Insurance law – Commercial general liability insurance – Intentional acts – Exclusions – Duty to defend – Duties and liabilities of insurer – Class actions
Ontario v. St. Paul Fire and Marine Insurance Co.,  O.J. No. 1170, 2023 ONCA 173, Ontario Court of Appeal, March 15, 2023, D. Paciocco, J.C. George and L.G. Favreau JJ.A.
The insured, the province of Ontario, is a defendant in a $300,000,000 class action arising from delays in the operation of Ontario’s bail release system. Ontario provided notice of the claim to its insurer, which had issued two commercial general liability policies to Ontario during the period of time that is the subject of the claim. The first policy covered the period of March 31, 1998 to March 31, 2003 and included coverage of $20,000,000 per occurrence. The second policy operated from March 31, 2003 to March 31, 2005 and included coverage of $15,000,000 per occurrence. Ontario was self-insured for the first $5,000,000.
Ontario retained Crown Law Office – Civil, a branch of the Ministry of Attorney General, to defend the underlying action and kept the insurer apprised of the progress of the litigation. A motions judge denied certification of the underlying action. By then, Ontario had expended approximately $300,000 worth of legal services defending the claim. After the motions judge’s decision was released, the insurer advised Ontario that it had concluded there was no available coverage.
Ontario brought an application for a declaration that the insurer had a duty to defend it in the underlying class action. The motions judge dismissed the application finding the insurer did not have a duty to defend under either policy. The motions judge concluded the true nature of the claims pleaded was that Ontario had engaged in intentional acts that caused harm and Ontario had knowledge that harm would flow from these intentional acts. The motions judge found the negligence claim was derivative.
Ontario appealed, advancing a number of grounds of appeal. The Court of Appeal found no error in the motions judge’s interpretation of the first policy. However, the Court of Appeal held that the motions judge had erred in interpreting the second policy. Specifically, there was a reasonable possibility of coverage for personal injury caused by an occurrence during the policy period. However, the Court of Appeal agreed with the motions judge that because Ontario had a self-insured retention of $500,000 under the second policy, and because Ontario had only expended $300,000 in costs at the time of the application, the insurer’s obligation to indemnify Ontario for its defence costs was not triggered.
This case was digested by Cameron B. Elder, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Cameron B. Elder at email@example.com.
To stay current with the new case law and emerging legal issues in this area, subscribe here.