February 2, 2009 by Canadian Underwriter
The phrase “companies under management control” is too vague to determine whether an unnamed insured — a roofing company hired by Atomic Energy Canada Ltd. (AECL) — is entitled to the AECL’s property policy coverage without the need for a trial first, an Ontario Court has determined.
AECL hired Ron Robinson Roofing Inc. to do roofing repairs at Building 250 of its research and energy facility at Chalk River, Ontario.
A fire broke out on the roof at the north end of Building 250 in November 1997, causing more than Cdn$1.3 million worth of damages — including damage related to the spread of radioactive contaminants throughout the Chalk River building and adjoining lands.
AECL’s property insurer brought a subrogation claim for about Cdn$1.3 million against Ron Robinson and Axa.
Ron Robinson had a commercial general liability (CGL) policy with Axa Insurance, which had exclusions for standard pollution (i.e. contamination) and nuclear liability. Axa relied on the CGL exclusions to deny Ron Robinson’s claim. (Ron Robinson did not advise Axa that he was doing work at the Chalk River facility.)
Both Axa and Ron Robinson asked the Ontario Superior Court of Justice for a motion of summary judgment, claiming that Ron Robinson was in fact an unnamed insured under AECL’s policy. The parties argued that since AECL hired Ron Robinson as a contractor, the roofer was one of the “companies under management control,” as stated in AECL’s policy.
AECL said the phrase referred only to companies that it had either formed or acquired, and not to companies that it had hired.
“Clearly a range of possibilities of management control exist, from the extreme of merely hiring and paying the contractor with no involvement at any point to the other extreme of micromanaging every detail of the contractor’s work and providing constant supervision and feedback,” Ontario Superior Court Justice Stanley Kershman wrote. “It is not immediately clear from the phrase ‘companies under control’ how much control is needed before a company will fall under the definition.
“It is not obvious, as [Axa and Ron Robinson] suggest, that the intention of the parties was to cover the entire range of control possibilities.”
The court thus decided a trial would be required to establish the precise meaning of the word “control,” and thereby define whether or not Ron Robinson was included within AECL’s insurance policy.