Insurance Co. of the State of Pennsylvania v. Cameco Corp.

[2010] S.J. No. 445

2010 SKCA 95

Saskatchewan Court of Appeal

S.J. Cameron, J.G. Lane and G.A. Smith JJ.A.

July 30, 2010

This is a companion appeal to Insurance Co. of the State of Pennsylvania v. Global Aerospace, Inc. [2010] S.J. No. 446 (Sask. CA).

In the summer of 1995, Cameco began construction of a mine in Kyrgyzstan. On October 4, 1995, a helicopter carrying workers to the mine crashed killing all on board including ten Canadians. At the time, Cameco had three potentially relevant insurance policies: an aviation liability policy issued by Global Aerospace, Inc. formerly known as Associated Aviation Underwriters, Inc. ("Global"); a general liability policy issued by the Insurance Company of the State of Pennsylvania ("ICSOP"), and a general liability policy issued by American Home Assurance Company ("American Home"). All three Insurers were put on notice of the claim by Cameco. Both ICSOP and American Home denied that their policies covered the claim.

In 1996, Actions were commenced by the Estates of the Canadian miners killed in the helicopter crash. ICSOP and American Home refused to participate in the defence of the Action while Global agreed on a "reservation of rights" basis to defend the Actions.

In February 1999, Cameco commenced an Action in the Court of Queen's Bench against ICSOP and American Home seeking declarations that these Insurers had a duty to defend Cameco in relation to any liability arising out of the claims. In February 2000, Cameco sought an order pursuant to Rule 188 of The Queen's Bench Rules for a determination on a point of law concerning the obligation of ICSOP and American Home to provide a defence and indemnity to Cameco. This order was granted by the Court of Queen's Bench but later overturned by the Court of Appeal on the basis that the issue involved questions of mixed fact and law.

Global and Cameco pursued settlements on behalf of Cameco in relation to the claims and, in February 2005, the claims were settled with Global incurring a total cost of approximately $6,411,000 to defend and settle the Actions. This constituted a full indemnity for Cameco in relation to these claims.

At this time, Global received advice from its legal counsel that any formal action for equitable contribution as against ICSOP and American Home was time barred. Therefore, in March 2007, Global applied to the Court of Queen's Bench for an order to amend the statement of claim in the Cameco Action to add itself as a Plaintiff and to claim payment in accordance with the policies of insurance directly from ICSOP and American Home to Global by way of contribution to the costs of defence and indemnity paid by Global on behalf of Cameco. The application by Global was brought pursuant to Rule 165 of the Queen's Bench Rules of Court which the Court found was limited to allowing a party to amend its own pleadings, not the pleadings of another party. However, as all parties were under the impression that Global was barred from directly bringing an Action for equitable contribution on its own behalf by the provisions of the Limitations Act, S.S. 2004, c. L-16.1, the Court found that the proposed amendments would be permitted pursuant to section 20 of the Limitations Act as Global's proposed claim arose out of the same transaction as that founding the Cameco Action. This decision was overturned on appeal on the basis that section 20 of the Limitations Act did not permit amendments so sweeping that they would in effect, transform a contract claim by Cameco against its Insurers and to a claim for equitable contribution by another Insurer.

In June 2008, Global retained new lawyers who took the view that, contrary to the position earlier taken by Global in both the Court of Queen's Bench and the Court of Appeal, the limitation period in relation to a direct, fresh claim for equitable contribution by Global against ICSOP and American Home had not, in fact, expired.

In June 2008, two applications were made to the Court of Queen's Bench in relation to the Cameco Action. First, Cameco sought to amend the action to explicitly convert it into a subrogation action on behalf of Global. This application was allowed by McMurtry J. Second, Global, relying on the advice of its new counsel, also launched a new and separate action directly against ICSOP and American Home claiming equitable contribution in relation to its costs of the defence and settlement of the claims against Cameco by the estates of its deceased employees. ICSOP and American Home brought an application seeking a summary dismissal of the Global Action arguing that the Court of Appeal had already determined that the limitation period applicable to Global's claim for contribution had expired and that the issue was res judicata, or governed by the principle of issue estoppel, and that the claim should be struck as an abuse of process. The Chambers judge dismissed ICSOP and American Home's application. ICSOP and American Home appealed.

The Court characterized the primary issue in this appeal as whether, where more than one insurer has issued a policy of liability insurance with respect to the same risk and one of the insurers has fully indemnified the insured, the paying insurer can maintain a subrogated action, in the name of the insured, against the non-paying insurer(s). ICSOP and American Home argued that no such action was recognized in law, submitting that the only relief available to the paying insurer is a contribution action, in its own name, against the non-paying insurers. ICSOP and American Home further submitted that any claim by the insured against the non-paying insurers ceased to exist once the insured was fully indemnified by the paying insurer, citing the decision of the British Columbia Court of Appeal in Pacific Forest Products Ltd. v. AXA Pacific Insurance Company, 2003 BCCA 241, leave to appeal to the Supreme Court of Canada refused, [2003] S.C.C.A. No. 293.

The Court of Appeal agreed with the submissions of ICSOP and American Home. The Court further agreed with the principles derived from the Supreme Court of Canada's decision in Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48 where the Court held that an insured who holds more than one policy against the same risk may never recover more than the full amount of the loss but is entitled to select the policy under which to claim indemnity. The Court noted that where an insured is double insured, the law treats the various policies as one insurance, thereby preventing the insured who has recovered from one insurer from recovering again from another insurer, citing Caledonia North Sea Ltd., v. London Bridge Engineering Ltd., 2000 S.L.T. 1123, affirmed (U.K.H.L.).

The Court drew a distinction between the right to subrogation and the right to contribution. Where a claim is advanced by way of subrogation, the subrogated party, the insurer, is entitled to all of the amount recovered by the nominal plaintiff (the insured) as against the third party up to the amount of its indemnity. In a contribution action, however, the proportionate liability of each insurer is determined and the paying insurer can only recover from the other insurers that amount which exceeds his proportionate share. In the circumstances of this case, it was clear that the paying insurer did not have an option to seek contribution from another insurer by way of a subrogated claim in the name of the insured.

In the result, the Court found that the Chambers judged erred in permitting the amendments that would convert the Cameco action to a subrogated action brought on behalf of Global. The Court also found that ICSOP and American Home should succeed in their summary dismissal application. It was clear that Cameco pled that it had been fully indemnified for its loss by Global. In accordance with the principles relating to subrogation and contribution analyzed by the Court, and in particular, the principle prohibiting an insured from recovering more than full indemnity under multiple insurance policies covering the same risk, the Court held that full indemnity by one insurer effectively extinguished the right of the insured to further recovery from a co-insurer. Therefore, there was no chance of success for the Cameco action.