Insurance Company of Canada v. Lombard General Insurance
Company of Canada,
2013 ONCA 416
(Blair, Tulloch and Lauwers JJ.A.), June 20, 2013
In this decision, the Court of Appeal assessed the
responsibility of two insurance companies to cover losses which
resulted from a 1995 Toronto apartment fire.
Among the defendants held liable for the fire were Axes
Investments, the owner of the building, and Tandem Group
Management, the property manager. Jointly represented at trial,
they were found liable for a portion of the plaintiffs' damages
as a single defendant. Axes and Tandem were insured under three
policies: a primary policy from Lombard General Insurance Company
of Canada, with limits of $1 million, insuring both Axes and
Tandem; a Lombard umbrella policy, with limits of $9 million,
insuring both Axes and Tandem; and a policy issued by Aviva
Insurance Company of Canada, with limits of $5 million, insuring
The insurers' peculiar responses to the tort actions, with
Lombard defending Axes and Tandem as a single defendant represented
by one counsel and Aviva declining to participate, set off a long
and complex legal battle. The central dispute between them was
which policy would respond to the losses in excess of the first
million dollars covered by Lombard's primary policy, and in
Ultimately Aviva paid the entire amount of the excess claim to
the tort plaintiffs. It then brought a motion for recovery from
Lombard for half of the payment.
Aviva submitted that Lombard should be responsible for half of
the payment on the theory that the Lombard umbrella policy covered
Axes and Tandem, and Tandem and Axes were each liable to pay the
portion of the damages assessed against them in the tort actions.
Lombard premised its argument on the fact that a previous
proceeding had determined that Aviva was required to respond next
after the Lombard primary policy to the liability of their joint
insured, Tandem. As Aviva's payment satisfied the
liability claim in full, Lombard argued it had no responsibility
under its excess umbrella coverage.
Grace J. agreed with Aviva and ordered judgment against
Lombard in the amount of $1,086,195.70, representing half of the
amount paid by Aviva. Lombard appealed.
Blair J.A. found a resolution of the appeal in the principles
of equitable contribution. Citing the decision of the Supreme Court
of Canada in Family Insurance Corp. v. Lombard Canada
Ltd., 2002 SCC 48,  2 S.C.R. 695, Blair J.A. outlined
the criteria for applying the doctrine between insurers:
(i) All policies concerned must comprise the same
(ii) All policies must be effected against the same
(iii) All policies must be effected by or on behalf of the
(iv) All policies must be in force at the time of the
(v) All policies must be legal contracts of
(vi) No policy must contain any stipulation by which it is
excluded from contribution.
As Blair J.A. explained, the doctrine of equitable
contribution has traditionally been applied to prevent
over-recovery by an insured with more than one insurer covering the
same risk, by requiring all insurers of the risk to share pro
rata in payment of the loss.
Having chosen the single defendant strategy in the tort
action, Lombard and Aviva were each equally obliged to respond to
the plaintiffs' claims in full. The fact that Aviva
"blinked" first and paid for the excess of the claim does
not relieve Lombard of its obligation.
Blair J.A. went on to find that Lombard's responsibility
to contribute to the damages awarded against Axes and Tandem could
be grounded in the principle of unjust enrichment. The trial judge
awarded damages against Axes and Tandem as a single tortfeasor and
the plaintiffs had the right to pursue either or both of them. Both
Axes and Tandem were obliged to pay the portion of the damages
awarded against them. When Aviva covered that obligation, it
conferred a benefit on Lombard and suffered a corresponding
deprivation. Blair J.A. concluded that there is "no reason in
law or justice" for Lombard's retention of the benefit
conferred by Aviva.
The Court concluded that Lombard was required to reimburse
Aviva for one-half of its payment to satisfy the tort claims. The
appeal was dismissed.
Canada Inc. v. American International Companies (American Home
, 2013 ONCA 395 (Laskin, Cronk and
Hoy JJ.A.), June 13, 2013
In this decision, the Court of Appeal considered whether the
Stonewall Principle should be adopted in Ontario.
This appeal arose from the multitude of claims brought in the
United States against Goodyear Canada arising from damages
allegedly sustained over many years due to exposure to asbestos
contained in materials manufactured and exported by the company.
Goodyear sued the respondents, which had issued occurrence-based
insurance policies to Goodyear for the period 1969-1980, seeking a
declaration that they are obliged to defend and indemnify it in
respect of the U.S. claims.
The central dispute between the parties concerned the
allocation of liability under the insurance policies for injuries
occurring after 1985. Goodyear claimed that due to a decision by
the insurance industry to cease underwriting risks related to
asbestos, it was unable to obtain insurance coverage at
commercially-reasonable rates in the United States from 1985
onward. At issue on a motion to determine certain interpretive
questions was how the alleged losses should be allocated, applying
the pro-rata allocation and the "continuous trigger
theory". The pro-rata allocation method and "continuous
trigger theory" provide a method to calculate how an insured
loss should be allocated during periods of insurance and
self-insurance. Goodyear relied on the US decision of Stonewall
Insurance Co. v. Asbestos Claims Management Corp., 73 F.3d
1178 (2d Cir. 1995), to support its submission that the respondents
should be held responsible for any asbestos injuries found to have
occurred after 1985. In Stonewall, the Second Circuit Court of
Appeals held insurers who had provided coverage for
asbestos-related risks prior to an industry-wide cut-off were
responsible for claims for continuing asbestos injuries after the
The motion judge disagreed, holding that Goodyear was
obligated to self-insure for any asbestos-related injury found to
have been suffered by claimants after the cut-off. Goodyear
appealed, submitting that the Stonewall Principle should
be adopted in Ontario on the grounds of fairness and contractual
interpretation. If the Stonewall Principle did not apply, the
pro rata theory of allocation might spread the monetary
value across so many years that it would not exceed Goodyear's
deductible. Goodyear would have, in effect, no
Writing for the Court of Appeal, Cronk J.A. rejected
Goodyear's contractual interpretation argument that the
coverage grants in the policies were ambiguous because they did not
address the allocation of liability where alleged losses spanned
several policy periods as may be the case with continuous asbestos
injuries. According to Cronk J.A., the language of the grants
demonstrated "a clear and unambiguous expression of the
parties' intentions" with regard to the scope of the
coverage, namely that the insurer had a duty to indemnify the
insured for losses caused by or arising out of each occurrence
during the policy period. Nothing implied an intention by the
parties to extend the insurer's indemnity obligation to
occurrences following that period. Rather, the parties expressly
agreed on time-limited liability coverage.
Cronk J.A. went on to address Goodyear's argument that
fairness necessitated the adoption of the Stonewall
Principle as a means of relieving insureds of the responsibility
for losses occurring during periods of involuntary non-coverage,
and to effect a true risk transfer between the parties. Cronk J.A.
noted that there were four fundamental problems with the notion
that the Stonewall Principle should be adopted in
First, Cronk J.A. found the Stonewall Principle to be
inconsistent with the express terms of the coverage grants, which
specified that the respondents' obligations were undertaken
with respect to occurrences that happened during the policy period.
Applying the Stonewall Principle would unjustifiably
expand the scope of the grants, requiring the respondents to
compensate parties for injuries sustained long after the expiration
of the policies, a period for which the insurers did not receive
premiums. Cronk J.A. noted that the unfairness of this result has
been acknowledged by various American courts.
Second, the fact that the Stonewall Principle has not
been universally accepted in the United States led Cronk J.A. to
conclude that the appropriateness of the Principle is
controversial, and its adoption in the United States far from
unanimous. The motion judge's reluctance to adopt it in
Ontario was supported.
Thirdly, Cronk J.A. rejected the adoption of the
Stonewall Principle on the grounds of public policy
considerations. Importation of the Principle would essentially
relieve Goodyear of its own risks in marketing products containing
asbestos. "There is no contractual foundation, or
consideration, for this deemed transfer of risk." To allow
such a transfer of risk would promote uncertainty in commercial
affairs and in the insurance market, contrary to the public
interest in stability and predictability.
Finally, Cronk J.A. also noted that the pro-rata
allocation method and the continuous trigger theory agreed upon by
the parties are themselves "judicially-conceived constructs...
designed to promote fairness." The adoption of the
Stonewall Principle in Ontario is therefore "neither
appropriate nor necessary" to achieve a fair allocation of
loss among the parties with respect to the claims.
The Court also rejected Goodyear's appeal to have its
The appeal was dismissed.
College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy
2013 ONCA 381 (Gillese, Epstein and Lauwers
JJ.A.), June 10, 2013
The retail sale of prescription drugs in Ontario is regulated
pursuant to a number of statutes concerning pharmaceuticals,
pharmacies and prescription drugs. Pursuant to its authority under
the Drug and Pharmacies Regulation Act, R.S.O. 1990, c.
H.4 and the Health Professions Procedural Code, the
Ontario College of Pharmacists, entrusted "with policing
violations of the legislation", initiated an action against
parties which, under the trade name Global Pharmacy Canada
("GPC"), market and sell generic prescription drugs
sourced in India over the Internet to consumers in the United
The College alleged that these parties, none of which are
authorized to sell prescription drugs in Ontario, were in breach of
various statutory provisions regulating the sale of prescription
drugs in Ontario, including operating a pharmacy without
accreditation and performing acts reserved to pharmacists and
accredited pharmacies. It brought an application to enjoin the
appellants from retail selling of prescription drugs from any
location in Ontario and to cease using the terms
"pharmacy", "pharmacist" and "drug"
in connection with its business.
At issue was whether GPC was indeed selling prescription
drugs, by retail, in Ontario, and whether its activities fell
within the jurisdiction of the College.
The company had recently reorganized its structure and
operations in a way it claimed would remove the jurisdiction of the
College. A new Ontario-based company RXP, ran the call centre
and GPC was sold to a Belize company which continued to operate
under the same name. GPC did not market pharmaceuticals to
Canadians or allow drugs to enter Canada. Rather, staff members who
took customer orders and processed payments were located at a call
centre in Mississauga.
The customer service representatives ensured that the orders
were filled in India and shipped directly to the United
States. In addition to the corporate restructuring, technical
measures were taken to block the sale of drugs to Canadians and
their shipment to Canadian addresses. Nonetheless, by February
2011, the website, which featured a maple leaf and Canadian flag,
still referred to the company as GPC and to its staff located in
Toronto. It continued to direct all customer interactions to its
facility in Mississauga.
Based on her view of the sales scheme, the application judge
concluded that GPC was selling prescription drugs by retail in
Ontario. She also held that there was a sufficient connection
between these activities and Ontario, such that the company fell
within the College's jurisdiction. She granted the injunction
until the company could demonstrate that it was in compliance with
the governing legislation.
Two groups of appellants, the Belize corporation carrying on
business as GPC and RXP, appealed to the Court of Appeal,
submitting that the application judge erred in both
Citing Celgene Corp. v. Canada (Attorney General),
2011 SCC 1,  1 S.C.R. 3, in which the Supreme Court held
that, in a regulatory context, words such as "place of
sale", "sold" and "selling" may not
necessarily be "given their strict commercial law
meanings," Gillese J.A. held that a purposive approach to
determining the meaning of sale was appropriate. It was the
substance, not the form, which was relevant when determining
whether the sale of prescription drugs took place in Ontario.
Gillese J.A. agreed with the application judge's finding
that, despite the restructuring, the substance of the sale
transactions, including its most critical aspects, continued to
take place through RXP, an Ontario corporation which is located in
and operates in the province. Without the staff in Mississauga, no
prescription drugs would flow from GPC to its customers.
As to the issue of jurisdiction, there was no dispute as to
the underlying principles. As the Supreme Court explained in
Unifund Assurance Co. v. Insurance Corp. of British
Columbia, 2003 SCC 40,  2 S.C.R. 63:
1. The territorial limits on the scope of provincial
legislative authority prevent the application of the law of a
province to matters not sufficiently connected to it.
2. What constitutes a "sufficient" connection
depends on the relationship among the enacting jurisdiction, the
subject matter of the legislation and the individual or entity
sought to be regulated by it.
The application judge had noted that determining whether a
sufficient connection exists is largely a contextual exercise.
Gillese J.A. noted that there was support for many of the findings
of fact which had grounded the application judge's conclusion
that there was a sufficient connection between the appellants and
Ontario such that they fell within the College's
jurisdiction. Most significant of these findings was that the
RXP facility in Mississauga housed the only staff that dealt with
Given the College's duty to protect the public interest,
Gillese J.A. rejected the appellant's claim that the College
was overreaching by assuming jurisdiction over their conduct.
Gillese J.A. clarified that the territorial limits of the
College's authority relate to the conduct that it can regulate,
not to Ontario consumers only.
The appeals were dismissed.
4. Peel Law
Association v. Pieters,
2013 ONCA 396
(Cronk, Juriansz and Pepall JJ.A.), June 13, 2013
This case arose from an alleged human rights violation
committed against two black lawyers.
The appellants were counsel in a proceeding at the Brampton
Courthouse. They were accompanied by a black articling student who,
along with one of the appellants, was wearing his hair in
dreadlocks. When the parties retired to the Peel Law Association
lawyer's lounge, which is reserved strictly for lawyers and law
students, the personal respondent, the library's administrator,
approached them and requested that they provide identification to
show that they were lawyers or law students. No one else in the
lounge was asked to produce ID.
The appellants brought applications to the Human Rights
Tribunal of Ontario ("HRTO"), alleging an infringement of
their rights under s. 1 of the Human Rights Code, R.S.O.
1990, c. H.19 to equal treatment with respect to services, goods
and facilities without discrimination because of race and
HRTO Vice-Chair Whist held that there were sufficient facts to
support a prima facie case of discrimination and shifted
the onus onto the respondents to show that the appellants' race
and colour were not factors in the librarian's conduct. He
found that "the respondents have failed to provide a credible
and rational explanation for why the personal respondent stopped to
question the applicants when she did" and inferred that her
decision to question them and the manner in which she did so
"was, in some measure, because of their race and colour".
The Vice-Chair held that the appellants' rights under s. 1 of
the Human Rights Code had been infringed.
The Divisional Court allowed the respondents' application
for judicial review. Finding that the Vice-Chair erred both in
determining that a prima facie case of discrimination had
been established and in requiring the respondents to then disprove
discrimination, the Divisional Court quashed the decision.
Writing for the Court of Appeal, Juriansz J.A. first
considered whether the Divisional Court applied the correct test
for discrimination in stating that, to prove a prima facie
case of discrimination, a claimant must prove differential
treatment, arbitrariness based on a prohibited ground, a
disadvantage and a "causal nexus" between the arbitrary
distinction and the disadvantage suffered. Noting that the term
"nexus" did not appear in the statements of the test for
discrimination found in Moore v. British Columbia
(Education), 2012 SCC 61, 351 D.L.R. (4th) 451 or
in the Shaw v. Phipps, 2012 ONCA 155, 289 O.A.C 163,
Juriansz J.A. held that it is preferable to use the words
"connection" and "factor" more commonly used in
the relevant jurisprudence. All that is required in order to meet
the test for discrimination is a connection between the ground of
discrimination and the adverse treatment, or that the prohibited
ground is a factor in the adverse treatment.
Juriansz J.A. found that the Divisional Court's use of the
modifier "causal" to "nexus" rendered the test
more stringent than what the law demands. The requirement of a
"causal nexus" between the adverse treatment and a
prohibited ground is "counter to the evolution of human rights
jurisprudence, which focuses on the discriminatory effects of
conduct, rather than on intention and direct cause." Thus, the
Divisional Court applied the incorrect test.
Turning to the issue of whether the Divisional Court erred in
finding that the Vice-Chair reversed the burden of proof, Juriansz
J.A. held that the Divisional Court failed to distinguish between
the legal burden of proof and the evidential burden.
Having found that a prima facie case existed, the
Vice-Chair correctly looked to the respondent for an
Juriansz J.A. next considered whether the Vice-Chair erred in
analyzing evidence in a compartmentalized fashion, first
considering the evidence called only by the claimant to determine
whether a prima facie case of discrimination had been
established and then considering only the evidence called by the
respondent to determine if the inference had been refuted.
Respondents' counsel argued that this approach led the
Vice-Chair to disregard important evidence and that he should have
considered all of the evidence before it at every stage of the
analysis. Juriansz J.A. rejected this notion, holding that
"[t]he only thing that matters is that at the end of the day,
the tribunal must take into consideration all the evidence".
The tribunal should be left to structure its analysis of the
evidence as it sees fit.
Juriansz J.A. noted that it is not, therefore, a matter of
whether the Vice-Chair disregarded evidence at a particular stage
of its analysis, but whether he disregarded evidence before
reaching his final conclusion. He then addressed the Divisional
Court's finding that the Vice-Chair had disregarded two items
of evidence, and held that it was "beyond doubt" that
this evidence had been considered.
Lastly, Juriansz J.A. considered whether the Vice-Chair erred
in referring to social science not in evidence. The respondents
submitted that it was improper for the Vice-Chair to do so and that
it was the sole basis upon which he found a nexus between the
adverse treatment and the appellants' race and colour. Juriansz
J.A. rejected this argument, noting that Vice-Chair cited
long-established propositions of law. As for the proposition
that "racial stereotyping will usually be the result of subtle
unconscious beliefs, biases and prejudices," the Court noted
that this had been recognized by the Court of Appeal and the
Supreme Court as a sociological fact. Juriansz J.A. went on to find
that the Vice-Chair's reference to social science evidence
addressed in Nassiah v. Peel Regional Police Services
Board, 2007 HRTO 14 (CanLII) related not to his first
inference that the librarian's decision to question the
appellants was in some measure due to their race and colour but
rather to his second inference as to the manner in which she
interacted with them.
While he agreed with the respondents that a tribunal must
exercise care in considering social science not in evidence,
Juriansz J.A. found that "social science can deepen the
understanding of interactions between individuals generally, thus
assisting the adjudication of a particular case." Moreover, no
unfairness resulted from the Vice-Chair's consideration of
Juriansz J.A. wrote that the question of discrimination turned
on whether the Vice-Chair was satisfied that the appellants'
race and colour were factors in their adverse treatment. There was
ample evidence, much of it supported by the evidence of an
independent witness, to ground the inference that the
appellants' race and colour were indeed factors in the
librarian's questioning of them. The Vice-Chair's
conclusion fell within the range of reasonable outcomes.
The Court allowed the appeal, set aside the decision of the
Divisional Court and reinstated the decision of the
5. Williams-Sonoma Inc. et al. v.
Oxford Properties Group Inc. et al.
, 2013 ONCA 441
(Weiler, Gillese and Hoy JJ.A.), June 26, 2013
In this decision, the Court of Appeal considered the doctrine
of privity of contract and whether a third party could benefit from
a waiver of liability.
The appellants are tenants at Toronto's Yorkdale shopping
centre. Their landlord contracted with the respondent independent
contractor, Ellis Don Corporation, to perform construction work at
the mall. The tenants' premises suffered an alleged seven
million dollars in water damage when a vandal opened a fire hose in
the area used by the respondent.
The lease between the appellants and the landlord required
that the appellants have insurance covering water damage. It also
contained a provision whereby the tenant waived all claims against
the landlord and against those for whom the landlord was "in
law responsible" with respect to occurrences for which the
tenant was required to be insured.
The tenants sued the contractor, claiming that it breached
common law and statutory duties owed them. The contractor brought a
motion for summary judgment, submitting that the landlord was
"in law responsible" for it and that it therefore enjoyed
the benefit of the limitation of liability provision in the lease.
The motion judge agreed, finding that the tenants were barred from
bringing their claim. The tenants appealed.
Writing for the Court of Appeal, Hoy J.A. noted that the
Supreme Court has recognized that the doctrine of privity of
contract can be relaxed so that a third party can enforce
contractual provisions made for its benefit. In London
Drugs Ltd. v. Kuhne & Nagel Ltd.,  3 S.C.R. 299, the
Supreme Court held that an employee was entitled to benefit from a
limitation of liability clause found in a contract between his
employer and a plaintiff, provided certain conditions were met.
Later, in Fraser River Pile & Dredge Ltd. v. Can-Dive
Services Ltd.  3 S.C.R. 108, the Court clarified that
the London Drugs approach was not limited to
employer-employee relationships, and re-framed the test as
1. Did the parties to the contract intend to extend the
benefit in question to the third party seeking to rely on the
2. Are the activities performed by the third party seeking to
rely on the contractual provision the very activities contemplated
as coming within the scope of the contract, as determined by
reference to the intentions of the parties?
Hoy J.A. found that the lease provided the parties to whom the
waiver of subrogation was extended were those for whom the landlord
was "in law responsible". The inquiry would therefore
begin with a consideration of whether the respondent contractor was
such a person.
Noting that the exercise should be carried out with reference
to the ordinary principles of contractual interpretation, Hoy J.A.
first considered the plain meaning of the words "in law
responsible" and found that its meaning was not limited to
responsibility arising through vicarious liability but included
persons for whom it is "liable, accountable in law, or is
legally responsible". Hoy J.A. concluded that the landlord was
"in law responsible" for the respondent within the
meaning of the lease as the landlord had become legally responsible
for the actions of the contractor through an indemnity provision in
Turning to the Fraser test, Hoy J.A. explained that
because the respondent was a person for whom the landlord was
"in law responsible" pursuant to the lease provision, the
parties did intend the benefit of that provision to extend to the
respondent. Therefore, the first prong of the Fraser test
was met. With respect to the second part of the test, Hoy J.A.
found that the activities performed by the respondent fell within
the scope of the lease provision because contractor services were
specifically contemplated by the lease.
Holy J.A. concluded that the respondent met the Fraser test
and was entitled to enforce the limitation of liability provision
of the lease as a defence to the tenants' claim.
The appeal was dismissed.