Fall 2020 – Newsletter

By Brian Sunohara

Many contracts call for one company to add another company as an additional insured on a policy of insurance. This is common in the construction industry. It is also common in several other circumstances. For example, a shopping centre owner may require its security contractor and maintenance contractor to add the owner as an additional insured.

Usually, the insurance policy covers the owner’s liability “arising out of the operations” of the contractor.

Purpose of Additional Insured Endorsement

In Sky Clean Energy Ltd. (Sky Solar (Canada) Ltd.) v. Economical Mutual Insurance Company, 2020 ONCA 558 (”Sky Clean”), the Ontario Court of Appeal noted that the inclusion of the owner under the contractor’s commercial general liability policy is an efficient and cost-effective way of allocating risks that arise out of the contractor’s operations under the contract.

If a claim arises, the owner can claim a defence and indemnity under the contractor’s policy, eliminating the need to claim under its own liability insurance policy.

Remedies for Insufficient Coverage

Despite the wording of a contract between the owner and a contractor, the language of the insurance policy governs.

In Sky Clean, the Court of Appeal stated that, if the coverage obtained by the contractor is not as broad as what the contract called for, the owner’s remedy may be against the contractor, either for indemnity under the contract or for breach of the contractual promise to obtain the specified coverage.

The Court of Appeal indicated that an owner who expects to be an additional insured should obtain a copy of the insurance policy and the additional insured endorsement, not just the certificate of insurance, to ensure that the appropriate coverage is in place.

Arising Out of the Operations

One frequent area of contention is whether a claim against an owner arose out of the operations of the contractor.

Fault on the part of the contractor is not required for coverage to the owner to be engaged, unless specified in the insurance policy. However, there must be a sufficient connection between the claim in question and the contractor’s operations.

In Sky Clean, the Court of Appeal stated that the phrase “arising out of the operations” requires more than a “but for” connection between the liability of the additional insured and the operations of the named insured. A “but for” connection is necessary but is not sufficient. There must be an unbroken chain of causation. Further, the connection cannot be “merely incidental or fortuitous”.

In addition, the word “operations” does not necessarily imply an active role by the named insured (contractor) in the creation of the liability event. “Operations” includes the creation of a situation or circumstance that is connected in some way to the alleged liability.

The question that must be asked is: “why did the additional insured’s liability arise?”

For example, the Court of Appeal referred to a case where the plaintiff alleged that she slipped on a wet floor at a grocery store. The store owner had contracted with a janitorial company to maintain the floor. The store owner was added as an additional insured on the contractor’s insurance policy, but “only with respect to liability arising out of the operations of the Named Insured”.

The factual allegations of negligence against the store owner related to unsafe conditions left by the floor cleaning operators. Since the store owner’s liability resulted from the contractor’s alleged failure to perform its contractual obligations, the insurer of the janitorial company was required to defend the store owner.

Therefore, at the duty to defend stage, in examining the pleadings, one has to consider:

• Is there at least a “but for” connection between the allegations of negligence against the additional insured and the operations of the named insured? In other words, but for the operations of the contractor, would the allegations of negligence against the owner have been made?
• Is the connection more than merely incidental or fortuitous?
• Does the claim allege an unbroken chain of causation, or is there an allegation of an intervening event that is outside the scope of the contractor’s operations?

It should also be noted that an insurer has a duty to defend where there is a “mere possibility” that the true nature of the pleaded claim, if proven at trial, falls within coverage and would trigger the insurer’s duty to indemnify: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33.

Conclusion

An owner who is added as an additional insured under a contractor’s insurance policy should obtain and review the insurance policy and the additional insured endorsement to ensure that the contractor obtained proper coverage as required by the contract.

If the contractor obtained coverage that is not as broad as what the contract called for, then the owner may have a remedy against the contractor for indemnity under the contract or for breach of contract.

Many insurance policies will cover an additional insured for liability “arising out of the operations” of the named insured. In determining whether the additional insured is entitled to coverage, the key question to ask is: why did the additional insured’s liability arise?

A ”but for” connection between the liability of the additional insured and the operations of the named insured is required, but is not sufficient. There has to be an unbroken chain of causation and a connection that is more than “merely incidental or fortuitous”.

Therefore, if there is only a very tenuous connection between the alleged liability of the owner and the operations of the contractor, coverage may not be available to the owner from the contractor’s insurer.

However, at the duty to defend stage, the test is whether there is a mere possibility that the claim falls within the insurance policy, based on the pleadings.

As a result, in many cases, the insurer of the contractor will have a duty to defend the owner, and a closer examination of whether the owner’s liability actually arose out of the contractor’s operations, and whether there is a duty to indemnify, has to be left for trial or another hearing in which factual determinations on causation are made.

By Colleen Mackeigan

Introduction

The Province of Ontario has been considering abolishing jury trials for civil matters, although no official decision has been announced. However, the closure of the Ontario courts due to COVID-19 and the impact of same on the legal system has potentially fast-tracked the end of juries.

This is concerning. The Supreme Court of Canada has stated that the “right to trial by jury is a substantive right of great importance of which a party ought not to be deprived except for cogent reasons”.[1]

As some regions, including Toronto, prepare to begin civil jury trials this fall, the majority of regions have determined that civil jury trials will not proceed for the foreseeable future. In the following cases, the court struck the jury notice of the defendant, allowing the matter to be heard by judge alone, on the basis that doing so would prevent further delay.

Benson v. Spencer, 2020 ONSC 5327

Background

The plaintiff in this case alleges personal injury as a result of being kicked by a horse owned by the defendant. The incident occurred in May 2010.

The action was initially set down for trial in May 2017 and was scheduled to proceed in November 2018. Several months prior, the trial was adjourned due to the plaintiff experiencing new symptomology, perhaps related to the accident, that had not been previously addressed. An adjournment was granted to allow more time for expert reports to be proffered in respect to the plaintiff’s new symptomology. The trial was bumped to the May 2019 trial sittings.

Several months later, the trial was again adjourned as the defendant was unable to attend a May 2019 trial due to a scheduled vacation. The trial was adjourned several more times thereafter, ultimately landing on the October 2020 long trial list.

In June 2020, the parties were advised by the Regional Senior Justice that civil jury trials would not be proceeding in the region in 2020 due to ongoing COVID-19 concerns. It was suggested that if the matter was to proceed by judge alone, it could be heard in 2020.

Arguments

The plaintiff moved for an order striking the defendant’s jury notice. The plaintiff argued that the delay the action would endure in waiting for jury trials to resume in the region was such that justice would be better served by striking the jury notice and proceeding by judge alone.  

The defendant argued that the concerns raised with respect to future delay of proceedings due to COVID-19 and pandemic related concerns that may arise once jury trials resume, were unknown and speculative and therefore the court should implement a “wait and see” approach, leaving it to the trial judge to ultimately decide whether to strike the jury.

The Decision  

Justice Sheard found that adopting a “wait and see” approach would not mitigate against delay, as with a standing jury notice the parties would have to wait until civil jury trials resumed before a trial judge would be appointed on the eve of trial, and at that juncture the matter of striking the jury notice would likely be moot as the delay would have already been sustained.

With respect to the background of the action and the numerous adjournments of trial, Justice Sheard was more deferential to the plaintiff’s position and did not find that the plaintiff had caused delay to the extent the defendant suggested.

In coming to this decision, notable attention was given to the hurdles that the courts will likely face running a jury trial during the pandemic, including whether it would even be possible to secure a jury due to concerns that would likely result in potential jurors being granted exemptions or deferrals to serve.

In light of these likely hurdles and the established principle that jury trials, while fundamental, are not absolute and must sometimes yield to practicality[2], Justice Sheard struck the defendant’s jury notice.

Louis v. Poitras, 2020 ONSC 5301

Background

This action arises from personal injuries allegedly sustained in a motor vehicle accident that occurred in 2013. The trial was originally scheduled to proceed in May 2018. The pre-trial was adjourned due to a conflict involving plaintiffs’ counsel and thereby the trial could not proceed as originally scheduled.

In June 2018, it was ordered that the tort and accident benefit actions arising from the same 2013 accident involving the plaintiffs be heard together in April 2020. Given that the courts operations were suspended as of April 2020, the trial did not proceed. 

Arguments

The plaintiffs moved to have the jury notice struck on the basis that proceeding with a jury would cause delay with respect to rescheduling the trial.

The defendants argued that they had a substantive right to a jury and the plaintiffs’ motion was premature as it was unknown whether a 10-week trial by judge alone could be heard before a 10-week trial with a judge and jury.

Furthermore, the defendants argued that the original date was adjourned due to plaintiffs’ counsel being unable to attend the original pre-trial date. The defendants requested that the court take a “wait and see” approach.

The Decision

Justice Beaudoin noted that the test with respect to striking a jury was set out by the Ontario Court of Appeal in Cowles v. Balac 2006 CanLII 41806 (ON CA), which states that the party moving to strike the jury bears the onus of showing that the legal or factual issues to be resolved, the evidence, or the conduct of the trial would merit the discharge of the jury. The court must be satisfied that the moving party has shown that justice to the parties will be better served by the discharge of the jury.

Justice Beaudoin noted that while there were no features of the legal/factual issues, evidence, or conduct of the trial that would merit the discharge of the jury in and of itself, the parties had not put forth evidence that a jury would be more capable than a judge alone in this case.

Justice Beaudoin found that prejudice would arise with respect to the plaintiff simply by reason of delay of the action being heard. He did acknowledge, importantly, that the delay of trial is not determinative on its own with respect to the right of the matter being heard by a jury. Nonetheless, he found that the delay was determinative in this context because the delay arose in the context of a global pandemic.

His Honour cited the reasoning in MacLeod v. Canadian Road Management Company, 2018 ONSC 2186, that the right to a civil jury trial may have to yield in appropriate cases in order to provide parties with an expeditious, affordable and proportionate resolution that is fair and just.

Ultimately, the jury notice of the defendants was struck as His Honour was satisfied that this was an appropriate case in which to exercise the discretion of the court to strike a jury notice as justice to the parties would be better served by the matter proceeding to trial in a timely manner with a judge alone.

Higashi v. Chiarot, 2020 ONSC 5523  

Justice Roger, in Higashi v. Chiarot, struck the jury notice of the defendant with oral reasons which have recently been transcribed and reported.

Arguments

While no background information with respect to the facts of the action was reported, the motion was brought by the plaintiff to have the defendant’s jury notice struck for reason that the ongoing delay due to the pandemic would cause prejudice to the plaintiff.

The defendant argued that the motion to strike was premature given that it was unknown whether a 4-week trial by judge alone could be heard sooner than a 4-week trial with a judge and jury.

The Decision

Justice Roger consulted with the Regional Senior Justice of Ottawa (where the trial was to proceed), his colleagues and court staff with respect to an estimate of when civil jury trials may proceed in Ottawa. It became evident to Justice Roger as a result of his inquires that it was unknown when civil jury trials could proceed, although a trial by judge alone could likely proceed by January 2021 if not sooner.

Justice Roger recognized that the right to a jury trial in Ontario is a substantive right that cannot be lightly interfered with unless there is just cause to do so. However, a jury trial is not an absolute right.

Justice Roger struck the defendant’s jury notice. He reasoned that, at the time of the decision, the timelines surrounding reinstatement of jury trials in Ottawa were unknown, it was evident a trial by judge alone could proceed sooner, the parties’ expert reports may have to be updated if the trial was further delayed, the parties were ready for trial, and the plaintiff statutorily loses 30 percent of any pre-trial loss of income she may have had before trial.

Nevertheless, Justice Roger noted that the pandemic situation is fluid and it remains unseen when this trial, even by judge alone, could ultimately be heard. He therefore stated that his decision on the very specific facts of this case could be reviewed if jury trials proceeded before this trial was heard.

What Does this Mean Moving Forward?

At this time, with no appellate authority addressing the appropriateness of striking a jury based on COVID-19 related delay, the foreseeable future of the jury trial will fall to the hands of individual judges guided by the specific regulations of the region in which the trial is to take place.

For example, given that jury trials are set to proceed in Toronto in October, a judge within the Toronto region would likely have no justifiable reason to grant a plaintiff’s motion to strike a jury notice on the basis of a COVID-19 imposed delay.

However, it remains to be seen how far the courts will go in striking juries. Given that plaintiffs’ counsel throughout the province are strongly in favour of the foregoing decisions, it is likely that we will see an influx of motions to strike jury notices.

While the foregoing cases have given weight to previous delay already endured in moving the matters to trial, it is curious whether the court will be so quick to strike a jury notice in a matter that has not previously been adjourned.

It should be expected that appellate authority will ultimately be released on this issue, unless the Ministry of the Attorney General moves forward to abolish jury trials in the interim.

For the time being, and as we continue to navigate the unknown, defence counsel should be wary of adjourning pre-trials and trial dates to the extent that it is possible, even when same would be done on consent. It is evident based on the foregoing decisions that any prior adjournment or delay can be used as grounds to strike a jury notice during these times.

If a consent adjournment cannot be avoided, which understandably may be in the case in these times, it may be worthwhile to agree with plaintiffs’ counsel that such adjournment will not be used as a basis to strike the jury notice in future.

Conclusion

While it remains unknown what will happen to civil juries in Ontario in the future, the jury trial continues to be a pivotal aspect of the civil justice system and the abolishment of same, whether it be by way of striking jury notices on a case by case basis, or altogether by the Ministry of the Attorney General, has and will be met with fervent resistance.

Consideration should be given to how the court may implement procedures that would allow for a jury trial to proceed despite the current pandemic, such as the utilization of further virtual measures. We do not know whether such measures will work unless we try. What we do know is that the courts and counsel have shown a tremendous ability to adapt during the pandemic.

As stated by Justice Myers in Arconti v. Smith, 2020 ONSC 2782:

“It’s 2020”. We no longer record evidence using quill and ink. In fact, we apparently do not even teach children to use cursive writing in all schools anymore. We now have the technological ability to communicate remotely effectively. Using it is more efficient and far less costly than personal attendance. We should not be going back.

…

In my view, in 2020, use of readily available technology is part of the basic skillset required of civil litigators and courts. This is not new and, unlike the pandemic, did not arise on the sudden. However, the need for the court to operate during the pandemic has brought to the fore the availability of alternative processes and the imperative of technological competency.

It is likely that the upcoming trial sittings slated for October in regions such as Toronto will offer some guidance as to the viability of conducting civil jury trials throughout the balance of the Ontario regions. 

Rogers Partners LLP will continue to closely follow developments in this regard and provide ongoing updates as further decisions and practice guidelines are released.

[1] King v. Colonial Homes Ltd., [1956] S.C.R. 528

[2] Girao v. Cunningham, 2020 ONCA 260, at para 171.

By Tom Macmillan

The volume of claims being made by companies worldwide for business interruption coverage in the wake of Covid-19 shutdowns has been unprecedented.  As of August 2020, the rate of Canadian companies seeking creditor protection has been quadruple the normal pace.  With Covid-19 cases currently on the rise after a relatively quiet summer, and with more restrictions anticipated, it can be expected that this number will balloon further.

Insurers have been inundated with claims, and with it has come intense scrutiny of common wording in business interruption clauses in all risks policies.  David Rogers of our office previously provided an excellent summary of the issues facing insureds when it comes to such claims.

As it currently stands, insurers are still denying most claims on the basis that, absent specific endorsements for communicable diseases and closure by order of civil authority, coverage for business interruption requires physical damage to a business.  There is no such physical damage in cases of Covid-19 outbreaks.

The UK Financial Conduct Authority, an organization that speaks on behalf of consumers in the financial system, anticipated that widespread litigation could result from coverage denials relating to business interruption claims, and this summer brought a test case on key policy wording.

The High Court last week made its ruling in The Financial Conduct Authority v. Arch and Others, [2020] EWHC 2448 (Comm).  The ruling should provide clarity on how the courts will interpret these provisions.

Eight insurers agreed to act as defendants in the test case, and furthermore agreed in advance to abide by the ultimate ruling when it comes to their processing claims.  The parties may appeal the ruling directly to the UK Supreme Court as part of an expedited process.  A post-ruling hearing on October 2, 2020 will provide insight into whether any parties plan to appeal. 

While only eight insurers participated in the test case, it can be expected that all other insurers who underwrite such policies are paying close attention to the case.  Wording on such policies differs slightly, but is generally similar.

Insurers and insureds can assume that the courts will look to the test case ruling as persuasive authority, and will seek to decide subsequent litigation consistently.  As such, the importance of this test case cannot be understated when it comes to the wave of claims that have already washed ashore, and those still on the way.

What Was Decided?

A full account of the decision is not possible in a short summary.  The decision itself is over 160 pages of complex analysis of policy wordings.  Among the eight insurers, 21 different groups of business interruption policy wordings were considered. 

Furthermore, these wordings were analyzed in the context of different hypothetical regulatory environments, contemplating how different businesses would be affected by shutdown orders and restrictions.

That being said, some broad themes emerged that will provide an interpretive framework for insurers and insureds whose policy language differs from the ones reviewed.

Communicable Disease Coverage

The court looked at a number of different wordings relating to business interruption caused by the outbreak of disease in a certain geographical proximity to the insured business.  The restriction to a certain vicinity is meant to preclude coverage for diseases that take place nowhere near the business at issue; there must be proximate connection between the disease and the business.

At issue in the test case was the impact of outbreaks of Covid-19 that occurred outside of the geographical limits set out in the policies (for some it was 1 mile of the business, for others 25 miles).  Specifically, how are parties to interpret coverage when the government response to a disease is the result, not of the local outbreak near the business, but of more widespread outbreaks elsewhere? 

The court ruled in the negative on that question, for most of the policy wordings considered (but not all).  It found that the separate outbreaks of Covid-19 are indivisible, and that all of them together trigger coverage, so long as there is in fact infection within the area outlined in the policy.  The court stressed that so long as this latter condition is met, it does not matter whether government response resulted exclusively from that local outbreak.

It is important to remember here, however, that the question of coverage for communicable disease coverage is dependent on the specific wording of the policy.  The court in FCA looked at a number of slightly different wordings, and came to different conclusions on some of them.  Accordingly, it is important to consider the actual wording of the policy at issue, before confirming or denying coverage.

Civil Authority

The court also considered policy wording relating to coverage for business interruption loss caused by closure or restriction by order of a civil authority.  The court’s conclusions on coverage in this category are very wording-specific, and caution should exercised in this regard.  Some policies contemplate, for example, government action arising because of “danger or disturbance in the vicinity.” 

The court stressed that wording such as this implies a localised emergency response.  Insurers and insureds are wise to consider the specific nature of the civil authority restrictions and regulations, in order to determine whether they would trigger coverage in that instance.

The court also drew a distinction between “advice” provided by government, and “action,” often with the latter only triggering coverage.  Mandatory pronouncements from government are more likely to trigger coverage than are recommendations.

In considering whether a pronouncement is mandatory, as opposed to recommended, only the former requires steps which can be lawfully enforced by the authority requesting it.  The court looked at a number of government pronouncements in March of 2020, outlining how some of them amounted merely to recommendations, and others to actions which would trigger coverage.

The court also noted that business interruption coverage might be triggered in circumstances where normal business operations are merely disrupted, but not ceased entirely.  Again, however, the precise wording of the policy prevails in interpreting such coverage.

Single Cause

A central issue argued during the case was whether the pandemic itself and the resulting government response constitute a single cause of a business’ loss, or whether they are divisible.  This is a key issue, as all business interruption requires that a covered loss be caused by an occurrence.

The High Court found that the pandemic and resulting response amount to a single cause of the covered loss.  This is welcome clarity, as it limits the potential for widespread litigation on the issue of whether the cause of insured losses were the pandemic or government restrictions. 

The court addressed the 2010 decision in Orient Express Hotels Ltd. v. Assicurazioni Generali SpA.  In that case, the court sided with an insurer who argued that there were minimal losses to an insured hotel arising from the flooding caused by hurricane Katrina.  The court agreed that, while the flood itself damaged the hotel, the fact that flooding devastated the region surrounding the hotel meant that the damage did not cause the business loss: it could be expected that no guests would attend the hotel in any event.

The court in FCA found that Orient Express was distinguishable on construction of relevant causes, but in any event that it was wrongly decided.  The court opined that the decision in Orient Express misidentified the peril at issue, that it was not “damage,” but more properly “damage caused by hurricanes.”  Construed this way, the flooding of the vicinity surrounding the hotel was clearly caused by the insured peril. 

Furthermore, the court noted that Orient Express results in the absurd outcome that the more significant the circumstances that lead to property damage (there, a truly devastating flood), the less coverage would be available to an insured.

This point is important, as the argument was raised that, even if there was an outbreak within the outlined vicinity of the affected business, nevertheless the existence of other outbreaks elsewhere, nationally, was the true cause of the business interruption loss.  In other words, business interruption losses in this context resulted not from local outbreaks, but from the widespread nature of the epidemic. 

The court rejected this argument, stressing that once coverage is confirmed, through the existence of infection within the outlined vicinity, then it is irrelevant what other outbreaks take place elsewhere.  The outbreak and the resulting response, then, are one single cause of the covered loss.

Trends Clauses

The court also considered application of “trends clauses” in the context of the pandemic.  Put simply, a trends clause guides assessment of indemnity, by reducing recoverable damages only to those caused directly by the insured peril, rather than by outside factors.  The idea is to put the insured in the place that it would have been in had the damage not occurred. 

In the example of a restaurant, strict application of a trends clause could suggest that its loss of business from the disease itself is minimal, as most of its loss can be traced to the regulatory response to the pandemic.  In other words, an Ontario restaurant was going to lose business in any event, given provincial restrictions, whether or not there was an outbreak in the vicinity of the restaurant.

The court’s treatment of trends clauses in FCA mirrored its treatment on the causation question, above.  It found that the insured peril is the interruption of business following the occurrence of disease, including via a civil authority’s response.

Accordingly, if a restaurant is required to close its doors as a result of a public order, it should be permitted to claim damages arising from that lost business, even though the order resulted from outbreaks elsewhere in the province, and even though the restaurant may have suffered most of its losses anyway had a local outbreak not taken place.

Where Things Stand Now

As noted above, there is a possibility of an expedited appeal of the High Court’s ruling.  If there is no appeal, however, insurers and insureds the world over are left with some clarity on how the courts will interpret a number of different policy wordings relating to Covid-19-related business interruption losses.

Even insurers who did not participate in the test case can find clarity in some of their own policies, and insureds can get a sense of how the courts will interpret potentially ambiguous policy wording.

The FCA appears happy with the outcome, and at present it is unclear whether the insurers will appeal or simply go ahead and settle existing and future claims in line with the ruling.

It perhaps goes without saying that the stakes here are historically high, in light of the volume of business interruption claims that have been and will be made in relation to the pandemic.  Stay tuned, as it is safe to assume that this issue is far from resolved

By Alon Barda

Earlier this year, I wrote an article entitled “Surprising Special Award Against Insurer” based on the case of Malitskiy v. Unica Insurance.[1] Among other things, that case found that an insurer cannot simply rely on the opinion of an assessor when determining a claimant’s needs.

Instead, the adjudicator held that the insurer should have considered all relevant medical evidence and should have followed-up with the assessors for clarification of the claimant’s needs.

The failure to do so resulted in a finding that the partial denial of benefits by the insurer to be “imprudent, inflexible, and immoderate” and the Licence Appeal Tribunal ordered a special award in the amount of 25%.

At the time, I noted that the adjudicator was certainly entitled to reject the opinions of the insurer’s assessors, but it was highly questionable as to whether the insurer “unreasonably withheld or delayed payments” to warrant a special award.

Indeed, insurers are not medical experts and should be able to rely on the expertise of assessors who conduct benefit-specific assessments, including occupational therapists that complete a detailed Form 1.

The insurer sought reconsideration of the Tribunal’s decision and, in the welcomed reconsideration decision of S.M. v. Unica Insurance Inc.,[2]the adjudicator set aside the special award in a lengthy, detailed and well-reasoned decision.

The Underlying Decision

The claim involves an ice fishing accident that occurred on March 16, 2014. The vehicle in which the claimant was travelling hit a pressure crack on the lake and slipped over, ejecting the passengers in the process.

The impact caused the claimant to suffer a brain injury and multiple fractures, including to his cervical spine and wrist. It was later discovered that the accident caused nerve damage in the claimant’s shoulder as well as cognitive and emotional impairments.  Unica deemed the claimant to be catastrophically impaired as a result of the accident.

After a seven day in person hearing, the Tribunal found the claimant entitled to almost all the benefits claimed, including attendant care and the home modification expense. 

While the Tribunal found that Unica paid for “most of the disputed benefits in part” and that the decisions were based on the assessments it completed, the Tribunal held, among other things, that on receipt of the Form-1, Unica’s assessors “should have investigated whether [the claimant] needed cuing, emotional support, and nighttime supervision”.

Furthermore, the Tribunal found that it was unreasonable for Unica to focus on its own OT reports when Unica’s assessors found the claimant to be catastrophically impaired and the evidence confirmed that the claimant required significant assistance.

The Tribunal found the Unica’s approach to be “imprudent, inflexible, and immoderate” and ordered a special award of 25% under s.10 of Reg. 664 totalling approximately $70,000.

Unica requested reconsideration on the basis that the Tribunal acted outside of its jurisdiction or violated the rules of natural justice or procedural fairness and/or that the Tribunal made an error of law or fact such that the Tribunal would likely have reached a different result had the error not been made.

Reconsideration Decision

On reconsideration, the adjudicator relied on the language and reasoning in the FSCO decision of Plowright v. Wellington Insurance Co.,[3] as to the conduct that should attract a special award.

The adjudicator outlined that in Plowright the actions of the insurer demonstrated a pattern of bad faith decision making on the part of the adjuster, “who ignored the opinion of a treating family doctor, ignored the commentary of an [insurer examination] assessor and terminated income benefits without providing a basis to the insured.”

This conduct was found to be an “immoderate, imprudent, inflexible, and excessive” approach. The arbitrator in Plowright ultimately awarded less than 10% of the total benefits as part of the special award.

The adjudicator clarified that is well-settled that a special award should not be ordered simply because it is determined that the insurer made an incorrect decision. Instead, he highlighted that in order to attract a s. 10 award, “the insurer’s conduct must rise to the level described in Plowright—it must be excessive, imprudent, stubborn, inflexible, unyielding or immoderate.”

The adjudicator noted that he struggled to understand how Unica’s adjusting decisions “bear any resemblance to those in Plowright or how its decisions would justify a 25% award under s. 10” considering the claimant was already deemed to be catastrophically impaired and the benefits in dispute were partially approved.

In particular, the adjudicator found that it was not imprudent, inflexible or immoderate for the insurer to question certain aspects of the home modifications.

He also found that Unica was entitled to rely on reports that were prepared by experienced professionals that made recommendations in good faith and that were reasonably supported by the bulk of the medical evidence.

Accordingly, the adjudicator found that the Tribunal erred wherein it found that it was unreasonable for the insurer to focus on its own OT reports and that the Tribunal “conflated the fact that the claimant sustained a catastrophic impairment with the notion of entitlement to benefits, which is an error of law.”

The adjudicator went on to clarify that, “while a catastrophic claim warrants greater scrutiny when adjusting a file, it does not mean that the insured is exempt from having to demonstrate that the goods and services they seek are reasonable and necessary, that an insurer cannot rely on its own reports or that an award should be imposed when recommendations in reports differ.” The adjudicator rightly noted that this occurs on a smaller scale in almost every case.

Most importantly, the adjudicator was particularly critical of the Tribunal’s finding that the adjuster ought to have asked assessors to investigate the claimant’s need for supervision. The adjudicator held that this unfairly placed the adjuster in the role of a medical professional and that it was not unreasonable to rely on the observations of a qualified occupational therapist.

The adjudicator went on to state as follows (at para 51):

With great respect, I trust this is obvious: insurance adjusters are not medical professionals and they should not be held to that standard. Insurance companies have a duty of good faith to adjust an insured’s file as claims are submitted, as new information becomes available, as their condition deteriorates, etc. However, while there is a duty of good faith, I find it is unreasonable and quite unfair to expect adjusters who come and go with some regularity to micromanage the assessments of qualified professionals to ensure that their reports respond directly to the specifics of a claim or else risk exposure to a s. 10 award if they do not.

The adjudicator made similar comments regarding the special award as it pertained to the home modification expense. He noted that it was an “error by the Tribunal to use the significant discrepancy in the proposed costs of the reports or her preference for [the claimant’s] home modification report as a basis for an award.”

Moreover, the adjudicator agreed with Unica that it was unfair, inaccurate and an error of fact for the Tribunal to suggest that the whole of the claimant’s medical evidence somehow pointed definitively at only one true or obvious outcome or that Unica ignored the medical evidence relating to the claimant’s needs when it partially approved the benefits in dispute.

Notably, the adjudicator addressed Unica’s submission that the underlying decision would have significant implications for the insurance industry with respect to the ability of insurance adjusters to rely on independent medical examiners and that this award waters down the threshold for what constitutes a special award.

On this point, the adjudicator agreed, and he held that there was no behaviour described in the decision itself that addressed the award that rises to the level of “excessive, imprudent, stubborn, inflexible, unyielding or immoderate” conduct warranting a s. 10 award in line with that set out in Plowright.

The adjudicator ultimately set aside the special award and concluded that “the Tribunal erred in ordering a 25% award under s. 10 of O. Reg. 664 because the award was not supported by the evidence of Unica’s conduct, the reasons supporting the award were not sufficient to justify the magnitude of the award and the rationale provided significantly waters down the threshold of what constitutes unreasonable withholding and delay.”

The Takeaway

In my earlier article on the underlying decision, I noted concerns regarding the implication the decision would have on insurance adjusters as insurance adjusters are not medical experts and an insurer should be able to rely on the expertise of assessors who conduct benefit-specific assessments.

Thankfully, this decision addresses this issue directly and clarified that insurance adjusters are indeed not medical experts and are entitled to rely on medical experts.

More importantly, the adjudicator set aside a very concerning and rather significant award that simply was not warranted based on the evidence available.

Moving forward, the test for a special award has not been watered down and only conduct that is excessive, imprudent, stubborn, inflexible, unyielding or immoderate as set out years ago in Plowright should attract a special award.

[1] 2020 CanLII 12718 (ON LAT).

[2] 2020 CanLII 61460 (ON LAT).

[3] 1993 OIC File No.: A-003985 (FSCO).

By Emily Vereshchak

The Supreme Court of Canada has released two decisions interpreting the test on a motion to dismiss under s. 137.1 of the Courts of Justice Act, known as the anti-SLAPP legislation (strategic lawsuits against public participation).

The direction provided by the Supreme Court is likely to change the approach taken by parties involved in motions to dismiss under s. 137.1 of the Courts of Justice Act and the manner courts adjudicate those motions.

These anti-SLAPP provisions were intended to mitigate lawsuits against individuals or organizations as an indirect tool to limit freedom of expression and deter parties from participating in public affairs.

1704604 Ontario Limited v. Pointes Protection Association, 2020 SCC 22 (“Pointes”) and Bent v. Platnick, 2020 SCC 23 (“Bent”) are the first Supreme Court decisions to analyze the legislation, and have refined the test previously articulated by the Ontario Court of Appeal.

The Legislation

Section 137.1 of the Courts of Justice Act is intended as a screening mechanism for lawsuits that unduly limit expression on matters of public interest. The section allows defendants to move at any stage of the proceeding for an order to dismiss the action. The legislation sets out a distinct test for such motions:  

Order to dismiss

(3) On motion by a person against whom a proceeding is brought, a judge shall, subject to subsection (4), dismiss the proceeding against the person if the person satisfies the judge that the proceeding arises from an expression made by the person that relates to a matter of public interest.

No dismissal

(4) A judge shall not dismiss a proceeding under subsection (3) if the responding party satisfies the judge that,

(a) there are grounds to believe that,

(i) the proceeding has substantial merit, and

(ii) the moving party has no valid defence in the proceeding; and

(b) the harm likely to be or have been suffered by the responding party as a result of the moving party’s expression is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.

The defendant has the initial burden to satisfy the motion judge that the proceeding arises from an expression relating to a matter of public interest (“the threshold burden”).

If the defendant is successful at this stage, the onus shifts to the plaintiff, who must establish that there are grounds to believe the proceeding has substantial merit, that the defendant has no valid defence (the “merits-based hurdle”), and that the public interest in permitting the action to continue outweighs the public interest in protecting the expression (“the public interest hurdle”).

Section 137.1(3) – The Threshold Burden

The Supreme Court stated that this step involves a two-part analysis. The defendant must demonstrate that: (1) the proceeding arises from an expression made by the defendant, and (2) the expression is related to a matter of public interest.

Justice Côté confirms that this threshold is established on a balance of probabilities. The burden on the defendant at this stage is not onerous.

Though “expression” is expressly defined in the statute, the Court goes on to elaborate on the other terms in the section, including the phrase “arises from”. The Court concludes that this phrase implies an element of causality.

However, Justice Côté emphasizes that this analysis must be subjected to a broad and liberal interpretation. As such, motions under s. 137.1 are not limited to those directly concerned with defamation suits.

Section 137.1(4) – The Merits-Based Hurdle

Once the burden shifts to the plaintiff for the merits-based hurdle, Justice Côté states that there must be a basis in the record and the law (including the context of the proceeding) to determine whether there are “grounds to believe” that the underlying proceeding has substantial merit and that there is no valid defence.

This standard requires something more than mere suspicion, but less than proof on a balance of probabilities. Section 137.1(4)(a) as a whole is fundamentally concerned with the strength of the underlying proceeding.

Importantly, in the assessment of s. 137.1(4)(a), the Supreme Court has departed from the Court of Appeal’s application of the standard of proof. Justice Côté writes that the assessment under 137.1(4)(a) must be made from the motion judge’s perspective.

While the Court of Appeal stated that the application of the standard depended on a “reasonable trier”, the Supreme Court has ruled that this improperly excludes the express discretion of the motion judge conferred in the provision. As such, the test at this stage must be a subjective determination of the motion judge.

(i) Substantial Merit

Justice Côté writes that the use of the word “merit” in this context fundamentally calls for a determination of the prospects of success of the underlying action. The burden is on the plaintiff to ensure that legitimate claims are allowed to continue. The Court articulated the analysis at this stage of the test as follows:

[…] to discharge its burden under s. 137.1(4)(a)(i), the plaintiff must satisfy the motion judge that there are grounds to believe that its underlying claim is legally tenable and supported by evidence that is reasonably capable of belief such that the claim can be said to have a real prospect of success.

The Supreme Court has maintained that the motion judge should engage in a limited weighing of the evidence and should defer ultimate assessments of credibility and other questions requiring a deep dive into the evidence at a later stage, so as to avoid sliding into a de facto summary judgment motion.

(ii) No Valid Defence

Similarly, at this stage, the Court states that the motion judge must assess the strength of any defences put in play by the defendants as part of the prospect of success of the underlying claim. Justice Côté writes that the word “no”is absolute.

Thus if any defence is valid, the plaintiff has not met its burden. The plaintiff must show that none of the defences put in play are not legally tenable or supported by evidence that is reasonably capable of belief.

Section 137.1(4)(b) – Public Interest Hurdle

The Supreme Court has articulated this stage as the “crux” of the analysis on a s. 137.1 motion. This step serves as a backstop for motion judges to dismiss even technically meritorious claims.

The burden is on the plaintiff to show on a balance of probabilities that it likely has suffered or will suffer harm, that such harm is a result of the expression, and that the corresponding public interest in allowing the proceeding outweighs the deleterious effects on expression and public participation.

Justice Côté first conducts an analysis of the term “harm”, as the section requires the harm suffered by the plaintiff as a result of the defendant’s expression to be weighed against the public interest in protecting the expression.

Either monetary or non-monetary harm can be relevant, and one type of harm is not more important than the other.  The alleged harm need not be synonymous with the damages alleged. A fully developed damages brief is not necessary, and the plaintiff does not need to definitively prove harm or causation at this stage.

Instead, the plaintiff must provide evidence for the motion judge to draw an “inference” of likelihood of an existence of harm and the relevant causal link.

Next, the motion judge must weigh the harm against the public interest in protecting the expression. Justice Côté emphasizes that the weighing exercise can be informed by s. 2(b) of the Canadian Charter of Rights and Freedoms jurisprudence, in addition to further factors enunciated by the Court of Appeal in Platnick v. Bent, 2018 ONCA 687 referred to as “indicia of a SLAPP suit”.

These indicia include:  (1) a history of the plaintiff using litigation or the threat of litigation to silence critics”; (2) a financial or power imbalance that strongly favours the plaintiff; (3) a punitive or retributory purpose animating the plaintiff’s bringing of the claim; and (4) minimal or nominal damages suffered by the plaintiff.

However, Justice Côté cautions that the weighing of public interest is not simply an inquiry into the hallmarks of a SLAPP. Therefore,  the only factors that might be relevant in guiding this exercise are those tethered to the text of s. 137.1(4)(b), which calls for a consideration of: “the harm suffered or potentially suffered by the plaintiff, the corresponding public interest in allowing the underlying proceeding to continue, and the public interest in protecting the underlying expression”.

Justice Côté lists several other factors that a motion judge may consider in the analysis in paragraph 80 of Pointes (in addition to the indicia of a SLAPP suit), which include the history of the litigation, broader or collateral effects on other expressions, disproportion between the resources being used in the lawsuit and the harm caused, and whether the expression or the claim might provoke hostility against an identifiable vulnerable group. However, the relevance of these factors is limited to the extent that they are tethered to the text of s.137.1(4)(b).

Application: 1704604 Ontario Limited v. Pointes Protection Association

In Pointes, a dispute arose between land developers (“170 Ontario”) and a group opposing a subdivision in Sault St. Marie (PPA). 170 Ontario was granted approval for a subdivision from the Sault St. Marie Region Conservation Authority (SSMRCA), and PPA opposed the approval on environmental grounds.

170 Ontario’s application was eventually approved, and PPA brought an application for judicial review. While the judicial review was pending, 170 Ontario sought approval from City Council, who refused the application. 170 Ontario appealed to the Ontario Municipal Board.

The application for judicial review was settled on an Agreement with terms including that, in any subsequent proceedings before the Ontario Municipal Board, PPA would not advance the position that the resolutions were illegal, invalid or contrary to environmental legislation.  However, during the Ontario Municipal Board proceedings, the president of PPA testified that the proposed development would result in significant environmental damage. As a result, 170 Ontario sued PPA alleging breach of contract.

PPA brought a motion under s. 137.1, and the judge dismissed the motion. The Court of Appeal allowed PPA’s appeal and dismissed the action.

The Supreme Court concluded that 170 Ontario’s breach of contract action arose from an expression, meeting the threshold burden.

On the merits-based hurdle, the Supreme Court agreed with the Court of Appeal that 170 Ontario’s action lacked substantial merit. There was nothing in the plain language of the Agreement which foreclosed PPA from advancing an argument that did not pertain to the SSMRCA’s decision. As such, 170 Ontario’s appeal was dismissed.

Application: Platnick v. Bent

Ms. Bent is a lawyer at an Ontario law firm and was president-elect of the Ontario Trial Lawyers Association (“OTLA”). The plaintiff, Dr. Platnick, is a medical doctor who performed medical assessments primarily for insurers in motor vehicle accident cases.

Dr. Platnick initiated a defamation suit after Ms. Bent sent an email to an OTLA Listserv email to 670 members making statements about Dr. Platnick, including that the doctor misrepresented and changed medical reports. Eventually, the email was leaked and published in a magazine.

Ms. Bent brought a motion to dismiss Dr. Platnick’s action under s. 137.1. The motion judge granted the motion. The decision was overturned by the Court of Appeal, reinstating Dr. Platnick’s action.

The Supreme Court allowed Dr. Platnick’s defamation suit to proceed and dismissed the appeal. The Court was split 5-4 in its decision.

Though it was agreed that the claim satisfied the threshold burden, the dissent (written by Justice Abella) disagreed with the majority with respect to whether the defence of qualified privilege was valid.

According to the majority, an occasion of qualified privilege exists if a person making a communication has an interest/duty to publish the information in issue and the recipient has a corresponding interest or duty to receive it. Privilege is defeated where the speaker is reckless as to the truth of the words or where the scope of the occasion of privilege is exceeded.

The majority stated that the specific references made to Dr. Platnick in the email from Ms. Bent were not necessary to the discharge of the duty giving rise to the privilege.

In addition, the Listserve contained an express prohibition on potentially defamatory remarks. As such, the majority concluded that OTLA acknowledged that posting potentially defamatory materials was neither necessary nor relevant to the duty encompassed in the occasion.

Finally, the majority pointed out that the record revealed a lack of investigation and reasonable due diligence by Ms. Bent prior to making her allegations to corroborate an allegation of professional misconduct. Ms. Bent did not attempt to communicate or consult with Dr. Platnick.

As the Court has a heightened expectation of reasonable due diligence on lawyers, the majority stated that Ms. Bent’s privilege was defeated on the ground that she was indifferent as to the truth of her statements.

In the dissent, Justice Abella writes that the defence of qualified privilege had a real prospect of success. Justice Abella notes that it would defeat the purpose of qualified privilege to withhold the availability of the defence because Ms. Bent chose to identify Dr. Platnick by name, as generic accounts of misconduct do not require the protection of qualified privilege.

Further, the dissent emphasized that Ms. Bent’s email provided appropriate information to appropriate people, as the Listserve was intended to be confidential to members of OTLA, who practice plaintiff personal injury law.

The dissenting judges concluded that Ms. Bent was duty-bound to identify Dr. Platnick to her colleagues, who had a corresponding interest and duty to receive the email.

Further, there was nothing in the record to support a finding of malice either due to recklessness or any other basis. Any harm inflicted on Dr. Platnick was caused by unforeseen and unforeseeable circumstances (referring to the subsequent leak of the email to a magazine).

The dissent viewed the email as proper administration of justice, concluding the appeal should have been allowed.

Conclusion

In clarifying the test on a motion to dismiss pursuant to s. 137.1, the Supreme Court has confirmed that motions under this section are heavily contextual and fact-specific.

It is evident that such motions are not restricted to defamation actions, but can be pursued in any proceeding arising from an expression on a matter of public interest.

It will be interesting to see if the lower courts will modify their approach to anti-SLAPP motions including implementing the Supreme Court’s direction regarding the proper burden of proof in s. 137.1(4)(a).

• We’re pleased to announce that the following lawyers have been selected for inclusion in the 2021 edition of The Best Lawyers in Canada: Stephen Ross, Kevin Adams, Anita Varjacic, Brian Sunohara, and David Rogers. Kudos to everyone at the firm for helping them achieve this recognition!
• Congratulations to Tom Macmillan, Meryl Rodrigues, and Matthew Umbrio for their success in a hearing at the Workplace Safety Insurance and Appeals Tribunal. In a decision released in June 2020, the Tribunal determined that the plaintiff’s claim was barred. Great work!
• In July 2020, David Rogers was published in The Lawyer’s Daily in an article addressing COVID-19 and Business Interruption Coverage.
• In July 2020, Tom Macmillan was published in The Lawyer’s Daily in an article discussing the suspension of limitation periods.
• In September 2020, The Lawyer’s Daily published an article by Matthew Umbrio on the extra-provincial application of Ontario’s priority dispute regime.
• Tom Macmillan was successful in a costs decision in September 2020 arising from a summary judgment motion.
• A paper by Anita Varjacic and Colleen Mackeigan, “Top Tips for Conducting an Examination-in-Chief of an Expert Witness”, has been selected for publication in the Oatley-McLeish Guide to Personal Injury Practice in Motor Vehicle Cases.
• At the invitation of a professor from the University of Windsor Faculty of Law, Brian Sunohara, Rebecca Moore, Meryl Rodrigues, Erin Crochetière, Emily Vereshchak, and Colleen Mackeigan are writing a chapter on oral discoveries for a new civil procedure text that will be published on CanLII.
• Stephen Ross continues to provide important contributions to the legal profession as a member of the Board of Directors of The Advocates’ Society. Stephen’s one of the representatives of The Advocates’ Society who’s currently involved in the Attorney General of Ontario’s consultation process on the Licence Appeal Tribunal.
• Stephen Ross is also Chair of The Advocates’ Society’s Mandatory Mediation and Single Judge Model Task Force. The issues being examined, at the invitation of the Attorney General of Ontario, include whether mandatory mediation should be expanded to apply throughout Ontario and whether mediation should be made mandatory prior to filing an action.
• Our three newest articling students, Angeline Bellehumeur, Athina Ionita, and Christopher MacDonald, recently started with the firm and have settled in nicely!
• We’re happy to welcome Jocelyn-Rose Brogan back from maternity leave. It took Jocelyn no time at all to get used to all of the Zoom meetings!
• Visit the RP Blog for regular updates on the law and our firm.

Class Actions and an Increasingly Litigious Ontario

On October 1, 2020, significant changes to the Class Proceedings Act will come into force. These changes will meaningfully alter the landscape of class actions in Ontario.

Many of the changes to the Act appear to aim to promote efficiency for the benefit of both defendants and plaintiffs. For example, the amendments allow for a motion to be brought prior to, or in conjunction with, a certification motion to consider early resolution of the issues in dispute.

The new scheme also grants the Court powers to manage multi-jurisdictional proceedings as well as broad jurisdiction to manage the conduct of a class proceeding to ensure “its fair and expeditious determination and, for the purpose, may impose such terms on the parties as it considers appropriate.”[1]

However, some amendments appear to create additional barriers for plaintiffs which did not exist under the former scheme.

Most controversially, the requirements for certification are now more stringent and require that the plaintiff demonstrate that questions of fact or law common to the class members predominate over the individual issues.[2] Under the former scheme, the plaintiff was required to merely demonstrate that class proceedings were the preferable procedure for the resolution of common issues.  

In addition, section 29.1 of the amended Act provides for a mandatory dismissal of a proceeding unless, by the first anniversary of the day on which the proceeding was commenced, a) the plaintiff has filed a complete motion record in the motion for certification, b) the parties have agreed to a timetable, c) the Court has ordered that the proceeding not be dismissed and has established a timetable, or d) any other steps as specified under the regulations have taken place.

The Act also requires that plaintiffs obtain Court approval for any third party funding agreements.[3]

These amendments appear to promote efficiency and provide mechanisms for the disposal of unmeritorious claims at an earlier stage in proceedings. However, the amendments may also limit the amount of class actions which are certified in Ontario.

Critics of the changes to the Act to the scheme also cite the intersection between the changes to the Class Proceedings Act and the expansion of tort immunity under the Crown Liability and Proceedings Act, arguing that the result may be a broad immunity from liability for large, government controlled corporations, while plaintiff classes with legitimate claims will be left without recourse.

However, some view these changes as necessary to ensure the survival of the class actions scheme and the broader civil litigation system. Arguments made in this regard cite the growing number of class actions commenced in Ontario and the vast public resources consumed in the course of these often drawn-out and protracted proceedings.

Indeed, in the United States over the last decade or so, the jurisprudence demonstrates a reluctance on the part of the Courts to certify class actions. Legislation has also been enacted to curtail the use of class actions as well as grant federal courts greater powers to manage class action proceedings.[4]

One might ask: why this is necessary? Why must legislators in Ontario act to restrict or limit class proceedings?

Anecdotally, one reason might be that Ontarians are catching up with their neighbours to the south in terms of litigiousness. On the one hand, this might be characterized as a good thing; more people are aware of their rights and are able to make the necessary financial arrangements to enforce them.

Conversely, one might argue that the present system, together with the popularity of adverse costs insurance and third party funding agreements, encourages the pursuit of unmeritorious claims. Moreover, it is debateable whether the resources consumed by these lawsuits are outweighed by the end-of-day awards to the individuals who seek to enforce their rights.

On the face of the amendments, it is difficult to argue with the changes to the Class Proceedings Act, which appear to be aimed to promote efficiency and which should, in theory, benefit all parties involved in these proceedings.

Whether this efficiency will come at a high cost for prospective plaintiff classes remains to be seen.

The broader changes to the landscape of civil litigation in Ontario as a result of these amendments (whatever they may be) will also be interesting to witness in the coming years.

[1] Class Proceedings Act, 2020, R.S.O. c. 11, Sched. 4, s. 12.

[2] Ibid s. 5 (1.1).

[3] Ibid s. 33.1.

[4] See for example: Comcast Corp v Behrend, 133 S Ct 1426 (2013), Epic Systems Corp v Lewis, 138 S Ct 1612 (2018) and the Class Action Fairness Act of 2005.