Hanis v. University of Western Ontario et al., (2008) 241 O.A.C. 303 (CA)

• Judge: Doherty, Sharpe and Gillese, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: March 26, 2008
• Jurisdiction: Ontario
• Citations: (2008), 241 O.A.C. 303 (CA);2008 ONCA 678

Hanis v. Ont. Univ. (2008), 241 O.A.C. 303 (CA)

MLB headnote and full text

Temp. Cite: [2008] O.A.C. TBEd. OC.045

Edward Hanis (plaintiff) v. James J. Teevan, Andrew K. Bjerring and The University of Western Ontario and Glenn Harris, William Trimble and Stewart McBride (defendants/respondent) v. Guardian Insurance Company of Canada , Herald Insurance Company, Crum & Forster of Canada Ltd., Gerling Global Insurance Company and Kansa General Insurance Company Ltd. (third parties/appellant)

(C44690; 2008 ONCA 678)

Indexed As: Hanis v. University of Western Ontario et al.

Ontario Court of Appeal

Doherty, Sharpe and Gillese, JJ.A.

October 8, 2008.

Summary:

The plaintiff had been employed since 1972 as the Director of the Social Science Computing Laboratory at the University of Western Ontario and as an Adjunct Professor without tenure. The plaintiff sued the University for wrongful dismissal, infringement of copyright in computer software and breach of contract. The plaintiff also alleged malicious prosecution arising out of the criminal charges that had been laid against the plaintiff. The University's insurer refused to defend the University. The University commenced third party proceedings seeking a declaration that the insurer was required to provide a defence. The third party action was held in abeyance by agreement while the main action continued. The University retained its own counsel and proceeded to trial. The trial judge dismissed the action. The plaintiff appealed the dismissal of his wrongful dismissal and copyright claims.

The Ontario Court of Appeal, in a decision reported at 111 O.A.C. 91, allowed the appeal in part and awarded the plaintiff damages for wrongful dismissal. The court dismissed the appeal respecting the copyright claim. The University moved for summary judgment on its third party claim.

The Ontario Superior Court, in a decision reported at [2003] O.T.C. 935, granted the University summary judgment. The court concluded that the insurer should have defended the University with respect to all claims covered or not, subject to a reservation of its rights, if any, of apportionment. The court subsequently ordered a trial of the following issues: (i) was the insurer entitled to any allocation of the legal defence costs incurred by the University and, if so, what was the proper allocation; (ii) what was the proper quantum of the University's legal defence costs; (iii) what, if any, prejudgment interest was the University entitled to on any amounts owed by the insurer under (i) and (ii) above.

The Ontario Superior Court, in a decision reported at [2005] O.T.C. 1080, held that the insurer was obliged to pay all defence costs related to the defence of claims covered by the policy even if those same costs furthered the defence of uncovered claims. However, the insurer was not required to pay defence costs solely related to the defence of uncovered claims. The court determined that 5% of the defence costs related exclusively to uncovered claims. The court held the insurer liable for 95% of the costs, quantified at slightly more than $2,000,000. The insurer appealed the allocation of defence costs, asserting that the insurer should only be held responsible for 20% of the costs.

The Ontario Court of Appeal dismissed the appeal.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence and other expenses - At issue was how, if at all, should the costs of defending a lawsuit be apportioned between the insurer and insured when some, but not all, of the claims made in the lawsuit were covered by the insurance policy - The Ontario Court of Appeal held that the nature and extent of an insurer's obligation was not a question of fairness or unfairness - Rather, it was a question of what the insurer had agreed to do in the policy - The answer to that question laid in the language of the policy, not in judicial notions of fairness - The insurer now conceded that a claim of malicious prosecution was covered - That coverage triggered the insurer's duty to defend and its obligation to pay defence costs associated with the claim - There was nothing in the policy's language that qualified that obligation or suggested that it did not apply to "mixed claims" - Nothing in the policy exempted the insurer from paying costs reasonably associated with the defence of malicious prosecution claims simply because they also assisted the insured in the defence of uncovered claims - The insurer could have written qualifying words into its policy, but chose not to do so - The court could not do so for the insurer - The court affirmed the trial judge's finding that 95% of the defence costs related to the defence of a covered claim and were therefore properly allocated to the insurer - See paragraphs 11 to 39.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence and other expenses - At issue was how, if at all, should the costs of defending a lawsuit be apportioned between the insurer and insured when some, but not all, of the claims made in the lawsuit were covered by the insurance policy - The Ontario Court of Appeal held that the question of apportionment should be determined by the operative language in the policy - The court observed that its characterization of the issue as one of contractual interpretation dictated the rejection of the position taken in some cases that where an insurer failed to defend a covered claim it had to, presumably by way of some sort of penalty, assume the defence costs of all claims both covered and uncovered - See paragraph 40.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence and other expenses - At issue on appeal was how, if at all, should the costs of defending a lawsuit be apportioned between the insurer and insured when some, but not all, of the claims made in the lawsuit were covered by the insurance policy - The Ontario Court of Appeal noted that the trial judge appeared to place the burden of proof on the insurer to clearly demonstrate what portion of the defence costs related exclusively to uncovered claims - The court questioned whether there was any compelling reason to depart from the general rule that the party claiming damages bore the ultimate or legal burden of proof on that issue, including proving the quantum of damages observed - See paragraph 43.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence and other expenses - At issue on appeal was how, if at all, should the costs of defending a lawsuit be apportioned between the insurer and insured when some of the claims made in the lawsuit were covered by the insurance policy - The trial judge held that 95% of the defence costs related to the defence of a covered claim (malicious prosecution) and allocated those costs to the insurer - The insurer appealed, asserting that it should only be held responsible for 20% of the costs, where, inter alia, all of the relevant events predated the coverage provided by the policy - The Ontario Court of Appeal rejected the submission - The alleged act of malicious prosecution occurred during the currency of the policy - The insurer accepted that it had a duty to defend the malicious prosecution claim and to pay the defence costs relating to that claim - The timing of the events germane to the proof or defence of that claim was irrelevant to the insurer's duty to defend and its obligation to pay defence costs related to the malicious prosecution claim - See paragraph 46.

Cases Noticed:

New Zealand Forest Products Ltd. v. New Zealand Insurance Co., [1996] 2 N.Z.L.R. 20 (C.A.), revd. [1997] 3 N.Z.L.R. 1; 219 N.R. 385 (P.C.), refd to. [para. 16].

Coronation Insurance Co. v. Clearly Canadian Beverage Corp. et al. (1999), 117 B.C.A.C. 22; 191 W.A.C. 22; 168 D.L.R.(4th) 366 (C.A.), agreed with [para. 21].

St. Paul Fire & Marine Insurance Co. et al. v. Durabla Canada Ltd. (1996), 92 O.A.C. 157; 31 O.R.(3d) 472 (C.A.), dist. [para. 25].

Daher v. Economical Mutual Insurance Co. (1996), 96 O.A.C. 255; 31 O.R.(3d) 472 (C.A.), dist. [para. 25].

Continental Insurance Co. et al. v. Dia Met Minerals Ltd. et al., [1996] 7 W.W.R. 408; 77 B.C.A.C. 251; 126 W.A.C. 251 (C.A.), refd to. [para. 26].

Sommerfield et al. v. Lombard Insurance Group, [2005] O.T.C. 232; 74 O.R.(3d) 571 (Sup. Ct.), consd. [para. 27].

Scott et al. v. Optimum Frontier Insurance Co., [2006] O.T.C. Uned. 448; 38 C.C.L.I.(4th) 139 (Sup. Ct.), consd. [para. 27].

Panteluk (Kelly) Construction Ltd. v. AXA Pacific Insurance Co., [2006] 6 W.W.R. 181; 263 Sask.R. 195 (Q.B.), consd. [para. 27].

Vero Insurance Ltd. v. Baycorp Advantage Ltd., [2004] N.S.W.C.A. 390, refd to. [para. 32].

Modern Livestock Ltd. and Lane v. Kansa General Insurance Co. (1993), 143 A.R. 46; 11 Alta. L.R.(3d) 355 (Q.B.), affd. (1994), 157 A.R. 167; 77 W.A.C. 167; 24 Alta. L.R.(3d) 21 (C.A.), disagreed with [para. 40].

Counsel:

Geoffrey D.E. Adair, Q.C., for the appellant;

Jane A. Langford and William G. Scott, for the respondent.

This appeal was heard on March 26, 2008, by Doherty, Sharpe and Gillese, JJ.A., of the Ontario Court of Appeal. The following decision of the court was delivered on October 8, 2008, by Doherty, J.A.