaba’s grouping is useful.)
Aviva ackonwledged that it was required to defend the “snow and ice” claims but argued that because it was already defending the named insured against all of these allegations, it had discharged that obligation. In making this argument, it relied on the decision of Mossip J. in D’Cruz v. B.P. Landscaping. We expressed our disagreement with Justice Mossip’s reasoning in an earlier post. Justice Belobaba also rejected her reasoning, saying:
[The Deerhurst defendants] cannot ignore the claims that are being made against them by the plaintiff merely because the insurer is providing a defence for an unrelated co-defendant. The fact that Aviva will have to pay two defence counsel or perhaps agree to a single independent defence counsel is, in my view, a necessary consequence of its contractual obligation. On this point, I respectfully disagree with the reasoning in D’Cruz v. B.P. Landscaping Ltd., [2007] O.J. No. 2704 at para. 16.
That took care of the “snow and ice” category of the underlying claim. More problematic were the other two types of claim: Deerhurst’s alleged negligence in the operation and management of the hotel and occupier’s liability. Justice Belobaba held that Aviva did not owe Deerhust a defence to the allegations in the latter two groups.
There are two important issues that arise on this part of the ruling. Unfortunately, only one of them is discussed in Justice Belobaba’s reasons.
