In the case of Vale Canada Limited v Royal & Sun Alliance Insurance Company of Canada, 2022 ONCA 862,1 the Ontario Court of Appeal dealt with jurisdiction issues in the context of an international insurance coverage dispute. The Court had to decide whether:
- The Ontario Superior Court of Justice had jurisdiction over actions brought by an insured and its primary insurer against the insured's excess insurers; and
- It was more appropriate for the Superior Court of Justice or the Supreme Court of the State of New York to hear the dispute.
The Court of Appeal held that the Ontario Superior Court of Justice had jurisdiction over the actions, and that New York was not a more appropriate forum for the dispute. In doing so, the Court held that comprehensive general liability insurers that underwrite primary or excess coverage for risks located in Ontario connect themselves to Ontario for jurisdictional purposes and must defend claims arising out of those risks in Ontario.
Vale Canada Limited ("Vale"), a Canadian mining company, had dozens of insurance policies with 24 primary and excess insurers to cover its worldwide operations. Vale incurred numerous environmental expenditures at its sites around the world, with 19 affected sites in Ontario. Vale's main costs and losses in Ontario stemmed from six major class actions related to Vale's operations in Port Colborne and Sudbury, Ont. Vale sought the costs of defence and indemnity related to these actions from its insurers.
Vale and its insurers tried to negotiate over the scope of coverage. Negotiations fell apart, and one of Vale's excess insurers sued Vale in the Supreme Court of the State of New York.
Vale then brought two coverage actions against its insurers in Ontario. In a third action, one of Vale's primary insurers sued all of Vale's insurers in Ontario to determine the respective shares of indemnity among Vale's insurers.
Several of the insurers moved to dismiss or stay the Ontario action on jurisdiction and forum non conveniens grounds. In New York, Vale and one of its primary insurers moved to stay the New York action on forum non conveniens grounds.
On Jan. 4, 2022, Justice Myers of the Ontario Superior Court of Justice held that Ontario had jurisdiction over the Ontario actions, and that New York was not a more appropriate forum for the actions.
The insurers and Vale appealed Justice Myers' decision.
Whether a court has jurisdiction over a case essentially asks the question of whether the court may properly hear a case that involves foreign parties or foreign issues. Canadian courts use the "real and substantial connection" test to determine whether a court has jurisdiction over a claim. The purpose of the "real and substantial connection test" is to identify a link between the relevant province and the subject matter of the litigation or between the province and the defendant.2 In Club Resorts Ltd v Van Breda3, the Supreme Court of Canada identified four presumptive connecting factors that create jurisdiction in tort claims:
- The defendant is domiciled or resident in the province;
- The defendant carries on business in the province;
- The tort was committed in the province; and
- A contract connected with the dispute was made in the province.4
If one of these four factors is present, then the court will assume jurisdiction.5 Although the Supreme Court originally created this test for tort claims, courts have also used it in breach of contract claims.6
After a court decides it has jurisdiction, the court may still decline to take up the action if it decides there is another "clearly more appropriate" forum. This is called the doctrine of forum non conveniens. Factors for assessing forum non conveniens include:
- the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum;
- the law to be applied to issues in the proceeding;
- the desirability of avoiding multiplicity of legal proceedings;
- the desirability of avoiding conflicting decisions in different courts;
- the enforcement of an eventual judgment;
- the fair and efficient working of the Canadian legal system as a whole;
- fairness to the parties;
- juridical advantage; and
- whether the parties are forum shopping.7
Justice Myers held that the Ontario Superior Court of Justice had jurisdiction over almost all of the claims against the insurers because Vale's insurers were carrying on a business in Ontario. Justice Myers held that the Court lacked jurisdiction over one excess insurer because it was not carrying on a business in Ontario.
Justice Myers also decided that Ontario was not forum non conveniens and that New York was not a clearly more appropriate forum.
Several of the defendant insurers argued that Justice Myers erred. One insurer argued that it was not appropriate for Justice Myers to use the factor of carrying on a business in a contract dispute. Another insurer argued that for a defendant to fit into the factor of carrying on a business in Ontario, it must have been carrying on a business at the time the plaintiff launces their action.
Even if it was appropriate to consider the "carrying on business" factor in contract cases, the insurers argued that they were not carrying on business in Ontario because they had negotiated and delivered Vale's insurance policies in New York. Also, the insurers argued that they could not be carrying on business in Ontario because several of them were not licensed or registered in Ontario to conduct insurance business either today or in the past.
The Court of Appeal largely agreed with Justice Myers. The Van Breda factor of "carrying on business" in Ontario was an appropriate presumptive connecting factor for contract claims. Carrying on business in Ontario could link the subject matter of the litigation and/or the defendant to Ontario, depending on the relationship between the business activities, the contract, and what the contract and claim were about.8
The Court of Appeal also held there can be jurisdiction over the defendant if the defendant was carrying on business in Ontario at the time they entered the contract with the plaintiff, or at the time they were to perform their obligations under the contract. The Court of Appeal disagreed that the defendant had to be carrying on business in Ontario at the time the plaintiff commenced their action.9
The Court of Appeal then considered what constituted carrying on a business in the insurance context. The Court agreed with Justice Myers that whether the insurers were registered and/or licensed in Canada and Ontario was relevant, but not determinative, of whether the Court had jurisdiction. More importantly, there could be jurisdiction depending on the location of the object of the insurance and the insurers' performance under it.10
In this case, the insurance policies created long-term relationships between the parties. The policies were occurrence based and created potential for liabilities long into the future. Though the policies insured Vale anywhere in the world, all of the insurers knew that Vale would receive and act on the policies in Ontario, that Vale's global insurance program insured an Ontario-based company with most of its mining assets in Ontario, and that the policies related to Ontario liabilities.11
The Court of Appeal disagreed with Justice Myers that the Superior Court of Justice did not have jurisdiction over claims against one of the excess insurers. The Court of Appeal held that this insurer, like the other insurers, was carrying on business in Ontario because it knew or had to have known that it was insuring liabilities arising out of Ontario operations.12
The Court of Appeal also agreed with Justice Myers that Ontario was not forum non conveniens. The fundamentals of the underlying case were based in Ontario. Almost all of the relevant information, documents, and witnesses were in Ontario. There was no reason why the Superior Court of Justice could not apply Ontario and New York law in this case. While it was desirable to avoid having two different court proceedings (one in Ontario and one in New York), it was important to ensure that the actions were tried in the jurisdiction with the closest connection to the actions. Finally, the Court held that it was fair that a comprehensive general liability insurer that underwrites primary or excess insurance coverage for Ontario risks carries on business in Ontario for jurisdictional purposes and thus commits itself to defending claims in Ontario.
The key takeaways from this decision are:
- Liability insurers connect themselves to Ontario by underwriting primary or excess insurance coverage for Ontario based risks. Ontario courts will have jurisdiction over claims against these insurers.
- Ontario courts may use Van Breda's presumptive connecting factor of "carrying on business" to determine jurisdiction in contract cases.
- If a court finds that a defendant in a contract case carries on business in Ontario, then the court will have jurisdiction over the defendant. However, the court will still have to decide whether Ontario is forum non conveniens.
1. Vale Canada Limited v Royal & Sun Alliance Insurance Company of Canada, 2022 ONCA 862 ["Vale"..
2. Vale at para 38.
3. Club Resorts Ltd v Van Breda, 2012 SCC 17 ["Van Breda"..
4. Van Breda at para 90.
5. Vale at para 39.
6. Vale at para 46.
7. Vale at paras 153-156.
8. Vale at paras 76-78.
9. Vale at paras 81-86.
10. Vale at para 110.
11. Vale at paras 111-113.
12. Vale at para 143.
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