Creative Door Services Ltd v AXA Pacific Insurance Company, 2017 ABQB 599

Court of Queen’s Bench of Alberta Citation: Creative Door Services Ltd v AXA Pacific Insurance Company, 2017 ABQB 599 Date: 20171010 Docket: 1403 05289 Registry: Edmonton Between: Creative Door Services Ltd. Plaintiff - and - AXA Pacific Insurance Company and Intact Insurance Company Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice D.A. Sulyma _______________________________________________________ I Introduction [ 1 ] Intact Insurance Company applies for

summary judgment. Creative Door Services Ltd. applies for a declaration that Intact has a duty to indemnity and to defend Creative in Third Party proceedings in Court of Queen’s Bench action 1203 100509. II Background [ 2 ] Intact (formerly AXA Pacific Insurance Company) insured Creative through Commercial General Liability policy 2130521 (CGL Policy) at all relevant times. [ 3 ] Creative contracted with AltaSteel Ltd. on September 24, 2009 for the supply and installation of an overhead door.

[ 4 ] Creative supplied 572422 Alberta Ltd. as a subcontractor to install the overhead door. The sole director and shareholder of 572422 was Marsh Miller. Miller was employed by 572422 when he was injured. He did not have Workers’ Compensation Board (WCB) coverage. [ 5 ] Miller was electrocuted during the course of the overhead door installation on January 13, 2010 in premises owned and operated by AltaSteel Ltd.

He has advanced a claim against AltaSteel alleging, inter alia , negligence and occupier’s liability. [ 6 ] AltaSteel defended the Miller Claim on August 14, 2012 alleging, inter alia , contributory negligence against Miller. [ 7 ] AltaSteel issued a Third Party claim in the Miller Claim against Creative on February 12, 2013, seeking contribution and indemnity. AltaSteel alleged that Creative breached the contract with AltaSteel by subcontracting the installation of the overhead door to 572422 and by failing to ensure that the subcontractor had WCB coverage.

It alleged that Creative hired a subcontractor with no WCB coverage, failed to notify AltaSteel that it had hired 572422, and failed to apply to WCB for a deeming order under the Workers’ Compensation Act , RSA 2000, c W-15. III Policy [ 8 ] The initial coverage grant in the Policy provides: 1. The Insurer agrees to pay on behalf of the Insured all sums (including prejudgment interest) that the Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured or assumed by the Insured under contract (as defined herein), for compensatory damages because of: (

a) bodily injury (as defined herein) sustained by any person or persons; (

b) personal injury (as defined herein); and (

c) property damage (as defined herein) due to an accident or occurrence (as defined herein) during the Period of Coverage; subject to the limits of liability, exclusions, conditions and other terms contained herein. [ 9 ] “Contract” is defined in the Policy (CGL-1(1109)) as:

a) a warranty of fitness or quality of Creative Door’s products or a warranty that work performed by or on behalf of Creative Door will be done in a workmanlike manner;

b) any written contract or written agreement or any other oral or verbal contract or agreement that is in the process of being written provided that it is in writing within 90 days of its inception. [ 10 ] Under “Additional Agreements”, Intact agreed to defend Creative against any claims, suits, or other proceedings where covered under the Policy and to pay costs of litigation and pay and satisfy all judgements (CGL-1(1109)).

IV Pleadings [ 11 ] AltaSteel’s Statement of Defence to Miller’s claim essentially denies negligence and, in the alternative, pleads contributory negligence on the part of Miller. [ 12 ] The Third Party Claim against Creative alleges that as part of the contract between AltaSteel and Creative, any contractor or sub-contractor hired to perform services on AltaSteel property must provide verification of adequate insurance coverage prior to coming on-site and a letter of verification of coverage from the WCB indicating that the contractor or sub-contractor was in good standing with the WCB.

Creative Door had an account with WCB. Creative Door, without the knowledge or consent of AltaSteel, sub-contracted the services of 572422 to install the overhead door. Miller was injured and did not have WCB coverage. Creative Door breached the contract by hiring a sub-contractor with no WCB coverage in place, by not applying to WCB for a deeming order to declare Miller to be a worker for WCB purposes, or by failing to notify AltaSteel that it was hiring Miller so that AltaSteel could ensure that proper WCB coverage was in place or apply to WCB for a deeming order.

AltaSteel seeks indemnity or contribution with respect to any judgment Miller may obtain against AltaSteel. V Parties’ Positions A Intact [ 13 ] Intact submits that the onus is on Creative to establish that the loss or damage claimed falls within the initial coverage grant of the Policy. A duty to defend is broader than the duty to indemnify and the two concepts must not be conflated. However, if there is no duty to indemnify, then there can be no duty to defend. [ 14 ] Intact argues that Creative is not entitled to coverage and that its Statement of Claim should be dismissed.

Intact submits that any analysis of whether the Policy is invoked should refer to the actual allegations contained in the Third Party pleadings against Creative. Those allegations are solely contractual, not of bodily injury. In essence, AltaSteel alleges that Creative had a duty to make insurance arrangements for Miller. There is no nexus between Miller’s injuries and that contractual breach. AltaSteel did not plead the

Contributory Negligence Act , RSA 2000, c C-27 or the Tort-Feasors Act , RSA 2000, c T-5. [ 15 ] Intact submits that there is no possibility that the claim in this case falls within the liability coverage. The Policy must be read as a whole. The Third Party claim does not allege any liability against Creative for compensatory damages for “bodily injury” as set out in the Policy. The Policy only covers liability for breach of contract if liability has been assumed by the insured under contract. The Third Party claim is a claim for breach of contract between two business entities.

There is no allegation in any of the pleadings that Creative is liable for Miller’s bodily injury. There is no reference to a duty or liability imposed on Creative for personal injury, as defined in the Policy. Further, property damage is not invoked by the pleadings.

B Creative [ 16 ] Creative argues that Intact must defend even if there is only a mere possibility that the claim falls within coverage. [ 17 ] It submits that the Policy provides coverage if Creative becomes legally obligated to pay by reason of liability imposed by law on Creative or assumed by Creative under contract for compensatory damages because of bodily injury sustained by any person. [ 18 ] Creative argues that Miller has advanced a bodily injury claim and seeks compensatory damages because of those bodily injuries. AltaSteel seeks contribution and indemnity from Creative.

AltaSteel effectively seeks to have Creative assume AltaSteel’s tort liability as a result of AltaSteel negligently electrocuting a worker on its premises. [ 19 ] Creative submits that on the plain face of the Policy, the contract and the pleadings, Intact is required to defend and indemnify Creative. It does not matter whether the claim for bodily injury is advanced directly or indirectly against Creative, as long as the claim is advanced “because of” bodily injury.

Creative notes that its contract with AltaSteel did not expressly provide that Creative had to ensure sub-contractors had WCB coverage or arrange it. Therefore, the Third Party claim is not only in contract, but also in negligent misrepresentation, breach of common law duty, mistake (unilateral or otherwise), and failure to honour a warranty which survives the contractual obligations of the initial contract. It is a claim for contribution and indemnity on an underlying bodily injury claim.

Therefore, it is an indirect claim flowing from a bodily injury. [ 20 ] Creative submits that unlike many CGL policies which expressly exclude contractual liability, this Policy expressly provides coverage for tort liability as well as contractual liability. Intact must defend whether the claim sounds in tort or contract. The Certificate of Insurance specifically and plainly provides coverage for contractual liability, as does a plain reading of the Policy and its

definitions. [ 21 ] Creative argues that no exclusions apply. The exclusions elsewhere in the Policy serve to underscore the breadth of Creative’s coverage for this type of claim. Simple language could have been used if Intact sought to exclude certain claims. [ 22 ] Creative submits in the alternative that if there is ambiguity, its

interpretation is consistent with the reasonable commercial expectations of the parties that workplace accidents such as these have insurance coverage. Otherwise, seriously injured parties would be left without recourse and insured parties who have paid thousands in premiums for coverage would be left without coverage for serious claims because of bodily injury. [ 23 ] Finally, Creative argues that

summary judgment is premature as unknown relevant facts have yet to be determined as the Miller Claim proceeds along with the Third Party proceedings. VI Law and Analysis [ 24 ] The Supreme Court in Progressive Homes Ltd v Lombard General Insurance Co of Canada , 2010 SCC 33 at paras 19-20 , [2010] 2 SCR 245 explained that an insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured for the claim, regardless of whether the allegations in the pleadings can be proven in evidence.

What is required is the mere possibility that a claim falls within the insurance policy. Further, what is determinative is the true nature or the substance of the claim. [ 25 ] The Supreme Court set out the principles of

interpretation applicable to insurance policies in Progressive Homes Ltd v Lombard General Insurance Co of Canada , 2010 SCC 33 at paras 22-29 , [2010] 2 SCR 245 and Ledcor Construction Ltd v Northbridge Indemnity Insurance Co , 2016 SCC 37 at paras 49-52 , [2016] 2 SCR 23. Where the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole. Where the language is ambiguous, general rules of contract construction must be employed, including that: the

interpretation should be consistent with the reasonable expectations of the parties, as long as that

interpretation is supported by the language of the policy; it should not give rise to results that are unrealistic or that the parties would not have contemplated in the commercial atmosphere in which the insurance policy was contracted; and it should be consistent with the

interpretations of similar insurance policies. If ambiguity still remains after these principles are applied, the contra proferentem rule is employed to construe the policy against the insurer.

In that regard, coverage provisions in insurance policies are interpreted broadly, and exclusion clauses narrowly. [ 26 ] In Riocan Holdings Inc v Intact Insurance Co , 2017 ABCA 73 at para 32 , [2017] AJ No 188, the Court held that in looking at the statement of claim for the purposes of determining coverage, it was necessary to look not only to the particular passages that advance a claim against a specific party, but also to the balance of the pleading relating to the events said by the claimant to have resulted in the injury which is the subject of her lawsuit.

In that case, the Court found an unbroken causation link between the alleged delicts of the additional insured and the alleged personal injury to the claimant. [ 27 ] In Tarrabain v Wawanesa Mutual Insurance Co , 2009 ABQB 270 , [2009] AJ No 912, one party sought to transfer tort liability through contract. The Court held that although the third party claim was structured as enforcing a right in contract, the actual nature of the right provided by the agreement in question was a global right for indemnification of liability for a temporary substitute

vehicle. In substance, it was a tort action, and therefore the insurer under a motor vehicle policy had a duty to defend. In affirming that decision, the Court of Appeal ( 2010 ABCA 25 , 474 AR 154) agreed that the alleged facts from the Statement of Claim must necessarily be considered along with the facts alleged in the Third Party Notice to determine whether the insurer had a duty to defend. [ 28 ] Intact distinguishes Tarrabain on the basis that 572422 was a subcontractor, not an employee, of Creative.

There is no evidence or allegation that Creative Door had anything to do with work at the AltaSteel premises. Vicarious liability does not arise by way of statute, common law or contract in this case. Further, that case involved automobile insurance and involved an agreement containing an indemnity. [ 29 ] Intact relies on Rocky Mountain House (Town) v Alberta Municipal Insurance Exchange , 2007 ABQB 548 , 428 AR 169, and cases cited therein. Verville J. considered whether the phrases “liability imposed by law” or “obligated to pay” covered breach of contract.

He held that contractual liability was not covered by the policy in that case. [ 30 ] In Gill (Litigation guardian of) v Ivanhoe Cambridge I Inc (cob Metropolis at Metrotown) , 2016 BCSC 252 , [2016] BCJ No 297, the Court held that, based on the policy as a whole, there was some ambiguity in an exclusion as to whether it extended to indirect or third party claims made against an insured for bodily injury to another insured. [ 31 ] Black’s Law Dictionary , 1999 defines “contribution” in part as the right that gives one of several persons liable on a common debt the ability to recover from each other, or the right to demand that another who is jointly responsible for a third party’s injury to supply part of what is required to compensate the third party.

It defines “indemnity” in part as a duty to make good any loss, damage, or liability incurred by another and the right of an injured party to claim reimbursement from a person who has such a duty. [ 32 ] Rule 3.46(1)(

a) provides that on service of a third party claim, the third party defendant becomes a party to the action between the plaintiff and the defendant. [ 33 ] The Policy wording at issue in this case is unambiguous. The resolution of these applications turns on the

interpretation of the Third Party claim against Creative in the context of all of the pleadings and whether, by virtue of that claim, Creative may become obligated to pay by reason of the liability imposed by law upon it or assumed by it under contract for compensatory damages because of bodily injury or personal injury. [ 34 ] It is not clear at this point in time upon what basis Creative might be held liable on the Third Party claim. Creative states that there is no express provision in its contract requiring it to ensure or arrange WCB coverage in the circumstances.

Therefore, if it is found liable, it is possible that its liability may not be grounded in contract, or not solely in contract. Further, if it shares responsibility with AltaSteel for any compensatory damages, those damages will be because of bodily injury. [ 35 ] I conclude that there is at least a mere possibility that the claim falls within coverage. VII Conclusion [ 36 ] The application for

summary judgment is dismissed. [ 37 ] Intact has a duty to indemnity and to defend Creative in Third Party proceedings in Court of Queen’s Bench action 1203 00509. Heard on the 9 th day of May, 2017. Dated at the City of Edmonton, Alberta this 10 th day of October, 2017. D.A. Sulyma J.C.Q.B.A. Appearances: Kathleen A. Ryan, Q.C. DLA Piper (Canada) LLP for the Plaintiff

Kurtis Kruse for the Defendant