Supreme Court of Canada: Multiple Concurrent Causes
- New Rule
In Derksen v 539938 Ontario Ltd.,  S.C.C.
72 (October, 2001), the Supreme Court of Canada abolished the rule
of policy interpretation which held that, absent policy wording
to the contrary, a loss caused by multiple concurrent causes where
any of the causes was an excluded peril was not covered, even if
one or more of the other causes was an insured peril. Instead, the
SCC established a new rule of interpretation in favour of coverage.
Under the new rule of interpretation, there will be coverage if
any of the concurrent causes are insured perils, even if another
of the causes is an excluded period, absent clear wording excluding
coverage. The headnote accurately summarizes this conclusion: "Where
there are concurrent causes, there is no presumption that all coverage
is ousted if one of the concurrent causes is an excluded peril.
If an insurer wishes to oust coverage in such cases, it must expressly
state that in the insurance policy. Moreover, whether an exclusion
clause applies in a particular case of concurrent causes is a matter
A narrow interpretation of the exclusion
clauses is consistent with the general principles of interpretation
of insurance policies and with the true intentions of the parties."
Increasing Cost Rewards in Litigation: Complexity
of Issues Not Sufficient
Many Canadian jurisdictions now have statutory provisions,
of one form or another, under which litigants in civil trials can
increase the level of the costs they will be awarded, if successful
at trial, by making offers to settle which are open for acceptance
until the commencement of trial and obtaining judgments equal to
or better than the offers. However, costs remain discretionary so
the Courts retain the power to not apply the offer/costs rules in
appropriate circumstances. In Techform Products Ltd v Wolda,
 O.J. No. 4306 (C.A.) (November 8, 2001), the Ontario Court
of Appeal held that the complexity of the issues was not a sufficient
reason to not apply Ontario the offer/costs rules where the plaintiff
succeed at trial and obtained judgment more favouorable than the
offer it had made. DC
Insurers Duty To Defend Extends To Costs of Personal
There are a plethora of decisions over the years,
many in the United States, where the Courts have found that an insurer's
obligation to defend under insurance policies extends to indemnification
of the insured for legal costs incurred in connection with a coverage
The more complex of these cases arose in California
where coverage issues arose in the context of environmental contamination
litigation where various insurers were involved. Insurers have ended
up paying several sets of defence counsel: defence counsel protecting
the interests of the insured in the action, defence counsel protecting
the interests of the insurer in the action, coverage counsel representing
the interests of the insured and coverage counsel representing the
interests of the insurer.
In Mendez et al. v. Nicholls et al. (2001),
55 O.R. (3rd) at 187 (S.C.) the plaintiff was injured in a catastrophic
motor vehicle accident. Statutory conditions are made part of the
insurance policy and certain rights are prescribed by provisions
under the Insurance Act.
The insurer in this case took the position that its
insured was in breach of statutory conditions and was no longer
entitled to indemnity under the policy. This decision was taken
just months before trial. Two things followed. First, counsel of
record for the insured, appointed initially by the insurer, voluntarily
sought to withdraw as solicitors of record. The insurer appointed
a new firm to act on behalf of the insured in the defence of the
action. The insurer also sought to be added as a statutory third
In the circumstances, the insured brought a motion
for an order that he was entitled to be represented by counsel of
his choice and have the costs of that defence paid by the insurer
even though new defence counsel had been retained by the insurer.
The court concluded that, in the circumstances under
which coverage had been denied, the insured had a "reasonable
basis for lacking confidence in the counsel that had been appointed
by" the insurer. However, the new counsel that had been appointed
by the insurer to take over the defence and who were not dealing
with the issue of coverage would not be in a position of conflict
of interest so there was no basis for denying the insurer its right
to appoint such counsel. Nevertheless, the court concluded that
the circumstances gave rise to a legitimate concern on the part
of the insured sufficient to justify counsel of its choice participating
in the defence of the action.
The court then held the insurer was responsible for
payment of that counsel's costs.
"As the division of judicial opinion makes clear,
however, different fact situations raise different policy considerations
that must be examined in order to determine whether, in any particular
case, the insurer should be compelled to furnish, or excused from
furnishing, a separate and independent defence for its insured.
For that reason, I have reservations about the wisdom of establishing
any hard and fast rule on the subject".
The court suggested that the question should be determined
upon consideration of the circumstances of each case.
In other words, although insurers usually do not contemplate
going beyond defending the insured, in the action, in circumstances
where there is any coverage dispute, the insurer must be mindful
of the need to protect the rights of the insured directly and the
risks it will face to pay one or more set of defence costs in doing
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