The action arose after the plaintiff, a pharmaceutical company,
entered into an agreement (the "Agreement") with one of
the defendants, UPS SCS ("UPS"), pursuant to which UPS
was to store vaccines belonging to the plaintiff in a
temperature-controlled environment. Unfortunately, unbeknownst to
UPS employees, the cooler in which the vaccines were being stored
malfunctioned, and the vaccines, after spending a weekend in an
excessively cool environment, were unsellable. The plaintiff's
insurer brought a subrogated claim for damages of $8,259,934.48
against UPS and the companies which had manufactured and maintained
the cooling system. All defendants brought a motion for summary
judgment which was granted by the Ontario Superior Court of
Under the terms of the Agreement, the plaintiff agreed to insure
its stored goods, including the vaccines, against all risk of loss
and was required to insure the full replacement cost of the
vaccines ( the "Covenant to Insure"). The Court
noted that the state of the law regarding covenants to insure was
clear: "The Ontario Court of Appeal has stated in an
unqualified way that, '[a] contractual undertaking by one party
to secure property insurance operates in effect as an assumption by
that party of the risk of loss or damage caused by the peril to be
insured against.': Madison Developments Ltd.v. Plan Electric Co. (1997) 36 O.R. (3d) 80."
Accordingly, the legal effect of the Covenant to Insure was that
UPS enjoyed "tort immunity." That is, where the plaintiff
agreed to obtain all-risk property insurance against damage to the
stored goods, the plaintiff could not sue UPS for a loss of those
goods caused by UPS's or its employees' negligence. Any
consequential losses resulting from the damage to the vaccines were
likewise covered by the Covenant to Insure. It therefore provided
a complete answer to the plaintiff's action.
The Court rejected the plaintiff's argument that the fact
that the Agreement contained a limitation of liability clause
capping UPS's liability at $100,000 meant that UPS could be
held liable for its negligence. The Court stated that the effect of
the Covenant to Insure was to displace the risk that would
otherwise be on UPS. Accordingly, UPS could not be responsible for
the plaintiff's loss beyond its limited obligation to pay
$100,000 (which it had done already).
The Court likewise rejected the plaintiff's argument that
because the parties had mutual insurance obligations, UPS should be
responsible for the damage to the vaccines. While UPS had agreed to
obtain liability insurance, this was to cover the risk of damage
and injury to third parties. The plaintiff, by contrast, had agreed
to obtain general liability insurance, covering damage to its own
property. The nature and purpose of the two kinds of insurance were
The claims against the other three defendants were also
dismissed. Since they were all alleged to have played a role in the
failure of the cooling or monitoring system in the warehouse, they
had an "identity of interest" with UPS and were entitled
to the benefit of the Covenant to Insure.
This decision highlights the importance of considering the
potential availability of summary judgment in circumstances where
the state of the law is clear and the scope of contentious factual
issues may be limited.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).