Personal Injury| Car Accident | Snow laughing matter: An insurer’s duty to defend an additional insured.

A recent ruling from the Ontario Court of Appeal sheds light on the extent of an insurance company’s duty to defend additional insureds under an insurance policy. On a snowy day in Pickering, a man was killed when his car skidded on ice and snow on the roadway, which was maintained by the Regional Municipality of Durham.

Durham had a contract with a local winter maintenance company to plow and maintain the roads. Under the contract, the company was required to obtain a comprehensive insurance policy and obtain 5 million dollars of coverage for Durham as an additional insured. The contract also provided that the company is to fully indemnify Durham in regards to any potential claim for damage arising from the performance of the winter roadway maintenance under the contract, except in cases where the damage was caused by the negligence of Durham or any of its employees.

The family of the deceased man brought an action against Durham and the company. In addition to alleging that the road design and construction was inadequate, the family of the deceased claimed that Durham and the company were negligent by failing to keep the road free of ice and snow and failing to close the road during a heavy snow storm.

As fingers were pointed, the company alleged that Durham was at fault not only because the road was dangerously designed and constructed, but also because it was Durham who was ultimately responsible for the supervision of the winter road maintenance.

Durham applied to the Ontario Superior Court for a declaration that the insurance company had a duty to defend Durham in the action, pay for its counsel of choice and indemnify them for any amounts awarded against them. The insurance company argued that some of the elements in the family’s claim, such as the dangerous road design and construction, fell outside of the scope of the insurance coverage that Durham held as an additional insured, and that they should not be required to defend Durham against these outlying claims. Justice Lemon of the Superior Court of Ontario agreed with the insurance company and held that they were only required to defend Durham for the damages resulting from actions covered by the policy.

Durham appealed and at the Ontario Court of Appeal, Chief Justice Strathy, Justice LaForme and Justice Huscroft found that the insurance policy contained an unqualified promise to defend for actions covered under the policy, and consequently the insurance company was obligated to pay for the reasonable costs of Durham’s defence, even if by doing so it furthers the defence of claims that were not covered by the policy. In coming to this conclusion, the court noted that the family’s claim of negligence against the company and Durham were essentially related to the winter roadway maintenance under the contract and consequently triggered the insurance company’s duty to defend. Further, the court found that there was no language in the insurance policy to suggest that the duty didn’t apply to mixed claims. The insurance company had also argued that they had met the duty to defend by defending the maintenance company against the same liabilities. This argument was rejected by the court on the grounds that as an additional insured, Durham had an independent right to a defence, outside of the defence provided to the maintenance company. In the opinion of the Ontario Court of Appeal, the duty to defend the additional insured is a separate contractual obligation to that of the duty to defend the insured.

The insurance company was ordered to pay for and provide Durham with counsel to defend the entire action. They insurance company was also entitled to seek an apportionment of the cost to defend the action to the extent of the claims that were not covered by the insurance policy. This ruling should alert insurance companies that their duty to defend an insured in an action may be triggered even if some elements of the action are outside the scope of the insurance coverage.