Pursuant to s. 530 of the Alberta Insurance Act, an Insured was entitled to enforce an unsatisfied judgment obtained against two employees of a company insured by the Respondent Insurer because the Insurer was estopped from denying that the employees were Insured persons under the policy

McConnell v. Aviva Insurance Co. of Canada Ltd., [2006] A.J. No. 81 Alberta Court of Queen’s Bench

This was an Application brought by an Insured pursuant to s. 530 of the Alberta Insurance Act, R.S.A. 2000, c.I-3, to enforce a judgment obtained against two employees of a company insured under a policy of cargo insurance (the “Policy”) with the Respondent Insurer Aviva Insurance Co. (“Aviva”). The Applicant argued that because the employees failed to satisfy her judgment, she was entitled to recover the judgment directly against the Insurer. While the employees were not named as Insured persons under the Policy, the Applicant argued that the Respondent represented that the employees were Insured persons under the policy and was therefore estopped from denying this.

The underlying facts were that the Applicant hired the Respondent to move her property and that during the move a fire broke out, destroying the property. She brought an action against the moving company and the two employees involved in transporting her goods (the “Fire Action”). Neither of the employees was ever served with the Statement of Claim nor did they attend Examinations for Discovery. Consequently, judgment was awarded against the two employees. However, a provision was included in the resulting Order that the moving company was not precluded from defending negligence allegations against it and that the matter of vicarious liability would be open for determination by the trial judge. The judgments remained unsatisfied.

On this Application, the Court held that because the moving company was the only named Insured and there was no ambiguity in the Policy, the employees were not Insured persons under the Cargo Insurance Policy. However, the Insurer was precluded from denying that the employees were Insured persons by the doctrine of estoppel by representation. This was because, while only one of the employees was aware of the litigation and the Insurer’s involvement, that employee was induced by the Insurer’s words and actions to believe that he was insured and that the Insurer would take care of his interests. He was presumed to have acted in reliance on this belief and he suffered prejudice as a result in that judgment had been granted against him.

The Court also found that the Insurer was not entitled to go behind the judgment granted against the Insured employee and defend his liability on the merits. The Applicant was therefore entitled to judgment against the Insurer.

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