In a personal injury action, the occupier of a premises was entitled to a partial defence under the liability policy of the contactor it hired to do snow maintenance. The contractor was entitled to a full defence under the liability policy of the subcontractor it hired to do the work.

[2015] M.J. No. 85

2015 MBQB 49

Manitoba Court of Queen's Bench

S.D. Greenberg J.

March 25, 2015

The plaintiff was injured when she slipped on ice while using the ATM at a branch of the Royal Bank of Canada ("RBC"). She sued RBC, Bee‑Clean, which RBC had hired to do snow maintenance, and Lawn Boys Ltd., who was Bee‑Clean's subcontractor for the snow maintenance. RBC and Bee-Clean respectively sought orders that Bee‑Clean and Lawn Boys and/or their insurers were required to defend them in the action.

RBC hired Bee‑Clean to provide snow maintenance services pursuant to an agreement that set out requirements for snow clearing, use of salt, sand and ice melter, and for Bee‑Clean to monitor weather conditions and inspect the property. The agreement provided for different levels of service during nighttime and daytime hours. The agreement also required Bee Clean to indemnify RBC for any claim against it for personal injury arising out of Bee‑Clean's performance of the agreement and to add RBC as an additional insured to its comprehensive general liability policy. RBC was named as an additional insured under Bee Clean's policy, but coverage was limited to the operations performed by Bee‑Clean on behalf of RBC. When Bee‑Clean subcontracted with Lawn Boys, the subcontract included the same specifications regarding snow maintenance and required Lawn Boys to indemnify Bee‑Clean for any claims arising out of the performance of the agreement and to add Bee‑Clean and its clients, i.e. RBC, as additional insureds under its general liability policy. Bee‑Clean was added as an additional insured to Lawn Boys' policy, but only with respect to liability arising out of the operations of Lawn Boys. RBC was not named as an additional insured under Lawn Boys' policy.

The plaintiff in the main action alleged that she fell as a result of the defendants' negligence in allowing ice to build up around the entrance to the ATM. The same particulars of negligence were alleged against all three defendants, including:

  • failing to take reasonable measures to remove ice which resulted from freezing rain during the nighttime hours;
  • failing to place traction sand or ice melting products around the entrance to the ATM, having regard to the fact that it was available for use by customers on a 24‑hour basis; and
  • failing to perform reasonable and appropriate inspection and/or to require that one or more of the contractors provided reasonable and appropriate inspection having regard to the fact that the premises were open for use by customers 24 hours per day.

At issue was the scope of the duty to defend when some of the allegations relate to acts that fall within the defendant's insurance coverage but some relate to acts that are not covered. One line of authority on this issue held that where the allegations in the claim create multiple bases for liability, only one of which is covered by the insurance policy, the insurer must defend the entire claim if the covered part of the claim embodies the true nature of the claim. A second line of authority held that where a claim includes both covered and non‑covered claims, the insurer is obliged to defend only those parts of the claim that fall within the coverage. The motions judge held that the first line of authority had been implicitly overruled by the decision of the Ontario Court of Appeal in Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506, where it was held that a pleading might contain both covered and uncovered claims and that the insurer only had a duty to defend those claims where there was a possibility they would fall within coverage. Given that the snow maintenance agreements provided for different levels of service during daytime and nighttime hours, it was held that the allegations in the claim established the possibility of a stand‑alone basis for liability on the part of RBC for not putting a reasonable system into place for nighttime snow clearance. In the result, it was held that RBC was only entitled to a defence under Bee‑Clean's policy for the allegations related to Bee‑Clean's performance or failure to perform the obligations under the snow maintenance agreement and RBC was not entitled to a defence with respect to allegations related to its broader duty as occupier.

With respect to Bee‑Clean's right to a defence under Lawn Boys' policy, it was conceded that Bee‑Clean was entitled to a defence with respect to liability based on the actions of Lawn Boys in the performance of the snow maintenance agreement. However, it was argued the allegations in the claim raised the possibility of liability by Bee‑Clean that was unrelated to the actions of Lawn Boys. For example, it was suggested that Bee‑Clean could potentially be liable for a failure to convey a request for service from the property manager to Lawn Boys or because the specifications for snow maintenance in the agreements may have been based on advice given to RBC by Bee‑Clean. It was held that though such evidence might come out at trial, this did not create a stand‑alone basis for liability against Bee-Clean. A reasonable reading of the claim suggested that insofar as Bee‑Clean and Lawn Boys were concerned, the essence of the claim was the same and Lawn Boys' insurer had a duty to defend Bee‑Clean with respect to all aspects of the claim. Because Lawn Boys had neglected to name RBC as an additional insured under its policy, its insurer had no duty to defend RBC. However, Bee‑Clean was entitled to damages against Lawn Boys for any amounts it was required to pay towards RBC's defence of the claim. No submissions were made on whether Bee‑Clean's insurer had a subrogated right to claim damages against Lawn Boys for the costs of defending RBC.