An insurer cannot subrogate against an insured, even if the insured is responsible for the loss

A condominium developer appealed from a decision that their Insurer could bring a subrogated action against them. The Court of Appeal allowed the appeal, and held that the Insurer had no subrogation rights against the Insured.

Condominium Corp. No. 9813678 v. Statesman Corp., [2007] A.J. No. 695, Alberta Court of Appeal, J. Côté, E. Picard and M. Paperny JJ.A., June 28, 2007

A condominium development was being built in four stages: A, B, C, and D. The Insured was the developer, controller, manager, and interim board of Stage C. The Insured also owned one residential unit and one parking space of that stage.

The condominium development was damaged in a fire allegedly started by a subcontractor, for whom the Insurer argued the Insured was vicariously liable. The Insurer paid out the full fire loss, and then sued the Insured to recover over $25,000,000 of that payment.

The Court noted that the type of insurance at issue was fire or all risk. This type of insurance is no-fault. The Court also noted that the law is well settled that the Insurer has no subrogation rights against an Insured no matter how negligent the Insured was. The Court found that departure from the usual rule against subrogation was unwarranted and would open a floodgate to excess litigation.

This case was originally summarized by Sarah Swan and originally edited by David W. Pilley.

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