Republished with permission from the Insurance Brokers Association of Alberta’s magazine The Alberta Broker (September 2023).
Courts in Alberta and elsewhere in Canada are encouraging the use of summary judgment to adjudicate claims at an early stage and to save on scarce court resources. However, the appropriateness of summary proceedings can depend on the complexity of the underlying issues, and questions may arise about whether simple issues can be extricated summarily or whether all issues should be dealt with at trial. Accordingly, in a complex construction insurance situation involving 13 separate actions and more than 90 Plaintiffs and 20 Defendants, is it appropriate for a duty to defend application to be heard summarily prior to trial?
Royal & Sun Alliance Insurance Company of Canada v Co-Operators General Insurance Company
The Alberta Court of King’s Bench in Royal & Sun Alliance Insurance Company of Canada v Co-Operators General Insurance Company, 2023 ABKB 426 recently considered whether a duty to defend application can be heard summarily or whether it should be adjourned to the trial process and heard concurrently with the underlying actions.
The facts of the case were that APM Construction Services (“APM”) was the general contractor on a project to expand the Bow River Seniors Lodge in Canmore, Alberta. DCR Inc. (“DCR”) was one of the subcontractors on the project. In June 2015, during construction work to expand the Bow River Seniors Lodge in Canmore, Alberta, an excavator struck and ruptured a live pressurized methane gas line. Gas escaped and ignited, causing a much larger explosion that resulted in property damage on site and to adjacent properties.[1]
Numerous lawsuits and applications were launched against various participants in the project, including APM and DCR. One proceeding was an Originating Application filed by Royal & Sun Alliance (“Royal & Sun”), who was APM’s insurer, seeking a declaration that Co-operators General Insurance Company (“Co-operators”), who was DCR’s insurer, owed a duty to defend and owed Royal & Sun a duty to contribute financially towards APM’s defence. Co-operators filed a cross-application seeking to have the duty to defend application adjourned to be heard at trial with the actions.[2]
At the time of the construction, the principal of DCR had signed a letter of acceptance in respect of the project. That letter was then provided to APM, together with Confirmation of Insurance which was signed by a representative of the Co-operators. In their application, Royal & Sun and APM submitted that, under DCR’s commercial general liability (“CGL”) policy, APM was an additional insured for claims against it based on the operations of DCR.[3]
At the same time, APM also had a CGL policy with Royal & Sun. APM tendered its defence through Royal & Sun and later requested indemnification from DCR under the letter of acceptance.[4]
In relation to whether APM had coverage under the DCR’s Co-operators policy, Co-operators position was that (1) it had not received a request to add APM as an additional insured; (2) APM was not added as an additional insured; (3) the confirmation of insurance was for information only and conferred no rights on APM; (4) DCR assigned its obligations to another contractor; and (5) at the time of the explosion, there was no longer any contract between APM and DCR, and the confirmation of insurance was of no effect.
The Court considered the following factors in determining whether the duty to defend application could proceed summarily or needed to be deferred to be dealt with at trial:
- Issues concerning an insurer’s duty to defend should be dealt with promptly;
- Whether there is a substantial factual dispute;
- Whether the applicant can meet the Weir-Jones summary judgment test that there is no defence to its claim for the declaration of a duty to defend and no genuine issue for trial;
- Whether the issue can be dealt with summarily and whether the Court has confidence in the sufficiency of the record to do so;
- The strength of the respective positions;
- Whether the Court’s finding in relation to duty to defend could impact the underlying actions;
- Whether a declaration could cause conflict between insured and insurer;
- Whether there is urgency to provide a defence;
- Whether the party seeking the declaration moved promptly;
- Whether there is prejudice or irreparable harm or inconvenience to any of the parties;
- The status of the underlying action; and
- Whether there is any practical benefit to the declaration.[5]
After considering the above, the Court held as follows:
- There was a dispute between the parties on whether APM was an additional insured on DCR’s CGL policy.
- There was no merit to Co-operators position that it was not bound by the confirmation of insurance and no genuine issue involving a trial.
- There was a genuine issue requiring a trial in relation to the legal effect of the certificate of insurance, any rights it conferred on APM, and the fact that APM was not designated an additional insured in the Declarations.
- There was a risk that a finding on the duty to defend application would have unintended consequences on the issues in the actions.
- Given the direct claims against APM, only some of the claims against APM would be covered by DCR’s CGL policy, which would cause conflict between Royal & Sun and Co-operators.
- There was no urgency, as APM was already being defended by Royal & Sun.
- APM had delayed claiming and filing the duty to defend application.[6]
As a result of the above, the Court held that it would not be appropriate for APM and Royal & Sun’s duty to defend application to be heard summarily. Rather, the Court held that the application should be joined with the other actions to be heard concurrently or consecutively.
The Take-Away
There are a variety of insurance issues raised by this set of facts and this decision. For instance, the parties debate the authority of Co-operator’s representative to bind Co-operator’s by signing the Confirmation of Insurance as well as the legal effect of the fact that APM was never actually added as an additional insured on the Declarations page of DCR’s CGL policy. It is no surprise that the Court in this case found a genuine issue for trial and was not satisfied that the issue of the duty to defend could be dealt with summarily.
This blog has been authored by Sara Hart, Partner at Dentons Canada LLP, and David Cowley-Salegio, Counsel at EPCOR.
[1] Royal & Sun Alliance Insurance Company of Canada v Co-operators, 2023 ABKB 426 (“Royal”) at para 1.
[2] Royal, supra at para 3.
[3] Royal, supra at paras 7-8.
[4] Royal, supra at para 9.
[5] Royal, supra at para 45.
[6] Royal, supra at paras 47-79.
