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September 2008
In this issue:
1. Firm News
2. Insurer Duty to Defend
3. CN Found in Breach of Service to Grain Shippers
1. Firm News
- Rui Fernandes and Gordon Hearn will be representing
the firm at the CMI conference in Athens in October. The Comite
Maritime International, which was formally established in 1897,
is the oldest international organization in the maritime law field.
The CMI holds a conference for maritime lawyers from around the
world every four years.
- Rui Fernandes will be representing the firm
at the 5th International Marine Claims Conference to be held in
Dublin also in October. This year's conference is entitled "Synergy
or Antagonism."
2. Duty to Defend
The Superior Court of Ontario has recently had another
opportunity to consider an insurer's duty to defend in the case
of RioCan Real Estate Investment Trust v. Lombard General Insurance
Co. (2008) 91 O.R. (3d) 63.
The plaintiff, RioCan operates two malls and is the
defendant in two separate actions wherein the plaintiffs seek damages
for personal injuries arising from incidents of falling ice or snow
in the mall parking lots (the "Personal Injury Actions").
RioCan had a contract with Palmer Paving ("Palmer") wherein
Palmer was to provide snowplowing and winter maintenance for the
parking lots.
RioCan's contract with Palmer included a clause wherein
the contractor "agreed to indemnify RioCan for losses suffered
as a result of anything arising from the work performed by the contractor
under the contract". Accordingly, RioCan initiated a third
party claim in the Personal Injury Actions.
Under the contract, Palmer was also required to maintain
insurance and RioCan was to be an additional insured under that
policy. Palmer obtained the required insurance from Lombard (the
"Lombard Policy"). Lombard accordingly undertook to defend
Palmer in the Personal Injury Actions.
At issue in RioCan Real Estate Investment Trust
v. Lombard General Insurance Co. was whether Lombard had a duty
to defend RioCan as well as Palmer. There were several allegations
made against RioCan in the Personal Injury Actions, but it argued
that the Lombard Policy covered it with respect to any allegations
regarding the removal of snow. It conceded that there were some
allegations in the Personal Injury Actions that could fall outside
of the contract with Palmer; however, it took the position that
Lombard still had a duty to defend even if, ultimately, it did not
have a duty to indemnify.
The Certificate of Insurance for the Lombard Policy
read:
"It is hereby understood and agreed that
RioCan Property Services, RioCan Holdings Inc. and RioCan REIT
are added as additional insured but only with respect to the above
noted contract and solely with respect to the operations performed
by the original named insured".
The Court found that the Personal Injury Actions made
some allegations against RioCan that "would fall within the
policy coverage and would therefore trigger a clear duty to defend
RioCan", however each action also had some allegations that
would not be covered.
The Court reiterated that:
"if the insured can demonstrate even
a mere possibility that the claim could fall within the policy,
then a prima facie duty to defend has been established.
This duty to defend may only be negated if the insurer can demonstrate
that the claim falls outside of coverage due to a specific exclusion
within the policy."
The principles of the duty to defend have been often
considered by the Supreme Court of Canada, and were summarized by
the Court. It is for the insured to show that there is a possibility
that the claim falls within the policy coverage.
The Court usually seeks to find coverage. If there
are allegations in the pleadings that could give rise to coverage
if proven, the Court will usually find a duty to defend. It is then
for the insurer to show that there is an exclusion that brings the
claim outside of the policy. The duty to defend is broader than
the duty to indemnify. It may be that there is a duty to defend,
even if, ultimately the claim is proven to fall outside of coverage
and there is therefore no duty to indemnify.
Lombard argued that there were conflicting allegations
that prevented it from indemnifying. Namely, in order to avoid Palmer
being found liable, Lombard may argue that any injury was caused
by the fault or negligence of RioCan as an occupier. If RioCan failed
in its duty as an occupier of the premises, the Lombard Policy would
not indemnify it. It is also in Lombard's financial interest to
blame RioCan for any damages.
Essentially, Lombard would be defending both RioCan
and Palmer but to properly defend either entity it would have to
accuse the other. This seems to put Lombard in a conflict of interest
position.
The Court held that there was a number of ways that
the Conflict issues could be addressed and that these concerns were
not sufficient to negate the duty to defend. Lombard is required
to defend on behalf of RioCan.
This case was decided based on the well-established
case law on the duty to defend. However, it makes apparent the issues
that insurers can face. There are often situations where multiple
parties are sued, each is adverse and one insurance company is on
risk for more than one party. This can lead to complicated litigations
wherein insurance companies have to hire multiple counsel and have
separate claims individuals working with each party.
These situations can be complex, and may lead to the
early settlement of complicated cases. However, they are inevitable.
The Courts are loath to place defence costs on individuals unless
there is no possibility that their insurer will indemnify them.
The duty to defend is a broad one and insurers need
to have strategies to deal with conflicts in the litigation context.
Cynthia Verconich
3. CN Found in Breach of Service to Grain Shippers
The Canadian Transportation Agency ruled on September
25th, 2008 on complaints received from six shippers that the Canadian
National Railway Company (CN) was not meeting its obligations under
the Canada Transportation Act to provide an adequate and
reasonable (suitable) level of service for the movement of Western
grain for crop year 2007-08.
The Agency found that CN failed to provide an adequate
and reasonable level of service to North East Terminal Ltd., Paterson
Grain, Parrish and Heimbecker Limited, and North West Terminal Ltd.
Based on the pleadings of the parties and all information
submitted, the Agency determined that a performance benchmark should
be applied as a basis for determining whether CN is providing an
adequate and reasonable level of service. The benchmark is comprised
of three components:
1. Number of rail cars requested by the shipper and
confirmed for delivery by the railway company. This provides shippers
with certainty that they will receive a reasonably high number of
rail cars based on their order;
2. Timeliness and predictability of the delivery of
confirmed rail cars. This takes into account the shippers' "want"
date and the actual delivery date of the cars and provides the shipper
with the predictability it needs for planning purposes; and
3. Recognition of factors that affect railway performance
such as weather, terminal unloads, excessive demand for rail cars
in peak periods, operational restrictions and derailments. While
shippers need a reasonable level of certainty for planning their
operations, the ability of a railway to provide a level of service
may be compromised for short periods of time by circumstances beyond
its control and will need some time to return to adequate and reasonable
service levels.
The Agency ordered CN to provide a level of service
to the shippers as set out in the performance benchmark.
CN was required to immediately:
1. confirm a minimum of 80 percent of the grain shippers'
requested rail cars;
2. deliver 90 percent of these confirmed cars on time
or in the subsequent two weeks; and
3. meet these performance standards on a 12-week rolling
average throughout each crop year. CN is still obligated to deliver
all remaining confirmed rail cars.
Rui Fernandes
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