CGL insurer has duty to defend third-party claim arising from workplace injury

There is a possibility that a third-party claim against a door installation company – whose subcontractor was injured on the job and was not covered by the Alberta Workers’ Compensation Board – falls under a commercial general liability policy, a court ruled recently.

Creative Door Services Ltd. had a contract in 2009 to supply and install a door for AltaSteel Ltd., Justice Doreen Sulyma of the Alberta Court of Queen’s Bench wrote. Creative’s CGL policy was written by AXA Pacific Insurance Company, now part of Intact Insurance Company.

A numbered company – which was owned by and employed Marsh Miller – was subcontracted by Creative Door to install an overhead door. Miller was injured in January, 2010. Miller advanced a claim against AltaSteel, alleging negligence and occupier’s liability.

“AltaSteel issued a Third Party claim in the Miller Claim against Creative,” Justice Sulyma wrote in a ruling released Oct. 10, 2017. AltaSteel alleged that Creative Door breached a contact  “by subcontracting the installation of the overhead door” to Miller’s numbered company “and by failing to ensure that the subcontractor had WCB coverage,” Justice Sulyma added. She dismissed Intact’s application for summary judgement, ruling that Intact has a duty to defend Creative Door.

Court records indicate that Intact argued that the AltaSteel third-party claim against Creative Door “does not allege any liability against Creative for compensatory damages for ‘bodily injury’” as set out in its CGL policy.

Intact argued “there is no allegation in any of the pleadings that Creative is liable for Miller’s bodily injury.”

But Creative Door argued that the CGL policy “plainly provides coverage for contractual liability.”

The CGL policy stipulates that Creative Door is covered for sums that the insured “shall become obligated to pay by reason of the liability imposed by law upon the Insured or assumed by the Insured under contract for compensatory damages” due to either bodily injury, personal injury or property damage due to an accident or occurrence.

The CGL policy defines contract as “a warranty of fitness or quality of Creative Door’s products or a warranty that work performed by or on behalf of Creative Door will be done in a workmanlike manner” and “any written contract or written agreement or any other oral or verbal contract or agreement that is in the process of being written provided that it is in writing within 90 days of its inception.”

The resolution of the dispute between Intact and Creative Door turns on the interpretation of the Third Party claim against Creative in the context of all of the pleadings and whether, by virtue of that claim, Creative may become obligated to pay by reason of the liability imposed by law upon it or assumed by it under contract for compensatory damages because of bodily injury or personal injury,” Justice Sulyma wrote. “It is not clear at this point in time upon what basis Creative might be held liable on the Third Party claim. Creative states that there is no express provision in its contract requiring it to ensure or arrange WCB coverage in the circumstances. Therefore, if it is found liable, it is possible that its liability may not be grounded in contract, or not solely in contract. Further, if it shares responsibility with AltaSteel for any compensatory damages, those damages will be because of bodily injury.”

Among the cases Justice Sulyma cited were the Supreme Court of Canada ruling in 2010 in Progressive Homes Ltd v Lombard General Insurance Co of Canada, which in turn quoted an earlier Supreme Court ruling in Non-Marine Underwriters, Lloyd’s of London v. Scalera.

To determine whether a liability insurer has a duty to defend, “what is required is the mere possibility that a claim falls within the insurance policy,” Justice Sulyma wrote in 2017 in Creative Door Services Ltd v AXA Pacific Insurance Company, “Further, what is determinative is the true nature or the substance of the claim.”

The Scalera ruling, released in 2000, arose from a lawsuit in British Columbia, filed by 12-year-old girl in 1996, against five bus drivers alleging they sexually assaulted her between 1988 and 1992. One of those drivers made a claim on his homeowner’s policy. In 1997, a B.C. court ruled that the insurer had a duty to defend the bus driver, despite an exclusion in his policy for bodily injury caused by intentional or criminal acts. That was overturned on appeal, with the province’s appeal court ruling that the driver was accused of an intentional act which was excluded by the policy. In his appeal to the Supreme Court of Canada, driver argued that the complainant’s lawsuit against him “alleged the non-intentional torts of negligence and breach of fiduciary duty.”

In ruling in favour of the insurer, that the intentional-acts exclusion clause applies, Chief Justice of Canada Beverly McLachlin wrote that assertions of negligence and breach of fiduciary duty “alone cannot be determinative. Otherwise, the parties to an insurance contract would always be at the mercy of the third-party pleader. What really matters is not the labels used by the plaintiff, but the true nature of the claim.”