• In Farmers’ Mutual Insurance Company v. Pinder (November 26, 2009), the Ontario Court of Appeal considered the issue of an insurer’s subrogation right against its own insured where it had paid out a mortgagee under a Standard Mortgage Clause (“SMC”). The insurer denied coverage for its insured’s fire damage claim on the grounds of a failure to notify of a material change in the risk and wilfully false statements in the proof of claim. The insurer then paid out the mortgagee under the SMC and pursued action, by way of subrogation, against its own insured. The court held that an insurer is entitled to subrogate under the SMC where two preconditions are met: (1) the insurer must make payment of the loss award, or part of it, to the mortgagee, and (2) the insurer must establish a claim that it has no liability under the policy to the mortgagor insured, it not being sufficient to merely assert grounds for denial. The court stressed that this conclusion flowed from the construction of the SMC and was not dependent on the specific facts of the case.  
  • In Ontario (Transportation) v. Canadian Surety Company (December 22, 2009), the Ontario Court of Appeal considered the scope of the duty to defend and indemnify under a certificate of insurance issued to an additional insured, in this case, the Ministry of Transportation of Ontario (“MTO”), under a road builder’s CGL policy. The court affirmed the trial judge’s conclusion that based on the specific wording of the certificate and the CGL policy (the certificate only confirmed that the MTO “has insurance” under the contractor’s policy, the policy only named the contractor as an insured, and the contract between MTO and the contractor only required insurance for MTO against claims resulting from or arising out of the contractor’s acts or omissions), the insurance afforded to the MTO was limited to claims based on its vicarious liability for the acts or omissions of the contractor and did not extend to MTO’s liability arising out of independent negligent acts or omissions of MTO’s own personnel. The trial judge noted that to extend full coverage to MTO under the contractor’s policy where no separate application was required and no additional premium was sought or paid, would not make commercial sense.  
  • A similar result to that in the Canadian Surety case above, was reached by the Ontario Superior Court of Justice in Atlific Hotels and Resorts Ltd. v. Aviva Insurance Co. of Canada (May 19, 2009), in the context of a resort that was made an additional insured by certificate of insurance under a snow removal contractor’s CGL policy. The certificate provided that the resort was an additional insured but only with respect to liability arising out of the contractor’s operations. This limitation confined the coverage for the resort to liability arising out of the contractor’s negligence in the removal of snow and ice and did not extend coverage for the resort’s own negligence in hotel operations and management and, more generally, occupier’s liability. The court thus found that the contractor’s CGL insurer did not have to defend the resort for the non-covered claims.  
  • In Pietrangelo et al. v. Gore Mutual Life Ins. Co. (February 22, 2010), the court considered, for the first time in Canada, the operation of a “marijuana” exclusion under a rental property policy for direct or indirect loss or damage, in whole or in part, to “dwellings or detached private structures or unscheduled personal property … used in whole or in part for the cultivation, harvesting, processing, manufacture, distribution or sale of marijuana or any product derived from or containing marijuana … regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage”. In this case, the tenant of the rental property was converting marijuana to hashish through the use of a homemade device that subsequently exploded, resulting in injury to the tenant and the destruction of the house. In large part, the decision turned on the meaning of the word “used” in the exclusion. In finding that the property owners were not entitled to coverage under the policy, the court found the “marijuana exclusion to be clear and unambiguous” (on the facts presented in this case) and that it applied to preclude coverage because the tenant “used” (in the sense that “used” meant “the act or practice of employing something”) the insured property for the specific purpose of producing cannabis resin at the time of the loss. The court expressly rejected the argument that “use of the home for this unlawful purpose has to be habitual or customary, rather than merely occasional or incidental, in order to be caught by the marijuana exclusion”.  
  • In what is understood to be the first judicial consideration in Canada of an asbestos exclusion, the Ontario Superior Court of Justice in 1604945 Ontario Inc. v. Lloyd’s Underwriters (March 8, 2010) upheld a form of Absolute Asbestos Exclusion Endorsement in finding that Lloyd’s had no duty to defend in respect of two underlying actions in which the plaintiffs alleged property damage and potential bodily injury by asbestos contamination resulting from a landlord’s renovation of leased premises. In reaching this conclusion, the applications judge found the exclusion to be clear and unambiguous and that absent the alleged asbestos contamination, the claims of the plaintiffs had no foundation (to be contrasted with the situation where damages are alleged to have been caused by both a covered and non-covered peril), and held, following the 2008 decision in Boliden Ltd. v. Liberty Mutual, that the “in any way involving asbestos” wording in the exclusion extended to preclude coverage for claims “in any way tied to or concerned with” asbestos.