Canada: When Commercial And Insurance Worlds Collide

Cadillac Fairview v. Jamesway Construction 2011 ONSC 2633

This matter involved a slip and fall on ice located on a sidewalk outside of the entrance to Fairview Park Mall owned by Cadillac Fairview.  At the time of this incident, there was a contract in existence between Cadillac Fairview and Jamesway Construction Limited which required Jamesway to keep the mall clear of snow and ice.  In addition, the contract between Cadillac Fairview and Jamesway included the following terms:

• Jamesway agreed to release and indemnify Cadillac Fairview in relation to any costs, expenses or claims for personal injury connected with Jamesway's performance of its snow and ice removal duties under the contract;
• Jamesway agreed to obtain a commercial general liability policy with limits of $2 million – this policy was to be issued jointly to Jamesway and Cadillac Fairview – such insurance was to be considered primary and not to call into contribution any other insurance available to Cadillac Fairview.

Although Jamesway obtained a commercial general liability policy from Dominion of Canada, this policy did not name Cadillac Fairview as a co-named insured or additional insured thereunder as required by the contract.

The injured claimant sued both Cadillac Fairview and Jamesway, each of which filed separate Statements of Defence and Crossclaims against each other for contribution and indemnity for any damages that may be assessed against them.  Each had separate counsel.

Cadillac Fairview brought this application against Jamesway and Dominion in which it sought an order that Jamesway and Dominion indemnify and assume carriage of Cadillac Fairview's defence in the tort action.

Mr. Justice Hambly noted that the snow removal contract required Jamesway to release Cadillac Fairview from every claim in connection with work being performed by it at the mall including any claims arising from personal injury.  The scope of the work required of Jamesway under contract included clearing snow and ice from both the parking lot and the sidewalks and applying salt to these areas.  He further concluded that the "true nature" of the injured plaintiff's claim was that she slipped and fell on ice on the sidewalk outside the entrance to the mall.  He found that this was covered by the contract which placed the obligation on Jamesway to keep the sidewalks of the mall free from ice. 

Mr. Justice Hambly then went on to conclude:

It is entirely possible, even likely, that a claim against Cadillac Fairview covered by the snow removal contract between it and Jamesway will succeed.  This will mean that Jamesway will be required to indemnify Cadillac Fairview under Section 5 of the contract.  If Jamesway had obtained a [commercial general liability policy] in the joint names of Jamesway and Cadillac Fairview as it contracted to do, there would not be a difficulty.  The insurer would be required to provide Cadillac Fairview with a defence.  It did not do so.  Jamesway will now have to provide Cadillac Fairview with a defence without the benefit of being insured. 

This decision exposed Jamesway to considerable uninsured liability in relation to Cadillac Fairview's defence costs.  Jamesway would be obliged to reimburse Cadillac Fairview's defence costs incurred up to the date of the court application as well as going forward through to the conclusion of any trial.  All this arose because Jamesway failed to ensure that its commercial general liability policy with Dominion of Canada included Cadillac Fairview as an additional named insured under the policy, something which Dominion of Canada would likely have done with no or little increase in premium.

Minto Developments Inc. v. Carlsbad Paving 2012 ONSC 1574

This decision involved a virtually identical fact scenario as arose in the Cadillac Fairview case.  This included the following:

• Minto owned residential property;
• Minto had a contract with Carlsbad requiring it to maintain the premises including the performance of snow clearing, snow removal and ice control on roadways and parking lots;
• Carlsbad agreed to indemnify and safe harmless Minto for all actions, awards, judgments and proceedings for personal injury, expenses and costs, including legal fees suffered or incurred by Minto arising out of or in any way connected with the operations of Carlsbad;
• Carlsbad was required to keep in force for the duration of the contract a commercial general liability policy and Minto was to be added as an additional insured with respect to Carlsbad's operations under the contract.  This insurance was to apply as primary and not excess insurance; 
• Intact Insurance Company issued a commercial general liability policy to Carlsbad – the certificate of insurance issued in relation to this policy indicated that Minto was added as an additional insured with respect to the operations performed by Carlsbad under the contract; 
• A claimant alleged that she slipped and fell on ice that had accumulated in the parking lot of the property owned by Minto – she sued both Minto and Carlsbad for damages on the basis that the defendants failed to properly apply ice removal material or ensure that the parking lots were sanded, salted and / or cleared of ice and snow;
• Carlsbad and Intact refused to assume carriage of Minto's defence and did not agree to indemnify Minto for the costs incurred to date in defending the tort claim.

After reviewing the allegations in the claimant's Statement of Claim, Mr. Justice Kershman concluded that the "true nature" of the Statement of Claim was that of negligence in which the Plaintiff slipped and fell on ice in the parking lot.  He also noted that Carlsbad's responsibility under the contract was to keep the parking lot clear and to deal with the issue of ice control.  Therefore, the conditions of safety of the parking lot were the responsibility of Carlsbad.  After reviewing the Cadillac Fairview decision and other case law, Mr. Justice Kershman concluded that both Carlsbad and its insurer, Intact, were obliged to provide and fund a full defence to Minto in relation to the underlying tort action.  In this regard, the court noted that Carlsbad had actually obtained a commercial general liability insurance policy naming Minto as a co-insured.  This made all the difference to the decision. 

LESSONS LEARNED

Accordingly, where a party has provided an indemnity and hold harmless agreement to another party and has also agreed to purchase a liability insurance policy that shows the other party as an additional insured, it is very important for the party providing those covenants to ensure that the insurance policy which they purchase includes such provisions.  Failure to name the other party as a co-insured or an additional insured will result in the first party's exposure to personal liability for defence costs incurred by the other party.  This could represent a significant sum of money to the business. 

One other point to bear in mind (and this does not appear to have been argued on Jamesway's behalf in the Cadillac Fairview decision), is that most commercial general liability policies provide an extension of liability coverage in relation to "insured contracts".  These provisions require the insurer to extend defence and indemnity coverages not only to their named insured (Jamesway) but also to any other party whom the insured has contractually agreed to hold harmless and indemnify in relation to third party claims for injury or damages arising from the insured's operations.  Accordingly, even if the other party has not been named as an "additional insured" under the first party's liability policy, the first party may still be able to rely on the "insured contracts" provisions of their commercial liability policy to extend liability coverage to the other party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.