Two or more errors, omissions or negligent acts are “related” for the purposes of a policy where there is a sufficient association or connection between them, reading the policy as a whole and bearing in mind its objective. In determining whether there is a sufficient association or connection, the court must consider the similarities and difference between the nature and kind of the alleged misconduct which underlies each claim, and the kind and character of the losses for which recovery is sought in each claim.

[2014] O.J. No. 3037

2014 ONCA 492

Ontario Court of Appeal

E.E. Gillese, K.M. van Rensburg and C.W. Hourigan JJ.A.

June 25, 2014

The issue in this case was whether or not a statement of claim filed against the insured in an underlying action disclosed more than one claim for the purposes of coverage under the insured’s professional liability policy. The insured sought a declaration on appeal to this effect.

The insured was a law firm. In the underlying action, the insured was being sued for breach of fiduciary duty and duty of care to its clients, and for acting in a conflict of interest. The clients’ claim related to the allegedly improper appointment of the insured as committee to one client’s estate, allegedly resulting in fees and charges to the estate that would not have occurred had there been a proper appointment, and for allegedly favouring one estate over another in the sale and management of the clients’ properties.

The insured’s policy had a liability limit of $1 million per claim resulting from a single or related errors, with an aggregate limit of $2 million. The insured’s clients’ claim exceeded these limits. The policy excluded claims for legal fees, accounts or any fee arrangement involving the insured. The insured applied for a declaration that the clients’ allegations raised at least two separate claims for the purposes of the policy. The application judge rejected the insured’s arguments and held that the claims were related and constituted a single claim under the policy, partially because the judge found that portions of the claim fell under the exclusion.

The court allowed the appeal on the basis that the exclusion did not apply, and because the alleged errors were not related because they were different in nature and kind. The court held that, “[T]wo or more errors, omissions or negligent acts are “related” where there is a sufficient association or connection between them, reading the Policy as a whole and bearing in mind its objective. In determining where there is a sufficient association or connection, the court must consider the similarities and difference between the nature and kind of the alleged misconduct which underlies each claim, and the kind and character of the losses for which recovery is sought in each claim.”

Applying the above, the court held that the first allegation related to the failure to disclose appropriate information to the court, whereas the second claim was based on allegations of active mismanagement. The two claims were therefore separate for the purposes of coverage under the policy.