Case: Northbridge General Insurance Company v. Aviva Insurance Company, 2022 ONCA 519 (CanLII)
Keywords: “other insurance” clause; doctrine of equitable contribution; professional insurance; pharmacist
Northbridge General Insurance Company (“Northbridge”) issues a professional liability insurance policy to members of the Ontario Pharmacists Association. (See para. 4). A member of the Association, Mr. Daneshvari, is a defendant in an action brought against him involving professional misconduct. (See para. 2). Mr. Daneshvari is insured under the “Northbridge Policy”. (See para. 4).
Aviva Insurance Company (“Aviva”) issues a commercial general liability to Ayda Pharmacy, Mr. Daneshvari’s employer. As an employee, Mr. Daneshvari is also insured under the “Aviva policy”. (See paras. 2, 4).
Both policies include an “other insurance” clause, which states the coverage provided is to be considered “excess over any other valid and collectible insurance” to Mr. Daneshvari. (See paras. 5, 8-9). The Application Judge (Chalmers J.) finds the two policies to be “irreconcilable” because they both purport to cover the same loss and each had an equivalent “other insurance” clause. (See para. 7). As a consequence, the Application Judge applies the doctrine of equitable contribution; grants Northbridge’s application for a declaration that both insurers split the cost of Mr. Daneshvari’s defence and indemnification equally. (See para. 10).
The Court of Appeal (Benotto, Zarnett, and Sossin, JJ.A.) finds no error in the Application Judge’s decision. (See para. 16).
As outlined by the Court of Appeal, the doctrine of equitable contribution applies where two insurance policies apply to an insured’s loss and are considered “irreconcilable”:
“The policies must cover the same risk for the same insured and must not exclude one another. In short, the policies must both apply to an insured’s loss and be irreconcilable”. (See para. 17).
In this case, both the Northbridge Policy and the Aviva policy cover the loss at issue and neither was clearly “excess to the other”. The “other insurance” clauses in both policies were intended to achieve the same goal. (See para. 20).
Citing paras. 19 and 23-28 of Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, the Application Judge observed that where an insurer’s intention to limit its obligations is not clearly set out in the policy, or if the competing intentions of the insurers cannot be reconciled, the principles of equitable contribution require the parties to equally share the costs of defence and indemnity. (See para. 19, quoting the Application Judge’s decision 2021 ONSC 6873 at para. 27).
For the Court of Appeal, the Application Judge’s interpretation of the policies was “open to him, and the appellant has shown no error with his analysis or conclusion”. (See para. 24). As a result, both insurers were required to contribute equally to the cost of Mr. Daneshvari’s defence and indemnification. (See para. 10).
Whether insurance policies are “irreconcilable” and subject to the doctrine of equitable contribution are matters of contractual interpretation. In the Court of Appeal, the parties disputed the applicable standard of review. The Court of Appeal was, therefore, faced with an important question affecting the interpretation of insurance contracts:
- is an Application Judge’s interpretation subject to a correctness standard, based on Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, or, alternatively,
- was the task set before the Application Judge herein a question of mixed fact and law, which attracts deference (i.e. the Court of Appeal should only interfere where there are “palpable and overriding errors”)? (See paras. 12-14).
The Court of Appeal determined that, because the “other insurance” clauses and other relevant portions of the policies at issue were not “standard form contracts” (or contracts with significant precedential value), the more deferential standard applies. (See para. 15).
Counsel for the Appellant: Deborah Berlach and Michael Connolly (Stieber Berlach LLP, Toronto)
Counsel for the Respondent: Donald Dacquisto and James Tausendfreund (Zuber & Company LLP, Toronto)