Walker v. Sovereign General Insurance Co.

The appeal by an insurer ("Sovereign") was dismissed. The Court found that the notice provided to Sovereign by a co-defendant of the bankrupt insured was sufficient notice in accordance with the policy conditions for liability coverage. In the alternative, that the plaintiffs were entitled to relief from forfeiture.

[2011] O.J. No. 4106

2011 ONCA 597

Ontario Court of Appeal

D.R. O'Connor A.C.J.O., J.I. Laskin and J.C. MacPherson JJ.A.

September 19, 2011

Marie and Albert Walker (collectively "Walkers") obtained judgment against Sun Shelters Industries Inc., a property maintenance company for damages resulting from a slip and fall accident in a parking lot.Sun Shelters went bankrupt and could not pay the judgment.The Walkers brought an action under s. 132 of the Insurance Act, R.S.O. 1990, c. I.8, seeking recovery of their judgment directly against Sovereign which had issued a liability insurance policy to Sun Shelters.The Walkers were successful in obtaining summary judgment on their claim.Sovereign appealed the finding.

The slip and fall accident at issue in the litigation occurred on January 30, 1999.The Walkers sued Emshih Developments, the owner of the property and Sun Shelters, the maintenance company retained to keep the property clear of ice and snow.Emshih cross-claimed against Sun Shelters for contribution and indemnity. Sun Shelters had gone bankrupt and did not defend the action.During the course of the litigation, Emshih discovered that Sun Shelters was insured by Sovereign and Emshih's counsel notified Sovereign of the Walkers' claim, forwarded all the pleadings to it and arranged for an adjournment of the trial to permit Sovereign to participate in the action.Sovereign declined to participate.The Walkers settled with Emshih and obtained judgment in the action against Sun Shelters for $100,000.The Walkers then brought action against Sovereign for the unpaid judgment they had obtained against Sun Shelters pursuant to s. 132 of the Insurance Act, which allows a third-party to recover against an insurer where its insurer has failed to satisfy the judgment for damages.

At the summary judgment application, the motion judge held that as Emshih had cross-claimed against Sun Shelters, and may have been entitled to part of the insurance proceeds, it therefore had standing to give notice of the claim to Sovereign.In the alternative, the motion judge held that the Walkers were entitled to relief from forfeiture under s. 129 of the Insurance Act as, "to the extent that there has been a breach of a condition, such breach amounts only to imperfect compliance with the policy".

On appeal, the Court rejected Sovereign's argument that Sun Shelters had breached the statutory conditions of the policy requiring it to give notice and cooperate in the defence.The Court agreed with Sovereign's argument that the statutory conditions did not apply to the claim and that the only conditions at issue were the policy conditions which apply to liability coverage.The Sovereign policy contained policy conditions which allowed notice to be given to Sovereign "by or for the insured".The Court found that on a plain reading of this provision, notice could be given by a person other than the insured but the policy did not define the class of persons capable of giving notice on behalf of the insured.The Court interpreted the provision in light of its purpose noting that the primary purpose was to ensure that Sovereign was aware of a claim against its insured, so it had timely opportunity to deal with the claim.Given the purpose and importance of the condition, the Court further held that if notice was to be given for an insured instead of by the insured itself, the person giving it should have sufficient proximity to the claim to have knowledge of the information required under the policy.In this case, Emshih was just such a person as it owned property where the accident occurred; it was a defendant in the original action; and it cross-claimed against Sovereign's insured.In the circumstances, the Court found that this was sufficient to allow Emshih to give notice "for" Sun Shelters as contemplated by s. 3(a) of the policy.

The Court of Appeal further held that relief from forfeiture under s. 129 of the Act was available to the Walkers in the circumstances of the case.Sovereign had actual notice of the claim and made a conscious decision not to participate in the litigation.Sovereign suffered no prejudice from the late delivery of the notice and there was no indication that it would have done anything differently if it had been provided with earlier notice.

In the result, Sovereign's appeal was dismissed.