A Broker Can Crossclaim Against an Insurer

A broker can crossclaim against an insurer where a declaration on the issue of coverage could provide the broker with a complete defence.

JBI v. ACE Ina Insurance, [2014] O.J. No. 2615, May 30, 2014, Ontario Superior Court of Justice, Master J. Haberman

Brokers sought leave to amend their statement of defence to add a crossclaim against a defendant insurer. The insured plaintiff brought an action against its insurer and brokers claiming the insurer was obligated to provide coverage as a result of a class action and Securities Exchange Commission (“SEC”) proceedings or, in the alternative, the brokers were liable for failing to ensure the insured had appropriate insurance coverage. The insurer defended the action by relying on an exclusion clause in the policy. The brokers defended the claim on the basis that they had acted appropriately and diligently. In the original pleadings, the brokers made no assertion that coverage had been wrongfully withheld. After the defences were filed, the insured and the insurer entered into a settlement agreement.

After the settlement agreement between the insured and the insurer, the brokers applied to amend their statement of defence to add a crossclaim against the insurer. In the crossclaim, the brokers sought a declaration that the insurer was liable to defend and indemnify the insured for both the class action and SEC proceedings. The insured opposed the amendment on the grounds that there was no longer any lis between it and its insurer. The insured also argued that the motion should fail on the basis that there was no cause of action between the brokers and the insurer.

The court held there is no requirement that one party asserting a crossclaim against the other must have an independent cause of action. In the circumstances, the brokers had met the test for seeking declaratory relief by seeking a declaration regarding coverage in their crossclaim. The court agreed with the brokers that as the claim against them was framed as alternative relief, a declaration that there was coverage against the insurer would provide them with a full defence to the action. Accordingly, the issue of coverage between the insurer and the insured was a “real issue” raised and put the brokers in a “shared legal relationship” with the insurer.

This case was digested by Djuna M. Field and edited by David W. Pilley of Harper Grey LLP.

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