Sole Consequence
February 5, 2018 by Michael S. Teitelbaum, Partner, Hughes Amys LLP
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Will one word – ‘solely’ — affect the scope of additional insured coverage?
In Brookfield Johnson Controls Canada LP v. Continental Casualty Company, Ontario Superior Court Justice Jane Ferguson considered the breadth of an insurer’s duty to defend an additional insured, potentially shedding new light on how extensive — or in this case, restrictive — that coverage can be.
Justice Ferguson found that an insurer did not have to defend an additional insured under a CGL policy because “the claims made against it are not, in substance, claims arising solely out of the operations of” the named insured.
Michael Teitelbaum, Partner, Hughes Amys LLP
The role that the inclusion of the term “solely” played in the reasoning of this decision appears significant. It remains to be seen whether, depending on how this and other cases unfold, this term will be adopted in other policies when including coverage for additional insureds.
THE BACKGROUND
A commercial contract between Olympic Dust Control and Brookfield Johnson Controls Canada, a property manager, obliged Olympic to supply rental floor mats for a variety of CIBC branch locations. The contract included a provision requiring that Olympic name Brookfield as an additional insured on Olympic’s insurance policy. Olympic was to obtain comprehensive liability insurance covering “all operations of the Olympic products and completed operations…”.
A certificate of insurance was issued to Brookfield purporting to add it as an additional insured under Olympic’s CGL policy. The certificate stated:
“Brookfield Johnson Controls Canada LP […] are added as Additional Insured but only with respect to liability arising solely out of the operations of the Named Insured and only with respect to Commercial General Liability [my emphasis].”
The policy provided that “an additional insured is insured but only with respect to their acts within the scope of your business.”
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-Michael S. Teitelbaum, Partner, Hughes Amys LLP
The courts will have to think long and hard on these issues as this is the thin edge of the wedge. Companies now are demanding certificates that state that the additional insured will be afforded coverage under the policy that is primary and that their own policies are non-contributory. With this language, I expect that liability could soon be triggered without any fault of the named insured if the courts support this. The problem with these wordings is they amount to forced agreements where you cannot reject the unreasonable demands. The insurer in turn cannot say no as they will lose the client and so everyday we issue certs that just get sillier and sillier. It is ridiculous that Billion dollar corporations try to cede their liability to ma and pa policyholder with $1,000 premiums.