Mallory v. Werkmann Estate et al., (2015) 330 O.A.C. 337 (CA)

• Judge: Strathy, C.J.O.
• Court: Court of Appeal (Ontario)
• Case Date: January 21, 2015
• Jurisdiction: Ontario
• Citations: (2015), 330 O.A.C. 337 (CA);2015 ONCA 71

Mallory v. Werkmann Estate (2015), 330 O.A.C. 337 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. JA.043

Robert Mallory (plaintiff/respondent) v. The Estate of Gabor Werkmann, deceased, Kriztian Nemes, Istivan Mihali (appellant/responding party) and Security National Insurance Company (defendant/respondent/moving party)

(M44420; M44451; C58453; 2015 ONCA 71)

Indexed As: Mallory v. Werkmann Estate et al.

Ontario Court of Appeal

Strathy, C.J.O.

February 2, 2015.

Summary:

Three motorcyclists, including Mihali, were travelling at speeds over 240 kph. One struck Mallory's vehicle and was killed. Mallory was severely injured. Mallory sued the three motorcyclists, alleging negligence, and his insurer Security National in case any liable party was underinsured. Mihali's insurance policy with Royal & Sun Alliance (RSA) limited coverage to $200,000 if the driver was racing or in a "speed test". RSA entered into an agreement with Mihali which allowed RSA to defend and settle the action while preserving its right to dispute coverage. RSA appointed defence counsel for Mihali. A settlement between Mallory, RSA and Security National fixed Mallory's damages at $444,850 and provided that Mihali and Security National could proceed to trial to determine whether Mihali was liable for Mallory's damages. If Mihali was found liable, RSA would be liable for at least $200,000 and potentially for the full amount. The trial judge found Mihali 25% liable. She dismissed the claim against Security National because Mihali was "insured at the time of the collision". Mihali's counsel filed a notice of appeal. Six grounds addressed Mihali's liability. Two alleged that the trial judge had erred in addressing the issue of coverage. RSA moved for leave to intervene in the appeal on the basis that it might be adversely affected by the judgment. Security National moved to remove counsel for Mihali, alleging a conflict of interest.

The Ontario Court of Appeal, per Strathy, C.J.O., denied RSA's motion for leave to intervene and granted Security National's motion to remove Mihali's counsel.

Barristers and Solicitors - Topic 1545

Relationship with client - Duty to client - General - Obligation of loyalty - Three motorcyclists, including Mihali, were travelling at speeds over 240 kph - One struck Mallory's vehicle and was killed - Mallory was severely injured - Mallory sued the three motorcyclists, alleging negligence, and his insurer Security National in case any liable party was underinsured - Mihali's insurance policy with Royal & Sun Alliance (RSA) limited coverage to $200,000 if the driver was racing or in a "speed test" - RSA entered into an agreement with Mihali which allowed RSA to defend and settle the action while preserving its right to dispute coverage - RSA appointed defence counsel for Mihali - A settlement between Mallory, RSA and Security National fixed Mallory's damages at $444,850 and provided that Mihali and Security National could proceed to trial to determine whether Mihali was liable for Mallory's damages - If Mihali was found liable, RSA would be liable for at least $200,000 and potentially for the full amount - The trial judge found Mihali 25% liable - She dismissed the claim against Security National because Mihali was "insured at the time of the collision" - Mihali's counsel filed a notice of appeal - Six grounds addressed Mihali's liability - Two alleged that the trial judge had erred in addressing the issue of coverage - Security National moved to remove counsel for Mihali, alleging a conflict of interest - The Ontario Court of Appeal, per Strathy, C.J.O., granted the motion - Including the issue of his own insurance coverage as a ground of appeal was not in Mihali's interest - The court concluded that defence counsel was acting on the insurer's instruction to advance a ground of appeal contrary to Mihali's interests - Counsel was appointed and paid by the insurer, but they owed a duty of good faith and loyalty to Mihali - It would bring the administration of justice into disrepute to permit them to continue to act as Mihali's counsel - See paragraphs 28 to 33.

Barristers and Solicitors - Topic 1618

Relationship with client - Conflict of interest or duties - Remedies (incl. procedure for) - [See Barristers and Solicitors - Topic 1545 ].

Barristers and Solicitors - Topic 1619

Relationship with client - Conflict of interest or duties - Situations resulting in a conflict - [See Barristers and Solicitors - Topic 1545 ].

Insurance - Topic 725

Insurers - Duties - Duty to defend - [See Barristers and Solicitors - Topic 1545 ].

Practice - Topic 685

Parties - Adding or substituting parties - Intervenors - On appeal - [See Practice - Topic 686 ].

Practice - Topic 686

Parties - Adding or substituting parties - Intervenors - Where applicant may be adversely affected - Three motorcyclists, including Mihali, were travelling at speeds over 240 kph - One struck Mallory's vehicle and was killed - Mallory was severely injured - Mallory sued the three motorcyclists, alleging negligence, and his insurer Security National in case any liable party was underinsured - Mihali's insurance policy with Royal & Sun Alliance (RSA) limited coverage to $200,000 if the driver was racing or in a "speed test" - RSA entered into an agreement with Mihali which allowed RSA to defend and settle the action while preserving its right to dispute coverage - A settlement between Mallory, RSA and Security National fixed Mallory's damages at $444,850 and provided that Mihali and Security National could proceed to trial to determine whether Mihali was liable for Mallory's damages - If Mihali was found liable, RSA would be liable for at least $200,000 and potentially for the full amount - The trial judge found Mihali 25% liable - She dismissed the claim against Security National because Mihali was "insured at the time of the collision" - Mihali's counsel filed a notice of appeal - Grounds 7 and 8 of the appeal alleged that the trial judge had erred in addressing the issue of coverage - RSA moved for leave to intervene in the appeal on the basis that it might be adversely affected by the judgment - The Ontario Court of Appeal, per Strathy, C.J.O., denied the motion - First, RSA had not established how it would be adversely affected by a finding of fact in a proceeding to which it was not a party - It had not met the test for intervention - Second, even if the finding could adversely affect RSA's interests, RSA was partly to blame for the situation - RSA would have been well aware of the importance of ensuring that its coverage position was properly communicated, yet it took no steps to clarify or to add itself as a statutory third party or to pursue an invitation to arrange an appointment before the trial judge - See paragraphs 34 to 45.

Cases Noticed:

Maftoun v. Banitaba et al., [2012] O.A.C. Uned. 643; 2012 ONCA 786, refd to. [para. 29].

Ernst & Young Inc. v. Chartis Insurance Co. of Canada et al. (2014), 314 O.A.C. 262; 118 O.R.(3d) 740; 2014 ONCA 78, refd to. [para. 29].

Parlee v. Pembridge Insurance Co. (2005), 283 N.B.R.(2d) 75; 740 A.P.R. 75; 253 D.L.R.(4th) 182; 2005 NBCA 49, refd to. [para. 29].

MacDonald Estate v. Martin and Rossmere Holdings (1970) Ltd., [1990] 3 S.C.R. 1235; 121 N.R. 1; 70 Man.R.(2d) 241, refd to. [para. 32].

781332 Ontario Inc. v. Mortgage Insurance Co. of Canada (1991), 5 O.R.(3d) 248 (Gen. Div.), refd to. [para. 32].

Counsel:

David L. Silverstone and Jeffery T. Booth, for the moving party, Security National Insurance Company;

Nestor E. Kostyniuk and Daniel Fenwick, for the responding party, Istivan Mihali;

Mark M. O'Donnell, for the proposed intervener, Royal & Sun Alliance Insurance Company.

These motions were heard in Chambers on January 21, 2015, by Strathy, C.J.O., of the Ontario Court of Appeal, who released the following endorsement on February 2, 2015.