An insurer has carriage of his action even when the largest component of the claim has been subrogated to his insurer

Insured which advanced claim for both uninsured loss and insured loss in subrogated claim was allowed to have carriage and control of action.

Zurich Insurance Co. v. Ison T.H. Auto Sales Inc., [2011] O.J. No. 4720, October 25, 2011, Ontario Court of Appeal, J.C. MacPherson, H.S. LaForme and G.J. Epstein JJ.A.

This appeal involved a dispute between an insurer and an insured following a large loss caused by a fire and explosion at an apartment building in Toronto. The insurer paid out $1.1 million to the insured. The insured claimed that it had an additional unisured loss of $700,000. The insured commenced an action against the alleged wrongdoer and included in the action both its claim for the uninsured loss and the insurer’s subrogated claim.

The dispute between the insurer and the insured subsequently arose with respect to the carriage and control of the action. The insurer argued that it was entitled to have carriage and control of the action pursuant to the subrogation clause in the policy. Alternatively, it submitted that it was entitled to have meaningful participation in the action and full control of its subrogated claim except on issues of liability common to both parties. Finally, the insurer argued that the insured breached its duty of utmost good faith by barring the attendance of the insurer’s counsel at the examinations for discovery in the action.

The dispute was heard by an application judge at the Superior Court who ruled in favour of the insured. The Court of Appeal upheld the application judge’s decision and adopted his reasons.

This case was originally digested by Cameron B. Elder and originally edited by David W. Pilley of Harper Grey LLP.

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