The Court dismissed the Insured’s action in which it sought reimbursement from one of its umbrella Insurers of funds paid on its behalf by another umbrella Insurer in a claim settled on a reservation of rights basis. The evidence demonstrated that an endorsement to the umbrella policy of insurance issued by the Defendant came into effect on an occurrence rather than on a claims-made basis and the Defendant was therefore not required to respond to the claim settled by the other umbrella Insurer.

Rio Algom v. Liberty Mutual Insurance Co. (c.o.b. Liberty International Canada), [2006] O.J. No. 329 Ontario Superior Court of Justice

This was an action by Rio Algom (“Rio”) against Liberty Mutual Insurance Co. (“Liberty”) in which Rio sought to recover from Liberty monies paid on its behalf in the settlement of an action against it. Rio was insured under an umbrella policy of insurance issued to it by Liberty. AIG, another of Rio’s Insurers, funded the settlement on a reservation of rights basis and Rio sought to recover from Liberty monies paid on its behalf in the settlement of the action against it. It was Rio’s position that the insurance policy issued by Liberty was the one that ought to have responded to the claim against Rio.

Both Insurers, AIG and Liberty, provided umbrella coverage to Rio. The AIG policy was in force in May 1995 to May 1996. The Liberty policy came into force in May 1996 and continued for a number of years. The underlying claim arose when an employee of Rio’s injured himself while in the course of employment in December 1995. The Liberty policy was in force in 1997 when the claim was eventually made. The main issue to be decided was which Insurer was obligated to respond to the claim which depended on whether the coverage pursuant to the applicable endorsement was provided on a claims-made or occurrence basis.

It was Rio’s position that the umbrella coverage issued to it by Liberty was written on a claims-made basis. Rio argued there were a number of reasons for this: the policy was stated to be on a claims-made basis and the wording of the endorsement was ineffective in changing the trigger of coverage to occurrence based; the reasonable expectations of Rio were inconsistent with the endorsement being written on an occurrence basis; and the wording of the policy as a whole was inconsistent with the endorsement being on an occurrence basis.

The Court failed to find any ambiguity in the wording of the endorsement which provided that for the coverage to apply there must be underlying insurance “at the time of injury” as set out in the schedule of underlying insurance. The policy was umbrella to underlying insurance in effect at the same time and the endorsement could not be given effect other than on an occurrence basis.

In the result, the Court found that the endorsement was triggered by an occurrence and not by the making of a claim. The AIG umbrella policy was therefore in effect when Rio’s employee was injured and AIG was required to respond to the employee’s claim. Accordingly, Rio was not entitled to reimbursement, on behalf of AIG, of the funds paid by AIG towards the settlement of that claim and Rio’s action was dismissed.

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