Travelers Guarantee Company v. Hants Realty Ltd., 2014 NSCA 69

Nova Scotia Court of Appeal Citation: Travelers Guarantee Company v. Hants Realty Ltd. , 2014 NSCA 69 Date: 20140625 Docket: CA 422112 Registry: Halifax Between: Travelers Guarantee Company of Canada Appellant v. Hants Realty Limited Respondent Docket: CA 422113 Registry: Halifax Between: Travelers Guarantee Company of Canada Appellant v. Hermiena Murphy Respondent Judge: The Honourable Justice Linda Lee Oland Appeal Heard: June 6, 2014, in Halifax, Nova Scotia Subject: Errors and Omissions Insurance - Duty to Defend –

Interpretation of “Claim” in Insurance Policy

Summary: The respondents, a real estate broker and a sales agent, knew of a complaint against the agent, which a purchaser filed with the Nova Scotia Real Estate Commission. In it, the purchaser alleged that the agent had failed to disclose information about the water supply, he had been unsuccessful finding water on the property, and “I think the realtor should cover the cost that I’m going to have to pay to get water here.” The respondents did not report the matter to their insurer.

Over three years later, the purchaser’s counsel advised them that they had instruction to start legal proceedings to recover alleged losses due to the lack of water. The respondents reported to their insurer, which denied coverage. They successfully obtained an Order requiring the insurer to defend and indemnify them in relation to the matter. Issues: Whether, by finding that a “Claim” as defined in the policy had not been “first made” before the effective date of the policy, the Chambers Judge erred. Result: Appeal allowed. The Chambers Judge erred in law.

The complaint satisfied the policy definition of “Claim”. A reasonable insured in all the circumstances would have concluded from the complaint that the purchaser intended to hold the insured liable. This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 15 pages.

Nova Scotia Court of Appeal Citation: Travelers Guarantee Company v. Hants Realty Ltd. , 2014 NSCA 69 Date: 20140625 Docket: CA 422112 Registry: Halifax Between: Travelers Guarantee Company of Canada Appellant v. Hants Realty Limited Respondent Docket: CA 422113 Registry: Halifax Between: Travelers Guarantee Company of Canada Appellant v. Hermiena Murphy Respondent Judges: Oland, Farrar, Bryson, JJ.A.

Appeal Heard: June 6, 2014, in Halifax, Nova Scotia Held: Appeal allowed with costs, per reasons for judgment of Oland, J.A.; Farrar and Bryson, JJ.A. concurring Counsel: Ian Dunbar and Ross Haynes, Q.C., for the appellants Michael Scott, for the respondent Hants Realty John T. Rafferty, Q.C. and Daniel F. Roper, for the respondent Hermiena Murphy Reasons for judgment: [ 1 ] The respondents, Hants Realty Limited and Hermiena Murphy, reported a claim made against them in 2009 by Robert and Anita Patten, to their insurer, Travelers Guarantee Company.

Travelers advised that it was not obliged to respond under the errors and omissions insurance policy issued to the respondents. The respondents brought an application for an Order requiring the insurer to defend and indemnify them in relation to the claim. [ 2 ] In his decision dated June 24, 2013 and reported as 2013 NSSC 195 , Justice J.E. Scanlan of the Supreme Court of Nova Scotia

(as he then was) determined that Travelers had an obligation to defend on behalf of both respondents. He subsequently awarded each of the respondents costs of $2,000 plus disbursements ( 2013 NSSC 279 ). Travelers appeals the Chambers Judge’s Orders dated November 4, 2013. [ 3 ] For the reasons which follow, I would allow the appeal. Background [ 4 ] On April 1, 2005, Mr. and Mrs. Patten purchased a property in Enfield. The vendor was CIBC Mortgages. Their real estate agent, Ms. Murphy, acted as dual agent for the vendor and the purchasers.

She was employed by the real estate broker, Hants Realty. [ 5 ] According to her evidence, Ms. Murphy received a call from Mr. Patten a few months after the closing. He was having difficulties with getting water and thought “somebody should help him out, because he couldn’t drill a well”. He asked for contact information for CIBC Mortgages. [ 6 ] Larry Matthews, principal of Hants Realty, testified that Mr. Patten called him. He didn’t remember the conversation, but recalled that Mr. Patten indicated that he was having water problems. Mr.

Matthews believed that he told him that the house, a bank repo, was sold “as is” and there wouldn’t be much that could be done. [ 7 ] In July 2005, Mr. Patten filed a complaint (the “Complaint”) against Ms. Murphy with the Nova Scotia Real Estate Commission (the “Commission”). He alleged that she had not disclosed the water problem on the property and, not having been able to find water, he had been buying water. Here is what the Complaint said in part: Attn. Brad Chissom To: Nova Scotia Real Estate Board.

Fr: Robert Patten Ref: Buying a house with information not being disclosed to me by Realtor or the bank because I was buying a bank Repo I Robert patten bought a house from Hant’s realty not knowing I’m going to run into water problems. The realtor was Hermie Murphy and she did not disclose to me any info stating that I would run out of water . I came here on a house hunting trip as well and she did not inform me of this problem. Well, I moved in on Apr. 01.05 thinking I got a good deal and then the water problem arose.

I phoned hermie and she said there was nothing she can do for me but good luck. … Hermie and the bank both knew their was going to be a water problem but failed to tell me..If I’ve known about this problem, I would not have bought this house.. I am now thousands of dollars in the hole trying to get water . I’ve drilled two sites to find water and no such luck. I am now at ropes end, with having to buy water at seventy dollars for 2000 gal. I go through 6000 gals. A/mth and that’s an extra 210.00 dollars I could use else where.

I feel I was treated unfairly in the matter of buying this house and I think the realtor should cover the cost that I’m going to have to pay to get water here . I’ve talked to the head guy at hant’s Realty and he said it’s the first time he heard of something like this to happen…He was supposed to get back in contact with me but never has..I hate to say it but I never figured on moving back east and being ripped off.

I don’t know who’s going to get this case or how it works but I’m going to need help..If their as any info: that you can pass on to me, please feel free to give me a call at any time. [Emphasis added] [ 8 ] Mr. Matthews received a copy of the Complaint and discussed it with Ms. Murphy. In particular, they considered whether it should be reported to their insurer. At the time, they were insured on a professional liability insurance policy with AXA Insurance (Canada).

The allegations in the Complaint were not reported to AXA. [ 9 ] In its correspondence acknowledging receipt of his Complaint, the Commission advised Mr. Patten that its jurisdiction does not extend to awarding damage settlements. On January 24, 2006, it found Ms. Murphy guilty of two allegations of professional misconduct, fined her $600 and reprimanded her. She appealed, unsuccessfully, twice: Murphy v. Nova Scotia Real Estate Commission , 2007 NSSC 318 , and Murphy v.

Nova Scotia Real Estate Commission , 2008 NSCA 85 . [ 10 ] In late September 2009, counsel for the Pattens wrote to Hants Realty advising that they had been instructed to commence legal action to recover their clients’ losses because of the lack of water on the property they purchased. They alleged that some $50,000 had been spent on the purchase of water, drilling wells, landscaping, etc., and the property had been rendered essentially valueless. [ 11 ] The respondents were then insured under a real estate agents errors and omissions insurance policy (the “Policy”) with Travelers.

The Policy was effective January 1, 2009 to January 1, 2010 (the “Policy Period”). Mr. Matthews promptly advised Travelers of the letter from the Pattens’ lawyer by reporting a claim. [ 12 ] In a letter dated August 5, 2010, the claims manager who investigated the matter on behalf of Travelers advised that coverage could not be provided to either Ms. Murphy or Hants Realty. This denial led to the respondents’ application for an Order requiring Travelers to defend and indemnify them in relation to the matter, the Chambers Judge’s decision, and now this appeal.

The Travelers’ Insurance Policy [ 13 ] The coverage provided under the Policy extended to real estate brokers (Hants Realty) and sales people (Ms. Murphy). It provided “claims made” coverage; that is, the coverage is limited to “claims made” against insureds under the Policy which are “first made” during the Policy Period, regardless of when the facts giving rise to the claim took place.

Section I of the Policy states the following: The Insurer agrees to pay on behalf of the Insured all Loss, in excess of the Individual Deductible and the Self-Insured Retention stated in the Declarations, which the Insured shall become legally obligated to pay, including Defence Costs, by reason of liability for any

Wrongful Act provided always that Claim therefore is first made against the Insured during the Policy Period and reported in accordancewith

SECTION VIII — NOTICE OF CLAIM — during the Policy Period. [Emphasis added] The definition of the term “Claim” is critical to the

interpretation of the Policy.

Section II of the Policy defines “Claim” as including a“written demand for damages or non monetary relief … against an Insured for a Wrongful Act committed by the Insured”. It defines"Wrongful Act" as including “any negligent act, error or omission … alleged to have been committed by the Insured … in theperformance of Professional Services for others.” [14] Moreover, the Policy contains certain exemptions. In particular, Exclusion (

g) states that the Insurer “shall not be liable tomake any payment for Loss”, in relation to a claim arising out of “any Wrongful Act, or any fact, circumstance or situation indicating thepossibility of a Claim” that was already known to the Insured prior to “the effective date” of the Policy. [15] When Travelers denied coverage, they said that the Complaint was communicated to both respondents before the PolicyPeriod. It was not a claim first made within the Policy Period. Alternatively, Travelers said that the respondents had sufficientknowledge in 2005 of circumstances that indicated the possibility of a claim and, accordingly, Exclusion (

g) applied to exclude thematter from coverage. [16] In his decision, the Chambers Judge determined that the Complaint did not constitute a claim as defined in the Policy. He wasalso not satisfied that the situation warranted a denial of coverage pursuant to Exclusion (g). He held that Travelers had an obligation todefend both respondents in the action brought by the Pattens. Later, I will set out his reasons in greater detail. Issues [17] Travelers raises two grounds of appeal which I reframe slightly as follows: (

i) Whether the Chambers Judge erred by finding that a "Claim" was not "first made" before the effective date of the Policy; and (ii) Whether he erred by incorrectly interpreting the Exclusion (

g) in a manner that failed to exclude coverage. I need to consider only the first to dispose of this appeal. Standard of Review [18] The parties agree that if, as the appellant argues, the judge failed to properly apply the legal principles related to theinterpretation of insurance contracts and thereby misinterpreted the Policy wording, the appropriate standard of review is correctness.

However, the respondents go on to submit that, whether or not the Policy was misinterpreted, the judge’s determination that there was no“claim” until September 2009 is an inference of fact which attracts the deferential standard of palpable and overriding error. [19] In Trisura Guarantee Insurance Company v. Belmont Financial Group Inc., 2008 NSCA 87, this court considered questionssimilar to those on this appeal.

Fichaud J.A., writing for the court, described the issues and set out the standard of review at ¶ 22-23 and31: [22] The issue is whether the chambers judge committed an appealable error by ruling that Trisura must defend Belmont in theRichardson action. Trisura makes two submissions: (1) the claim was “first made” before the Policy Period began on September 20,2006 and is outside the Coverage in the Insuring Agreement

article I; and

(2) Belmont reasonably ought to have foreseen the claimbefore the first Inception Date of September 20, 2006 and coverage is excluded by

article IV (1). [23] The standard of review is correctness for extractable issues of law and palpable and overriding error for both issues of fact ormixed issues with no extractable legal error: Housen v. Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R. 235, at ¶ 8, 10, 19-25, 31-36.A palpable and overriding error of fact is a finding that is clearly wrong and is shown to have affected the result: H.L. v. Canada(Attorney General), 2005 SCC 25 , [2005] 1 S.C.R. 401, at ¶ 65, 69. … [31] In my respectful view, the chambers judge misinterpreted Mr. Richardson’s claims in the letters of May 23, July 11 and August24, 2006. The

interpretation of these letters to identify the nature of the claim is an issue of law to which I apply the correctness standardof review. [20] In ING Insurance Company v. SREIT (Park West Centre) Ltd., 2009 NSCA 38, this court considered an appeal from aChambers Judge’s order that the insurer defend the claim. The judge had determined that allegations in the pleadings could give rise toliability within the insurance coverage.

On appeal, Saunders J.A., writing for the court, considered the standard of review, and theTrisura decision in that regard: [19] In my opinion the Chambers judge’s findings should be reviewed on a standard of palpable and overriding error. His principalfocus was not to interpret the terms of the insurance contract, but rather to assess the pleadings in order to ascertain the substance andtrue nature of the claim, and whether it could give rise to liability within the policy coverage.

In this, Justice Beveridge’s inquiryinvolved a question of mixed fact and law, and one which was heavily weighted towards the facts. His decision is owed considerabledeference. Absent palpable and overriding error we will not intervene. Housen v. Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R.235.

… [21] The issue facing Justice Beveridge in this case was fundamentally different than the question which arose in Trisura GuaranteeInsurance Co. v. Belmont Financial Group Inc. [2008] N.S.J. No. 436. There, a correctness standard of review was applied becausethe judge in first instance had been required to interpret the contents of a series of solicitors’ letters in order to decide, objectively, thenature of the claim and whether sufficient notice had been communicated of circumstances which could reasonably give rise to the claimunder a claims made insurance policy, thus triggering a duty to defend.

The principal inquiry in Trisura called for an application of thelegal principles governing

interpretation of insurance contracts, coupled with a proper construction of the impugned correspondence. Because of those features – absent in this case – a correctness standard was applied. [21] The respondents argue that here, unlike Trisura, there is no dispute as to the nature of the claim. According to their submission,the decision under appeal, like that in SREIT, involved a question of mixed fact and law, with a heavy emphasis on the facts. They alsorely on a statement in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., (SCC), [1993] S.C.J.No. 10, the leading case on the principles applicable to the

interpretation of “claims made” policies, McLachlin J. (as she then was),stated at ¶ 48: “… what constitutes a claim “made” is a question to be resolved on the facts of the case.” [22] In my view, the issue of whether the Chambers Judge erred in finding that a “Claim” was not “first made” before the Policy’seffective date calls for a standard of review of correctness. To determine that question, the judge was required to interpret the Complaintand the Policy, including certain defined terms. None of the facts before him were in dispute; his obligation was to apply the law tothose facts.

As the respondents have observed, the question in Trisura focused on the nature of the claim. However, as ¶ 21 of SREITexplained, the principal inquiry there, as here, called for “an application of the legal principles governing

interpretation of insurancecontracts, coupled with a proper construction of the impugned correspondence”, for which a correctness standard is the appropriatestandard of review. [23] I do not accept that, on its own, the partial sentence from ¶ 48 of Reid Crowther can be relied upon to establish the existence of aclaim as a question of fact, which attracts a deferential standard of review.

As will be seen from the fuller extract which appears later inmy decision, those words were not directed to the determination of the standard of review but, rather, in explaining the importance of thefacts of a case to which the legal principles were applied. [24] For the forgoing reasons, I will apply the correctness standard to my analysis of the decision under review. Analysis [25] The Policy covers only “Claims” “first made” during the Policy Period.

Travelers argues that the 2005 Complaint meets all thecriteria set out in the Policy definition of Claim, and thus the Chambers Judge erred in finding that the respondents are entitled tocoverage or a defence pursuant to the Policy which came into effect on January 1, 2009. [26] In Reid Crowther, the Supreme Court of Canada indicated that when considering the definition of “Claim”, it is substance ratherthan form which is important. Moreover, the applicable test is an objective, rather than a subjective, one.

McLachlin J. (as she thenwas) emphasized at ¶ 48: … What is required, unless the policy expressly so stipulates, is a form of demand or assertion of liability, not a formal demand orassertion of liability. Under a policy such as the one in this appeal, which contains no express requirement of a formal demand or indeedany demand at all, what constitutes a claim "made" is a question to be resolved on the facts of the case. There is no magic formula. Onemust look to the reality of what the third party was communicating to the insured by words and conduct.

If the message was clear, thefact that the third party through politeness refrained from stating its demand or intention to hold the insured liable in categorical legalterms should not preclude a finding that a claim has been made.

Where the reasonable insured in all the circumstances would concludethat a third party was making a claim against him or her in the sense that if satisfactory payment or other form of reparation were notmade the third party would sue, then it may be said that a claim has been made, even though a formal statement of liability and/ordemand has not been tendered. [Emphasis added] [27] In Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, the Supreme Court of Canada againaddressed what was required for a "Claim" to be made under a "claims made" policy.

After quoting from Reid Crowther, LeBel J. for thecourt stated: 51 In essence, a claim at common law requires a third party to communicate an intention to hold the insured responsible fordamages. … [28] In Trisura Guarantee, this court applied Reid Crowther, and Jesuit Fathers. It found that an exchange of correspondencebetween the plaintiff's counsel and the insured's counsel constituted a claim “first made” prior to the commencement of coverage, andthus was excluded from coverage.

In that case, the letters from the plaintiff’s counsel did not specifically request compensation, butstated that if the transfer sought was not effected or "no explanation" was provided within a certain time, the plaintiff would seek aremedy through the court. Fichaud J.A. stated: [36] In my view, a reasonable insured with the information in these letters, received by Belmont before September 20, 2006, wouldconclude that Mr. Richardson was making a claim against Belmont for the tort of negligent misrepresentation. A reasonable insuredwho was in doubt about the reference to Queen v.

Cognos would ask his lawyer to explain, after which the insured would have knownthat the letter of May 23 signalled a tort claim for negligent misrepresentation.

The reasonable insured, having been notified he would besued, would do this before just warranting to his new insurer, on September 20, 2006, that he has "no knowledge of any fact,circumstance or situation which could reasonably give rise to a claim" under the policy. … [29] According to Travelers, the application of the reasoning in Reid Crowther, Jesuit Fathers and Trisura all lead to the sameconclusion: the 2005 Complaint is a "Claim" within the Policy definition.

It reiterates that that definition includes “a written demandfor damages … against an Insured for a Wrongful Act committed by the Insured.” Travelers urges that the Complaint provided notice to

the respondents of all necessary elements under that definition and the case law, including: (

a) a cause of action – the Complaint alleged negligence (a “Wrongful Act”) on the part of Ms. Murphy by failure to disclose known water problems during the sale process. This is the same cause of action the Pattens later raised in 2009; (

b) damages – the Complaint described failed efforts to find water by drilling on the property, and the ongoing cost of having to purchase water. The same damages were raised in 2009; and, (

c) an intention to hold the insured responsible for damages - the Complaint stated that “the realtor should cover the cost that I’m going to have to pay to get water here.” In 2009, the Pattens’ counsel alerted the respondents that his clients were seeking damages. In

summary, Travelers say that it is clear from a comparison of the Complaint and the Pattens’ Statement of Claim that the claim in regard to this matter was “first made” in July 2005, well before the Policy Period, and therefore outside Policy coverage, and that the Chambers Judge erred in finding otherwise. [ 30 ] The reasons of the Chambers Judge on this issue are not lengthy.

They begin: [8] In analysing the arguments of the respective parties, I note there is nothing before the Court which would in any way suggest that the Applicants were anything but honest and forthright with the insurers, both AXA and Travelers, for the entire period in question. There is nothing before the Court which would suggest that the Applicants were, in any way, attempting to hide from either AXA or Travelers, the proceedings before the Commission or concerns expressed by the Pattens. The evidence of Ms. Murphy is that when the issue first arose, she discussed the complaint and phone calls with Mr.

Matthews, who was the broker for Hants Realty. He noted the distinction as between the limited authority and scope of the inquiry by the Commission and any action – potential liability based on tort. It was Mr. Matheson’s position that no claim had been made and, therefore, there was no “claim” of which they should advise AXA. [9] The policy as between the Applicants and AXA is not before the Court. The Court is of the understanding, however, that under the AXA policy it was the broker that was insured. The coverage was then extended to include the various agents that worked through the brokerage.

Under the Travelers policy it is understood that each agent is insured individually. Both policies however were, as noted above, “claims-made” policies. Assuming the AXA policy, being a “claims-made” policy, had similar provisions to the Travelers policy, under the AXA policy the Applicants would not be able to seek coverage nor indemnity from AXA. That is because there was no claim during the period of coverage as provided by AXA. Again, I note that the AXA policy is not before the Court. … [ 31 ] After setting out

Section I of the Policy and its

definitions of “Wrongful Act” and “Claim”, the Chambers Judge continued: [10] The definition of “claim” is set out in Clause (

b) of

Section 2 of the Travelers policy. The Applicants were not entitled to make a claim or seek indemnity if the similar provisions existed in the claims made policy of coverage provided by AXA. That is, there was no written demand for damages or monetary relief. Secondly, there was no civil proceeding commenced, service of Notice of Action, or Statement of Claim, etc. Thirdly, there was no arbitration, or mediation, or other alternative dispute resolution proceeding dealing with the claim which was made in 2009 and for which the Applicants seek coverage.

The Commission made it clear that they would not be dealing with damages. Using the definition as set out in the Travelers policy there is no claim within the period of coverage, during the effective coverage period, covered by AXA. Clearly the Applicants had and still would have no recourse against AXA if the terms of the policy were similar. [11] The Applicants intended to be covered either by AXA or Travelers through the entire time in question.

The Applicants did not anticipate, or expect, there was any period of time wherein any claims made were not covered. [ 32 ] In commencing his analysis at ¶ 8 and 9 of his decision, the Chambers Judge made observations about two matters: (

a) the respondents were honest and forthright with both their insurers, AXA and Travelers; and (

b) although the AXA policy was not in evidence, the respondents were not likely able to seek coverage or indemnity under that claims-made policy. With respect, both these matters were irrelevant to the

interpretation of the Policy definition of “Claim”. As established in Reid Crowther , the test is an objective one. As a result, the respondents’ honesty in their dealings with their insurers was not a factor. [ 33 ] Although the Chambers Judge twice stated that the AXA policy was not before the court, it was in evidence. It was appended as an exhibit to the affidavit of Ms. Murphy. While he was mistaken in regard to the AXA policy, nothing turns on this error.

This is because how the AXA policy may or may not have read, and whether the respondents were or were not precluded from obtaining coverage through that policy, were not relevant considerations in determining the issue of whether the Complaint amounted to a “claim” under the Travelers policy. [ 34 ] Moreover, his statements at ¶ 11 that the respondents intended to be covered either by AXA or Travelers through the entire period in question, were not integral to the requisite analysis. [ 35 ] After quoting portions from Reid Crowther that a “claim” required some form of communication of a demand for compensation or assertion of liability by third party upon the insured, the Chambers Judge continued: [13] The Pattens were advised that the complaints process through the Commission could not determine or deal with the issue of tortious liability.

It is noteworthy, as well, that in the disposition of the complaint the Commission determined that Ms. Murphy did disclose the problems with the water in the presence of a home inspector, however, the Commission imposed a penalty of $600.00, not

for lack of disclosure but for other reasons. [14] Having determined that, in accordance with the definition of a claim, as set out in the Travelers policy, a claim was not made by the Pattens prior to Travelers insuring the Applicants, the Court now turns to the issue as to whether or not exclusion (

g) of the Traveler’s policy alleviates Traveler’s obligation to defend. … [ 36 ] The Commission’s disposition of the Complaint against Ms. Murphy is not relevant to the legal

interpretation of the term “Claim” in the Policy. Nor is the fact that the Pattens knew that the Commission could not award damages. [ 37 ] With respect, the analysis in the decision under appeal as to why the Complaint is not a “Claim”, within the quoted Policy definition, is not clear. It does not examine the Complaint in the context of that definition. Although ¶ 10 states that there was no “written demand for damages”, there is no explanation of why or how the Complaint did not meet the criteria. [ 38 ] I reiterate from Reid Crowther at ¶ 48: “There is no magic formula.

One must look to the reality of what the third person was communicating to the insured by words and conduct.” What was Mr. Patten communicating in his Complaint when he wrote: “. . . I think the realtor should cover the cost that I’m going to have to pay to get water here”, if not an intention to hold the realtor liable for his alleged and ongoing damages? [ 39 ] The respondents both urge that the fact that these words were contained in the Complaint to the Commission, a regulatory body, rather than in correspondence addressed to the respondents, makes all the difference.

The decision under appeal did not rely on this argument. Hants Realty in its factum submits: 40. Relevant evidence adduced at trial in support of that conclusion included evidence that the Complaint was not made "upon the insured" and that that Hants was not identified in the Complaint to the Commission. Most importantly, the Complaint came in the form of a regulatory complaint to the Commission. Hants submits that this is key , as all involved were aware that the Complaint was made to a body that does not deal with tortious liability or damages.

The Learned Trial Judge clearly gave this issue great consideration and it is submitted that a reasonable insured would interpret the mode of complaint as an indication that no damages were being sought. If no damages were being sought, then the Policy is not engaged and there is no "claim". (Emphasis added). [ 40 ] With respect, what was important was the substance of the Complaint, not to whom it was initially sent, or whether the communication was direct or indirect. It was undisputed that the Complaint quickly came to the attention of Hants Realty and Ms. Murphy.

They knew from that communication that they had an unhappy and frustrated client, one who had taken the time to write to the Commission setting out allegations of professional negligence and reiterating his belief that “the realtor should cover the cost that I’m going to have to pay to get water here.” A reasonable insured looking at this Complaint would conclude that Mr. Patten intended to hold the respondents liable for his alleged losses. [ 41 ] Ms. Murphy also relies on certain words in ¶ 48 of Reid Crowther : 48 . . . There is no magic formula.

One must look to the reality of what the third party was communicating to the insured by words and conduct. If the message was clear, the fact that the third party through politeness refrained from stating its demand or intention to hold the insured liable in categorical legal terms should not preclude a finding that a claim has been made.

Where the reasonable insured in all the circumstances would conclude that a third party was making a claim against him or her in the sense that if satisfactory payment or other form of reparation were not made the third party would sue, then it may be said that a claim has been made , even though a formal statement of liability and/or demand has not been tendered. [Emphasis added] She says that it was not clear from the Complaint that “the third party would sue” if the insured did not make satisfactory payment or other reparation. There was no express mention of a lawsuit and, while Mr.

Patten stated that he should be compensated, he did not say whether he intended to do anything about it. Mr. Patten chose to pursue the matter before the Commission which he knew early on could not provide him with a financial benefit. Consequently, she argues, the Complaint was not a matter which needed to be reported to the insurer. [ 42 ] The case law does not always require a specific threat of a legal proceeding.

For example, in Reid Crowther from which this passage is taken, a claim alleging that an engineering company had improperly supervised the construction of a municipality’s sewage and water system was made during the policy period of a “claims-made” policy, and settled. Some months later, the town foreman showed the engineering company’s on-site engineer further damage and commented that the work was typical of that done on the project and approved by the engineering company. The possibility, likelihood or certainty of further legal proceedings was not raised.

However, the Supreme Court held that, in these circumstances, there had been an assertion of liability and a demand for compensation had in effect been made. [ 43 ] I also observe that the respondents ignore the sentence prior to that on which they rely in ¶ 48 of Reid Crowther .

For convenience, I repeat it here: If the message was clear, the fact that the third party through politeness refrained from stating its demand or intention to hold the insured liable in categorical legal terms should not preclude a finding that a claim has been made I also observe that in Jesuit Fathers , after setting out what must be required in order for a claim to be made, LeBel J. for the court summarized at ¶ 51: In essence, a claim at common law requires a third party to communicate an intention to hold the insured responsible for damages. [ 44 ] Mr.

Patten’s clear assertion that the realtor was liable to him in damages had been brought home to the respondents. There was no evidence that while the Complaint proceeded to hearing before the Commission and then through two appeals, the respondents had heard that the water problem had been resolved, or that Mr. Patten had decided not to proceed against them. Nor was there any evidence that they had made any inquiries in that regard. The respondents acknowledged that the limitation period for the bringing of a claim in

negligence had not expired. [ 45 ] In my view, when he found that the Complaint did not constitute a “Claim” under the Policy, the Chambers Judge erred in law. The Complaint to the Commission, which was received by the respondents, satisfied the Policy definition of “Claim”. It was “a written demand for damages or non monetary relief … against an Insured for a Wrongful Act committed by the Insured.” A reasonable insured in all the circumstances would have concluded from the Complaint that the Pattens intended to hold the insured liable. Disposition [ 46 ] I would allow the appeal.

If the respondents received the costs awarded them by the Chambers Judge, those amounts shall be returned to Travelers. I would award Travelers costs of $2,800 plus disbursements as agreed or taxed on the appeal and the proceedings below. Oland, J.A. Concurred in: Farrar, J.A. Bryson, J.A.