Canadian Underwriter

Location of primary insurer, not excess insurers, decides proper legal forum

December 12, 2022   by David Gambrill

Electronic pins on a global map

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Ontario is the appropriate legal forum for determining whether a Canadian mining company is entitled to be insured for environmental liability claims arising mostly in Ontario — despite the fact several of its 22 excess insurers are global and not located in Ontario.

The Ontario Court of Appeal ruling Tuesday took a detailed look at the legal principles for determining the proper forum to hear a dispute about environmental insurance liability claims centred in Ontario, but that feature “tower” excess insurance coverage supplied by global insurers with headquarters located in New York and elsewhere.

“The insurers argue that because much of the excess insurance was purchased on the international insurance market located there, New York is the clearly preferable forum,” the Ontario Court for Appeal ruled. “More particularly, U.S. Fire [Insurance Company] argues that New York is clearly the more convenient forum to adjudicate claims against the [excess] insurance tower, because New York is the centre of gravity of the insurance tower and the only court with jurisdiction over all insurers in the tower.

“This is a revelatory submission because it inferentially posits the excess insurance coverage as the most important issue in this litigation. But, in factual and insurance terms, this is not correct. Giving effect to it would have the excess insurance ‘tail’ wagging the proverbial primary liability ‘dog.’ The fundamentals of this case are in the Ontario liability and indemnity facts.”

In Vale Canada Limited v. Royal & Sun Alliance Insurance Company of Canada, mining company Vale placed 92 policies of insurance worldwide over several decades with 24 primary and excess insurers. The excess insurance policies were essentially follow-form to primary insurance policies that applied to Vale’s mining and other operations in Canada and elsewhere.

The insurance policies were occurrence-based and had the potential for long-tail liabilities – liabilities that were not engaged until beyond the policy periods. Vale disputed with its primary liability insurers, including RSA, over whether coverage applied beyond the policy periods.

Vale has paid for environmental claims related to 26 of its sites around the world for which it claims insurance coverage. Of those, 22 sites are in Canada, and 19 are in Ontario. It also has claims for sites operated through subsidiaries in Japan, Indonesia, New Jersey, and Wales.

In Ontario, Vale incurred legal costs and losses in six major class actions and putative class actions for environmental damage caused to property in Ontario from operations in Port Colborne and Sudbury. All these actions are completed. Vale is seeking to claim insurance coverage for its defence costs and very large losses from its primary insurers, including RSA, and, if necessary, from its excess insurers.

Vale and one of its primary comprehensive general insurers, RSA, started actions in Ontario’s Superior Court of Justice to resolve the dispute.

This happened immediately after one of the excess insurers, Travelers, started a lawsuit in the Supreme Court of the State of New York, more or less for the same reason. The Ontario courts were asked to decide whether Ontario or New York was the proper legal forum to hear the case.

Ultimately, the Court of Appeal found Ontario was the forum simpliciter because of the expectations the excess insurers had created by selling its insurance to a client based in Ontario.

The Court of Appeal ultimately agreed with the Ontario Superior Court’s decision that Ontario was the proper legal forum in which to hear the case.

“[I]f a policy was sold by an insurer who carried on business [in Ontario] here at the [relevant] time, the moving insurers cannot have expected that by moving, or transferring the policies to someone outside Ontario, they could escape liability here,” the Appeal Court said, citing agreement with the motions judge. “[The motions judge] also stated that an insurer who carried on business [in Ontario] created sufficient jurisdictional links ‘to support a reasonable and frankly, obvious, expectation that they would be called to account on their insurance policies here.’”

The Appeal Court went on to dismiss a claim by Travelers that it was not doing excess business in Ontario at the time Vale launched its legal action. The Appeal Court found the excess insurer only had to have done business at the time the policy was issued, not when the claim for indemnity was made.

As for the insurers’ arguments that Ontario was a forum non conveniens for the global excess insurers, the Appeal Court observed the excess insurers were writing cover for the primary insurers based in Ontario, so the most appropriate forum was Ontario.


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