Spring 2020 Newsletter

By Anita Varjacic

The very recent decision in Lloyd v. Bush, 2020 ONSC 842, released on February 6, 2020, demonstrates some of the frailties in our legal system.

Lloyd v. Bush arose out of a motor vehicle accident that occurred on January 3, 2003, with the third trial decision being rendered just over 17 years after the accident.

The case involved two distinct aspects of liability.  First, there was the issue of liability for the accident itself as between the two drivers.  The plaintiff, Leslie Lloyd and the defendant, David Bush who was operating a fuel truck owned by MacDonald Propane were traversing an S curve corner at the same time in winter weather conditions.  There was a dispute as to who crossed over the centre line causing the collision.

The second issue was whether the winter maintenance undertaken by the Town of Napanee met the standard of care in place at the time.  The plaintiffs’ damages were also in dispute.

The first trial proceeded in spring of 2009 before Justice Scott lasting 20 days.  During the course of the trial, the defendants David Bush and MacDonald Propane entered into a Pierringer Agreement with the plaintiffs, with the trial against the municipalities proceeding.

Justice Scott dismissed the plaintiffs’ case concluding that the plaintiffs had not established liability against either the motor vehicle defendants or the municipalities.

The precise amount of damages awarded was unclear as the trial judge did not make a quantified finding on many care costs, instead simply stating that he agreed with the defence calculations.  He did award non-pecuniary general damages of $280,000.00 to Ms. Lloyd, $120,000.00 to her husband for his FLA claim, future loss of earnings of $930,694.00, past lost earnings of $2,449.00, home modifications of $129,129.00, and a finding that attendant care costs be provided in the sum of $31,200.00 per annum.

Justice Scott awarded the Municipal defendants over $400,000.00 in costs.

The case went to appeal.  The Court of Appeal overturned the initial trial decision in its Judgment released in May 2012[1].  A new trial was ordered on the basis that the trial judge had made comments during the course of the trial, which rose to the level of creating a reasonable apprehension of bias by the trial judge adverse to the plaintiffs.

The second trial proceeded before Justice Tausendfreund in October 2014, with Judgment rendered February 6, 2015[2].  The second trial took 18 days.  Many witnesses from the first trial testified at the second trial.

Justice Tausendfreund awarded Judgment of $2,674,837.02.  His Honour found that the Municipality was responsible for the plaintiffs’ damages by 60%, David Bush (who had previously settled) 30% and 10% contributory negligence on the plaintiff.  Costs of over $900,000.00 were awarded to the plaintiffs.

The second trial decision was appealed by the municipal defendants.  The Court of Appeal set aside the second trial judgment on March 28, 2017[3].  The decision on damages was not interfered with.

However, the Court of Appeal did find that the trial judge had committed several errors with respect to his liability analysis.  Accordingly, a third trial was ordered as it related to the issues of liability, including causation and contributory negligence.

The case went to trial for a third time before Justice Mew.  That trial took 9 days.  Some witness testimony from prior trials was relied upon.  In his recent decision released February 6, 2020[4], Justice Mew found the Municipality 50% responsible, David Bush 33% responsible and Leslie Lloyd 17% contributorily negligent.

How is it that the same case, with the same witnesses, can proceed before three different judges, with three different outcomes?  Is there really justice?

This case illustrates that while the law may be black and white, its application is not.  The application of the law to a particular set of facts is at best, a shade of grey. It is informed by the individual experiences, views, personalities, biases, etc. of triers or fact, both judges and juries alike.

It is those differences that often result in cases proceeding to trial in the first instance.  If all lawyers assessed cases the same, there would never be any dispute and every case would settle.

Lloyd v. Bush, and all of its various iterations simply highlights the difficulties that lawyers face in predicting trial outcomes.  The same case, the same witnesses, the same facts, yet three different outcomes, and markedly so.

Is the third time a charm?  As it turns out probably not.  Can any one of the parties in this case say they were a “winner”?  Probably not.

What can we take away from this?  Trial outcomes are unpredictable, a risk factor that should always be taken into account.  Or, perhaps as Charles Dickens once said, sometimes “the law is an ass”[5].

[1] Lloyd v. Bush, 2012 ONCA 349.

[2] Lloyd v. Napanee (Town), 2015 ONSC 761.

[3] Lloyd v. Bush, 2017 ONCA 252.

[4] Lloyd v. Bush, 2020 ONSC 842.

[5] Charles Dickens, in Oliver Twist.

By Carol-Anne Wyseman

In Kanani v. Economical Insurance,[1] the plaintiffs brought a motion for production of their accident benefits insurer’s reserve information. The plaintiffs had brought claims against Economical for the breach of its duty to act in utmost good faith, retroactive and ongoing attendant care benefits, and statutory interest.

In essence, the plaintiffs argued that the setting of reserves of a claim file may dictate or impact on how the claim is adjudicated or what benefits are paid on a claim. They also argued that the state of mind of Economical was the central issue in this case, in particular how the issue of attendant care benefits was analyzed, adjusted and considered.

The plaintiffs also submitted that Economical had put its state of mind at issue by claiming that it was unaware of the need for attendant care benefits. In addition, the plaintiffs’ Statement of Claim contained particular allegations of bad faith, which the plaintiffs argued put Economical’s knowledge in issue.

On the other hand, Economical argued that the reserving process is different than the adjudication process. It also denied that it had put its state of mind in issue and also argued that the setting of reserves would not show Economical’s state of mind.

The plaintiffs’ motion was dismissed.

Justice Nadeau reasoned that, while reserves are created and affected by the ongoing assessment and adjustment of the claim as new information comes in, the adjustment of the claim is not affected by the presence or quantum of reserves. His Honour added that the fact that reserves and adjusting may be intertwined does not necessarily make reserves relevant to the litigation.

Justice Nadeau opined that, in the absence of unusual circumstances supported by the existence of sufficient facts, the level of the reserves set by an insurer is immaterial to a bad faith claim.

His Honour reasoned that the fairness aspect of the duty of good faith relates to the manner in which the insurer conducts its dealings with the insured in investigating, assessing and responding to the insured’s claim. It does not relate to the insurer’s setting of a reserve after considering the risk as a whole, which includes its assessment of the claim as well as other factors, such as legal costs and the cost of experts.

For reserve information to be considered relevant, evidence is required that the setting of reserves influenced or dictated the ongoing assessment of the claim or influenced bad conduct. Such evidence was not provided in this case.

Justice Nadeau added that the prejudicial effect of requiring Economical to produce reserve information would outweigh its minimal, if any, probative value. Namely, the plaintiff would be provided with an unfair and unnecessary advantage in the lawsuit by being told what the insurer believes the case is worth.

Further, Economical’s ability to negotiate a settlement would be impaired, as knowledge of the reserve might create a feeling of entitlement in the plaintiff to a settlement in that amount, despite the reserve being nothing more than an “intelligent estimate of the risk as a whole” based on the facts known at the time.[2]

Justice Nadeau further noted that, without there being allegations of misconduct in the setting of the reserves, disclosure of the reserve information is “generally not relevant”.[3]

This is an important decision for insurers, as it means that, outside of rare and exceptional circumstances, an insurer is not required to provide a claimant with reserve information.

[1] 2020 ONSC 7201.

[2] Ibid at para 24.

[3] Ibid at para 29.

By Stephen G. Ross and Erin Crochetière

With the rise in the value and number of insurance claims, instances where the exposure reaches into excess layers of insurance will be more common. As such, it is anticipated that the number and nature of disputes between primary and excess carriers will increase.

In the American context, the law regarding duties owed between primary and excess insurers is well developed. Conversely, there are very few reported Canadian decisions on the topic.

This article examines the nature and scope of the duties owed between primary and excess insurers from a Canadian perspective, including a consideration of common issues that arise when multiple layers of insurance are potentially applicable to a claim.

As elaborated below, it is the authors’ view that, regardless of the context in which the remedy arises (equitable contribution, equitable subrogation, or a duty of care in tort), the law requires that, where an excess insurer is harmed by the unreasonable conduct or actions of a primary insurer, the primary insurer be held accountable to the excess insurer for the financial losses caused.

Similarly, where there is a concurrent duty to defend, and an excess insurer is put at risk by a claim, then the excess insurer should be involved in the investigation and adjusting of the claim, and to contribute to defence costs accordingly.

In short, there is a relationship of proximity between primary and excess insurers such that the parties know, or ought to know, that a failure on its part could result in financial loss to the other. It is the writers’ view that these losses should be recoverable, so long as they are reasonably foreseeable.

We will begin our analysis with a review of the key authorities and publications on the issue, starting with an agreement that has been reached with several insurance companies regarding guiding principles for primary and excess liability insurers.

The Agreement of Guiding Principles

The Insurance Bureau of Canada has implemented the “Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims, 1996.”

The Agreement outlines various duties owed between primary and excess insurers such as: the duty to act prudently in negotiating towards settlement, the duty to make reasonable efforts to investigate all facts relevant to the evaluation of the claim, and the duty to provide relevant information to assist in an insurer’s assessment of exposure.

The Agreement also outlines various duties owed by the excess insurer to the primary insurer where the excess insurer elects, or is required, to become involved in the defence and investigation of a claim.

These duties include a duty to share all information and to contribute to the proportionate costs of adjusting the claim, regardless of the ultimate value of a settlement or judgment.

The Agreement has received little judicial attention and has been cited by only two reported Canadian decisions.[1]

In both cases, although the Court seemed to accept that the Agreement had application to disputes between certain insurers, it did not engage in a meaningful analysis of the Agreement as the disputes in question involved insurers that were not signatories to the Agreement.

Notably, some large insurers operating in Canada are not signatories to the Agreement and, as such, it will be of limited assistance in resolving disputes involving these insurers.

Nevertheless, whether applicable or not in any given case, the principles outlined in the document provide a useful analytical framework for any dispute between insurers.

At the very least, the Agreement can serve as a base understanding of the nature of the primary and excess insurer relationship and the rights and remedies each might expect or intend had the parties actually sat down to negotiate a defence handling agreement as between them.

Indeed, the core duties, such as the duty to negotiate prudently in settlement, the duty to investigate all relevant facts, and the duty to share all relevant information, seem quite sensible and are likely what the parties would have agreed to had they turned their minds to the issue.

Equitable Contribution: Allocation of Defence Costs 

In the context of disputes regarding the allocation of defence costs, given that there is usually no actual contractual relationship between primary and excess insurers, Canadian courts have applied the principle of equitable contribution in order to resolve disputes between insurers.

In Broadhurst & Ball v American Home Insurance Co., the Court of Appeal for Ontario held:

Since these insurers have no agreement between themselves with respect to the defence, their respective obligations cannot be a matter of contract. Nonetheless, their obligations should be subject to and governed by principles of equity and good conscience, which, in my opinion, dictate that the costs of litigation should be equitably distributed between them.^[2] [emphasis added]

This principle was followed by the Ontario Court of Appeal in Alie v Bertrand & Frère Construction Co.^[3] wherein the Court held that, where there is a concurrent duty to defend between primary and excess insurers, and the excess insurer is put at risk by the claim, then the excess insurer should contribute to defence costs.^[4] The Court stated that the nature of the contribution will depend on the equities of each case.^[5]

In other decisions, the Court has made clear that, where there is no concurrent duty, such as when the primary limits have been exhausted,^[6] or when the excess policy expressly excludes a duty to defend, there may be no liability for contribution to defence costs.

For example, in ACE INA Insurance v Associates Electric & Gas Services Ltd., the primary insurer, ACE INA, sought contribution for defence costs from the excess insurer, AEGIS. The claim arose out of an explosion and fire, following which damages were claimed in excess of $50 million. The limits of the (primary) ACE INA policy, were $1 million and the AEGIS (excess) policy provided for $45 million in coverage.^[7]

ACE INA argued that, since AEGIS would bear the majority of liability, it should share in defence costs. AEGIS argued that, as stipulated in the AEGIS policy, it would only become liable for defence costs once the limits of the primary policy had been exhausted.

The AEGIS policy expressly stated that there was no duty to defend unless defence costs were not covered by other insurance. Specifically, the policy stipulated:

the COMPANY shall not be liable for expenses as aforesaid when such expenses are included in other valid and collectible insurance[…].

The Court of Appeal held that “in insurance contracts not governed by statute, the obligation of an excess insurer to contribute to defence costs must either flow from a duty to defend or from the express language of the policy.”^[8]

The Court concluded that, as the policies question did not insure the same risk, the doctrine of equitable contribution did not apply and AEGIS was not obligated to contribute to defence costs.

Equitable Subrogation: Duty to Settle Within the Primary Limits

Another principle that has been applied in the context of disputes between insurers is the principle of equitable subrogation. This principle is most commonly applied in the context of disputes with respect to settlement within the primary layer of insurance.

Courts in Ontario, British Columbia and Saskatchewan have recognized a duty owed by insurers to their insureds to act in good faith and to use reasonable care in settling a claim where the claim may exceed the policy limits.[9]

However, when an insured obtains excess insurance, and an excess insurer is exposed to liability for indemnification due to a primary insurer’s failure to settle reasonably, what, if any, remedy is available to the excess insurer?

In the United States, some courts have adopted the principle of “equitable subrogation” to remedy this situation. Equitable subrogation operates to allow an excess insurer to subrogate the rights of its insured against a primary insurer.^[10]

In essence, the principle of equitable subrogation operates such that an insurer can subrogate any right owed to an insured and enforce it as against another insurer.

The Ontario Court of Appeal in Hampton v. Traders General Insurance Co. discussed the doctrine of equitable subrogation as follows:

In such a situation, the American courts have recognized that the insured has a cause of action against the insurer for breach of its duty to settle in good faith, […citation omitted]. Where an insured has purchased excess liability insurance and where the excess liability insurer has paid the amount of the judgment in excess of the primary policy limits, the American courts have applied “equitable subrogation” to allow the excess insurer to stand in the place of the insured and pursue a claim against the primary insurer for the breach of its duty to the insured to settle in good faith [citations omitted].[11]

The Ontario Court of Appeal also cited a decision by the Minnesota Supreme Court in Continental Casualty Co. v. Reserve Ins. Co., 238 N.W. 2d 862, at 864 (Minn. 1976):

When there is no excess insurer, the insured becomes his own excess insurer, and his single, primary, insurer owes him a duty of good faith in protecting him from an excess judgment and personal liability. If the insured purchases excess coverage, he in effect substitutes an excess insurer for himself. It follows that the excess insurer should assume the rights as well as the obligations of the insured in that position.^[12]

The Ontario Court of Appeal implicitly approved of the approach adopted by the Minnesota Supreme Court, however, the principle of equitable subrogation did not apply to the facts of the case at bar and it was therefore not applied.

Notably, the Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims, 1996, outlines the duty of an excess insurer to “conduct itself in a manner so as to avoid delay in reaching settlement, and not to cause the primary insurer to incur unreasonable defence costs.”

Accordingly, the duty to act reasonably in settlement negotiations is a reciprocal one, both by operation of the Agreement, and presumably at common law.

Although Canadian courts have often conflated the principles of equitable contribution and equitable subrogation,[13] it is the opinion of the authors that these principles should be understood as distinct.

The principle of equitable subrogation allows insurer A who has indemnified the insured for a loss caused by insurer B, to step into the shoes of the insured and subrogate the rights owed to the insured by insurer B.

This framework is useful in resolving disputes regarding improvident settlement, and perhaps others, such as the right to receive notice and the right to be informed of litigation.

However, subrogation is not necessarily a suitable analytical framework for resolving claims for contribution for defence costs. Where there is a concurrent duty to defend on both a primary and excess insurer, the principle of equitable subrogation would operate such that either the excess insurer or primary insurer could subrogate the rights of the insured and, in theory, recover the entirety of defence costs.

In these circumstances, the more appropriate, and equitable result, as recognized by the Court of Appeal for Ontario in Broadhurst & Ball and Alie v Bertrand & Frère Construction Co. through their application of the doctrine of equitable contribution, is that each insurer contribute to defence on an equitable basis that is in proportion to their respective indemnity payments.

Equitable contribution therefore, operates independent of any subrogation of the rights of the insured and is based principally on the equities of each case.

It is useful to note that in the automobile insurance context, there are a number of provisions in the Insurance Act which speak to the allocation of costs between primary and excess insurers as well as the duty to settle reasonably.[14] These provisions will be discussed at greater length later on in this article.  

Tort: A Duty of Care Owed Between Primary and Excess Insurers

The law of negligence has also been applied in the context of disputes between primary and excess insurers. In this regard, some American courts have found there to be an independent duty, similar to the one owed to an insured, owed by a primary insurer to an excess insurer such that an excess insurer may have a direct right of action against the primary insurer.^[15]

This approach, despite its firm grounding in the basis of negligence law, has thus far found support in only one reported Canadian decision.

In Hollinger International Inc. v American Home Assurance Co.^[16] Hollinger’s primary insurers entered into a settlement with the plaintiffs in only one of a number of the actions brought against the insured for $50 million dollars, which was the limits of the primary insurer’s policy. As a result, the excess insurers were exposed to defence costs as well as any indemnification for liability born out in the other actions brought against the insured.

On the motion for approval of the settlement, the excess insurers argued that the settlement should not be approved on the grounds that they were not involved in the settlement process, that a summary judgment motion should have been brought as there was a reasonable chance of its success, and that there was no explanation as to why $50 million was a reasonable settlement amount.

The Court considered whether there was a reasonable basis for the settlement, taking into account the competing interests of the various constituents. The Court held that the fact that the excess insurers were not directly consulted was reasonable as the settlement did not include exposure to the excess insurers for indemnity.

The Court further found that the primary insurers were reasonable in concluding that there was a risk that a summary judgment motion would not succeed, and that $50 million was not an unreasonable settlement amount in all of the circumstances.^[17]

The Court further considered the decision of the California Court of Appeal in Transit Casualty Co. v. Spink Corp.^[18] in which the Court held that:

The parties [being insured, primary and excess insurers] occupy a three-way relationship, which regardless of privity gap may engender reciprocal duties of care in the conduct of settlement negotiations; when a damage claim threatens to exceed the primary coverage, the reasonable foreseeability of impingement on the excess policy creates a three-way duty of care…

The Ontario Superior Court accepted the above statement as a general proposition.^[19]

The Court also noted that the Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims in the Canadian context elaborated upon the good faith principle as between insurers.^[20]

The Court further noted that at least two Canadian decisions at the appellate level recognized that the relationship and duties as between primary and excess insurers may extend beyond contract: Broadhurst & Ball v American Home Insurance Co., [Infra] and Aetna Insurance Co. v. Canadian Surety Co.^[21]

In Aetna, the Alberta Court of Appeal, in the absence of contract between insurers, held that “duties may flow from a primary insurer to an excess insurer under certain circumstances.”^[22]

On the facts of the case, the Court found that the primary insurers did not breach the duty of good faith owed to the excess insurers. The Court cited the following factors, among others, in support of this conclusion:

• The excess insurers were aware that settlement discussions were undertaken by the primary insurers.
• The primary insurers proceeded in good faith in the belief that settlement could be achieved without risk to the excess layers.
• The settlement was made in circumstances where, given the number of claims to which they were exposed in multiple jurisdictions, there could be little doubt that the limits of the primary layers would be exhausted.^[23]

Given the decision in Hollinger, it appears that the sate of Canadian law is such that duties owed between primary and excess insurers include a duty of care based in the law of negligence.

This approach seems sensible, as all elements of a cause of action in negligence could well apply to disputes between primary and excess insures, as outlined below.

1. Duty of Care: the court in Hollinger, supra, accepted that there is a sufficient relationship of proximity between primary and excess insurers such that a duty of care exists.
2. Standard of Care: the likely standard of care will be of a reasonable liability insurer in similar circumstances.
3. Causation – cause in fact: if “but for” the actions of the defendant-insurer, the plaintiff-insurer would not have suffered harm, then the causation element will be satisfied.
4. Remoteness/foreseeability – cause in law: If the harm complained of was a reasonably foreseeable consequence of the actions of the defendant-insurer, then this element will be satisfied.
5. Damages: If the plaintiff-insurer suffered actual financial (and not potential or hypothetical) damages, this element will be satisfied.

A General Duty to Act Reasonably

As such, it appears that there are a number of different approaches, and causes of action, that can be said to govern the relationship between primary and excess carriers and the nature of the rights and remedies that may be invoked as between them, including:

• Equitable subrogation;
• Equitable contribution; and
• A tort based duty of care.

Although the cause of action may be characterized in different ways, all of the approaches share a common theme; the guiding principle at law as it relates to the relationship between primary and excess insurers is one of equity, fairness, and reasonableness. The law recognises that the actions and file handling of a primary insurer can have a direct and adverse impact on an excess insurer.

Similarly, once an excess insurer is put at risk by a claim, they too will likely have a duty to become involved in the adjusting of the claim, to act reasonably, and to contribute towards defence costs.

As such, an excess insurer can likely, through one or more of the mechanisms set out above, hold a primary insurer to account (financially) in terms of the following non-exhaustive list of potential missteps:

• Failure to promptly investigate the liability and damages aspect of a claim as presented against the insured;
• Failure to take proper steps to control and adjust the loss in terms of due diligence, loss control measures, and expert retention;
• Failure to advance defenses reasonably available to the insured including limitation periods or other legal defenses to the claims advanced;
• Failure to contribute to a proportionate share of the defence and the plaintiff’s costs of a claim in excess of the primary limits, with the contribution of each in proportion to the indemnity payments made, or to be made, by each insurer;
• Improperly eroding the limits by making ex gratia payments for claims not representing viable third party liability claims as against the insured; and
• Failure to take reasonable steps to ensure the claim or claims are settled within the primary limits.

Similarly, a primary insurer should have a remedy against an excess insurer where the excess insurer (assuming it is put at risk by the claim) refused to share relevant information, acted unreasonably in the adjusting of the loss or in the conduct of settlement negotiations, or failed to contribute a proportionate share of defence costs.

Although it is likely that an excess insurer is entitled to receive a copy of the primary insurer’s file (and vice versa) and to seek and review the support available for all payments made,[24] the actual level of permissible scrutiny has not been well outlined at law.

It is the authors’ view that an excess insurer should not be entitled to engage in an infinite retroactive analysis of all aspects of the primary carrier’s file handling and payments. Different insurers may adjust the same claim differently and the law should concern itself with only major file handling issues or errors in judgment.

It is submitted that excess insurers should not be permitted to second guess every decision made by a primary insurer. Only when the primary insurer’s conduct falls below the standard of care expected of a reasonable liability insurer in similar circumstances should an excess carrier be entitled to a remedy at law.

Where circumstances warrant, the same standard should apply to the conduct of an excess insurer – to act as a reasonable liability insurer when put at risk by a loss.

Duties Owed Between Primary and Excess Insurers in the Auto Insurance Context

The respective provincial Insurance Acts provide yet another source of law which may have implications in the context of disputes between primary and excess insurers, particularly in automobile insurance claims. For example, section 257(4) of the Ontario Insurance Act provides:

Where indemnity is provided to the insured under two or more contracts and one or more of them are excess insurance, the insurers shall, as between themselves, contribute to the payment of expenses, costs and reimbursement for which provision is made in section 245 [costs of investigations, defence costs, costs assessed against the insured etc.] in accordance with their respective liabilities for damages awarded against the insured. [emphasis added]

As such, in the automobile context, the Insurance Act itself stipulates that primary and excess insurers should contribute proportionately to the costs of defending a claim.

Notably, there is some debate in the law regarding the circumstances to which this provision applies. In one decision, the Court of Appeal held that this provision only applies when a matter has proceeded to judgment, and not necessarily when a matter settles.^[25]

However, it is the authors’ view that the outcome in that case was driven by its fairly unique and extreme facts and that, otherwise, the provision would and should likely have more widespread application.

There are other Insurance Act provisions applicable to an insurer’s file handling in the automobile insurance context.[26] If a primary insurer fails to follow the procedures as required by the Act, and the failure causes financial harm or prejudice to the excess insurer, it is likely that there are legal remedies available to the excess insurer.

In short, the duty owed by a primary insurer to an excess insurer is all the more robust in the automobile context given the heavily regulated and rather onerous nature of the obligations on third party liability insurers in that milieu.

Conclusion

Although the law in Canada governing disputes between primary and excess insurers is in its infancy, there are remedies available when an insurer’s financial interests have been prejudiced by the actions of another insurer.

Whether the remedy arises out of the principle of equitable contribution, equitable subrogation, a duty of care in tort, or by operation of statute, the law recognizes that, where an excess insurer is harmed by the unreasonable actions of a primary insurer, equity and fairness dictates that a remedy be granted.

In such circumstances, the primary insurer should be held accountable to the excess insurer for financial losses caused by the primary insurer’s unreasonable conduct.

However, it is not enough that the excess (or other) insurer would have adjusted the claim differently. It is the authors’ view that, so long as the primary insurer’s actions were reasonable and met the standard of care expected of a reasonable liability insurer in a similar situation, an excess insurer should not be entitled to a remedy.

In this respect, primary insurers should ensure that they promptly investigate a claim, take all proper steps to control a loss, and advance all defenses reasonably available on behalf of an insured.

Similarly, where an excess insurer is put at risk by a claim, they should be required to become involved in the adjusting of the claim and be held to a standard of reasonableness. In particular, an excess insurer should be sure to share all relevant information, to act reasonably in not delaying settlement, and contribute towards defence costs.

As stated at the outset, the law with respect to the rights and remedies as between primary and excess insurers is not well developed in Canada.

In this article, we explored the key authorities on point in the Canadian and American context and looked to draw some overarching themes or principles.

In the end, we conclude that there is clearly a relationship of proximity between primary and excess insurers such that one party knows, or ought to know, that a failure to act reasonably on its part could cause financial loss to the other.

It is the writers’ view that where an insurer is put at risk by a loss, the reasonable foreseeable losses that flow from the failure to act as a reasonable liability insurer in similar circumstances should also be recoverable.

It is hoped that this article provides some assistance as it relates to the state of the law in this area, and as it may relate to the development of a general duty as between primary and excess insurer to act reasonably, or to make good on the financial losses that flow from the breach of such a duty.

[1] Hollinger International Inc. v American Home Assurance Co., [2006] O.J. No. 140, 144 A.C.W.S. (3d) 1098 (Ont. Sup Ct. J.; Kansa General International Insurance Co., Re, 2001 CarswellQue 5207, EYB 2001-26900.

[2] Broadhurst & Ball v American Home Insurance Co., (1990) 1 OR 3d 225 at paras 41 and 42 (ON CA).

[3] Alie v Bertrand & Frère Construction Co., [2002] O.J. No. 4697 (ON CA).

[4] Ibid at para 174 and 175.

[5] Ibid at para 175.

[6] Boreal Insurance Inc. v Lafarge Canada Inc., (2004) 70 O.R. (3d) 502 (Ont. Sup Ct J) at para 45.

[7] ACE INA Insurance v Associates Electric & Gas Services Ltd., 2013 ONCA 685.

[8] Ibid at paras 21 & 26.

[9] Dillion v Guardian Insurance Co, [1983] ILR 1-1706 (Ont H Ct); Bullock v Trafalgar Insurance Co. of Canada, [1996] OJ No 2566 at para 103; Fredrikson v Insurance Corp. of British Columbia, [1990] B.C.W.L.D. 991, 20 A.C.W.S. (3d) 421 (BC Sup. Ct.); Shea v. Manitoba Public Insurance Corp. [1991] I.L.R. 1-2721, [1991] B.C.W.L.D. 1147 (British Columbia Supreme Court) at para 149; Wilson v Saskatchewan Government Insurance, 2010 SKQB 211.

[10] Valentine v Aetna Insurance Co., 564 FR. 2d 292 and 296 (9^th Cir 1977).

[11] Hampton v Traders General Insurance Co., [1997] OJ No 400 at para 11..

[12] Ibid at paras 10-12 (On CA).

[13] Broadhurst & Ball v American Home Insurance Co., 1 OR 3d 225 at para 42; American Home Assurance Co. v. Temple Insurance Co., [2009] OJ No 249, 174 ACWS (3d) 1157 at para 59.

[14] Insurance Act, RSO 1990, c I 8, ss. 257, 258.

[15] Hartford Accident & Indemnity Co. v Michigan Mutual Insurance Co., 6161 NY 2d 569, 463 NE 2d 608 (NY 1984).

[16] Hollinger International Inc. v American Home Assurance Co., [2006] O.J. No. 140, 144 A.C.W.S. (3d) 1098 (Ont. Sup Ct. J.).

 [17] Ibid at paras 63 to 68.

[18] Transit Casualty Co. v. Spink Corp., 94 Cal. App. 3d 124 (U.S. Cal. Ct. App. 3 Dist. 1979).

[19] Hollinger International Inc. v American Home Assurance Co., [2006] O.J. No. 140, 144 A.C.W.S. (3d) 1098 (Ont. Sup Ct. J.) at para 87.

[20] Ibid at para 89.

[21] Aetna Insurance Co. v. Canadian Surety Co. (1994), 149 A.R. 321 (Alta. C.A.).

[22] Ibid at para 153.

[23] Hollinger International Inc. v American Home Assurance Co., at para 92.

[24] Agreement of Guiding Principles Between Primary and Excess Liability Insurers Respecting Claims, 1996 at Section III.

[25] ING Insurance Co. of Canada v. Federated Insurance Co. of Canada, (2005) 138 A.C.W.S. (3d) 1159, 197 O.A.C. 324 (On CA) at para 33.

[26] Insurance Act, RSO 1990, c I 8, ss 258, 258.3.

By David M. Rogers and Andrew Yolles

In the recent decision in Cavanaugh et al. v. Grenville Christian College, 2020 ONSC 1133, Justice Leiper found that Grenville Christian College, a boarding school in Brockville, Ontario, breached both the duty of care and the fiduciary duty it owed to its students as a result of the unreasonable and abusive lifestyle the school imposed on its students between 1973 and 1997.

Justice Leiper also found that it would be appropriate to award punitive damages against the school as a result of this conduct.

Justice Leiper’s decision follows a five week trial on the common issues in this class proceeding. The matter was certified as a class action by the Divisional Court in 2014 ONSC 290, with the aim of streamlining the claims advanced against the school by its former students by permitting a single determination of the issues common to all such claims.

The Divisional Court felt the common issues would include the practices and policies of the school, and whether those practices and policies constituted a systemic breach of the school’s duties to its students.

Background of School

Grenville Christian College was founded in 1969, and operated as a boarding school for primary and secondary school students. In 1973, the school’s founders, Alastair Haig and Charles Farnsworth, introduced a new program of strict discipline for the school, which was derived from the principles and practices of a Christian community in the United States known as the “Community of Jesus”.

Grenville’s new programming consisted of very strict discipline, the use of corporal punishment, and tight control over the lives of its students in order to ensure compliance with the school’s values.

After extensive evidence from former students and staff members of the school, as well as expert evidence on the standard practices of Ontario schools during the relevant time period, and the effect those practices would have had on students, Justice Leiper concluded that a number of Grenville’s practices were abusive and systemically negligent.

“Discipline Status”

First, Justice Leiper held that the school’s practice of placing students on “discipline status” fell below the standard of care. Students of Grenville would be placed on discipline status for breaking the school’s rules, or for having a bad attitude. While “on discipline”, students were separated from their peers, taken out of class, not permitted to wear their regular uniform, and were assigned chores to carry out around the school.

Discipline status lasted a variable amount of time from days to weeks. The chores they carried out were often regular work, like cleaning dishes, but would sometimes be extremely punitive, such as having to cut grass with small scissors. Being “on discipline” carried an element of social ostracism as well, as other students were not permitted to speak with students on discipline.

Justice Leiper found that this practice of discipline by enforced isolation and sometimes excessively degrading or dangerous work duties was systemic and fell below the standard of care for a school during that time period.

Corporal Punishment

Justice Leiper also found that Grenville’s use of corporal punishment fell below the applicable standard of care. Paddling was the primary method of corporal punishment used by Grenville.

While corporal punishment, including paddling, was used by other schools in Ontario during the same time period, the standard of care required the school to mete out corporal punishment consistently in accordance with an established policy, and without resulting in significant injury or bodily harm.

At Grenville, however, Justice Leiper found that paddling was applied arbitrarily and inconsistently, there was no established policy for or records kept about its use, and it was applied with sufficient force that students were injured on numerous occasions.

Other Findings of Abuse

Another practice Justice Leiper found to be abusive and systemically negligent was the use of school correction assemblies, or “light sessions,” to correct misbehaviour. These sessions essentially consisted of specific students being singled out and publicly shamed in front of the whole school.

A further practice of the institution found to be negligent was the practice of bringing children to the school’s boiler room and showing them the furnace flames, which were used to instill a fear of going to hell for bad behaviour in the children.

Justice Leiper also took issue with Grenville’s teachings regarding sexuality. She felt that many of Grenville’s practices in this regard constituted sexualized abuse of the students, including requiring students to make sexual confessions, berating students for inciting lust, using derogatory terms for women and girls, humiliating students over expressing romantic or sexual feelings, vilifying homosexuality, and providing an unbalanced view of sexuality as sinful.

Conclusions of Trial Judge

Justice Leiper held that all of this conduct on the part of Grenville represented systemic harm that fell below the standard of care for an educational institution during the time period in which these events occurred, and was therefore negligent.

Her Honour further found that Grenville owed a fiduciary duty to its students, and that this fiduciary duty had been breached by the same impugned conduct. She held that by imposing its abusive and unreasonable lifestyle on its students, Grenville had acted contrary to its students’ best interests.

Finally, Justice Leiper held that this same conduct on the part of Grenville warranted an award of punitive damages.

Conflicting Evidence

There are many other interesting features of this judgment, in addition to the foregoing findings of the trial judge. One of the more interesting issues the trial judge dealt with is the evidence led at trial that many students had an overall positive experience at Grenville, and attributed their success in life to the education and discipline they received there.

The defendants argued that this evidence is inconsistent with the plaintiffs’ depiction of Grenville as an institution where students were systemically abused and oppressed.

Justice Leiper addressed this apparent contradiction by finding that the students’ differing experience and outcomes can be explained by their individual resiliency, which she held can mitigate the impact of abuse and lead different students to experience the same events differently.

Thus, Her Honour found that it was possible for the school to have been systemically negligent and abusive in its student programming, but nevertheless produce numerous alumni who had a positive experience with and good outcomes as a result of that same programming.

Punitive Damages

Another noteworthy feature of this decision is that punitive damages were found to be warranted, despite the fact that the school is no longer operating, and despite the historical context in which the impugned behaviour occurred.

As the trial judge herself noted, punitive damages are an extraordinary remedy intended not to compensate the plaintiff, but to deter, denounce, and punish a defendant whose behaviour has offended the Court.

Justice Leiper held that the fact that Grenville no longer exists does not interfere with the policy objectives of denouncing conduct that affects the health and emotional well-being of young students.

However, Justice Leiper did not appear to consider the fact that these events occurred many years in the past. There does not seem to have been evidence before Her Honour that there remained today a serious concern about institutions operating as Grenville did. In the absence of such evidence, it is unclear how the Court can be confident that this kind of denouncement of such behaviour today is at all needed.

Questions About Decision

It is worth noting that Grenville itself, and the very conduct that Justice Leiper found to be systemically negligent and abusive, were based on the principles and ideals of a particular sect of the Christian faith.

The parents of Grenville’s students would have chosen Grenville with full knowledge of its values and attitudes towards discipline, sexuality, and religion. Presumably, they did this because they shared those values and attitudes, and wanted them instilled in their children.

While there was evidence at trial that students may have been prevented from complaining about the treatment they received at the school, the evidence did not seem to establish that Grenville deceived its students’ parents about what kind of institution it was.

Grenville was certainly not a mainstream institution by any means, and its practices and attitudes may well have deviated from the norm at the time. However, the fact that the parents of Grenville’s students chose to send them to Grenville, and why, is completely absent from Justice Leiper’s analysis.

Taking Justice Leiper’s analysis further, one wonders whether the parents who enrolled their children in Grenville, or whether religious institutions and programs with similar attitudes towards discipline and sexuality, can be said to be negligent, abusive, and worthy of punitive sanction, as Justice Leiper felt Grenville is. The absence of consideration of this key part of the context in which Grenville operated is certainly an interesting issue raised by this decision.

Next Steps

In any event, it will now be up to the individual claimants to establish that they suffered actual damages as a result of the conduct for which Justice Leiper found Grenville to be liable to the class of its students as a whole.

That is, of course, only if Justice Leiper’s decision is upheld on appeal. The authors understand an appeal is likely forthcoming, and we look forward to yet another interesting decision in this matter.

By Anita Varjacic and Matthew Umbrio, Student-at-Law

What is an “accident”?

We all know one when we see one; or do we?

The word “accident” is a seemingly simple word, with a definition commonly understood to mean a single, unexpected, coincidental event that has resulted in some misfortune.  Unfortunately, over time, this has been distorted by the courts.

When insurers do not explicitly delineate the parameters for what constitutes an “accident” or do not define the word  in a policy, it can result in exposure for an insurer and lead to unexpected and uncertain outcomes

This however is frequently overlooked by even the most comprehensive accident insurance policies.

History of the Definition of “Accident” in the Common Law

It has long been accepted that the term “accident” is to be given its ordinary meaning, unless contractually defined, as that word does not have a legal definition.

Lord Macnaghten, of the English House of Lords, once opined that the “expression ‘accident’ is used in the popular and ordinary sense of the word as denoting an unlooked-for mishap or an untoward event which is not expected or designed”.[1]

The Supreme Court of Canada in 1978 approved of Lord Macnaghten’s interpretation in Mutual of Omaha Insurance Co v Stats[2] and this definition continues to appear in Canadian case law to this day.

The Court in Stats also expressly noted that the definition of “accident” does not vary as between indemnity and accident insurance policies – the definition is to be consistent in the common law, absent any modifiers in the relevant policy. Notably, the common law definition at this time clearly demarcated that an “accident” is an event, and not a series of events.

Unfortunately, the courts have since distorted the term, making it difficult for insurers to accurately assess whether a given injury resulted from an “accident”.

The Ontario Court of Appeal in Voison v Royal Insurance Co of Canada[3] elaborated on Lord Macnaghten’s definition in the context of an accident insurance policy. Although generally in agreement with prior interpretations of the term, the Court of Appeal supported the proposition that the term “accident” is not limited to cases where there is a single inciting event.

The Court held that an accidental injury need not arise from an antecedent mishap that results directly in injury. Where the injury is unforeseen, unexpected, and without design, and would not be likely to result naturally, the unusual result could be considered an accidental injury, though caused by an intentional act. In that case a person assumed an awkward position, stood up, suffered pain and ultimately was paralyzed as he had suffered an occlusion of the spinal artery.

Following Voison, the common law was largely unchanged until the Supreme Court of Canada decision Martin v American International Assurance Life Co[4]. In this decision, the Court was asked to determine whether the death of an insured doctor that had injected himself with an overdose of opiates could be classified as an accident such that his family would be entitled to an Accidental Death Benefit Provision under his life insurance policy.

The insurer denied the claim, arguing that the self-injection was a deliberate act and could not be considered a “death by accidental means” as required by the policy.

In response to the insurer’s argument, the Supreme Court of Canada abolished the previously held distinction between “death by accidental means” and “accidental death”. This distinction allowed insurers to narrow coverage and only pay a benefit where both the death and the actions leading to that death were accidental.

By abolishing this distinction, the Court modified the legal test for determining whether an accident had occurred, opining that the analysis was “whether a reasonable person in the position of the insured expected to die”. This analysis is a subjective one.

More recently, in Gibbens v Co-operators Life Insurance Co.[5], the Supreme Court of Canada was tasked with determining whether an insured that had developed transverse myelitis, resulting from genital herpes acquired through unprotected sex, could be considered accidental.

As transverse myelitis was not defined as a critical disease, and the policy otherwise required death or dismemberment to result from external, violent, and accidental means, the insurer denied payment of the benefit.

In the decision, the Supreme Court recognized that the term “accident” lacked a bright line legal definition, but declined to introduce one, instead advocating for a “generous interpretation”. The Court did recognize two important, limiting considerations.

Firstly, although the term is to be read generously, a clear policy can restrict that definition. Secondly, care should be taken by the courts to ensure that accident insurance is not so broadly interpreted that it effectively becomes a general, comprehensive policy.

In a modification to their decision in Martin, the Supreme Court in Gibbens stated that there is no necessary equivalence between “unexpected” and “accident”, in that an event may not be defined as an accident solely because it was unexpected. The Court provided an example: “if a man, sitting at a bus station, is hit by a bus that has careened out of control, that is unquestionably an accident – but it is not an accident by virtue of the fact that the man did not expect it”.

The Supreme Court’s decisions in Martin and Gibbens created uncertainty and confusion. The analysis for which the Court advocated in Martin seems to be at odds with the Court’s decision in Gibbens, with the expectation test contrasting with the Court’s determination that there is no equivalence between “unexpected” and “accident”.

Essentially, if the court is left to decide what constitutes an accident under a policy that has not defined the term, it would be tremendously difficult to predict the outcome. The definition of Lord Macnaghten, once an effective tool to determine whether an accident had occurred, has essentially been cast aside.

Current State of the Law

Considering the above, what is an accident?

As the Court noted, in Gibbens, a “century and a half of insurance litigation has failed to produce a bright line definition of the word “accident””.

We know that:

• An accident is no longer limited to a single event
• Intentional acts can be considered an accident if the outcome was unintended or unexpected
• Unintended or unexpected outcomes may not be an accident if arising from a natural cause or illness or disease
• Depending upon the circumstances, an objective or subjective or combined analysis may be required
• One must always have regard to the policy, the definitions and the exclusions in a policy
• Based on the current state of the law, the analysis is muddled and uncertain

There are several other decisions that illustrate the difficulty in predicting what the court will consider an accident.

Toronto Professional Firefighters’ Assn v Toronto (City)[6] is a clear example of this unpredictability. In this decision, the Toronto Professional Firefighter’s Association sought to overturn an arbitrator’s decision that the estate for a deceased firefighter was not entitled to receive accidental death benefits.

The firefighter’s death resulted from renal cancer, which was linked to his exposure to toxic substances during his employment. The arbitrator had found that his death was not unexpected, or alternatively, that he had died of natural causes. The Divisional Court overturned the arbitrator’s decision, stating that, since the increased risk of cancer was unknown, the firefighter could not have expected to die.

In Van Berlo v Aim Underwriting Ltd.[7], the Court was tasked with determining whether an aircraft crash was an accident within the terms of the relevant policy. Before taking off, the owner, and pilot, of the aircraft noticed that one of the engines had failed to start. After getting out of the aircraft and inspecting the engine, he determined that it was still safe to fly the short distance to his home from the airstrip.

The insurer denied his claim, reasoning that his actions constituted negligence and he had voluntarily and knowingly assumed the risk.

In rejecting the insurer’s argument, the Court found that the pilot had believed he could fly the plane home without incident and had not expected to suffer an injury. The Court found that the crash was a “close-call” and that the pilot, although negligent, had not assumed the risk such that the injury should fall outside the scope of the policy.

What Can Insurers Do?

Despite the debate and confusion over what is an “accident”, the solution is quite simple. All insurers, whether providing accident insurance or a comprehensive policy, can and should consider defining the term “accident”.

A narrow definition, excluding repeat choices, injuries borne through repeated events, or injuries arising from the negligence of the insured, would allow for insurers to reduce coverage, if that is what is intended.

This would allow insurers to more easily assess their risk. Explicitly delineating what sorts of events may constitute an accident could  prevent the judicial unpredictability that has plagued this area of the law.

Conclusion

Despite being a simple question: what is an “accident”, the answer is far from clear.

One could argue that the lack of clear insurance policy language is to blame.  One could also argue that the courts have strived to ever expand the definition of accident in favour of insureds.

Either way, insurers should consider clear language, a policy definition of “accident”, in combination with clear exclusions if the intent on providing coverage is to limit coverage to what we all can easily identify as an “accident”.

After all, don’t we all know an accident when we see one?

[1] Fenton v. Thorley & Co., Ltd., [1903] A.C. 443.

[2] Stats v. Mutual of Omaha Insurance Co., [1978] 2 S.C.R. 1153, 87 D.L.R. (3d) 169.

[3]Voisin v. Royal Insurance Co. of Canada (1988), 66 O.R. (2d) 45, 53 D.L.R. (4th) 299 (CA).

[4] Martin v. American International Assurance Life Co., 2003 SCC 16, [2003] 1 S.C.R. 158.

[5] Gibbens v. Co-operators Life Insurance Co., 2009 SCC 59, [2009] 3 S.C.R. 605.

[6] Toronto Professional Fire Fighters’ Assn. v. Toronto (City) (2007), 156 A.C.W.S. (3d) 962, 223 O.A.C. 146 (Ont. Div. Ct.).

[7] Van Berlo v. Aim Underwriting Ltd., 2014 ONSC 7214, 248 A.C.W.S. (3d) 45.

By Brian Sunohara

The spread of COVID-19 is affecting people in many ways.  Peoples’ health and wellbeing should be the foremost consideration during these times.

Another issue is the manner in which people work. Most of us in the legal profession are working from home.  At our firm, it has been an easy transition to work from home since everyone at the firm can connect to our computer system remotely.

However, what happens if an affidavit needs to be commissioned? Can social distancing be maintained? According to the Law Society of Ontario, affidavits may currently be commissioned by videoconference.

The commissioning of affidavits is governed by the Commissioners for Taking Affidavits Act. Section 9 of this act indicates as follows:

Every oath and declaration shall be taken by the deponent in the presence of the commissioner, notary public, justice of the peace or other officer or person administering the oath or declaration who shall satisfy himself or herself of the genuineness of the signature of the deponent or declarant and shall administer the oath or declaration in the manner required by law before signing the jurat or declaration.

Therefore, an affidavit is required to be commissioned in the “presence” of a lawyer or other commissioner for taking affidavits. The act does not specify whether “presence” means “physical presence”.

The commissioning of affidavits is not regulated by the Law Society.  However, the Law Society states that the best practice for commissioning documents is for the lawyer or paralegal to be in the physical presence of the deponent.

That being said, the Law Society has advised that, due to COVID-19 and until further notice, it will interpret the “presence” requirement as permitting documents to be commissioned via video conference.  It must be noted that this is not binding on the court.

The Law Society’s website mentions two possible ways to accomplish virtual commissioning:

An example of virtual commissioning is a lawyer who meets with a client via Skype® or FaceTime® and directs the client to sign the relevant legal document that is visible to the lawyer through video.  The client then returns the original executed document to the lawyer who, upon receipt, signs the document as a witness to the client’s signature. Another example is a client and a lawyer logging into the same platform to view and electronically sign the same document simultaneously, despite being in different physical locations.

Under section 11 of the Electronic Commerce Act, 2000, most documents can be signed by an electronic signature.  However, the court offices in some jurisdictions want to see original signatures. It is, therefore, possible that documents signed electronically will not be accepted for filing by the court. It is best to check with the court office in advance.

The Law Society warns that lawyers and paralegals should be alert to the risks of virtual commissioning, including issues of fraud, identity theft, undue influence, duress, and capacity.

The Law Society has written a helpful resource on virtual commissioning. It has also prepared very useful information on practicing law during COVID-19. Please see the Law Society’s website for its “LSO: COVID-19 Response”.

By Alon Barda

In 2017, the Executive Chair of the Licence Appeal Tribunal (“LAT”) held that, under specific circumstances, the LAT can apply s.7 of the Licence Appeal Tribunal Act[1] (“LAT Act”) to relieve against a missed limitation period.

The directive of the Executive Chair was clear. Nevertheless, a recent reconsideration decision of the LAT held that s.7 does not apply to SABs matters and created much confusion in the process.

The following article will discuss the 2017 case and then address cases that followed that decision and the competing case. The article will then address how LAT cases since the release of the competing case have applied s.7 and will conclude with a discussion of the need for an appellate decision on the issue.

The writer will also comment on how insurers should address cases where a claimant is seeking to relieve a missed limitation period pursuant to s.7 of the LAT Act.

Background

 In A.F. v. North Blenheim Mutual Insurance Company (“A.F. v. North Blenheim”),[2] the Executive Chair of the LAT reconsidered two decisions where the Tribunal applied the two-year limitation under s.56 of the Statutory Accident Benefits Schedule (“Schedule”) and dismissed the claims as statute barred.

The Executive Chair on her own initiative ultimately held that it was a significant error of law for the Tribunal not to consider s.7 of the LAT Act and sent both matters back for a hearing on the application of s.7, which states as follows:

Despite any limitation of time fixed by or under any Act for the giving of any notice requiring a hearing by the Tribunal  …  if the Tribunal is satisfied that there are reasonable grounds for applying for the extension and for granting relief, it may,

(a) extend the time for giving the notice either before or after the expiration of the limitation of time so limited; and

(b) give the directions that it considers proper as a result of extending the time.

In her decision, the Executive Chair highlighted that the Tribunal, in determining whether to grant an extension of time under s.7 of the LAT Act, generally weighs the following four factors to determine whether the case is one that warrants an extension to be granted:

1. The existence of a bona fide intention to appeal within the appeal period;
2. The length of the delay;
3. Prejudice to the other party; and,
4. The merits of the appeal [challenge of insurer’s denial].

Initial Decisions Rendered After A.F. v. North Blenheim

Cases that followed the A.F. v. North Blenheim decision showed that the Tribunal was both applying s.7 and even doing so to relieve against missed limitation periods.

In D.A. v. Aviva Insurance Canada,[3] the Tribunal ultimately found that, while it was unnecessary to invoke s.7, the applicant’s claim for non-earner benefits (“NEB”) nevertheless met the criteria for granting an extension.

In 17-004874 v. Economical Mutual Insurance Company,[4] the Tribunal held that, even if it were to find the applicant’s NEB claim had merit, a consideration of all of the factors together with the facts of the case resulted in a finding that the justice of the case favoured not extending the limitation period.

In A.O. v. Unifund Assurance Company,[5] the Tribunal held that the application that was filed with the Tribunal for Income Replacement Benefits after the expiry of the limitation period of two years was permitted to proceed pursuant to section 7 of the LAT Act.

The Decision of 18-001196 v. Certas – Wait, s.7 Does Not Apply?

While the issue appeared well settled, the application of s.7 of the LAT Act was set into a state of flux with the reconsideration decision of adjudicator Deborah Neilson in 18-001196 vs. Certas Home and Auto Insurance Company.[6]

In the underlying decision, the Tribunal found that the application was filed after the expiry of the two-year limitation period for all the benefits claimed. Nevertheless, the Tribunal held that the claim was permitted to proceed under s.7 of the LAT Act.

As set out above, s.7 of the LAT Act applies “despite any limitation of time fixed by or under any Act”. On reconsideration, the insurer argued that the Tribunal erred in finding that s.7 of the LAT Act applies to limitation periods fixed under a Regulation.

The Tribunal had rejected this argument and held that the limitation period in question is contained within a regulation (the Schedule), which in turn was enacted under the Insurance Act, such that the applicable limitation period is one that was prescribed under an Act.

The applicant relied on the decision of A.F. v. North Blenheim wherein, as discussed above, the Executive Chair found that the intention of the legislature was for s.7 of the LAT Act to apply to SABs claims because there was nothing in that section excluding Insurance Act matters.

The adjudicator stated that the insurer’s argument regarding the difference between a Regulation and an Act was not before the Executive Chair. Furthermore, the adjudicator highlighted that the Executive Chair was not asked (the Executive Chair reconsidered the Tribunal decision on her own initiative and presumably considered all relevant issues) to consider that both the terms “Act” and “Regulation” are used in s.3 of the LAT Act, which references the duties assigned to the Tribunal “by or under any Act or Regulation”. Conversely, in s.7 only the term “Act” is used.

As such, the adjudicator found that, if “by or under any Act” is meant to include Regulations made under the Act, then the use of “regulation” in s.3 of the LAT Act is redundant. She found such an interpretation to be contrary to the principles of statutory interpretation.

The adjudicator further highlighted that the Insurance Act used to have a section that imposed a limitation period for SABs claims that was repealed when the dispute resolution process was transferred to the LAT.

The adjudicator held that, if the Legislature intended to give the Tribunal the discretion to extend the limitation period, then the one contained in the Insurance Act would not have been repealed but would have been amended to state that it was subject to the discretion of the Tribunal in accordance with the LAT Act.

For the reasons above, the adjudicator agreed with the insurer that “on a plain reading, the Legislative intent was to remove the limitation period from the jurisdiction of s.7 of the LAT Act, as it is no longer a limitation of time fixed by or under any Act, but rather it is fixed under a regulation.”

Accordingly, she agreed with the respondent and held that the Tribunal erred in law in finding that it had the discretion under s.7 of the LAT Act to extend the limitation period designated by a Regulation and not an Act.

Subsequent to this decision, Adjudicator Neilson made a similar finding regarding s.7 of the LAT Act in M.N v Aviva General Insurance Company.[7]

But Wait, is A.F. v. North Blenheim Correct After All?

Three recent decisions have rejected the decision in 18-001196 v. Certas regarding the application of s.7 of the LAT Act.

In the reconsideration decision of V.M.L. v. Aviva General Insurance Company[8] the adjudicator highlighted that the Executive Chair in A.F. v. North Blenheim analyzed the Legislature’s intent and concluded that the Legislature could have amended this section of the LAT Act but did not do so, despite amending other sections of the Act.

The adjudicator noted that, while both decisions are in direct contrast, and that he is not bound by another member’s decision, he prefers the opinion of the Executive Chair and “the reasoning in North Blenheim that the legislature is presumed to know the law and not make mistakes.”

In this regard, he stated that section 7 of the LAT Act was “not repealed or amended when the Tribunal assumed jurisdiction for matters under the Schedule as of April 1, 2016.” As such, he agreed with the Executive Chair that section 7 of the LAT Act applies to SABs claims.

In S.W. v. Aviva General Insurance[9] Aviva relied on the decision in 18-001196 v. Certas and argued that the Tribunal does not have jurisdiction to extend the limitation period under s.7 of the LAT Act. The adjudicator found as follows at para 14 regarding the decision in 18-001196 vs. Certas:

Respectfully, I disagree with its analysis and ultimate conclusion and note that it is currently under appeal. In any event, I note that that decision is not binding on me here. Absent direction from a court of superior jurisdiction on the applicability of s. 7, I follow the significant body of existing jurisprudence from this Tribunal indicating that this Tribunal does have jurisdiction under s. 7 of the LAT Act to extend a limitation period if the justice of the case supports it. Here, I find evidence to justify exercising the Tribunal’s discretion to extend the limitation period under s. 7 of the LAT Act.

In a very recent decision of R.M. v. Certas Home and Auto Insurance Company[10] the same adjudicator that decided the reconsideration decision of V.M.L. v. Aviva General Insurance Company stated once again that he prefers the decision of the Executive Chair in North Blenheim at it pertains to the applicability of s.7.

The Takeaway – Where Do We Go From Here?

While the 18-001196 v. Certas decision certainly favours insurers, it is notable that there are no other adjudicators at the LAT that have followed this decision. Conversely, the decision in A.F. v. North Blenheim was widely followed prior to the 18-001196 v. Certas decision and has since been favoured by adjudicators.

It is the opinion of this writer that an appellate court will likely find that s.7 applies to applicants seeking relief in SABs claims from a missed limitation period based on the reasoning set out in North Blenheim.

The writer understands that this issue is likely to be addressed on an appeal in the near future. However, until a decision is rendered by an appellate court, insurers should raise the Certas case in all matters wherein an applicant is seeking to extend a limitation period pursuant to s.7 and should take the position that s.7 of the LAT Act does not apply to extend the limitation period in SABs matters.

[1] S.O. 1999, c. 12, Sch. G.

[2] 2017 CanLII 87546 (ON LAT).

[3] 2018 CanLII 39443 (ON LAT)

[4] 2018 CanLII 83515 (ON LAT)

[5] 2019 CanLII 58501 (ON LAT).

[6] 2016 CanLII 153125 (ON LAT) (note “2016” is the year noted in the citation despite this being incorrect).

[7]2019 CanLII 119731 (ON LAT).

[8] 2020 CanLII 12745 (ON LAT).

[9] 2020 CanLII 12727 (ON LAT).

[10] 2020 CanLII 19575 (ON LAT).

By Brian Sunohara

For many years now, consumer transactions have been conducted over the Internet, sometimes with companies in faraway places.  With the prevalence of e-commerce, more and more questions are arising over whether a business which has no physical presence in a jurisdiction can be sued in that jurisdiction, if it engages consumers through the Internet.

This issue was front and centre in the Ontario Court of Appeal’s recent decision in Vahle v. Global Work & Travel Co. Inc., 2020 ONCA 224.

Background

Two sisters from Ontario went to Thailand to teach English. The teaching program was organized by the defendant.

While riding a motor scooter, the sisters were struck by a car. One sister died and the other sustained serious injuries. A lawsuit was commenced in Ontario.

The defendant is an international travel agency. Its parent company is based in Australia, and it has offices and employees in Vancouver, British Columbia.

The defendant argued that the Ontario court lacked jurisdiction and that Ontario was not the convenient forum.

Motion Decision

Justice Schabas noted that the onus lies on a plaintiff to show that at least one of the presumptive connecting factors can be established. The presumptive connecting factors were outlined by the Supreme Court of Canada in Club Resorts Ltd. v. Van Breda, [2012] 1 S.C.R. 572:

• The defendant is domiciled or resident in the province.
• The defendant carries on business in the province.
• The tort was committed in the province.
• A contract connected with the dispute was made in the province.

Justice Schabas held that two of the presumptive connecting factors applied.

First, there was at least a “good arguable case” that a tort was committed in Ontario. A misrepresentation by the defendant may have occurred in Ontario. The tort of negligent misrepresentation is committed “where the representation is received and relied upon”. Further, the defendant’s conduct following the accident could give rise to claims of negligence involving steps that it took or ought to have taken in Ontario.

Secondly, although the defendant does not have a physical presence in Ontario, Justice Schabas noted that it engages in e-commerce in Ontario by contacting and contracting with travellers in Ontario. There was a “good arguable case” that the defendant carries on business in Ontario.

As a result, it was presumed that Ontario has jurisdiction. Justice Schabas held that the defendant did not rebut the presumption.

Justice Schabas then examined the question of forum non conveniens and held that the defendant did not satisfy the burden of showing that Thailand was clearly the more appropriate forum for the lawsuit.

Appeal Decision

On appeal, the Court of Appeal found no error in the motion judge’s findings related to the torts of negligent misrepresentation and negligence having been committed in Ontario.

The Court of Appeal stated that a motion judge is not to assess the merits of a case.  Rather, he or she must be at least satisfied that there is a “good arguable case” supporting a presumptive factor, taking into account the allegations in the Statement of Claim and the evidence, where evidence is led.

The requirement to have a “good arguable case” supporting a presumptive factor was easily met in this case.  The sisters were in Ontario when they responded to Internet advertisements from the defendant.

The defendant was well aware that it was attracting Ontario clients through representations made in Ontario. The defendant represented that it would ensure the living, safety, security, and emergency needs of the sisters.  At least some of the representations relied on were alleged to have been made to them in Ontario.

The presumption of Ontario having jurisdiction was not rebutted.  In order to rebut a presumptive connecting factor, a defendant must establish facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them.

The defendant argued that some of the alleged misconduct was that of a Thai company and other entities for which it is not responsible.  The Court of Appeal indicated that, on a jurisdiction motion, it is not necessary for the Court to determine whether all of the alleged misconduct was that of the defendant or whether all of the alleged misconduct is connected to Ontario.

Rather, the questions are “whether the statement of claim asserts the core elements of a cause of action known to law and appears capable of amendment to cure any pleadings deficiencies and whether the claimant has established a good arguable case that the cause of action is sufficiently connected to Ontario to found jurisdiction”.

Lastly, the Court of Appeal saw no basis to interfere with the motion judge’s conclusion that the defendant did not prove that Thailand was clearly the more appropriate forum for the lawsuit.

As a result, the appeal was dismissed, and the claim will proceed in Ontario.

Conclusion

When companies conduct business through the Internet, they can sometimes be sued in Ontario, even if they have no physical presence in Ontario.

In the case in issue, the defendant contacted and contracted with travellers in Ontario.  It actively solicited the business of Ontario residents and made representations to them.

Engaging in such activities may be sufficient for a court to find that there is a “good arguable case” that the defendant carries on business in Ontario and/or committed a tort in Ontario and is, thus, subject to the jurisdiction of the Ontario court.

By Micah Pirk-O’Connell, Student-at-Law

The Representative Plaintiff

In order to bring a class action before the courts, class counsel must find a representative plaintiff. This member of the class is willing to participate closely with class counsel to help drive the litigation forward. The Class Proceedings Act dictates that there must be a representative plaintiff or defendant who:

• would fairly and adequately represent the interests of the class,
• has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
• does not have, on the common issues for the class, and interest in conflict with the interests of other class members. [1]

One of the leading cases in the Canadian class action sphere with respect to the relationship between representative plaintiff and class counsel is Fantl v. Transamerica Life Canada [2].

In Fantl, the law firm representing the class dissolved, creating a schism between lead counsel and three of his partners. After hearing the application for an order to require Mr. Fantl, the representative plaintiff, to accept lead counsel and his new firm to represent the class, Justice Perell dismissed the application and allowed Mr. Fantl to retain counsel of his choosing.

Justice Perell outlined his reasoning in the decision as follows:

The reasons amount to no more than concluding that  Mr. Fantl is  a genuine plaintiff and while in the context of a class proceeding the Court has the jurisdiction to overrule a plaintiff’s choice of lawyer, the Court should defer to the plaintiff’s choice, unless it is demonstrated that the choice is inadequate; that is, the Court should only intervene if the plaintiff’s choice would deny the proposed class or the class in a certified class action the relationships and the representation to which it is entitled in a class action. [2]

The test for representation in a class action is one of adequacy, rather than superiority. A lawyer or firm need not be the best suited in order to represent a class; they need only be adequate to the task.

Justice Perell went on to elaborate that the test for showing inadequacy of representation is difficult to meet. If a plaintiff’s choice of firm is adequate, the court is not likely to intervene.

In other words, a genuine plaintiff will be treated much like the plaintiff in a traditional solicitor/client context. Provided the counsel preferred by the representative plaintiff is adequate, and a change in lawyer will not adversely affect the rest of the class, the court will likely allow the representative plaintiff to change class counsel as they see fit.

However, what happens when a plaintiff is not genuine, and how do we determine when a plaintiff is no longer genuine?

The Volatile Plaintiff

In Azar v. Strada Crush Limited [3], a recent decision from Justice Morgan of the Superior Court of Justice, a representative plaintiff was found to be inadequate to the task of representing his class not once, but twice. This resulted in the class action being decertified in accordance with section 10(1) of the Class Proceedings Act.

This class action began with a claim for unpaid wages by employees. The class of 154 employees at Strada Crush Limited alleged that their employer intentionally misclassified them in order to avoid paying overtime and holiday pay to which they were entitled. The class proceeding was certified on August 17, 2018. Mr. Azar was the representative plaintiff and Mr. Henry Juroviesky had carriage of the action.

Subsequent to the certification of the class action and a falling out with Mr. Juroviesky, Mr. Azar moved to appoint Darryl Singer of Diamond and Diamond as new class counsel. Mr. Azar alleged that Mr. Juroviesky had failed to inform him of the possible adverse cost consequences of proceeding as the representative plaintiff (it is commonplace, though not mandatory, for class counsel to indemnify the representative plaintiff against any potential cost award).

Mr. Juroviesky brought his own motion, which alleged Mr. Azar was not competent to act as representative plaintiff, and required a litigation guardian. Defence counsel brought a cross motion to have Mr. Azar removed from his position as representative plaintiff.

Through Mr. Azar’s affidavit, Justice Morgan learned that a personal relationship motivated Mr. Azar’s decision, stating:

It seems to me that in seeking to terminate the retainer of class counsel who successfully took a difficult case through the certification stage, and in seeking instead to appoint the lawyer representing his friend who is in a business dispute with class counsel, the Plaintiff has not put forward the best interest of the class he represents. [4]

In the result, Mr. Azar was removed as representative plaintiff and Mr. Juroviesky was given 60 days to replace him with a new representative plaintiff. Having failed to find a willing plaintiff within the two months allotted to him, and having reconciled with Mr. Azar, the pair brought a motion before the court to have Mr. Azar reappointed as class counsel.

This time, Mr. Azar accused Diamond and Diamond of improperly influencing him into changing counsel. Once again Justice Morgan found Mr. Azar inadequate to the task, writing in his decision that “Mr. Azar is too volatile, too self-focused, and too easily manipulated and distracted from the class’ interest to qualify as representative Plaintiff in this action.” [4]

This notion of the representative plaintiff being manipulable is one with particular application in the class action context. The issue of how involved a representative plaintiff ought to be can change depending on which judge is hearing the case.

In a system where representative plaintiffs are often sought out and recruited by class counsel, judges are wary of plaintiffs with no genuine interest in the litigation acquiescing to every whim of class counsel.

The concern is that a representative plaintiff who is not appropriately involved might, for example, approve a settlement that is more favourable for the lawyers than the class members.

In this case, Mr. Azar’s suspect motivations prevented Justice Morgan from allowing him to be reinstated as representative plaintiff. Mr. Azar accused both Mr. Juroviesky and Mr. Singer of misleading him, as well as convincing him to bring both ill-fated motions.

Justice Morgan felt that Mr. Azar’s action “exhibited a lack of independent judgment and an inability to provide guidance to, and a check on, counsel’s approach to the claim.” [3]

Conclusion

Ultimately, the greatest loss in this case is to the class itself. The three driving goals of class proceedings in Canada are judicial economy, access to justice, and behaviour modification. Class actions are an incredible tool for access to justice because they allow otherwise economically unviable claimants a chance to have their day in court.

Mr. Azar’s  behaviour robbed the other class members of that chance. However, as Justice Morgan himself wrote: “it does not foster access to justice for the class to be represented by someone who is not up to the task”[3]. Should a representative plaintiff be found in the future, pending any limitation periods, it remains possible for the action to be recertified.

Defence counsel should ensure they are alive to these issues, and consider bringing a motion to have a volatile or disingenuous representative plaintiff removed, where appropriate.

[1]       Class Proceedings Act, 1992, S.O. 1992, c. 6.

[2]       2008 CarswellOnt 2249

[3]       2020 ONSC 549

[4]       2019 ONSC 4436

By Modasir Rajabali

Insurance policies are often buttressed by the fundamental principles of contract law, which include concepts such as the intention of the parties, understanding the policy’s terms, and the surrounding circumstances known to the parties at the time of contract formation.  Contractual interpretation serves to outline the principles of these policies, in consideration of any given factual matrix.

One such case, First Condo Group Ltd. v. Lloyd’s Underwriters, 2020 ONSC 146, sheds light on the general view of the courts when it comes to interpreting exclusion clauses in insurance policies.

In this case, the unfortunate Mr. Jason Cash was injured on the premises of the Durham Condominium Corporation No. 62 (“DCC 62”) while working on an electrical pole on October 20, 2015. Mr. Cash suffered a severe traumatic brain injury. The Cash family began the first of several proceedings against DCC 62 in 2016.

Previously, First Condo Group Ltd. had prepared a Reserve Fund Study for DCC 62, which addressed the safety and remaining life span of lampposts on the condominium corporation’s property. The Reserve Fund Study was prepared on November 11, 2013, after which no other services were provided to DCC 62.

As a result, both DCC 62 and Mr. Cash issued a claim as against First Condo for contribution and indemnity, and negligence, respectively. In turn, First Condo reported the claim to Lloyd’s, who denied coverage. First Condo made an Application for an order that Lloyd’s provide coverage.

Lloyd’s policy to First Condo was effective for four years between March 25, 2010 and March 25, 2014. No claims were made during this policy period. From March 25, 2014 to September 10, 2015, First Condo was insured by another insurer. Lloyd’s issued a new policy on September 11, 2015 to September 11, 2016, which was annually renewed until 2019.

The policy differentiated between a “claims-made” insurance policy and an “occurrence policy”. A “claims-made” insurance policy means that the insurer would provide coverage regardless of when the negligence giving rise to those claims may have occurred.  Coverage is triggered when a claim is made against the insured during the policy period.

In contrast, an “occurrence policy” provides insurance coverage for liability triggering events during the policy period, irrespective of when an actual claim is made.

Lloyd’s argued that the policy in question was a claims-made insurance contract and that the alleged negligence in preparing the Reserve Fund Study was before the Retroactive Date of September 11, 2015.

The insurer further argued that the word “incident” in the exclusion clause referred to First Condo’s conduct and not the claims arising from that conduct. As such, any claims that arise from the insured’s conduct before the Retroactive Date, would be void of coverage.

The exclusion clause is reproduced below:

65. Retroactive Date

in respect of INSURING CLAUSES 1, 3 (Section G only), 6 and 7 arising out of any actual or alleged incident occurring, in whole or in part, on or before the retroactive date.

First Condo argued that that the word “incident” meant “a discrete event or occurrence”, referring to the injury of Mr. Cash, which occurred on October 30, 2015. As such, that date would be after the Retroactive Date, meaning that the incident was not excluded from coverage.

In following the precedent set by former Chief Justice McLachlin in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252, Justice Perell stated that the word “incident” referred to the negligent preparation of the Reserve Fund Study by First Condo, which was completed in 2013. That was the incident that gave rise to the claim made by Mr. Cash against First Condo in September 2018.

The Court held that the policy remained a claims-made policy, and First Condo’s application was dismissed.

• We hope everyone is staying safe during the COVID-19 pandemic. Our lawyers and staff are available by phone, e-mail, and videoconference.
• In January 2020, an article written by Carol-Anne Wyseman on the limitation period in duty to defend applications was published in The Lawyer’s Daily.
• Ankita Abraham wrote an article on the changes to the Simplified Procedure, which was published in January 2020 in the Ontario Risk & Insurance Management Society newsletter.
• Alon Barda wrote an article called “Striking Claims Against Insurance Adjusters” that was published in The Lawyer’s Daily in January 2020.
• In January 2020, Stephen Ross co-chaired The Advocates’ Society Tricks of the Trade conference. Brian Sunohara spoke on Surveillance and Social Media Evidence.
• Alon Barda was quoted in Canadian Underwriter in January 2020 regarding a decision by the Licence Appeal Tribunal in which a special award was granted to a claimant.
• In January 2020, Meryl Rodrigues conducted an informative in-firm seminar on pleadings.
• Tom Macmillan had an article published in The Lawyer’s Daily in January 2020. The article addressed a Court of Appeal decision regarding an exclusion in a homeowner’s policy.
• In February 2020, Brian Sunohara and Erin Crochetière were defence counsel in a trial involving a claim against a police force related to alleged motor vehicle negligence, breach of Charter rights, and false arrest. The trial is currently scheduled to continue in May 2020.
• In February 2020, we had our annual Associates Appreciation Dinner at the house of our senior partner, Stephen Ross.
• Mo Rajabali wrote an article called “Relief from forfeiture in context of recoverable depreciation”. The article was published in The Lawyer’s Daily in March 2020.
• Please follow us on our Rogers Partners Twitter account: @RogersPartners
• Visit the RP Blog for regular updates on our firm and the law.

What Does it Mean to be a “Reasonable” Parent?

I sit at my desk to write this piece after having spent my week watching over the every move of my son and daughter. While my husband and I have been working from home, we have been switching hats between lawyer, engineer, teacher, entertainer, musician and puppeteer, with some help from our friends at Nintendo and Netflix.

This, of course, is not a normal week but one which has been gifted (or imposed) on us by the Covid-19 pandemic.

Global pandemic or not, parenting is challenging, particularly when you are dealing with a teenager, or worse again, a three-nager. We cannot always be there to watch over the every move of our children. They take the school bus. They ride bikes. They cross roads. They fly drones. They kick balls. They drive cars.

And we, as their parents, can be held responsible for their actions in law if they hurt others or damage property while so doing. At least until they turn 18.

Now, we all strive to be the “perfect” parent, whatever that may be. But fear not, while you may hold yourself to this impossibly high standard, the Court does not.

All you must be is reasonable. A “reasonable” parent – now that, I think, I hope, is a standard I can meet.

What does it mean to be a “reasonable” parent in the eyes of the law? Well, in true lawyer fashion, it depends on the circumstances.

The Parental Responsibility Act

We can, first, look to the Parental Responsibility Act[1] for guidance. Under this provincial statute, parents can be sued for loss of or damage to property caused by their children and for economic loss suffered as a consequence of same. The monetary threshold for recovery is the limits of the Small Claims Court, which is currently $35,000.

The Parental Responsibility Act places a reverse onus on the implicated parent, which means that once it has been established that the damage was caused by the child, the parent will be found automatically responsible for the actions of the child.

Parents can rebut this presumption, however. First, they can satisfy the court that the activity that caused the loss or damage was not intentional. Failing same, to avoid liability, parents will need to prove that they provided “reasonable supervision” over the child at the time the offence was committed and that they made “reasonable efforts” to prevent or discourage the child from engaging in such an activity.

The Court may consider a variety of factors in makings its determination in this regard, including the age of the child, the child’s prior conduct, the potential danger of the activity, the physical and mental capacity of the child, the level of supervision, whether the parent has sought to improve his or her parenting skills by attending parenting courses or otherwise, and any other relevant matter.

What is reasonable supervision is fact-specific and appears very much related to the age of the child. The Landlord and Tenant Board relied on the Parental Responsibility Act to find a tenant responsible for the repairs of a glass front door which was broken by his three and a half year old son.[2] The child was throwing rocks repeatedly at the door, while his mother was distracted speaking to someone in a nearby parked car. Given his age, the Board found that close supervision was required.

As an aside, the effect of this seemingly momentary parenting failure could have had devastating consequences for this family. This result, coupled with the eviction powers under the Residential Tenancies Act, could have seen the family ordered to vacate their home. Fortunately, in the circumstances of that particular case, the Board decided to grant relief from eviction.

In Connolly (Litigation Guardian of) v. Riopelle,[3] an eight year old boy was in the care of his grandfather while his mother was shopping. The child was playing in front of his grandfather’s house unattended for between 30 and 45 minutes when he was struck by a vehicle driven by the defendant driver.

The grandfather moved for summary judgment on the basis that the allegation of negligent supervision made against him did not constitute a genuine issue for trial.

In denying the motion, the Court found that there was a rational basis for the trier of fact to conclude that there was negligent supervision by the grandfather. He failed to look out from time to time to ensure the child was adhering to the rules that had been set.

The child had played in the yard only a few times before, perhaps never before without adult supervision, and it was unknown whether there were attractions in this new setting that could prove too difficult for the child to resist when adults were not around.

If parents have delegated supervision, the court will consider whether that was a reasonable delegation – not whether they arranged for the best type of supervision available.[4] It may look at the age of the babysitter and what happened on any previous occasion that that individual cared for your child.

The case of Shannon v. Westman (Litigation Guardian Of)[5] involved two minors breaking into a neighbours’ house during the summer holidays and stealing several items, including jewellery to the approximate value of $20,000. The Court commented that in the absence of any special circumstances, children are capable of supervising and caring for other children once they are 12 years of age.

As a result, it was not unreasonable for the parents in Shannon to leave the two minors, aged 10 and 14 respectively, without direct supervision while they were at work. Further, no untoward incidents had occurred in the past while the 14 year old was left to supervise.

There was a similar outcome in Cinnirella v C.C., (Litigation Guardian of),[6] a case which arose out of the unlawful use of an automobile by a 15 year old, unlicensed minor. The Court found it reasonable that the parents had left the minor in the care of his 17 year old sister. In fact, there was no evidence led to suggest that he required supervision at all.

Looking Beyond the Parental Responsibility Act

We can look beyond the realms of the Parental Responsibility Act for further examples of what the court considers a reasonable parent. Apportioning fault to the parents of children who have injured themselves or others is not a new phenomenon.

Discussion of what is considered a reasonable parent has arisen frequently in the auto context. As a parent, we all know road safety is crucial. Children are unpredictable. They judge distance, speed and sounds differently than adults. They are easily distracted and impulsive. They can dart out into the street faster than an adult can react.

Where a minor is involved in an auto accident, the courts will pay close attention to whether the parents have provided reasonable instruction on road and traffic safety to the child.

Thereafter, and in negligence cases generally, the factors set out in the Parental Responsibility Act are typically the nature of issues explored and questions asked of parents as a measure of the potential liability for the child’s action.

There is no reverse onus, however, where a claim is based in negligence. The burden of proof remains with the plaintiff to establish that the parents were negligent in the manner in which they supervised their child and that this negligence caused or contributed to the plaintiff’s loss.

In Arnold v. Teno,[7] the Supreme Court of Canada elaborated on the standard of care and the reasonable parent test in such cases. Rather than look to the standards of the larger community or society generally, the Court focussed on the character and habits of the particular neighbourhood where the accident occurred, and the appropriate standard of supervision in that neighbourhood.

Most recently, the Court reiterated this standard of care in Lever et al v. Katerberg in discussing the potential liability of the parents of a five year old girl who was injured by a lawnmower while playing in her neighbour’s yard. The Court heard from several neighbours to determine the community standard of when neighbouring children were playing in each others yards and what parent(s) were responsible for supervising same.

As such, your parenting skills may well be the one area where you should ensure to keep up with the Jones’.

Conclusion

So, what does it mean to be a “reasonable” parent? I am not sure the answer is any clearer, unfortunately. Know that perfection is not the standard. And, as so eloquently put by the Court, “all parents can do is inform and instruct, shelter and sustain.”[8]

Be prudent and lead by example. That, I believe, is the best that we can do to avoid us, or our children, ending up on the wrong side of the law.

[1] Parental Responsibility Act, 2000, S.O. 2000, c. 4

[2] TEL-62891-15 (Re), 2016 CanLII 38373 (ON LTB)

[3] Connolly (Litigation Guardian of) v. Riopelle, 2010 ONSC 7140

[4] See Shannon v. Westman (Litigation Guardian Of), [2002] O.J. No. 2339 at para 37, followed by Cinnirella v C.C., (Litigation Guardian of) [2004] O.J. No. 3007

[5] Shannon v. Westman (Litigation Guardian Of), [2002] O.J. No. 2339

[6] Cinnirella v C.C., (Litigation Guardian of) [2004] O.J. No. 3007

[7] Arnold v. Teno, [1978] 2 SCR 287

[8] Lever et al .v. Katerberg, 2019 ONSC 48 at para. 40 citing Ibrahim v. McLenahan, [1996] B.C.J. No. 3128