Whether an insurance company has acted in good faith is a genuine issue for trial and not suitable for summary dismissal

Plaintiff Surety brought a motion for summary judgment against the Defendant Construction Companies. The Defendants alleged bad faith in handling the claims. The motion was dismissed, the Court finding a genuine issue existed for trial.

Zurich Insurance Co. v. Paveco Road Builders Corp., [2009] O.J. No. 1211, Ontario Superior Court of Justice, March 23, 2009, T.R. Lederer J.

The Plaintiff Insurance Company brought a motion for summary judgment. The Plaintiff was the surety in respect of bonds issued by the Defendant Construction Companies. The Defendants had agreed to indemnify the Plaintiff for any losses or payments under the bonds. The Plaintiff brought an action to enforce its rights under its Indemnity Contract with the Defendants when the Defendants failed to make payments pursuant to that Contract. The Defendants questioned the good faith of the Plaintiff in handling certain claims and on the basis that it refused to honor the Indemnity Contract. The Plaintiff argued that there was no evidence to support the argument that the Plaintiff or its Agent had acted in bad faith.

The Court dismissed the Plaintiff’s motion. The Court found that the question of whether the Plaintiff acted in good faith was a genuine issue for trial. The fundamental question was whether the Surety acted with an absence of good faith in processing claims made and bonds it had executed were called on. The Court found that in order to answer this question, it would be necessary to look beyond the complaints made by the individual Defendant and examine whether the actions of the Surety suggested the possibility of an absence of good faith. The Court found that the nature of the question exacerbated the difficulty that counsel for the Plaintiff confronted on this motion. The Court found that it is likely that the case would depend on inferences to be drawn from the actions of the Plaintiff Surety. The Court found that the questions raised by counsel for the Defendants were enough to suggest that a genuine issue for trial exists.

This case was originally summarized by Cameron B. Elder and originally edited by David W. Pilley.

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