Aetna Insurance Co. et al. v. Canadian Surety Co. et al., (1994) 149 A.R. 321 (CA)

• Judge: Fraser, C.J.A., Hetherington and Conrad, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: May 27, 1994
• Citations: (1994), 149 A.R. 321 (CA)

Aetna Ins. Co. v. Cdn. Surety Co. (1994), 149 A.R. 321 (CA);

         63 W.A.C. 321

MLB headnote and full text

Aetna Insurance Company and Turner Valley Transport (1972) Ltd. (plaintiffs/respondents appellants by cross-appeal) v. The Canadian Surety Company, Emmanuel St. Louis and Rudolph Collicott (defendants/respondents respondents by cross-appeal) and Markel Insurance Company of Canada (defendant/appellant respondent by cross-appeal)

(Appeal No. 12723)

Indexed As: Aetna Insurance Co. et al. v. Canadian Surety Co. et al.

Alberta Court of Appeal

Fraser, C.J.A., Hetherington and Conrad, JJ.A.

May 27, 1994.

Summary:

Turner Valley contracted with St. Louis to provide a tractor and driver (Collicott) to haul goods to Montana in Turner Valley's trailer. Collicott was involved in accidents in Montana. The Montana plaintiffs in two separate actions successfully sued. Markel insured Turner Valley's owned vehicles and all drivers with consent (trailer). Canadian Surety insured St. Louis and Collicott. Cov­erage included owned and nonowned vehicles (tractor and trailer). Aetna insured Turner Valley and its employees. Coverage included nonowned vehicles (tractor). Aetna paid the judgments, interest and costs, the defence costs of Turner Valley and settled a punitive damage claim based on late pay­ment of the first judgment. Aetna and Turner Valley sued Markel and Canadian Surety for contribution and restitution. Canadian Surety counterclaimed for monies expended in defending St. Louis and Collicott.

The Alberta Court of Queen's Bench, in a judgment reported 119 A.R. 49, allowed the action in part. The court dismissed the claim for contribution against Markel and Cana­dian Surety and the restitution claim against Canadian Surety. The court allowed the restitution claim against Markel. Markel appealed. Aetna and Turner Valley cross-appealed.

The Alberta Court of Appeal dismissed Markel's appeal against Canadian Surety, but allowed it in part against Aetna and Turner Valley. The court allowed Aetna's and Turner Valley's appeal in part. In the result, Aetna was entitled to judgment for 50% of the Montana judgments, interest and costs against each of Markel and Canadian Surety. Aetna's claim for restitution against Markel for defence costs and monies paid to settle the punitive damage claim was disallowed. The court deferred the decision on costs.

Estoppel - Topic 8

General principles - Conditions precedent - The Alberta Court of Appeal stated that the requirements for issue estoppel were "(1) the same question has been decided; (2) the judicial decision which is said to create the estoppel was final; and (3) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies" - See paragraph 28.

Estoppel - Topic 378

By record (res judicata) - As a bar to subsequent proceedings - Parties - Codefendants - The Alberta Court of Appeal discussed the application of issue estoppel between codefendants - The court referred to the statement that "in order to create a res judicata as between code­fendants, three conditions are requisite: (1) there must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3) the question between the defendants must have been finally decided" - See paragraph 35.

Estoppel - Topic 386

By record (res judicata) - As a bar to subsequent proceedings - Issues decided in prior proceedings - Two Montana negli­gence actions determined causation, negli­gence and imposition of liability - In Alberta, the insurer who defended and paid the judgments sued two other insurers for contribution and indemnity - The Alberta Court of Appeal stated that the fact find­ings of the Montana courts on causation, negligence and imposition of liability were binding on the parties in the Alberta insur­ance action - Issue estoppel applied and, in any event, the insurance issue did not arise until liability was finally resolved - The various insurance policies were to be interpreted according to Alberta law, but on the basis of the fact findings and law in the Montana actions - The issue was which policies provided coverage, and how much, on the facts as found by the Mon­tana courts - See paragraphs 26 to 39.

Insurance - Topic 785

Insurers - Liability - Where two or more policies cover risk - Primary v. excess insurance - Turner Valley contracted with St. Louis to provide a tractor and driver (Collicott) to haul goods to Montana in Turner Valley's trailer - Collicott was involved in accidents in Montana - The Montana plaintiffs in two separate actions successfully sued - Markel was the pri­mary insurer of the trailer - Canadian Surety was the excess insurer of the trailer and primary insurer of the tractor - Aetna was the excess insurer or the tractor - Fault was not apportioned between the tractor and trailer in the Montana action - The Alberta Court of Appeal stated that fault should be apportioned equally between the tractor and trailer - The court stated that "(1) Markel is the primary insurer for liability occurring as a result of the use or operation of the trailer, which is 50 per cent of the total liability for the accidents; (2) Canadian Surety is the excess insurer with respect to that liability, and its obligation to pay arises only when the limits of Markel's policy are exhausted; (3) Canadian Surety is the primary insurer with respect to liability occurring as a result of the use or operation of the tractor, which is 50 per cent of the total liability for the accidents; and (4) Aetna is the excess insurer with respect to that liability, and its obligation to pay arises only when the limits of Canadian Surety's policy are exhausted" - See paragraphs 123 to 139.

Insurance - Topic 1853

Insurance contract - Interpretation - Nar­row construction against insurer - The Alberta Court of Appeal stated that "the general rule regarding the interpretation of insurance contracts is that provisions of a policy allowing coverage should be interpreted by the courts broadly to the benefit of the insured, and provisions which limit coverage should be interpreted strictly or narrowly against the insurer" - See para­graph 106.

Insurance - Topic 2876.1

Subrogation - Between insurers - An excess insurer was denied recovery of defence costs and settlement of a punitive damages claim relating to two Montana negligence actions involving multiple insurers by way of contribution or restitu­tion - Aetna sought recovery of the defence costs and the settlement under the American doctrine of equitable subrogation or duty of good faith between insurers - The Alberta Court of Appeal discussed the applicability of the doctrine and held that even if it applied, the facts in the present case did not support recovery against the other insurers on that basis - See para­graphs 201 to 212.

Insurance - Topic 2941

Contribution among insurers - General - The Alberta Court of Appeal stated that the right of contribution between insurers "is derivative through the insured. Contri­bution is an equitable principle that has arisen to create fairness inter se the insurers where two or more insurers are both primarily liable to pay. One is called to pay and equity allows the payor to look to other potential payors for contribution. It is an independent remedy, separate from statutory rights to contribution. It arises to ensure equity between or among insurers. Restitution is a similar remedy applicable in a different circumstance. Whereas con­tribution applies where both insurers are primarily liable, restitution applies where the insurers are not both primarily liable; rather one insurer has the ultimate or primary responsibility and the debt is discharged by the person with the second­ary responsibility. Even higher is the demand for equity. Restitution is also different because it is not an action deriv­ative of the rights of the insured. Restitu­tion exists as an independent cause of action where a party is required to dis­charge an obligation of the party with ultimate responsibility. To allow restitution ... in this case is merely an extension of the right to equity inter se insurers. ... The remedies of equitable contribution and restitution can co-exist with the statutory remedies set out in the Insurance Act" - See paragraphs 146 to 148.

Insurance - Topic 2942

Contribution among insurers - Statutory v. equitable remedies - An insurer submitted that the Insurance Act provided exclusive remedies as between insurers, thereby excluding equitable causes of action between insurers - The Alberta Court of Appeal held that nothing in the Act abro­gated the equitable doctrines of equitable contribution and restitution as between insurers - See paragraphs 140 to 144.

Insurance - Topic 2947

Contribution among insurers - Conditions precedent - General - The Alberta Court of Appeal stated that the prerequisites for contribution among insurers were "(1) all the policies concerned must cover the same subject matter; (2) all the policies must be effected against the same peril; (3) all the policies must be effected by or on behalf of the same assured; (4) all the policies must be in force at the time of the loss; (5) all the policies must be legal contracts of insurance; and (6) no policy must contain any stipulation by which it is excluded from contribution" - See para­graph 154.

Insurance - Topic 3811

Automobile insurance - The contract - Use or operation - What constitutes - Two Montana negligence actions resolved causation, negligence and imposition of liability respecting accidents caused by the negligence of a tractor-trailer driver - One insurer sued in Alberta for contribution and restitution from two other insurers (Canadian Indemnity and Markel) - Mark­el's policy extended coverage to "use or operation" of the trailer - The Alberta Court of Appeal rejected Markel's argu­ment that there was no coverage, because the trailer could not be "operated", only the tractor could - Montana courts made a fact finding that both the tractor and trailer were driven and liability was imposed for negligence in such operation - The law did not go so far as to say that there could never be liability qua the trailer short of a defect - Negligence arose from the use and operation of both the tractor and the trailer - Accordingly, the Markel policy provided coverage - See paragraphs 40 to 86.

Insurance - Topic 3813

Automobile insurance - Contract - "Employee" defined - Aetna insured Turner Valley and its employees - Turner Valley contracted with St. Louis to provide a tractor and driver to haul Turner Valley's trailer - The issue was whether the driver was Turner Valley's "employee" and thereby covered under the Aetna policy - The Alberta Court of Appeal held that the driver was not an "employee" of Turner Valley, where Turner Valley had no con­trol over the driver or his route and did not pay him - The driver remained on St. Louis' payroll - See paragraphs 110 to 113.

Insurance - Topic 4250

Automobile insurance - Statutory condi­tions - Exclusions - Driving while intoxi­cated - Two negligence actions found the driver to be drunk, impaired and that his drunkenness impaired his driving capacity - Insurers submitted that the driver's in­toxication limited their liability to $35,000 under ss. 300(1) and 306(11) of the Insur­ance Act and statutory condition 2(1) - Coverage was excluded where intoxication made the driver incapable of proper con­trol of his vehicle - The Alberta Court of Appeal held that the insurers failed to discharge the onus of showing that the driver's intoxication made him incapable of proper control of his vehicle - A finding of intoxication, without more, was insuffi­cient to constitute a lack of capacity - There was no evidence that the driver's intoxication was to the point that he was incapable of properly controlling his vehicle - See paragraphs 114 to 121.

Insurance - Topic 4331

Automobile insurance - Exclusions - Rental or lease of vehicle - Turner Valley contracted with St. Louis for a tractor and driver to haul Turner Valley's trailer - St. Louis' insurance policy covered both the tractor and trailer, but excluded coverage where the automobile was "rented or leased to another" - The Alberta Court of Appeal held that the arrangement between the parties was not a lease or rental, ac­cordingly, coverage was not excluded - Turner Valley had no control over the driver or his chosen route - There was no written lease or rental agreement - The agreement was an oral agreement to pay St. Louis for hauling goods - The court stated that "to qualify as a lease for the purposes of the policy, any agreement to lease or rent must at a minimum contain a degree of control passing to the lessee such that the risk insured for has changed" - See paragraphs 87 to 109.

Restitution - Topic 695

Benefit acquired from the plaintiff - Re­covery of money - General - [See Insur­ance - Topic 2941 ].

Restitution - Topic 702

Benefit acquired from the plaintiff - Re­covery of money - Money paid under compulsion - The Alberta Court of Appeal stated that restitution was available for the compulsory discharge of another's liability where "(1) the payment must be compelled or compellable by law; (2) the plaintiff must not have officiously exposed him or herself to the liability to make the pay­ment; (3) the payment must discharge the liability of the defendants; and (4) as between the plaintiff and the defendant, the defendant must have been ultimately or primarily liable for the liability dis­charged" - See paragraph 163.

Words and Phrases

Privies - The Alberta Court of Appeal discussed the meaning of "privies", as used in the issue estoppel requirement that a judicial decision bound the parties or their privies - See paragraphs 32 to 33.

Cases Noticed:

Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd. et al., [1967] 1 A.C. 853; [1966] 2 All. E.R. 536 (H.L.), refd to. [para. 28].

Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248; 2 N.R. 397; 47 D.L.R.(3d) 544, refd to. [para. 28].

O'Hara et al. v. Wawanesa Mutual Insur­ance Co. (1990), 108 A.R. 308 (C.A.), refd to. [para. 28].

Worker's Compensation Board (Alta.) v. Peters (1990), 108 A.R. 396 (C.A.), refd to. [para. 28].

North Waterloo Farmers Mutual Insurance Co. v. Wylie (1989), 40 C.C.L.I. 227 (Ont. H.C.), refd to. [para. 35].

Blue Bird Body Co. v. Ryder Truck Rental Co., 583 F.2d 717 (U.S.C.A.), refd to. [para. 47].

Law, Union & Rock Insurance Co. v. Moore's Taxi Ltd., [1960] S.C.R. 80; 22 D.L.R.(2d) 264, refd to. [para. 61].

Stevenson v. Reliance Petroleum Ltd., [1956] S.C.R. 936; 5 D.L.R.(2d) 673, refd to. [para. 62].

Nova Scotia Power Corp. v. Tank Lines Ltd., Seaboard Liquid Carriers Ltd., Wark, Wark and Sun Alliance Insurance (1978), 31 N.S.R.(2d) 629; 52 A.P.R. 629; 91 D.L.R.(3d) 410 (T.D.), refd to. [para. 63].

Gramak Ltd. v. State Farm Mutual Auto­mobile Insurance Co. (1975), 63 D.L.R.(3d) 630; 10 O.R.(2d) 518 (H.C.), refd to. [para. 64].

Kavanaugh v. Quinnsway Transport Ltd. and O'Neill (1982), 40 Nfld. & P.E.I.R. 184; 115 A.P.R. 184; 142 D.L.R.(3d) 750 (Nfld. C.A.), refd to. [para. 66].

Superior Equipment Haulers (1966) Ltd. v. Zurich Insurance Co. (1988), 57 Alta. L.R.(2d) 158 (C.A.), refd to. [para. 68].

Stromberg v. South British Insurance Co., [1952] I.L.R. 419; 6 W.W.R.(N.S.) 193; [1952] 4 D.L.R. 134 (Alta. C.A.), refd to. [para. 68].

Highway Victims Indemnity Fund. v. Federal Fire Insurance Co. of Canada, [1979] 2 S.C.R. 289; 28 N.R. 601; 99 D.L.R.(3d) 256, refd to. [para. 73].

State Farm Mutual Automobile Insurance Co. v. Zurich Insurance Co. (1988), 33 C.C.L.I. 172; 66 O.R.(2d) 176 (H.C.), refd to. [para. 75].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488; 112 D.L.R.(3d) 49; [1980] I.L.R. 1-1176, refd to. [para. 106].

Indemnity Insurance Co. of North America v. Excel Cleaning Service, [1954] 2 D.L.R. 721 (S.C.C.), refd to. [para. 106].

Canadian Indemnity Insurance Co. v. Campbell (1966), 56 W.W.R.(N.S.) 57 (B.C.C.C.), refd to. [para. 119].

Embury v. Saskatchewan Government Insurance Office (1954), 13 W.W.R.(N.S.) 523 (Sask. Dist. Ct.), refd to. [para. 119].

LeBlanc et al. v. MacDonald Estate and Norwich Union Fire Insurance Ltd. (1968), 2 N.S.R.(2d) 637; 1 D.L.R.(3d) 132, refd to. [para. 119].

Villeneuve v. Fireman's Fund Insurance Co., [1972] 5 W.W.R. 109 (B.C.S.C.), refd to. [para. 120].

Federal Fire Insurance Co. of Canada v. McCabe, [1981] I.L.R. 1-1388 (Ont. C.C.), affd. [1982] I.L.R. 1-1551 (Ont. C.A.), dist. [para. 149].

State Farm Mutual Automobile Insurance Co. v. Prudential Assurance Co. (1986), 54 O.R.(2d) 621; 17 C.C.L.I. 166 (H.C.), dist. [para. 149].

Royal Insurance Co. of Canada v. Aguiar (1984), 7 O.A.C. 141; 16 D.L.R.(4th) 477; 48 O.R.(2d) 705 (C.A.), dist. [para. 149].

Carleton (County) v. Ottawa (City), [1965] S.C.R. 663, refd to. [para. 162].

Brook's Wharf and Bull Wharf Ltd. v. Goodman Brothers, [1937] 1 K.B. 534; [1936] 3 All E.R. 696 (C.A.), refd to. [para. 162].

Peel (Regional Municipality) v. Ontario (1988), 49 D.L.R.(4th) 759 (Ont. H.C.), revd. on other grounds (1990), 42 O.A.C. 356; 75 D.L.R.(4th) 523 (C.A.), affd. [1992] 3 S.C.R. 762; 144 N.R. 1; 59 O.A.C. 81, refd to. [para. 163].

Otis v. Weidmark (1911), 1 W.W.R. 382; 4 Sask. L.R. 531 (S.C.), refd to. [para. 165].

Mayhew v. Forrester (1814), 5 Taunt. 615, refd to. [para. 165].

Howard Sand & Gravel Co. v. General Security Insurance Co. Canada Ltd., [1954] S.C.R. 785, refd to. [para. 165].

Moule v. Garrett (1872), L.R. 7 Exch. 101, refd to. [para. 165].

Herring v. Wilson (1884), 4 O.R. 607 (C.A.), refd to. [para. 168].

Scott v. Brown, Doering, McNabb & Co., [1892] 2 Q.B. 724 (C.A.), refd to. [para. 168].

Continental Casualty Co. v. Yorke, [1930] S.C.R. 180, refd to. [para. 177].

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63; 68 D.L.R.(4th) 321, refd to. [para. 183].

American Home Assurance v. Stinchcombe (1992), 136 A.R. 290; 7 Alta. L.R.(3d) 74 (Q.B.), refd to. [para. 185].

Fredrickson v. Insurance Corp. of British Columbia, [1990] 4 W.W.R. 637 (B.C.S.C.), refd to. [para. 203].

Shea v. Manitoba Public Insurance Corp. (1991), 55 B.C.L.R.(2d) 15 (S.C.), refd to. [para. 203].

Dillon v. Guardian Insurance Co. (1983), 2 C.C.L.I. 227 (Ont. H.C.), refd to. [para. 203].

Broadhurst & Ball v. American Home Assurance Co., [1991] 1 L.R. 1-2674; 42 O.A.C. 161 (C.A.), leave to appeal re­fused (1991), 136 N.R. 405; 49 O.A.C. 400; 79 D.L.R.(4th) vi (S.C.C.), refd to. [para. 206].

Statutes Noticed:

Insurance Act, R.S.A. 1970, c. 187, sect. 2(46) [para. 127]; sect. 2(48) [para. 126]; sect. 290(1)(a), sect. 290(1)(b) [para. 80]; sect. 295(1)(b) [para. 180]; sect. 300(1) [para. 115]; sect. 305(1) [para. 181]; sect. 305(4) [para. 141]; sect. 306(1) [para. 176]; sect. 306(4)(b) [para. 117]; sect. 306(6) [para. 178]; sect. 306(11) [para. 116]; sect. 320(1) [para. 128]; sect. 320(2) [para. 129]; sect. 321(1) [para. 141]; stat. cond. 2(1) [para. 114].

Authors and Works Noticed:

Black's Law Dictionary (6th Ed. 1990) [para. 33].

Castel, J.G., Canadian Conflict of Laws (2nd Ed. 1986), p. 238 [para. 175].

Colinvaux, Raoul, The Law of Insurance (5th Ed. ), p. 148 [para. 145].

Craies On Statute Law (7th Ed. 1971), pp. 338, 339, 343 [para. 143].

Dicey and Morris, Conflict of Laws (12th Ed. 1993), c. 14, p. 460 [para. 27].

Fridman, G.H.L, and McLeod, James J., Restitution (1982), pp. 349 to 364 [para. 163].

Ivamy, E.R. Hardy, General Principles of Insurance Law (4th Ed. 1979), generally [para. 154].

Leake on Contracts (1st Ed. 1867), p. 41 [para. 165].

Maddaugh, P.D., and McCamus, J.D., The Law of Restitution (1990), pp. 715 to 729 [para. 163].

Wade, H.W.R., Administrative Law (6th Ed. 1988), p. 939 [para. 104].

Counsel:

H.W. Veale, Q.C., for the appellant, Markel Insurance Co. of Canada;

J.H. Wilson and P.B. McLaws, for the respondents, Aetna Insurance Co. and Turner Valley Transport (1972) Ltd.;

E.S. Ruud, for the respondent, Canadian Surety Co.;

E.P. Groody, for the respondents, Emman­uel St. Louis and Rudolph Collicott.

This appeal was heard at Calgary, Alberta, before Fraser, C.J.A., Hetherington and Conrad, JJ.A., of the Alberta Court of Appeal.

On May 27, 1994, Conrad, J.A., delivered the following judgment for the Court of Appeal.