Midnight Marine Limited v. Miller Shipping Limited, 2019 NLSC 228

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Midnight Marine Limited v. Aviva Insurance Company of Canada , 2019 NLSC 228 Date : December 17, 2019 Docket : 200801T0764 Between: Midnight Marine Limited and Miller Shipping Limited Plaintiff And: Aviva Insurance Company of Canada Defendant And: Wedgewood Insurance Limited First Third Party And: John Penney Second Third Party Before: Justice Daniel M. Boone Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: June 26 to 28; October 7, 10 and 11, 2019

Summary: The Plaintiffs applied for

summary judgment and

summary trial of their action against the Defendant insurer for indemnity under a property loss endorsement to a CGL policy. The application for

summary judgment was dismissed as the Defendant had demonstrated a factual basis for a bona fide defence. The application for

summary trial was allowed. The Court determined that the

Defendant was not required to indemnify the Plaintiffs under terms incorporated by reference into the renewal policy as allowed undersubsection 5(3) of the Insurance Contracts Act, R.S.N.L. 1990, c. I-12. Appearances: John R. Sinnott, Q.C. Appearing on behalf of the Plaintiff Jorge P. Segovia Appearing on behalf of the Defendant Kevin F. Stamp, Q.C. Appearing on behalf of the First & Second Third Party Authorities Cited: CASES CONSIDERED: Hryniak v. Mauldin, 2014 SCC 7; Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld. S.C.(T.D.)); Young v.

Noble, 2016 NLCA 58,; Swain v. Vickers, 2019 NLSC17; Farrell Bros. Ltd. v. Pike, 2003 NLSCTD 60,; Central Disposal Services Ltd. v. Pardy’s Waste Management and Industrial ServicesLtd., 2017 NLTD(G) 77, aff’d 2019 NLCA 15; Green v. Harnum, 2006 NLCA 46; Patterson v. Gallant, (SCC), [1994]3 S.C.R. 1080; Barnet Properties Ltd. v. Commonwealth Insurance Co. (1996), (BC SC), 32 B.C.L.R. (3d) 39; SouthStormont (Township) v. Frank Cowan Co., 2008 CarswellOnt 3444, 37 C.E.L.R. (3d) 179 (Sup. Ct.) STATUTES CONSIDERED: Insurance Contracts Act, R.S.N.L. 1990, c.

I-12 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sched. D TEXTS CONSIDERED: Barbara Billingsley, General Principles of Canadian Insurance Law, 2nd ed. (Canada: LexisNexis, 2014) REASONS FOR JUDGMENT Boone, J.: INTRODUCTION [1] This dispute involves the

interpretation of an insurance contract. It comes before the Court on application by the Plaintiff forsummary judgment or, alternatively, for

summary trial. [2] The Plaintiffs are a shipping company and a related enterprise. The Plaintiffs conduct the operation by tugs and barges. Theprimary aspect of the Plaintiffs’ business is the transport of pulpwood from Eastern Canada to the island portion of Newfoundland andLabrador (Newfoundland), but the Plaintiffs also take on other shipping work. [3] The Plaintiffs were engaged to transport scrap metal from the Caribbean to Newfoundland, and dispatched a tug and the bargeLabhauler to carry out this contract. On the return voyage, in March 2007, the barge rolled in rough Caribbean seas.

A piece of heavyequipment owned by the Plaintiffs, known as a Material Handler, slipped overboard from the barge during this event and was lost. [4] The Plaintiffs were insured by Defendant Aviva Insurance Company of Canada (“Aviva”) and submitted a claim for the lostMaterial Handler. Aviva denied the claim. It relied on a condition that the insurance had territorial limits restricting coverage for theMaterial Handler to losses occurring within Canada and the continental U.S.A., and also on an exclusion of coverage while it waswaterborne. [5] There is no dispute about the

interpretation of the territorial limit or the waterborne exclusion. If those terms were part of theinsurance agreement then it did not cover the Material Handler while waterborne and in the Caribbean. The Plaintiffs assert, however,that the policy was not in accordance with the insuring agreement and that under the terms of that contract they were entitled to beindemnified against the loss of the Material Handler resulting from any peril in any location. The Plaintiffs argue in the alternative thateven if the policy was in accordance with the insuring agreement when first issued, the terms on which Aviva relies were not part of the

renewal policy in effect at the time of the loss. [ 6 ] The Plaintiffs say that Aviva was aware that the Material Handler was intended to be used on the barge and that the Plaintiffs wanted insurance to cover it while onboard. Even if Aviva was not directly aware of this then, the Plaintiffs’ position is that Aviva was impressed with this knowledge because First Third Party Wedgewood Insurance Limited (“Wedgewood”) was the agent for Aviva or because Aviva and Wedgewood were operating as partners.

For the same reasons, the Plaintiffs assert that Aviva ought to be liable for any fault of Wedgewood in failing to arrange a policy in accordance with the Plaintiffs’ intent. [ 7 ] Aviva admits that there was an insurance contract but pleads that the terms of the contract were as set forth in the policy. Aviva pleads as well that the Contractors’ Equipment Floater endorsement was incorporated by reference into the renewal policy. Aviva denies that Wedgewood was its partner or its agent in the business of providing insurance coverage.

In the alternative, Aviva pleads that if Wedgewood was its partner and agreed to an insurance contract in different terms than the policy provided, or failed to arrange the insurance coverage sought by the Plaintiffs, then Aviva is entitled to indemnity from Wedgewood. Aviva asserts this claim against Wedgewood in a Third Party action. Wedgewood denies the partnership alleged, and, otherwise, joins with Aviva in contesting the Plaintiffs’ claims. [ 8 ] The Plaintiffs applied both for

summary judgment under Rule 17 and for

summary trial under Rule 17A. At the hearing of its applications, the Plaintiffs did not seriously pursue the Rule 17 application, but they did not abandon it. I will therefore have to address this application. All the parties agreed that this matter could be determined by way of

summary trial. [ 9 ] I have decided that the Plaintiffs’ application for

summary judgment will be dismissed, and that their application for

summary trial will be allowed. However, I have also decided that even though this matter can be determined by

summary trial, the result of the

summary trial is that the Defendant has successfully demonstrated that the insurance contract did not cover the loss of the Material Handler and the Plaintiffs’ action is dismissed. BACKGROUND [ 10 ] The Plaintiffs are related companies. The principal of both is Patrick Miller. The Plaintiffs jointly operate a shipping enterprise. Neither the distinction between the operations of the two companies or the role each company exercised in the enterprise is relevant to any of the issues in this proceeding. The insuring agreement with Aviva insured both companies.

Therefore, there is no need in this decision to distinguish which company owned the Material Handler or the tugs and barges used in the shipping enterprise. [ 11 ] The Plaintiffs’ enterprise had been in operation for some time before the loss of the Material Handler. For much of this time, since at least 1996, the Plaintiffs arranged insurance coverage through Wedgewood. Mr. Miller handled most of these dealings on behalf of the Plaintiffs, dealing almost exclusively with Wedgewood employee John Penney. Mr.

Penney placed marine insurance on the Plaintiffs’ tugs and barges with various marine insurers and, initially, non-marine insurance with Atlantic Insurance (“Atlantic”). The non-marine insurance with Atlantic included a comprehensive general liability policy (CGL) with limits of $2 million, and coverage for certain equipment under a Contractors’ Equipment endorsement. [ 12 ] The Plaintiffs had a long-standing contract with Abitibi Ltd. to transport wood pulp to Newfoundland from Eastern Canada. In June, 2005, Abitibi and the Plaintiffs negotiated a new contract.

Abitibi imposed a requirement that the Plaintiffs be covered by a CGL policy with Abitibi as a named insured and limits of $10 million. The Plaintiffs’ Atlantic CGL policy provided limits of only $2 million. Mr. Penney approached Atlantic for an increase in limits but Atlantic declined this increase in risk. Therefore, Mr. Penney approached three other insurers, including Aviva, to seek pricing and terms for a CGL policy with $10 million limits. [ 13 ] Coincidentally, in June, 2005, the Plaintiffs acquired the Material Handler.

The purchase price of $565,000 was financed by an equipment lease in the amount of $515,375. A condition of the lease was that the Plaintiffs insure the Material Handler, with the finance company as named insured. [ 14 ] The Plaintiffs bought the Material Handler in order to put it on the barge Labhauler to use in loading and offloading cargo. Before this time, the Plaintiffs owned other equipment used on its barges. Atlantic Insurance insured this other equipment under the coverage arranged by Mr. Penney of Wedgewood. The framework of the Atlantic policy was similar to the later Aviva policy.

Both policies were CGL policies with first-party property insurance provided through endorsements. The equipment used on the barges was insured under a Contractors’ Equipment endorsement to each policy. [ 15 ] Wedgewood had already approached insurers, including Aviva, for CGL coverage before the question of coverage for the Material Handler was raised by Wedgewood. [ 16 ] Aviva responded with an offer of insurance. Aviva and Wedgewood engaged in negotiation of the pricing for the insurance.

Aviva issued the insurance policy on July 18, 2005. [ 17 ] The Material Handler and other equipment was insured through an endorsement in Aviva standard form called a Contractors’ Equipment Floater. The endorsement insured the Material Handler to a monetary limit of $515,000.

The endorsement excluded coverage for property while waterborne and also included a Special Condition limiting coverage to property located within the territorial limits of Canada and the continental U.S.A. [ 18 ] Aviva renewed the policy a year later to cover the period from July 2006 to July 2007. [ 19 ] The Material Handler was lost over the side of the barge Labhauler on March 18, 2007. [ 20 ] Mr. Miller immediately reported the loss of the Material Handler to Wedgewood. He says that Mr. Penney was equivocal regarding coverage, and Mr.

Miller therefore read the Aviva renewal policy himself (for the first time) and confirmed that the Material Handler was listed in the policy. Although he said in his Affidavit that the renewal policy did not have the Contractors’ Equipment Floater attached and he was therefore surprised when coverage was denied by Aviva, on cross-examination, he admitted that at the time

he only checked the equipment schedule. ISSUES [ 21 ] Broadly speaking, the only question in this action is whether Aviva is required pursuant to the terms of the insurance contract to indemnify the Plaintiffs against the loss of the Material Handler. There are, of course, a number of more narrow issues that must be resolved in order to answer the essential question. And, also, I must decide whether this application presents an appropriate means to resolve the primary issue. [ 22 ] The issues for determination are as follows: 1. Are the Plaintiffs entitled to

summary judgment under Rule 17? 2. Is this case one appropriate for

summary trial under Rule 17A? 3. Is there a genuine issue for trial? 4. Is it nevertheless possible and appropriate to decide the issues on the application based on the existing record? 5. Were Wedgewood and Aviva partners in providing insurance coverage to the Plaintiffs? 6. Was Wedgewood acting as the agent for the Plaintiffs or Aviva when it arranged the insurance contract? 7. What were the terms of the insuring agreement? 8. Was the insurance policy in accordance with the insuring agreement? 9. Did the renewal policy include the exclusions and limitations on coverage upon which Aviva relies? ANALYSIS

Summary Judgment Are the Plaintiffs entitled to

summary judgment under Rule 17? [ 23 ] The conditions for

summary judgment are stated in the terms of Rule 17: 17.01 Application for entry of a

summary judgment 17.01(1) Where the defendant has filed a defence or appeared on a hearing under an originating document, the plaintiff may, on the ground that the defendant has no defence to a claim in the originating document or a part thereof or has no defence to such a claim or part except to the amount of any damages claimed, apply to the Court to enter judgment against the defendant. [ 24 ] In response to an application for

summary judgment, the Defendant has an onus to establish that its pleadings show a bona fide defence and there is a requirement for a trial to resolve conflicting evidence or legal issues. The Defendant cannot rely solely on its pleadings but must respond by showing an evidentiary basis for issues of fact or law that could establish a defence to the claim. [ 25 ] The Plaintiffs rightly conceded at the hearing that their application had little chance of success, but they declined to abandon it. They should have.

I have no hesitation in finding that the Amended Defence and the affidavit evidence clearly raise a viable defence. The Defendant relies on policy terms that excluded coverage for the loss of the Material Handler while waterborne in the Caribbean. The Plaintiffs admit the effect of these terms although they say that a defence based on the terms of the policy cannot succeed because, first, the policy is not in accordance with the insuring agreement, and second, that the exclusion and condition relied on by the Defendant were not part of the renewal policy.

These issues cannot be determined without resolution of conflicting evidence or of legal issues following factual findings. [ 26 ] The application for

summary judgment is dismissed.

Summary Trial

Summary Trial Rules and Case Law [ 27 ] The Plaintiffs’ Application is pursuant to Rule 17A of the Rules of the Supreme Court, 1986 , S.N.L. 1986, c. 42, Sched. D , the pertinent parts of which read as follows: 17A.01

Summary Trial 17A.01(1) A plaintiff or defendant may, after defence has been filed and at any time prior to the proceeding being placed on a trial list, apply to the Court with supporting affidavit material or other evidence for

summary trial seeking judgment on or dismissal of all or part of the claim in the statement of claim, as the case may be 17A.03 Disposition of Application 17A.03(1) Where the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant

summary judgment accordingly.

17A.03(2) Where the Court decides that there is a genuine issue with respect to a claim or defence, a judge may nevertheless grantjudgment in favour of any party, either upon an issue or generally, unless (

a) the judge is unable on the whole of the evidence before the Court on the application to find the facts necessary to decide thequestions of fact or law; or (

b) it would be unjust to decide the issues on the application. 17A.03(3) Where the Court is satisfied that the only genuine issue is the amount to which a party is entitled, the Court may order a trialof that issue or grant judgment with a reference to determine the amount. 17A.03(4) Where the Court is satisfied that the only genuine issue is a question of law, the Court may determine the question and grantjudgment accordingly. 17A.03(5) Where a party claims an accounting and the responding party fails to satisfy the Court that there is a preliminary issue to betried, the Court may grant judgment on the claim with a reference to take accounts. [28] In Hryniak v.

Mauldin, 2014 SCC 7, the Supreme Court of Canada described

summary trial rules as important tools to ensuretimely, proportional, and cost-effective access to justice. The Supreme Court directed broad

interpretation of such rules in order toachieve those policy goals. [29] In this jurisdiction, the proper approach to applying Rule 17A was the subject of detailed consideration by Justice Green, as hethen was, in Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405 A.P.R.317 (Nfld. S.C.(T.D.)). Justice Green considered the policy basis for the Rule, and the application of similar rules in other Canadianjurisdictions. He then, at paragraph 76 of the decision, set out seventeen principles as a guide to the applying the Rule.

This Court hasendorsed and applied the Marco principles on numerous occasions, and the Court of Appeal has approved the framework set out in thatcase as the appropriate approach to the proper application of Rule 17A. [30] In essence, the principles guiding a decision on the appropriateness of

summary trial are directed at determining whether thesummary trial will allow for sufficient fact finding to decide, in a just manner, the legal issues raised by the pleadings. Application of

Summary Trial Principles to This Case The threshold question: Is this case one appropriate for

summary trial? [31] In Young v. Noble, 2016 NLCA 58, at paragraph 27, Chief Justice Green said the threshold question on an application forsummary trial is “whether the applicant has provided some evidentiary basis for the assertions made and whether the nature of the caseis such that it is potentially capable of being dealt with in the attenuated manner contemplated by a

summary trial.” [32] This case involves the

interpretation of an insurance contract. It is potentially capable of determination on

summary trial. Theprinciples governing

interpretation of such agreements, including interpretative aids and presumptions, and the use to which extraneousevidence can be put, are well known. [33] The Plaintiffs have provided the insurance policy and related documents, including emails among the Plaintiffs, Aviva, andWedgewood. The Plaintiffs’ affidavit evidence addresses the surrounding circumstances. [34] The Defendant and Third Party agree that the threshold issue should be resolved in favour of proceeding with

summary trial. [35] I find that the preliminary threshold has been crossed. Has the Respondent raised a genuine issue for trial? [36] Once the threshold question is resolved in favour of proceeding, the onus is on any party opposing

summary trial to satisfy theCourt that there is a genuine issue for trial. [37] In this case, the primary issue is the

interpretation of the insurance contract. Secondary issues include whether Wedgewoodwas acting as agent of the Plaintiffs or of Aviva in arranging insurance coverage, and whether Aviva and Wedgewood were operating aspartners for the purpose of issuing insurance policies. The Plaintiffs have put forward their

interpretation of the insurance contract andthe documentary evidence supporting their allegation that Wedgewood was acting as agent for Aviva and that Aviva and Wedgewoodwere partners. In response, Aviva and Wedgewood have set out contrary positions in respect of each of these issues, and have filedaffidavits and documentary evidence in support of those positions. [38] I find that the contrary positions put forward by Aviva and Wedgewood, supported by affidavit and documentary evidence, raise

genuine issues for trial. Is it nevertheless possible and appropriate to decide the issues on the application based on the existing record? [ 39 ] Once the potential obstacle to

summary trial presented by a genuine issue is identified, the next requisite step is to determine whether the obstacle can be overcome by reliance on the record presented on the application. [ 40 ] In order to determine this issue, I must decide whether I have sufficient comfort level with the factual record (including affidavits, documentary exhibits, and evidence given viva voce on cross-examination) to allow me to make the findings of fact and draw the necessary, commonsense inferences, to properly adjudicate this dispute. In making that determination, I must bear in mind that I may, on

summary trial, resolve conflicting evidence if the proven facts, and commonsense inferences from proven facts, allow. [ 41 ] The evidence presented on this Application included all documents and emails related to the issues mentioned by any of the witnesses. The parties provided affidavits and discovery transcripts from those principally involved in the matter, and several were cross-examined. [ 42 ] Mr. Penney was the only Wedgewood employee who spoke with the Plaintiffs concerning insurance coverage on the Material Handler, and he also communicated with Aviva regarding the coverage sought by the Plaintiffs. He was, in the sense of the term used by Justice Green in principle 14(

c) in Marco , a “principal player” in these events. The evidence presented by Aviva included excerpts from evidence given by Mr. Penney on discovery. However, no party filed affidavit evidence from Mr. Penney. The Plaintiffs argued that I ought to draw adverse inferences from the failure of Aviva and Wedgewood to provide affidavit evidence from him, and I will deal with that argument later in these reasons. However, in considering whether I have sufficient comfort to resolve this matter on

summary trial, I must decide whether the lack of affidavit evidence from Mr. Penney disturbs my comfort to such a degree that I should decline to proceed summarily. [ 43 ] I find that it does not, for the following reasons. Mr. Penney was involved in communicating with Aviva regarding insurance coverage. However, he was not the only one from Wedgewood who did so. In fact, most of the communication by Wedgewood with Aviva was by Gail Parsons, who also did not provide an affidavit. The evidence presented on this Application included all communications (mainly emails) between Aviva and Wedgewood regarding coverage.

Aviva employee Joanne MacDonald gave affidavit evidence of an important telephone conversation with Mr. Penney, and Aviva introduced her notes of that telephone conversation into evidence. Similarly, Mr. Miller gave evidence of his conversations with Mr. Penney. Mr. Penney testified on discovery where he was examined by counsel for the Plaintiffs and for the Defendant. In respect to the main matters in issue, Mr.

Penney testified on discovery that he did not recall, or else gave evidence that was consistent with the documents in evidence. [ 44 ] Finally, and most importantly, I find for reasons that I will explain, that Wedgewood acted as agent for the Plaintiffs, and not for Aviva, in arranging coverage, and that Aviva and Wedgewood were not partners for the purpose of placing insurance coverage for clients of Wedgewood. The Plaintiffs did not sue Wedgewood. As noted, the evidence included all of the relevant communication between Aviva and Wedgewood. Even if the Plaintiffs’ evidence showed that Mr.

Miller communicated different insurance needs to Wedgewood than were communicated in turn to Aviva, then this does not affect my comfort in proceeding to resolve the claim by the Plaintiffs against Aviva. If the Plaintiffs had brought action against Wedgewood for fault in arranging coverage, then the lack of evidence from Mr. Penney would have caused me concern, although I then may have been able to still proceed on the basis of Mr. Miller’s evidence and the failure by responding parties to have put their “best feet forward.” [ 45 ] Further, there is no suggestion that Mr.

Penney would have had relevant evidence to offer on the issue of whether Aviva and Wedgewood were operating as partners, or whether Wedgewood was acting as agent for the Plaintiffs or Aviva in placing insurance coverage for the Plaintiffs. [ 46 ] The parties all agreed that this action can be disposed of on this application, although I note the parties’ agreement on this issue is not determinative (see, e,g,, Swain v. Vickers , 2019 NLSC 17 ). [ 47 ] For the reasons outlined, I find it is both possible and appropriate on

summary trial to decide the issues presented by the Plaintiffs. Were Wedgewood and Aviva partners in providing insurance coverage to the Plaintiffs ? [ 48 ] The Plaintiffs say that Aviva and Wedgewood held themselves out to the Plaintiffs as partners. The 2006-07 renewal policy was sent (twice) under cover of a renewal notice that said: “ Wedgewood Insurance Limited in partnership with Aviva Insurance Company of Canada is pleased to enclose the renewal of your Commercial policy.” [emphasis added] [ 49 ] Further, the Plaintiffs say that Aviva and Wedgewood were actually operating as a partnership.

The Plaintiffs rely in this regard on the terms of a Broker/Agent Agreement, dated, April 2005, between Aviva and Wedgewood. In particular, the Plaintiffs point to provisions in the agreement that allowed Wedgewood to bind Aviva to coverage in certain limited classes of business, and to a

schedule entitled Property and Casualty Contingent Profit Commission

Schedule that provided for a form of profit sharing in respect of premiums on Aviva policies net of claims and adjustment costs. [ 50 ] Aviva denies that it and Wedgewood held themselves out as operating in legal partnership. Aviva says that no reasonable person would understand from the highlighted words in the renewal notice that Aviva and Wedgewood were operating as a legal partnership.

Moreover, Aviva argues the only consequence of a holding out of a partnership is that it can underpin a finding of partnership by estoppel, and such a finding must also be grounded in a showing of detrimental reliance that is not established here. [ 51 ] Aviva and Wedgewood deny that they were in a legal partnership because the indicia required before a partnership will be found are not established on the evidence. [ 52 ] The authorities do establish that an alleged holding out of partnership would only have legal consequence in this case if the act

of holding out was relied on by the Plaintiffs to their detriment. If the Plaintiffs had demonstrated detriment, then Aviva and Wedgewood would be estopped from proving that they were not actually operating in a partnership. [ 53 ] The parties did not plead the Partnership Act , R.S.N.L. 1990, c. P-3 , subsection 15(1), but it provides: 15.

Persons liable by 'holding out' 15(1) A person who by words spoken or written, or by conduct represents or who knowingly permits himself or herself to be represented, as a partner in a particular firm is liable as a partner to anyone who has on the faith of the representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or permitting it to be made. [ 54 ] In Farrell Bros. Ltd. v.

Pike, 2003 NLSCTD 60 , Handrigan, J., after review of relevant case law, found that this provision of the Partnership Act is a codification of common-law principles. I adopt the following statement of the law by Handrigan, J, at paragraph 59: Partnerships that have never existed in fact, or which existed formerly and have ceased operating as partnerships, may be deemed to exist or to continue to exist if the putative partners say or do anything that may cause third parties to believe they are operating as a partnership.

These partnerships will only arise or continue to exist if the third parties dealing with the partnership relied on the representation, acted to their detriment, and did not know the true state of affairs. The onus lies on the third parties to adduce evidence showing a representation, reliance and loss. [ 55 ] The Plaintiffs neither pleaded, argued, nor demonstrated that they relied in any way on the statement that Aviva and Wedgewood acted in partnership to deliver the renewal notice in 2006. In fact, there is no evidence that Mr.

Miller even read this statement until after the loss of the Material Handler. [ 56 ] The Plaintiffs can therefore only succeed in their claim that Aviva and Wedgewood are liable as partners by demonstrating that they were actually partners in the business of insurance underwriting (in which case knowledge of Wedgewood regarding the Plaintiffs’ business would be attributed to Aviva) or of insurance brokerage (in which case Aviva would be liable for any fault by Wedgewood in arranging for the insurance coverage). [ 57 ] The terms of the Broker/Agent Agreement do not purport to create a partnership.

The Agreement sets out the terms under which Wedgewood can solicit business on behalf of Aviva and bind the company and the requirements for collecting and remitting premiums. It also describes the method by which the compensation for Wedgewood is to be calculated. The Plaintiffs focus on this latter aspect of the Agreement to argue that Aviva and Wedgewood were actually operating as a partnership in a material way. The compensation terms include (once total premiums for Aviva policies sold by Wedgewood reach a defined amount) a Contingent Profit Commission Schedule.

Once sales reached this level, then Wedgewood was entitled to a further payment in addition to its standard commission. The amount of this payment was calculated by reference to total premiums on one side of the ledger, and claim(

s) payouts and adjustment expenses on the other. The inclusion of this

schedule was obviously designed as an incentive for Wedgewood both to sell more Aviva policies and to do so to customers at lesser risk for claims. [ 58 ] Profit sharing can be an indicia of partnership. However, an agreement to share profits does not by itself create a partnership. The agreement must be considered in the context of the whole business arrangement, and, if relevant, the practice in an established industry. In Central Disposal Services Ltd. v.

Pardy’s Waste Management and Industrial Services Ltd. , 2017 NLTD(G) 77, in a decision affirmed by the Court of Appeal, 2019 NLCA 15 , Faour, J. reviewed the case law that defined the other indicia of partnership as including ownership of joint property, joint participation in management of the business, joint bank accounts, and a firm name. That list is not exhaustive. The essential question is whether it has been demonstrated that the parties intended to operate a business together with a view to sharing profits and losses.

Although there are recognized indicia of partnership, the facts of each case must be carefully scrutinized in order to discern the actual intention of the alleged partners: Green v. Harnum , 2006 NLCA 46 . [ 59 ] Aviva vice president Gordon Murray provided evidence in this matter by an affidavit and he was cross-examined by the Plaintiffs. Mr. Murray’s evidence demonstrated the Contingent Profit Commission

schedule was not a true agreement for profit sharing but, rather, an incentive compensation scheme to reward Wedgewood for selling Aviva policies to low-risk customers. It did not entitle Wedgewood to share in the general profits of Aviva, or require Wedgewood to share in any of Aviva losses. It did not entitle Aviva to profit from any other business of Wedgewood. The business of each company remained separate, and there was no common management of the pursuit of overlapping interests. There was no agreement to assume obligations of the other, and there were hold harmless agreements to the contrary.

Wedgewood did not agree to become responsible for indemnity under policies Aviva wrote for Wedgewood customers. Wedgewood and Aviva may have agreed to a form of profit sharing, but they did not agree to operate a business together. [ 60 ] I am satisfied that the Plaintiffs have not demonstrated that Aviva and Wedgewood were operating as partners in either the brokerage or underwriting business. Was Wedgewood acting as the agent for the Plaintiffs or Aviva when it arranged the insurance contract? [ 61 ] An insurance broker is an intermediary between insurer and insured.

In the course of a single transaction, the broker may be an agent of the insured or the insurer or even both. The analysis required to determine which relationship prevails is a functional one and involves resolution of questions of fact. [ 62 ] In this case, the function under consideration is that of negotiating and concluding the contract of insurance. The evidence on

summary trial establishes the following facts that are relevant to the issue under consideration. [ 63 ] First, the Broker/Agent Agreement between Aviva and Wedgewood authorized Wedgewood only to bind Aviva to cover in certain classes of business not relevant here and otherwise only to solicit applications for coverage with Aviva retaining the authority to make underwriting decisions.

[ 64 ] Second, the Broker/Agent Agreement did not create an exclusive arrangement between Aviva and Wedgewood. Rather, the Agreement contemplated that Wedgewood would continue to place insurance with other carriers in the course of its brokerage business. [ 65 ] Third, the Plaintiffs had an established relationship with Wedgewood. Mr. Miller attested in his Affidavit and testified on discovery that he relied on Wedgewood as broker to arrange the coverage required for his business. He felt that Mr.

Penney knew the Plaintiffs’ business and the manner in which operations were conducted, including knowing that the Material Handler was used on the barge. [ 66 ] Fourth, the Plaintiffs were aware that Wedgewood placed business with numerous insurers. Mr. Miller knew that in this case, as he put it at discovery, that Wedgewood “went to market” to place the insurance required. In his Affidavit, Mr. Miller said that he knew that Wedgewood approached several insurers to arrange the increase in CGL coverage and coverage for the equipment including the Material Handler.

This was the first time that Wedgewood had placed insurance for the Plaintiffs with Aviva. [ 67 ] Fifth, Mr. Miller testified that he did not generally read the numerous insurance policies arranged for the Plaintiffs by Wedgewood.

He relied on the broker to obtain the coverage required, and he relied on the broker to read the policies. [ 68 ] Sixth, in the negotiations between Wedgewood and Aviva, Wedgewood worked on behalf of the Plaintiffs to obtain a lower rate for the premiums charged for insuring the equipment, including the Material Handler. [ 69 ] Seventh, during the negotiations for insurance coverage, Wedgewood represented the interests of the Plaintiffs; Aviva acted on its own behalf. Aviva looked to Wedgewood to provide information concerning the business operations of the Plaintiffs, but not to represent it in negotiations.

Aviva issued the policy following the conclusion of negotiations with Wedgewood over premiums. Neither of the three parties expected that conclusion of the contract was contingent on the Plaintiffs’ direct agreement to the terms. [ 70 ] I find as a fact that Wedgewood acted as agent of the Plaintiffs and not as agent for Aviva in arranging the insurance coverage on the Material Handler.

What were the terms of the insuring agreement? [ 71 ] My conclusion that Wedgewood was the agent for the Plaintiffs for the purpose of arranging insurance coverage on the Material Handler is a significant factor in resolution of this issue. [ 72 ] The Plaintiffs say the insurance contract with Aviva provided indemnity against the loss of the Material Handler due to all risks.

They argue that the policy terms and conditions on which Aviva relies to deny coverage are not effective because they limit coverage in a manner which is contrary to the insurance contract. [ 73 ] Aviva and Wedgewood take the position that the insurance policy in this case was the written representation of the insuring agreement and that the evidence does not demonstrate that the insuring agreement provided for broader coverage than set out in the policy. [ 74 ] The Plaintiffs’ primary argument is that the terms of the insurance contract were as set out in an email from Aviva to Wedgewood on July 15, 2005, that said: “Contractor’s equipment-rate 2.00 per $100 subject to a $2500 deductible. **All risk coverage, 90% co insurance, basis of valuation actual cash value.” [ 75 ] This email was styled as an offer of coverage.

The Plaintiffs say that, although negotiations for the rate and deductible continued after this email, all these further negotiations were predicated on the provision of insurance of the Material Handler against all risks, without exclusion or limitation beyond monetary limits of actual cash value. [ 76 ] I accept the Plaintiffs’ position that an insurance policy is not necessarily an insurance contract. An insurance policy can set out some, or even all, of the terms of a contract, and the issuance of a policy is evidence of the existence of a contract.

But, if there is a difference between the terms of an insurance contract and the provisions of the issued policy, then the insuring agreement prevails. [ 77 ] Although I accept the validity of this general proposition, the Plaintiffs have not demonstrated that in this case the terms of the insurance policy providing for, and limiting, the coverage of the Material Handler differed from the insuring agreement. [ 78 ] In order for the Plaintiffs’ argument to succeed, they must accept that Wedgewood was their agent authorized to negotiate insurance coverage for the Material Handler.

The email that the Plaintiffs say constituted an all-risks insurance contract without limitation was sent from Aviva to Wedgewood. It was never sent to the Plaintiffs. Its contents were not communicated to the Plaintiffs. It could only have had contractual effect, therefore, if it was sent and received by Wedgewood as agent for the Plaintiffs. [ 79 ] Aviva and Wedgewood were speaking to each other in this email in industry shorthand on the basis that each understood the other.

Moreover, the necessary background to that understanding is the knowledge that each also understood the following significant aspects of the insurance business in the Defendant’s Memorandum at paragraph 48: By definition, an insurance company is in the business of regularly selling and providing insurance coverage. As part of its business considerations and in advance of meeting with any particular client, an insurance company decides the terms and conditions under which it is willing to provide insurance coverage for certain common types of risk.

This means that, in most situations, an insurance company does not negotiate the detailed terms of insurance coverage with individual customers. Instead, before entering into any insurance agreements, an insurer typically drafts a series of pre-fabricated contracts outlining the terms upon which particular kinds of coverage will be provided. These contracts are known as “standard form policies.” The insurer then provides the appropriate standard from

policy to clients purchasing insurance coverage. Barbara Billingsley, General Principles of Canadian Insurance Law , 2nd ed. (Canada: LexisNexis, 2014) [ 80 ] In this case, the evidence clearly established that Aviva and Wedgewood negotiated the terms of the policy as including terms that limited and excluded coverage, and particularly, the very terms at issue here.

The dealings between Aviva and Wedgewood in respect of this insurance contract started with a request from Wedgewood, on a standard form entitled “Commercial Insurance Submission, Request for Quotation.” That Submission included a request for coverage including “Contractors’ Equipment (Broad Form) coverage for equipment. The Contractors’ Equipment Floater endorsement in this case, both in its terms and according to the evidence of Aviva representative, Joanne MacDonald, was the broad form that Aviva used for an endorsement to provide first-party coverage for equipment.

This form of endorsement was used throughout the negotiations (most often referred to as the “CEF”) between Aviva and Wedgewood that occurred before and after the email of July 15, 2005, that the Plaintiffs argued constituted the terms (other than price) of the insuring agreement. [ 81 ] In addressing this aspect of the case, the Plaintiffs also say that regardless of the original submission, Aviva became aware the Plaintiffs actually wanted coverage on the Material Handler while it was on land and while it was waterborne on a barge. In order to demonstrate this, the Plaintiffs relied on

interpretation of emails and notes of discussions among Aviva employees, and between Aviva employees and Wedgewood employees. The Aviva witness, Joanne MacDonald, did not accept the Plaintiffs’

interpretation. She maintained that the notes she made reflected her understanding that coverage pursuant to the endorsement was only required to cover losses that occurred while the equipment was on land. [ 82 ] The Plaintiffs did not demonstrate that the emails and phone conversation altered the perception by Aviva of the insurance Wedgewood sought on behalf of Plaintiffs.

The notes and emails unambiguously indicated that Aviva adjusted its pricing of coverage to account for extra equipment added to the policy, for the pricing on equipment coverage previously offered by Atlantic, and its (erroneous) understanding that the equipment was covered under the barge marine policy while on the barge. There is nothing in this documentation that showed on a balance of probabilities that Aviva or Wedgewood were discussing placing coverage for the Material Handler while it was on the barge at sea.

This documentation demonstrated, to the contrary, that Aviva set its pricing on the basis that first-party coverage was only needed when the Material Handler and other equipment was stored off the barge during the shipping offseason. In particular, a handwritten note by Joanne MacDonald on July 18, 2005 noted: John Penny called & left a message-Material Handler is an excavator with a claw used to load & offload John questions rate of 2.00- we will only be covering while the equip. Is on land & during the offseason when in storage.

During the summer it is on the barge & covered under the marine policy. [ 83 ] The Plaintiffs argue at this point that Mr. Penney was aware the Material Handler would be used on the barge while waterborne, that he was also aware the marine policy would not cover first-party loss to the equipment, and that the Plaintiffs wanted coverage for the barge at all times. The parties introduced excerpts from the discovery evidence of Mr. Penney. I find his evidence to be ambiguous and not entirely addressing the material points.

It does seem that he was aware the Material Handler would not be covered while waterborne, and he testified that he later tried to obtain quotes from other insurers for coverage for the Material Handler while waterborne. However, he also says the Plaintiffs were aware the Aviva policy did not cover the Material Handler while it was waterborne. [ 84 ] Moreover, the Plaintiffs suggest that at any point on which Mr. Penney’s evidence was unclear or unambiguous, I ought to resolve that issue by drawing an adverse inference from the failure of Aviva and Wedgewood to present an affidavit from him.

I do not need to consider that submission because of my finding that Wedgewood acted in the coverage negotiations as agent for the Plaintiffs and not for Aviva. Mr. Penney’s knowledge is not relevant to determining the knowledge of Aviva. His knowledge may have been relevant in an action against Wedgewood for failure to arrange adequate or requested insurance coverage.

However, it would only have been relevant in this proceeding if he had communicated that knowledge to Aviva. [ 85 ] I therefore find that the insuring agreement included the provision for coverage of the Material Handler under the Contractor’s Equipment Floater endorsement insurance policy issued by Aviva, including the waterborne exclusion and territorial limit on coverage.

The original policy, covering the period July 2005 to July 2006 was in accordance with the insuring agreement. [ 86 ] Even if I had accepted the argument of the Plaintiffs as vitiating the waterborne exclusion, this does not address the territorial limit on coverage pursuant to the endorsement. The evidence from the negotiations demonstrates that neither Aviva nor Wedgewood contemplated that the Material Handler would be onboard a barge on a voyage outside the territory covered by the endorsement.

Even if it had been covered while waterborne, the Material Handler still would not have been covered in the Caribbean. Was the insurance policy in accordance with the insuring agreement? [ 87 ] Given my conclusion on the previous issue, the answer to this question is obviously yes. The insuring agreement, insofar as it covered the Material Handler, provided for coverage under the Contractors’ Equipment Floater endorsement, with the standard terms included in that endorsement.

Did the renewal policy include the exclusions and limitations on coverage upon which Aviva relies? [ 88 ] My conclusions on the preceding issue leads to the determination that if the Material Handler had been lost overboard in the initial policy period, then it would not have been covered as the loss occurred outside the territorial limit of coverage, and excluded from coverage as it occurred while the Material Handler was waterborne.

[89] However, the loss occurred during the period of the renewal policy. [90] The Plaintiffs argue the provisions that limited and excluded coverage were not included in the renewal policy. [91] Aviva says the Contractors’ Equipment Floater endorsement, including the terms excluding and limiting coverage, was attachedto the initial policy and incorporated by reference in the renewal policy. Otherwise, says Aviva, there would be no coverage at all as theonly coverage provided was that set out in the endorsement. [92] This issue has a statutory context. The Insurance Contracts Act, R.S.N.L. 1990, c. I-12,

section 5, provides, in part, as follows: 5.

(1) All the terms and conditions of a contract shall be set out in full in the policy or by writing securely attached to it when it is issuedand unless so set out no term of the contract or condition, stipulation, warranty or proviso modifying or impairing its effect is valid oradmissible in evidence to the prejudice of the insured or a beneficiary. …

(3) Where a contract, whether or not it provides for its renewal, is renewed by a renewal receipt, it is a sufficient compliance withsubsection (1) where the terms and conditions of the contract were set out in accordance with that subsection and the renewal receiptrefers to the contract by its number or date. [93] The Plaintiffs say Aviva did not renew the policy by renewal receipt within the meaning of subsection 5(3).

Therefore,incorporation by reference of the endorsement to the prior year policy was not sufficient to make that endorsement part of the renewalpolicy. [94] Aviva sent the renewal policy to Wedgewood for delivery to the Plaintiffs on June 21, 2006, and later sent the renewal directlyto the Plaintiffs. On both occasions, the renewal was by Renewal Notice, to which were attached Policy Declarations.

First-partycoverage for the equipment, including the Material Handler, was listed on the Declarations page under the heading “Liability Forms andEndorsements Applicable to this Policy,” as Form number 072219-05 Contractors’ Equipment Broad Form. The list of insuredequipment, including the Material Handler, was attached in a

schedule described as “Attached to and forming part of Form 072219-05-Contractors’ Equipment Floater (Scheduled- Broad Form).” The Declarations page also contained the following language: “The onlyinsurance afforded by this Policy is that which is provided by the forms indicated below.

Reference should be made to the applicableforms for details.” [95] Aviva therefore intended to provide first-party property coverage for the equipment during the renewal period under the sameendorsement that had covered the equipment in the initial policy. [96] Aviva sent the Renewal Notice under cover of a form letter advising of a number of changes to the policy. The letter alertedinsured persons to changes to commercial property coverage under an endorsement that did not apply to the coverage here, and alsonoted that Aviva would no longer insure damage caused by fire resulting from a terrorist acts.

Aviva also provided notice of changes tothe CGL coverage. The new CGL policy was attached to the renewal notice. The changes set out in the Renewal Notice did not affectthe coverage provided under the Contractors’ Equipment Floater endorsement. But, that endorsement was not attached to the RenewalNotice. [97] The parties provided me with cases from other jurisdictions in which statutory provisions equivalent to the Insurance ContractsAct, subsections 5(1) and 5 (3) were interpreted and applied.

However, none of those cases directly answered the question before me inthis case. [98] This case involves consideration of a non-continuous form of insurance contract. As described by the Supreme Court of Canadain Patterson v. Gallant, (SCC), [1994] 3 S.C.R. 1080, at paragraph 13, in this situation the “meaning of a "renewal" ofan insurance policy involves the situation where a separate and distinct contract comes into existence at each renewal.” [99] Renewal of a non-continuous insurance contract creates a new contract, not an extension of the old.

Ordinary principles ofcontract law, as modified by statute, govern the formation of a valid insurance contract. These principles include the requirement foroffer, acceptance, certainty of terms, and consideration. The Insurance Contracts Act,

section 5 modifies application of the law ofcontract. The purpose of

section 5 is to “protect persons from the effects of provisions which they do not know about:” BarnetProperties Ltd. v. Commonwealth Insurance Co. (1996), (BC SC), 32 B.C.L.R. (3d) 39, per Braidwood, J. [100] Pursuant to subsection 5(1), an insurer is precluded from proving that an insured accepted terms or conditions not included, in orattached to, the policy. Such a term or condition may not be applied to the prejudice of the insured. It does not matter that an insuredmay have had actual notice of the term or condition in question.

To this limited extent, subsection 5(1) allows the insured to take thebenefit of a contract provision without accepting the burdens of any prejudicial effects of the provision. [101] The effect of subsection 5(1) is itself modified by subsection 5(3). As stated by MacKinnon, J. in the course of applying theequivalent Ontario provisions, in South Stormont (Township) v.

Frank Cowan Co., 2008 CarswellOnt 3444, 37 C.E.L.R. (3d) 179 (Sup.Ct.) at paragraph 21: “These provisions approve a practice where, upon renewal, reference can be made to a prior existing contract ofinsurance, for the purpose of identifying the terms and conditions of the renewal contract.” [102] By its terms, subsection 5(3) applies only in the case of a renewal receipt. The predecessor to

section 5 has been included instatutes governing insurance law since at least the mid-19th century. At that time, the meaning of renewal receipt would have beenclear. The insured would have paid the renewal premium in full and received a receipt for it. I was not provided with any authority

defining the meaning of the term “renewal receipt” used in subsection 5(3) . The ordinary meaning of the words used suggests that the term means an acknowledgement of payment for renewal of a policy. [ 103 ] In Patterson v. Gallant , at paragraph 18 , the Supreme Court of Canada described two means for renewal of non-continuous policies: The procedure of first mailing an offer to renew, and subsequently mailing a renewal receipt, is known as a two-step renewal process. The actual renewal certificate or renewal receipt is only sent once the renewal premium is paid.

The two-step renewal process employed by the appellant in the case on appeal is in contrast to the one-step renewal process where an insurer mails the actual renewal certificate and the premium notice in a single mailing. In the one-step process, no further documents are sent after the renewal premium is paid. [ 104 ] Patterson v. Gallant involved an issue of whether an automobile policy was renewed, and there are specific statutory provisions respecting automobile insurance policies in each province.

However, the following analysis by the court did not depend on the special provisions respecting automobile insurance: 19 The respondent contends that the appellant in the present case in effect used a one-step renewal process, and that the Offer to Renew, along with the pink card, functioned as the equivalent of an insurance policy within the meaning of s. 218(6) of the Insurance Act. I do not agree. 20 The appellant mailed an Offer to Renew; the documentation was an offer of insurance coverage. It was made clear on its face that the policy would be renewed if the renewal premium were paid on time.

The Offer to Renew sent to the insured did not purport to be a binding insurance policy regardless of the payment or non-payment of premiums. It specifically stated that coverage would be renewed only if the renewal premium were paid. 21 The documentation sent to the insured did not purport to be, nor should it be construed to be, the equivalent of a renewal certificate and hence an insurance policy within the meaning of s. 218(6) of the Insurance Act. [ 105 ] I find that the documents demonstrate the policy renewal in this case occurred through a one-step process.

Aviva sent the Renewal Notice to the Plaintiffs with an attached

summary of account that noted the total premium due and that the premiums were to be paid by pre-authorized periodic payments from the Plaintiffs’ bank account in accordance with a payment schedule. This document in effect constituted agreement by Aviva to accept the payment of the premium over time. The first of these payments was scheduled to occur 60 days following the renewal date of July 18, 2006. There was no statement in the Renewal Notice that the inception date for the renewal coverage was dependent on the payment of premiums.

Aviva bound itself to the coverage in the Renewal Notice in consideration of the agreement by the Plaintiffs to make these scheduled payments. The Plaintiffs were bound to pay the premiums through the automatic withdrawals or otherwise unless they canceled the policy. I find that this account

summary was a renewal receipt within the meaning of subsection 5(3) . [ 106 ] The documentation complied with the purpose of

section 5 of the Insurance Contracts Act . It advised the Plaintiffs of changes to the CGL policy, but it incorporated the unchanged Contractors’ Equipment Floater endorsement by reference to the name and number of the endorsement. The endorsement had been delivered to the Plaintiffs with the initial policy. The documents provided to the insured therefore communicated all of the terms of the renewed policy.

SUMMARY AND CONCLUSIONS [ 107 ] The Plaintiffs’ application for

summary judgment under Rule 17 is dismissed. [ 108 ] I can determine this case on

summary trial. Therefore, I allow the Plaintiffs’ application for

summary trial under Rule 17A. [ 109 ] However, I find that the Defendant is not required to indemnify the Plaintiffs against the loss of the Material Handler overboard from the barge Labhauler in March 2007. [ 110 ] The Plaintiffs’ action is therefore dismissed. The Defendant is entitled to its costs taxed on Column III of the Rules of the Supreme Court, 1986 . [ 111 ] The Third Party joined with the Defendant in successfully defending the Plaintiffs’ claim. However, generally, an unsuccessful plaintiff will not be held responsible for the costs of a third party.

There are cases where the Court can exercise its discretion to award a third party its costs against a plaintiff, usually when it is demonstrated that the participation of the third party was an imperative, inevitable once the Plaintiffs sued the Defendant. This is not such a case. Further, because of the manner in which the case unfolded, the merits of the third party action by the Defendant were never decided. The Third Party is not entitled to its costs against either the Plaintiffs or the Defendant. _____________________________ Daniel M. Boone Justice