Coventree Inc. v. Lloyds Syndicate 1221 (Millennium Syndicate), (2012) 291 O.A.C. 178 (CA)

• Judge: O'Connor, A.C.J.O., Armstrong and Watt, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: February 09, 2012
• Jurisdiction: Ontario
• Citations: (2012), 291 O.A.C. 178 (CA);2012 ONCA 341

Coventree Inc. v. Lloyds Syndicate 1221 (2012), 291 O.A.C. 178 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. MY.026

Lloyds Syndicate 1221 (Millennium Syndicate) (respondent/appellant) v. Coventree Inc. (applicant/respondent in appeal)

(C54323; 2012 ONCA 341)

Indexed As: Coventree Inc. v. Lloyds Syndicate 1221 (Millennium Syndicate)

Ontario Court of Appeal

O'Connor, A.C.J.O., Armstrong and Watt, JJ.A.

May 24, 2012.

Summary:

At issue was whether a director's and officer's insurance policy provided coverage for a claim when notice of the potential for that claim had been provided to a previous insurer or whether it was excluded by the policy.

The Ontario Superior Court, in a decision reported at [2011] O.T.C. Uned. 4788, held that the policy afforded coverage. The subsequent insurer appealed.

The Ontario Court of Appeal dismissed the appeal.

Contracts - Topic 7521

Interpretation - Surrounding circumstances - General - [See Insurance - Topic 1851 ].

Insurance - Topic 1851

The insurance contract - Interpretation of contract - General - The Ontario Court of Appeal set out legal principles to be applied in interpreting insurance contracts - The court stated that "The analysis begins with an examination of the text of the written agreement. The aim is to determine the objective intentions of the parties from the words they have used. However, the words of a contract alone may not be determinative of the objective intention of the parties. Contracts are not to be looked at in a vacuum. Rather, it is 'perfectly proper, and indeed may be necessary, to look at the surrounding circumstances in order to ascertain what the parties were really contracting about' ... The court's search for the intention of the parties may be aided by reference to the surrounding circumstances or factual matrix at the time of the negotiation and execution of the contract, as viewed objectively by a reasonable person ... Words used in a contact are often better understood when the context of their use is understood. The purpose of the context is to determine what a reasonable person in the context of the surrounding circumstances would have understood the agreement to be. The subjective intentions of the parties are not relevant. Consideration of the surrounding circumstances is generally restricted to the circumstances known to both parties at the time of the execution of the contract. These circumstances include facts that were known or reasonably capable of being known by the parties when they entered into the contract." - See paragraphs 15 to 18.

Insurance - Topic 1852

The insurance contract - Interpretation of contract - Intent of the parties - [See Insurance - Topic 1851 ].

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - The Ontario Court of Appeal stated that the Supreme Court of Canada had set out the principle that in interpreting insurance contracts, exclusion clauses should be narrowly construed - The court held that it followed that a generally worded exclusion clause should give way to an agreement to cover a specific matter - See paragraph 46.

Insurance - Topic 2151

The risk - Exclusions - General - [See Insurance - Topic 1856 ].

Insurance - Topic 6833

Liability insurance - Director's indemnification insurance - Defence costs - [See Insurance - Topic 6838 ].

Insurance - Topic 6838

Liability insurance - Director's indemnification insurance - Exclusions - Prior acts - At issue was whether a director's and officer's insurance policy provided coverage for a claim when notice of the potential for that claim had been provided to a previous insurer, or whether it was excluded by the policy - The application judge considered the language of the policy as well as the circumstances underlying the negotiation and issuance of the policy - He concluded that the policy afforded coverage - The Ontario Court of Appeal saw no basis to interfere with his conclusion - The court also dismissed the insured's cross-appeal from the award of costs on a partial indemnity scale - The insured claimed that costs on a full indemnity scale were warranted because it was a case involving an insured applying for a declaration regarding the obligation to pay defence costs - Cost awards were discretionary and should not be lightly interfered with - A judge of first instance was in the best position to determine the entitlement, scale and quantum of any such award - The application judge acknowledged that full indemnity costs had been awarded in cases involving the duty of the insurer to provide a defence to a claim - However, he found that here the defence costs were claimed as an item insured under the policy, and not based on the insurer's duty to provide a defence to a claim that might fall within the insurance policy - The insurer had a legitimate question respecting the policy's interpretation and it should have been able to raise it without exposing itself to substantial indemnity costs - See paragraphs 1 to 49.

Cases Noticed:

Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; 147 N.R. 44; 83 Man.R.(2d) 81; 36 W.A.C. 81, refd to. [para. 15].

Hill v. Nova Scotia (Attorney General), [1997] 1 S.C.R. 69; 206 N.R. 299; 157 N.S.R.(2d) 81; 462 A.P.R. 81, refd to. [para. 17].

Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust et al. (2007), 222 O.A.C. 102; 85 O.R.(3d) 254; 2007 ONCA 205, refd to. [para. 17].

Dumbrell v. Regional Group of Companies Inc. et al. (2007), 220 O.A.C. 64; 85 O.R.(3d) 616; 2007 ONCA 59, refd to. [para. 18].

King v. Operating Engineers Training Institute of Manitoba Inc. (2011), 270 Man.R.(2d) 63; 524 W.A.C. 63; 2011 MBCA 80, refd to. [para. 18].

Derksen et al. v. 539938 Ontario Ltd. et al., [2001] 3 S.C.R. 398; 273 N.R. 356; 150 O.A.C. 1; 2001 SCC 72, refd to. [para. 46].

McNaughton Automotive Ltd. v. Co-Operators General Insurance Co. (2008), 250 O.A.C. 352; 298 D.L.R.(4th) 86; 2008 ONCA 597, refd to. [para. 48].

Counsel:

Eric A. Dolden and Paul Dawson, for the respondent/appellant;

Geoffrey D.E. Adair, Q.C., and Jennifer King, for the applicant/respondent.

This appeal was heard on February 9, 2012, by O'Connor, A.C.J.O., Armstrong and Watt, JJ.A., of the Ontario Court of Appeal. O'Connor, A.C.J.O., delivered the following decision on May 24, 2012.