An insured’s homeowner’s policy was held not to operate as an excess liability policy, obligating the insurer to contribute to defence costs and settlement respecting a lawsuit arising out of a fall that occurred after hours at the insured’s business premises.
Insurance law – Homeowner’s insurance – Bodily injury – Corporate capacity – Excess liability – Costs
Aviva Insurance Company v. Intact Insurance Company,  OJ No 78, 2018 ONSC 238, Ontario Superior Court of Justice, January 9, 2018, Kristjanson J.
An individual suffered personal injuries when he fell off a ladder during a private, after-hours jam session at Lakeland Engineering’s (“Lakeland”) premises which were owned by 106220 Ontario Inc. (“106220”). The principal of Lakeland Engineering and 106220 was Sanjay Patel. The individual filed a lawsuit against Lakeland, 106220, and Mr. Patel.
There were three insurers potentially available to indemnify Mr. Patel in the underlying lawsuit: (i) Royal Sun Alliance (“RSA”), which insured Lakeland as well as its principal, Mr. Patel, but only while he was acting in a corporate capacity for Lakeland; (ii) Aviva Insurance Company (“Aviva”), which insured 106220 as well as its principal, Mr. Patel, but only while he was acting in a corporate capacity for 106220; and (iii) Intact Insurance Company (“Intact”), which insured Mr. Patel through his personal homeowner’s policy. Only RSA and Aviva offered a defence. Each of the three policies contained an “other insurance” clause. Intact’s clause provided that the policy would be considered excess if there was “other insurance which applied to a loss or claim, or would have applied if this policy did not exist”. The underlying claim was settled with an allocation of liability 1/3 to the engineering firm, 1/3 to the building owner, and 1/3 to Mr. Patel personally. Intact did not take part in the settlement.
Aviva brought an application to compel Intact to contribute to costs incurred in defending and settling the liability claim against Mr. Patel. The court found Aviva’s and Intact’s policies were not overlapping but complementary policies, and as such, the Intact policy could never sit as excess coverage over the Aviva policy. As a result, Intact wrongfully failed to provide a defence and failed to indemnify Mr. Patel for loss caused by him in his personal capacity. It was held that the settlement reached between the parties bound Intact, and, on the basis of unjust enrichment, Intact was obligated to contribute to the defence and settlement of the lawsuit.
This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at email@example.com.