Drane v. Optimum Frontier Insurance Co., (2004) 272 N.B.R.(2d) 241 (CA)

• Judge: Ryan, Daigle and Deschênes, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: Thursday October 16, 2003
• Jurisdiction: New Brunswick
• Citations: (2004), 272 N.B.R.(2d) 241 (CA);2004 NBCA 52

Drane v. Optimum Frontier Ins. (2004), 272 N.B.R.(2d) 241 (CA);

    272 R.N.-B.(2e) 241; 715 A.P.R. 241

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2004] N.B.R.(2d) TBEd. JN.047

Optimum Frontier Insurance Company (formerly National Insurance Company) (respondent/appellant) v. David Joseph Drane (applicant/respondent)

(93/03/CA; 2004 NBCA 52)

Indexed As: Drane v. Optimum Frontier Insurance Co.

New Brunswick Court of Appeal

Ryan, Daigle and Deschênes, JJ.A.

June 24, 2004.

Summary:

Following a single vehicle accident, Virtue sued Drane and Totten. Drane claimed that he had been a passenger in the vehicle which was owned by Totten and driven by Sprague. Optimum Frontier Insurance (the insurer) joined as a third party to the action. Drane applied for an order that the insurer appoint legal counsel, at its expense, to defend him in the Virtue action.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at 263 N.B.R.(2d) 138; 689 A.P.R. 138, allowed the application. The insurer ap­pealed.

The New Brunswick Court of Appeal dismissed the appeal.

Insurance - Topic 725

Insurers - Duties - Duty to defend - Fol­lowing a single vehicle accident, Virtue sued Drane, alleging that Drane was driv­ing - Drane denied that he was driving - Optimum Frontier Insurance (the insurer) refused to defend Drane, alleging that he had breached several policy and statutory conditions - The insurer was added as a third party pursuant to s. 250(14) of the Insurance Act - The New Brunswick Court of Appeal rejected the argument that an insurer's duty to defend was automatically suspended when an insurer was added as a third party under s. 250(14) until the ques­tion of the alleged breaches was deter­mined - The court affirmed that the insurer had a duty to defend and to appoint inde­pendent counsel, at its expense, to repre­sent Drane because, inter alia, Drane had contested the alleged breaches, there was a conflict between Drane and the insurer about who was driving, and it was unclear whether the alleged breaches could be adjudicated upon summarily - See para­graphs 1 to 27.

Insurance - Topic 725

Insurers - Duties - Duty to defend - The New Brunswick Court of Appeal stated that "The decision whether to suspend the insurer's duty to defend the underlying action against its insured, pending the determination of the question of an alleged breach of condition of the policy, must be informed by certain considerations which, in turn, depend on the facts of each case." - The court set out relevant factors to be considered - The court stated that the parties should adduce sufficient evidence to allow the judge to make an informed deci­sion - See paragraphs 24 to 26.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence and other expenses - [See first Insurance - Topic 725].

Insurance - Topic 4512

Automobile insurance - Actions - Defence by insurer - Adding insurer as third party - Pleading by insurer - Following a single vehicle accident, Virtue sued Drane, al­leging that Drane was driving - Optimum Frontier Insurance (the insurer) refused to defend Drane, alleging that he had breached several policy and statutory con­ditions - The insurer was added as a third party pursuant to s. 250(14) of the Insur­ance Act - The New Brunswick Court of Appeal opined that "an insurer is not al­lowed to adopt, in its third party defense, a position incongruent with that of the defendant insured" - However, the court held that it was not necessary to decide the point - See paragraph 27.

Practice - Topic 3061

Applications and motions - General - Avoidance of multiplicity of proceedings - Following a single vehicle accident, Virtue sued Drane - Optimum Frontier Insurance (the insurer) refused to defend Drane - The insurer was added as a third party pursuant to s. 250(14) of the Insurance Act - The insurer commenced an action, seeking a declaration that it did not have to defend or indemnify Drane - Subsequently, Drane filed a notice of application, seeking a declaratory order directing the insurer to appoint independent counsel, at its ex­pense, to defend him - The insurer sought to stay Drane's application on the basis that it had already commenced legal pro­ceedings seeking the same declaration - The New Brunswick Court of Appeal affirmed the application judge's refusal to stay Drane's application - There was no apparent reason why Drane could not take proceedings to have the question of the duty to defend dealt with, considering the insurer's inaction on the issue - Drane had been carrying the cost of defending the Virtue action since it was commenced - The insurer's contention that Drane was short-circuiting its action lacked merit.

Cases Noticed:

Longo v. Maciorowski et al. (2000), 137 O.A.C. 159; 50 O.R.(3d) 595 (C.A.), appld. [para. 9].

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63, refd to. [para. 11].

Veillieux et al. v. Chambers (1995), 25 O.R.(3d) 538 (Gen. Div.), not folld. [para. 13].

Morrison v. Co-operators General In­surance Co., [2003] N.B.R.(2d) (Supp.) No. 24 (T.D.), refd to. [para. 15].

Counsel:

Barry R. Morisson, Q.C., and Nathan Weinman, for the appellant;

Colin D. Feltham, for the respondent.

This appeal was heard on October 16, 2003, by Ryan, Daigle and Deschênes, JJ.A., of the New Brunswick Court of Appeal. Deschênes, J.A., delivered the following decision for the court in both official lan­guages on June 24, 2004.