The Ontario Court of Appeal closed out
2015 with its decision in Carneiro et al and Regional
Municipality of Durham et al and Zurich Insurance Company
Ltd., providing important analysis of a winter maintenance
contractor's duty to defend a municipality in personal injury
claims arising from wintery conditions.
On February 8, 2013, Antonio Carneiro Jr. died in a motor
vehicle accident in Durham Region during a snowstorm. Mr.
Carneiro's surviving family members brought a claim against the
driver and owner of the third party vehicle, as well as the
Regional Municipality of Durham ("Durham Region") and its
roadway winter maintenance contractor ("the Contractor").
The allegations against Durham Region and the Contractor were
identical and broad in many respects relating to the maintenance,
plowing and salting of the roadway. The claim also made independent
design allegations as to the roadway and failure to warn motorists
of the dangerous conditions along the roadway as against Durham
Under the contract, the Contractor was required to obtain a
policy of insurance and to name Durham Region as an additional
insured. While the contract expressly limited the Contractor's
indemnity obligations to Durham Region by excluding indemnity for
damages caused by the negligence of Durham Region or its employees,
the policy contained an unqualified promise to defend Durham Region
for actions covered by the policy.
At first instance, Justice Lemons dismissed Durham Region's
motion seeking a defence from the Contractor's insurer, ruling
that the insurer should only be required to defend Durham Region
with respect to the insured claims (i.e. the covered claims). In
reviewing the pleadings, Justice Lemons could not discern the
"true nature" of the action, noting the broad allegations
and separate causes of action relating to road design and the
failure to warn motorists (i.e. uncovered claims) were clearly not
something for which the Contractor was insured.
The Court of Appeal allowed Durham Region's appeal, and
ordered the insurer to provide Durham Region with independent
counsel, at the insurer's expense, to defend the entire action.
The Court of Appeal had no difficulty discerning the true nature of
the claim, which was that the deceased lost control of his car
because it skidded on an icy and snowy road. The pleadings related
directly to the Contractor's obligations under the contract,
and thus engaged the insurer's obligation to defend Durham
Region. As there were no exclusions in the policy regarding the
defence of Durham Region with respect to covered versus uncovered
claims, the insurer was required to defend the claim in its
entirety. At the end of the proceedings, the insurer was entitled
to seek an apportionment of the defence costs, to the extent they
dealt solely with uncovered claims, or exceeded the reasonable
costs associated with the defence of the covered claims.
The Court of Appeal ended with the comment that the duty to
defend issue must be determined expeditiously, on the basis of the
allegations in the underlying litigation, read with the insurance
coverage, noting that the failure to do so in the present matter
had increased the costs of the litigation and has caused delay to
Carneiro serves as a reminder to municipalities and
their contractors and insurers to understand both what has been
contracted for by way of winter maintenance obligations, as well as
the insurance coverage afforded and defence obligations in the
event of a civil action for personal injury. Clarity and mutual
understanding of these obligations may assist both to avoid the
necessity of undue litigation and costs. And, should these issues
not be resolvable, to promptly bring the issues before the
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