For those of you that did not know, if I was not a lawyer, I would be rocking out on a stage singing and doing all things musical.  Which is why this case is interesting to me on a number of different levels.  If you are having an after-hours jam session at your office and an injury occurs, is there coverage under your home insurance policy for the injury?  According to the following decision, there is!

Aviva Insurance Company v. Intact Insurance Company, is a recent 2018 decision by the Ontario Superior Court of Justice about whether a home insurance policy should be contributing towards a workplace injury.  The case addresses the importance of pleadings, res judicata and coverage issues, which are all interesting issues in the insurance realm. 

Aviva brought an application to compel the home insurer Intact to contribute to costs regarding defending and settling a liability claim against their mutual insured Sanjay Patel.  Patel had insurance as follows:

  1.       RSA offered insurance to Patel as a principal of the engineering firm where the incident took place;
  2.       Aviva, insurer of the company owning the building which was controlled by Patel; and
  3.       Intact, Patel’s home insurer.

Aviva and RSA offered a defence regarding the injuries sustained by Patel’s friend Novak, when he fell off of a ladder during an after-hours jam session held at the Engineering company. 

Prior to the settlement, RSA had sought to compel Intact to provide a defence, but an applications judge, after reviewing the other insurance policies, held that Intact had no duty to defend, since it was an excess insurer.  Accordingly, given this decision, res judicata, was asserted, which is the principle that a cause of action may not be relitigated once it has been judged on the merits. 

Both the RSA and Aviva policies, had “other insurance” clauses.

Intact’s other insurance clause was as follows:

Insurance Under More Than One Policy

If you have other insurance which applies to a loss or claim, or would have applied if this policy did not exist, this policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance used up.

The Statement of Claim does not distinguish between the various capacities in which he was or could have been acting at the time of the loss.  This is important because the Claim does not trigger one particular type of coverage.  Patel was liable therefore as principal of the numbered company which owned the building where there engineering company was housed.   He was exposed as principal of the engineering company  and he was exposed personally, because he had invited Novak to his building for an after-hours jam session unrelated to his business.

Patel sought coverage from each of the 3 insurers.  Aviva and RSA acknowledged their duty to defend Patel, but issued a reservation of rights letter in the event that Patel was liable in his personal capacity. 

Intact refused to defend Patel.  In an application brought for coverage by Patel as against Intact, it was stated that the Intact policy would be considered excess insurance and would not respond until the amount of such insurance is used up.  Because coverage had not been exhausted, there was no obligation for Intact to defend. 

Settlement was reached at a private mediation.  Intact was invited to participate at the mediation, as Aviva indicated that the Aviva policy specifically excludes any personal liabilities of Patel.  However, Intact took the position that the policy was excess and would not be triggered.

The action was settled for $380,000.00 all inclusive, with 1/3 split against Patel in his personal capacity.  The funding for the personal interest was split on a 50:50 basis by Aviva and RSA.  Aviva went on to seek reimbursement for Intact’s proportionate share of costs incurred by Aviva in defending Patel in his personal capacity and for Intact’s proportionate share of the settlement of the underlying action paid by Aviva for Patel’s personal liability. 

It was found that notwithstanding the application, the issue of Intact’s duty to indemnify had never been fully decided. 

Accordingly, the doctrine of issue estoppel would not apply because it would create an injustice.

Reference was made to Family Insurance Corp. v. Lombard, a 2002 decision of the Supreme Court of Canada, which adopted the following principles from Ivamy’s General Principles of Insurance Law (6th ed. 1993) as establishing the right to contribution among insurers where there are overlapping policies:

1     All the policies concerned must comprise the same subject‑matter.

2     All the policies must be effected against the same peril.

3     All the policies must be effected by or on behalf of the same assured.

4     All the policies must be in force at the time of the loss.

5     All the policies must be legal contracts of insurance.

6    No policy must contain any stipulation by which it is excluded from contribution.

Aviva’s position was as follows:

Aviva submits that the Aviva and Intact policies are not overlapping, as they fail parts (1) and (2) of the Ivamy test. The subject matter and the peril insured against by the Intact policy is the personal liability of Patel, with a specific exclusion of coverage for Patel’s business pursuits. The subject matter of the Aviva policy and the peril insured against is the corporate liability of Patel as a principal of 1062220, with a specific exclusion of coverage for Patel’s personal actions. As such, the policies never overlap, and the Intact policy could never be excess coverage over the Aviva policy.

Furthermore, it was held that Aviva’s policy was not overlapping but complementary in that they each respond to separate allegations relating to separate risks; personal and corporate.  Therefore, it was found that Intact wrongfully failed to provide a defence and failed to indemnify Patel for loss caused by him in his personal capacity. 

However, should Intact be allowed to question the allocation of the 1/3 split, given that it had declined to participate in the mediation? 

The following was held:

Intact took a significant risk by not attending the mediation given that: (a) Intact had a duty to defend; (b) Aviva did not participate in the previous application, (c) res judicata might not apply as it is a discretionary doctrine, (d) the Supreme Court’s decision in Family Insurance was not raised before the application judge, and (e) the issue of indemnification had never been addressed.  In these circumstances, Aviva and RSA were free to settle without Intact’s approval provided that they acted reasonably and in good faith in settling the action.

Lastly, it was found that there were equitable grounds for Intact to contribute to the defence and settlement, relying on unjust enrichment.

In Conclusion

Intact had still not decided whether it would be appealing this decision. 

It is likely that RSA will be asserting a similar motion if RSA and Intact cannot agree on similar terms.

It really all comes back to first principles and looking at the pleadings to determine what type of coverage is afforded.  Notwithstanding the “other insurance” clauses, the pleadings asserted a loss in part in Patel’s personal capacity and therefore, triggered coverage under the home insurance policy. 

Accordingly, I ensure that all of my music jam sessions are at home, under one policy of insurance!