Giving Notice

The 2011 Ontario Court of Appeal ruling in The Sovereign General Insurance Company v. Walker¹, a decision from a motion for summary judgment, addressed two important points:

• A single policy of commercial insurance can contain separate notice conditions applicable to separate areas of coverage. In other words, a party cannot rely on statutory notice conditions applicable to property coverage while pursuing a liability claim.
• The court expanded the class of persons capable of properly giving notice per the terms of the policy’s notice conditions. The purpose of “by or for the insured” was expanded to include a co-defendant in the action. As the property owner in a slip-and-fall case, the co-defendant was held to be a person with “sufficient proximity to the claim to have knowledge of the information required.”

Overview

The plaintiff brought two separate actions. The first arose out of a slip and fall and judgment was awarded in the plaintiff’s favour. The second was an attempt to collect from the defendant’s insurer pursuant to s. 132 of the Insurance Act.

First action

The slip and fall occurred at the Power Centre in Burlington, Ontario on Jan. 30, 1999. The plaintiffs issued a statement of claim against Emshih Developments Inc., the owner of the property, and against Sun Shelter Industries Inc., the contractor responsible for maintenance. Emshih also cross-claimed against Sun Shelter.

Sun Shelter went bankrupt before delivering a statement of defence or a statement of defence to cross-claim. It was noted in default on June 13, 2003. Counsel for Emshih then discovered, sometime in the weeks before the scheduled trial date of Apr. 11, 2005, that Sovereign General Insurance Company was Sun Shelter’s liability insurer. Counsel for Emshih contacted Sovereign on Mar. 29, 2005 and informed the insurer for the first time about the claims against its insured and the imminent trial date.

The trial was adjourned to permit Sovereign an opportunity to participate, but Sovereign declined. Emshih settled and the trial proceeded as against Sun Shelter only. Judgment was awarded to the plaintiff.

Second action

The plaintiffs, Marie and Albert Walker, then commenced a second action against Sovereign for payment under s. 132 of the Insurance Act. This provision allows a third party to recover against an insurer where its insured has failed to satisfy a judgment for damages. A motion for summary judgment was brought for the amount of the plaintiff’s judgment against Sun Shelter less Emshih’s contribution. Sovereign brought a cross-motion for summary judgment to dismiss the action.

Motion for Summary Judgment

Sovereign took the position that Sun Shelter was in breach of the policy conditions, since Sovereign had not received proper notice of the claim. The plaintiffs submitted that counsel for Emshih, the insured’s co-defendant in the action, gave proper notice of the claim. In making this argument, the plaintiffs relied on the following statutory condition in the commercial insurance policy issued by Sovereign to Sun Shelter, under the heading ‘Who May Give Notice and Proof’:

“8. Notice of loss may be given, and proof of loss may be made by the agent of the Insured named in the contract in case of absence or inability of the Insured to give the notice or make the proof, and absence or inability being satisfactorily accounted for, or in the like case, or if the insured refuses to do so, by a person to whom a part of the insurance money is payable (emphasis added).”

The motion judge held that Emshih, as a result of its cross-claim against Sun Shelter, was “a person to whom a part of the insurance money is payable.” As a result, Emshih’s notice to Sovereign was deemed to be in compliance with the terms of the policy.

The defendant submitted that the plaintiff’s reliance on this statutory condition was misplaced. This was a liability claim and the notice provision was in a part of the commercial insurance policy that specifically applied to property coverage and the peril of fire. Ontario Superior Court Justice William Hourigan disagreed, stating in Paragraph 48 of his decision: “In my view, on the wording of the policy, all perils insured by the policy are subject to the statutory conditions. Sovereign’s case at its highest is that there is an ambiguity regarding whether statutory condition 8 is applicable. It is well established that where an ambiguity is found to exist in an insurance contract, the language in issue shall be construed against the insurance carrier.”²

Justice Hourigan went on to find that, in any event, the plaintiffs would have been entitled to relief from forfeiture pursuant to s. 129 of the Insurance Act. To the extent that there had been a breach of the notice condition, such a breach amounted only to imperfect compliance.

The Appeal Decision

The Ontario Court of Appeal upheld Justice Hourigan’s decision, but for different reasons. Ontario Court of Appeal Justice John Laskin agreed that even though Sun Shelter itself had not given Sovereign notice of the claim, Sovereign had received notice from the owner of the parking lot, Emshih, a co-defendant in the original action, and that this notice complied with the policy conditions.

However, Justice Laskin disagreed with the motion judge’s finding that statutory condition 8 was the notice provision applicable to the plaintiff’s loss. “Perhaps in isolation, the word ‘perils’ is broad enough or ambiguous enough to support the motion judge’s conclusion,” Laskin wrote. “But, the policy must be read as a whole. And when it is read as a whole, there is no ambiguity. The policy contains two separate sets of conditions. Each set must be given scope and meaning.”

Sovereign’s policy with Sun Shelter contained two standalone coverages, each with its own set of conditions. The statutory notice conditions applied to property coverage while the policy conditions applied to liability coverage. Since this was a liability claim, the applicable notice requirements were contained in the policy conditions, which were distinct and separate from the statutory conditions relating to property coverage.

Nonetheless, the outcome remained the same and the appeal was dismissed. Upon analysis of the separate notice provisions for liability coverage, Justice Laskin determined that Emshih, as co-defendant in the first action, was still within a class or persons capable of giving notice under the terms of the policy.

The notice of loss requirement contained in Section 3(a) of the policy conditions for liability coverage reads as follows: “In the event of an accident or occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given promptly by or for the insured to the insurer or any of its authorized agents (emphasis added).”

In determining the class of people that should be entitled to give notice for the insured, Justice Laskin wrote: “Given its purpose and importance, if the notice is to be given for an insured instead of by the insured itself, the person giving it should have sufficient proximity to the claim to have knowledge of the information required by s. 3(a) [of the policy conditions, cited above]. Emshih was just such a person. It owned the property where the accident occurred; it was a defendant in the original action; and it cross-claimed against Sovereign’s insured. In giving notice to Sovereign, Emshih was giving notice for Sun Shelt
ers as contemplated by s. 3(a) of the policy.³

Justice Laskin went on to conclude that in any event, the plaintiffs would have been entitled to relief from forfeiture.

Comment

Justice Laskin’s decision emphasizes, yet again, the importance of reading and understanding a policy of insurance as a whole. Separate areas of coverage can contain separate notice conditions. An insured — or in this case, a plaintiff bringing an action under s. 132 — is not entitled to rely on notice provisions not applicable to their particular claim.

The second important point relates to policy conditions that provide for notice “by or for the insured.” Generally, this type of wording has been understood to apply mainly to brokers giving notice on behalf of the insured. This has now been expanded to include any persons with “sufficient proximity to the claim to have knowledge of the information required.”

Following Justice Laskin’s reasoning, a notice provision must be interpreted in light of its purpose. Notice is to provide the insurer with sufficient awareness of a claim so that it can respond in a timely and appropriate fashion. It follows that anyone close enough to have sufficient knowledge of the claim should be seen as capable of giving notice for the insured. As the property owner in a slip-and-fall action, the co-defendant was held to be just such a person.

The potential implications for insurers in terms of who can give notice of a claim are obvious. If insurers wish to continue with the historical understanding that the insured and a representative of the insured are the persons who are obliged to provide notice (and not plaintiffs or co-defendants), then changes to the wording of notice provisions are required.

1 2011 ONCA 597
2 see Consolidated-Bathurst v. Mutual Boiler, [1980] 1 SCR 888 (SCC)).
3 As a matter of interest, the Appeal Court did not address one of the other notice provisions, which provided that the insured should be required to forward any court process served on it to the insurer, which had not been done. The language in that provision does not indicate that the process can be forwarded on behalf of the insured.