In Riocan Holdings Inc. v. Intact Insurance Co., 2017 ABCA 73, the Alberta Court of Appeal very recently considered a commercial general liability insurer’s duty to defend an additional insured. Frankly, the result in Riocan is unsurprising, because the insurer was effectively asking the Court of Appeal to ignore the forest for the trees. Where an assessment of coverage requires that we determine the “true nature” of the claim against the insured, an artificial parsing or dissection of the pleadings will rarely win the day. Perhaps more importantly, Riocan directs us to be mindful of allegations of independent fault against an additional insured (e.g. a separate factual theory upon which liability could be based).
In Riocan, the named insured was a snow removal contractor (“the Contractor”) who supplied services to the owner of a property (“the Property Owner”) where a retail bank was located. The snow removal contract included a very broad indemnity clause, requiring the Contactor to indemnify the Property Owner in respect of every loss the Property Owner suffered “as a result of … anything arising from or related to the [snow and ice removal work].” The indemnity was to apply “whether [the Property Owner] is negligent or not.” Under the snow removal contract, the Contractor was also obliged to secure a commercial general liability policy that named the Property Owner as an additional insured. The Contractor obtained the requisite policy, which insured the Property Owner, but only “with respect to work performed on [the Property Owner’s] behalf by [the Contractor].”
A patron alleged that she slipped and fell on an icy sidewalk, suing Contractor and the Property Owner. With respect to the Property Owner, she alleged that it had failed to post warning signs, failed to remove ice and snow from the sidewalk, failed to supervise the Contractor, and generally failed in its duty to ensure she was reasonably safe. The pleading alleged the Contractor and Property Owner had both failed in their duties under the Occupiers Liability Act. The Contractors’ commercial general liability insurer denied defence coverage for the Property Owner, asserting that some of the allegations implicated the Property Owner’s broader and independent duties as an occupier, which had not been delegated to the Contractor. In other words, these allegations had nothing to do “with respect to work performed on [the Property Owner’s] behalf by [the Contractor]…” and did not fall within coverage. In the Queen’s Bench, Erb J. found there was a duty to defend the Property Owner. The insurer appealed.
In the Court of Appeal, the insurer argued that the Queen’s Bench Justice ought to have considered coverage under the policy for each particular allegation against the Property Owner, one by one. Identifying two discrete categories of allegation against the Property Owner (i.e. allegations arising from the Contractor’s work and allegations arising from Property Owner’s duty as an occupier), the insurer argued its policy only provided defence coverage for allegations arising from work performed by the Contractor (i.e. not general Occupiers’ Liability Act allegations).
The Alberta Court of Appeal disagreed, first explaining a few basic principles that must always guide our coverage analyses (i.e. from Progressive Homes Ltd v Lombard General Insurance Co of Canada, [2010] 2 SCR 245), which are as follows:
1. 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.
2. What is required is the mere possibility that a claim falls within the insurance policy.
3. What is determinative is the true nature or the substance of the claim.
The Court of Appeal observed “… It is 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.” This broad understanding of the pleadings was to then be applied to the policy and the Contactor’s obligations under the snow removal contract. In the policy, the only qualification to the Property Owner’s coverage as an additional insured was that the alleged occurrence must be: “with respect to work performed on [the Property Owner’s] behalf by [the Contractor].” Thus, the central question was whether the claims against the Property Owner arose out of the work performed by the Contractor on the Property Owner’s behalf. In the Court of Appeal’s view, the general Occupiers Liability Act claims certainly did. These allegations could not stand on their own, absent the Contractor’s performance (or lack of performance) of its obligations under the snow removal contract. The Court explained:
[37] There is an unbroken causation link between the alleged delicts of [the Property Owner] and the alleged personal injury to the claimant; the statement of claim contemplates both the actions of [the Contractor] and the actions of [the Property Owner] that allegedly placed the claimant in a position to slip and fall. There is no independent fault alleged against [the Property Owner] that would support an action in negligence absent the activities of [the Contractor]. The claims made by the slip and fall claimant against [the Property Owner] do not support a claim against [the Property Owner] independent of the adequacy of the icy sidewalk maintenance performed by [the Contractor].
None of the allegations in the underlying Statement of Claim were “independent of the proposition that the ice on the sidewalk made it unsafe for the claimant to traverse.” Defence coverage was triggered. Dismissing the appeal, the Court of Appeal explained that “an "Additional Insured" enjoys independent rights, including the right to a defence, irrespective of any defence provided to the named insured” The Court rejected the suggestion that the insurer could discharge that obligation solely be defending the named insured.
To reiterate, Riocan directs us to be mindful of allegations of independent fault against an additional insured (e.g. a separate factual theory upon which liability could be based). Applying the Court of Appeal’s approach, had the pleadings alleged facts falling outside the Contractor’s obligations under the snow removal contract (e.g. a defective building component striking the plaintiff and triggering her fall on the icy sidewalk), a better case against coverage might have been made. Of course, each case will turn upon its own particular facts.