September 30, 2011
Case #1: The Right to Control Litigation
Zurich Insurance Company Ltd. v. Ison T.H. Auto Sales Inc. 2011 ONSC 1870 (S.C.J.)
Commentary by Michael Foulds, Theall Group LLP
This case involved a dispute between insurers and an insured over who had the right to control the litigation in a situation where the insurers had a subrogated claim but the insured also had an uninsured claim against the tortfeasor.
The losses occurred as a result of an explosion and a fire at an apartment building. The insured, an automobile dealer, was storing 71 cars in rented space in the underground parking lot of the building. The cars were damaged and could not be sold as new.
The insured made a claim and was paid $1.9 million under its insurance policy. The insurers were able to recover approximately $900,000 in salvage for the cars, and thus had a net subrogated claim of approximately $1,000,000.
The insured issued a claim against the tortfeasor for loss of profit in the amount of $700,000. The loss of profit was based upon the difference between the manufacturer’s price and the price for which the vehicles could be sold to customers.
The court found that the provisions of the insurance policy altered the common law and allowed the insurers to subrogate before “full indemnity” was paid to the insured. However, there was no explicit policy provision that allowed the insurers to control the litigation when the insured was not fully indemnified. As a result, the insured had the right to control the litigation until it had been fully indemnified for its insured and uninsured losses.
The court did leave open the possibility that in cases where an insurer’s interest was so vastly disproportionate to the insured’s that it would be unreasonable to allow the insured to have control of the litigation.
It should also be noted that it was argued that the insurers’ claim was for “hard” provable damages but that the uninsured claim was for soft damages (i.e. more difficult to prove). The court stated that there was no evidence before it to give merit to this argument.
Insurance Industry Implications:
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Case #2: When is a limo a “party vehicle”?
Whipple v. Economical Mutual Insurance Co., FSCO Arbitration No. A09-002745 (Nov. 15, 2010)
Commentary by Ian Gold, Thomas, Gold, Pettingill LLP
A Financial Services Commission of Ontario (FSCO) arbitrator concluded that an insured was involved in an “accident” in accordance with Ontario’s Statutory Accident Benefits Schedule (SABS), when he fell while attempting to perform a handstand/headstand maneuver in a limo van. The arbitrator found that the vehicle was a “party vehicle.” She felt that the activities of the passengers were integral to the ordinary use of the limo bus. She did not conclude that the activity was so “off-beat” or extreme so as to remove it from satisfying the purpose for which the vehicle was used. At time of print this case was currently under appeal.
Insurance Industry Implications:
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Case #3: Motorboat exclusion
Woodbury v. State Farm Fire and Casualty Co., (2010), 88 C.C.L.I. (4th) 261 (Ont. S.C.J.)
Commentary by Ian Gold, Thomas, Gold, Pettingill LLP
The court held that liability arising from injuries sustained in a motorboat collision was excluded under the insurer’s homeowner policy. The court also held that the exception to the exclusion did not restore coverage for a motorboat with a 175 hp inboard engine. The insurer had no duty to defend.
Insurance Industry Implications:
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Case #4: Early disclosure of coverage
Sharma v. Timminco Limited, (2010), (ONSC 790)
Commentary by Alan D’Silva, Stikeman Elliott LLP
Ravinder Kumar Sharma brought a proposed class action that involved a common law negligent misrepresentation claim against the Timminco Ltd. defendants and also a statutory misrepresentation claim.
The plaintiffs stated that they had information about the insurance coverage available to some of the defendants in their proposed class action, but sought production of the policies. The plaintiffs asked the defendants to disclose any insurance policies that may provide coverage for the litigation.
The defendant responded that their clients would not agree to produce the policies at the early stage of the litigation unless ordered to do so by the court. The plaintiffs made a motion for the production of the defendants’ insurance policies relating to litigation and related information about coverage conditions.
The judge granted the plaintiffs this motion.
Insurance Industry Implications:
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Copyright 2011 Rogers Publishing Ltd. This article first appeared in the May 2011 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.