Category Archives: Cases

Weekly post on cases.

The Cruel World of Insurance Policies

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In the recent case of Certain Underwriters at Lloyd’s of London v All Spec Home Inspections and Mario Lucciola, the Court considered the availability of insurance coverage to a home inspector who missed a critical electrical problem on a home inspection resulting in a contractor’s death. At the very end of the decision, the Judge made reference to the “cruel world of claims-made-and-reported policies of insurance.” While colourful language of this nature is not unusual for the particular Judge in this case, it is not language that one sees very often.  Nevertheless, the facts of this case show how appropriate they are.

Mr. Lucciola, a self-employed home inspector, conducted an inspection of a property in St. Catharines in July 2010.  At the time, Mr. Lucciola had professional liability insurance on the basis of a one-year term renewed annually through to 2011.

Mr. Lucciola produced a report and photographs, making no reference whatsoever to any electrical problems.

On August 16, 2010, a contractor was doing work in the attic of the property.  He came into contact with an exposed energized bare copper wire.  He was electrocuted and he died.

Three days later, on August 19, 2010, Mr. Lucciola signed an application for professional liability insurance as he had done every year since 2006.  His insurance application required him to indicate whether or not any claim had been made against him in the last five years, and whether or not he was aware of any situation or circumstance which may result in a claim in the future.  Mr. Lucciola answered “no” to both questions.

The policy was then issued for a further period of one year.

Several days later, Mr. Lucciola was interviewed by an investigator for the Ministry of Labour, at which time he was asked whether or not he had noticed the wire in the attic. He indicated first that he had not noticed it and subsequently that he had but that he had tested it with an electrical tester and received no response from it.  For that reason, he had not made any note of it in his report.

About a year later, the Ministry of Labour conducted an inquest.  Subsequently, Mr. Lucciola signed yet another application for insurance.  It contained the same questions and he answered them in the same way.  Accordingly, a policy was issued for a further one year.

All of these policies contained language to the effect that if the insurer subsequently became aware that if any of these questions had been answered incorrectly, there would be no coverage for any claim or action emanating from a fact or circumstance that the applicant failed to mention in his application.

A lawsuit was subsequently brought against Mr. Lucciola.  He notified his insurer of the claim.  The insurer brought this application for an order that it had no obligation to provide insurance coverage.

The Court had little difficulty concluding that Mr. Lucciola should have known of the potential claim against him when he made his application for the insurance policy that was in effect at the time that he was sued, and should have answered “yes” to that question on his application.  As a result, the Court ruled that the insurer was entitled to deny coverage.

The interesting point in this case has to do with the type of insurance policy that was in place.  Mr. Lucciola’s policy was a “claims-made-and-reported” insurance policy, rather than an occurrence policy.  These are very different.  In a claims-made-and-reported policy, it is the transmittal to the insurer of notice of the claim that invokes coverage.  In an occurrence policy, coverage goes into effect when the incident upon which the claim is based actually takes place.

In this case, the incident (the contractor’s death) took place in August 2010.  The policy in place at that time had been applied for by Mr. Lucciola in 2009.  In 2009, when he answered “no” to the questions as to whether or not he was aware of a possible claim, he was being entirely accurate.  Had his policy been an occurrence policy, the insurer would have had to provide coverage.

In this case, however, the policy in place when coverage was invoked was the policy in effect at the time that Mr. Lucciola notified his insurer of the claim.  In applying for that policy, Mr. Lucciola had answered “no” to questions that should have been answered “yes”.  For that reason alone, Mr. Lucciola was disentitled to coverage.

This is obviously a critical distinction.  If you have professional liability insurance coverage, and you are not aware of the type of policy that protects you, this case is a good lesson on the importance of finding that out and keeping it in mind.

The New World of Summary Judgments: Are the Courts Going Too Far?

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The recent case of King Lofts Toronto I Ltd. vs. Emmons involves the granting of a summary judgment where the remedy would never have been possible in the past.

This was a solicitor’s negligence case in which the law firm moved for summary judgment dismissing the claim and, without formally bringing a cross-motion for summary judgment, the former client requested a partial summary judgment against the law firm.

In 2005, a developer retained the Defendant law firm to act on a purchase of four commercial properties in downtown Toronto. The price was $22.5 million. The title indicated that the City of Toronto owned a strip of land and a laneway under the rear of one of the buildings.

The purchaser assigned its interest in the purchase agreement to the Plaintiff in this case, whose principal was described by the Court as an experienced businessman and investor in real estate. The Plaintiff retained the law firm to continue and to complete the transaction.

Before closing, the lawyer handling the file told the Plaintiff about the laneway. He also said that this was a minor issue that was covered by title insurance that was being obtained. He indicated that the problem would be solved by converting the property from the Registry System to the Land Title System, that this could be completed after closing, and that the cost of doing so would be relatively nominal. Subsequently, the law firm indicated that after closing they could approach the City and ask for a by-law to be passed to convey the lane to the Plaintiff. Alternatively, they could attempt to obtain a court order based on the length of time that the building had been located on the laneway itself.

In any event, it was clearly conveyed to the Plaintiff that the problem was a minor one and likely covered by title insurance.

What the Plaintiff was not told is that the City would request payment for a conveyance of the laneway even though it had been located under a building for about eighty-six years. He was also not told that the title insurance policy excluded coverage for City-owned laneways.

The deal closed with no holdback in respect of the laneway. After the closing, the Plaintiff did nothing about the laneway and several years passed.

In 2008, the Plaintiff received an unsolicited offer from a Real Estate Investment Trust to purchase the properties. An agreement was signed for the sale to the REIT for a purchase price of $31.5 million.

Before the closing of that transaction, the lawyer for the REIT demanded that the title be rectified so that the Plaintiff could convey the laneway. When the Plaintiff looked into it further, it discovered that it would cost $106,000 to get the City to convey the laneway. An application was made to the title insurance company for coverage but that was denied.

The Plaintiff had no choice but to pay the $106,000 for the laneway. It then closed the deal to sell the properties to the REIT for $31.5 million – $9 million more than it had paid four years earlier.

The Plaintiff then sued the law firm for negligence.

At this point, one might well take a step back and suggest that having achieved a profit of almost 50%, the Plaintiff might have better things to do than to chase its former law firm over $106,000. It may be the fact that the law firm had billed the Plaintiff more than $270,000.00 in fees for the purchase transaction, which the Plaintiff had apparently found excessive, played a role in the Plaintiff’s decision to pursue the matter.

In any event, the law firm brought a motion for judgment to dismiss the claim on a variety of grounds. The most interesting one, in my view, related to the issue of causation.

As the Court pointed out, for a lawyer to be liable for professional negligence, the client must prove that the misconduct caused the client’s loss and that the client has suffered damages as a result. Generally, the “but for” test is used, on a balance of probabilities. In other words, the client must show that the injury would have not occurred “but for” the negligence of the lawyer.

In this case, the Plaintiff argued that had he been made aware of the extent of the problem, and the cost of resolving it, he would have insisted on a reduction in the purchase price.

By way of contrary evidence, the original purchaser of the property (who had assigned the purchase agreement to the Plaintiff) provided evidence that the vendor was notoriously hard to deal with and would never have agreed to such a reduction.

If that is true, of course, it could be argued that the law firm actually did the Plaintiff a tremendous favour. If the Plaintiff had been told of the extent of the problem and asked for the reduction, and the vendor had refused, it is very possible that the Plaintiff would have lost the deal (and therefore, the handsome profit achieved upon resale four years later).

As a reflection of the current state of the law on summary judgments, however, what is particularly interesting is what the Judge did with this evidence.

The Judge simply accepted the Plaintiff’s evidence and disregarded the evidence of the original purchaser. He decided that it was “at least doubtful that the vendor…could have simply relied on the recession clause to withdraw from the transaction” and concluded on a balance of probabilities that likely, there would have been agreement between the parties on a holdback or an abatement of the purchase price.

The Judge went on to dismiss the law firm’s motion for summary judgment and to grant summary judgment in favour of the Plaintiff on liability, with a trial to follow on damages.

In my view, this is a surprising decision that may move the yardsticks for summary judgment a long way. The current jurisprudence does allow the judges to make some credibility findings in certain circumstances. Here there was a contest between written evidence from the Plaintiff as to what he would have done (with the benefit of hindsight) on the one hand, and written evidence from another individual with nothing to gain or lose in the transaction suggesting that what the Plaintiff would have done would not have worked. I would have thought that this would have required a trial in order to resolve. However, that was not this motion court Judge’s opinion.

Subject to review by the Court of Appeal, this case might well constitute a significant development in the law of summary judgment in Ontario.

Drunk Driving and Just Cause for Dismissal

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Employees sometimes conduct themselves in an outrageous manner, get fired, and insist that what they did was nowhere even close to just cause for termination.  Remarkably, sometimes they succeed and the employer has to pay damages for wrongful dismissal.

Those types of cases make it difficult to advise either side in a wrongful dismissal case as to what a court may or may not consider to be just cause.  Since the determination of just cause is essentially a factual one, it is only in rare cases that a definitive opinion can be given.

In my view, a definitive opinion could have been given to the employee Plaintiff in a recent decision of the Court of Appeal called Dziecielski v. Lighting Dimensions Inc.   In that case, the Trial Judge had dealt with a situation in which an employee had an unblemished employment record until the day that he was returning to work in a company vehicle which he was operating without the required authorization at that time.  He stopped for lunch and drank four beers in one hour.  He then got back into the vehicle, lost control of it, destroyed it, and sustained serious injuries.  He subsequently pled guilty to having a blood alcohol reading in excess of the legal limit.

At trial, the Judge found this to be serious misconduct and notwithstanding his long term employment relationship and unblemished record, concluded that his conduct constituted just cause for termination.

To succeed in an appeal of a case like this, the appellant has to show that the Trial Judge made a “palpable and overriding error”.  In this case, the Court of Appeal saw no error at all, let alone a palpable and overriding error.

It is difficult to see how anyone would have thought that a Trial Judge might minimize the seriousness of this type of behaviour simply because of an employee’s long and unblemished employment record.  Fortunately, the Court of Appeal has now delivered the message loud and clear.  An unblemished record is a factor for the Court to consider in assessing just cause, but it will not override truly serious misconduct.

Could NHL Enforcers Sue the League?

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As a lifelong fan of the Montreal Canadiens, I was as sickened as anyone else at the sight of Habs enforcer George Parros lying on the ice during the Habs home opener game against the Toronto Maple Leafs on October 1st.

Parros was signed by the team to a contract paying him almost $1,000,000.00 for the season during this past summer. He was not signed for his scoring abilities. During his career as a professional hockey player, he has played for a variety of teams where he has served exactly one role, which is that of a professional fighter on skates. The fact that he was injured in the course of a fight to the extent that he suffered a concussion and will be out of the line-up indefinitely, should come as a surprise to no one.

Over the course of the last year, at least three noted NHL “enforcers”, retired and otherwise, have died. Those deaths gave rise to a flurry of comments from a variety of sources concerning the place of fighting in professional hockey, and particularly, whether or not additional rules should be implemented to discourage or outlaw it. The injury to Mr. Parros has sparked yet another such flurry.

However, in an interesting article published online on TSN.ca on October 2nd, TSN Legal Analyst Eric Macramalla looked at the question of whether or not the NHL could be held liable for brain trauma sustained as a result of a career playing hockey.

Mr. Macramalla refers to the legal action that had been commenced by a number of retired NFL players against the National Football League alleging that the League is responsible for the long-term effects of concussions which the players have suffered. The alleged basis for liability had to do with the proposition that the League was well aware of the long-term risks of brain injuries and failed to disclose those risks to players while they were active.

In my view, there is a significant difference between the two sports when it comes to possible brain trauma. Football is an inherently violent sport. Heads collide on an ongoing basis as an integral part of play in the NFL. While equipment manufacturers have improved head protection considerably since the days of leather helmets, the other protective equipment worn by NFL players is probably equivalent to suits of armour worn by knights during the Middle Ages in terms of rigidity. If the NFL had scientific evidence as to the long-term effects of repeated collisions of this nature and deliberately withheld that information out of a concern for the future of the game, and its ability to generate revenues for team owners, that would indeed be a problem. Having said that, in professional football, it is hard to see that there are any steps at all that could be taken to prevent head trauma during play. The only answer, as far as I can see, is to simply stop playing.

Professional hockey does not, or at least should not, involve collisions between players’ heads and other rigid surfaces as an inherent part of the game. These things do happen of course, and careers are sometimes ended as a result. However, for the most part, the most serious injuries of this nature seem to occur to those players whose main function is to fight. While fighting has always been a part of professional hockey, it does not absolutely have to be. To a significant extent, it is voluntary.

It is theoretically possible that the NHL might well have evidence available to it that suggests that long-term brain damage can result from repeated trauma such as that suffered by NHL enforcers. If so, it is possible to construct a legal argument that might give rise to a damage claim. In my view, however, the possibility of a successful action of this nature is exceedingly remote. NHL enforcers are grown men who know what they are getting into when they sign contracts to be professional fighters on skates.

Dismissal For Delay: How Long Is Too Long?

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The recent decision of the Ontario Court of Appeal in Khan v. Metroland Printing, Publishing and & Distributing Ltd. et al is a useful reminder that even though the wheels of justice may feel like they turn slowly, there is a limit to everything.

This case arose out of a mayoral election in Richmond Hill, Ontario in 1997. The successful candidate in that election was William Bell. The unsuccessful candidate was Colleen Khan. Both are now deceased.

In January 1998, Ms. Khan and others commenced this action alleging that defamatory statements, including statements allegedly made by Mr. Bell, were published in Metroland’s newspaper. The action was defended and Bell also delivered a counterclaim alleging that Ms. Khan’s campaign literature included defamatory statements about him.

The pleadings and examinations for discovery were completed in late 1998.

Nothing else happened to move the case forward. In 2001, the Court made an Order requiring Mr. Bell to pay security for costs into Court. That Order was finally set aside in May 2005.

Nothing took place between May 2005 until February 2013 when the Defendants brought a motion to dismiss the action for delay. In response, the Plaintiffs insisted that they still intended to proceed with the case.

The Judge hearing the motion pointed out that over fifteen years had passed since the alleged defamation took place and fourteen years had passed since the action was started. While the position of the Khans on the motion was that they wanted to proceed to trial, there was simply no explanation as to why the action was not set down on the trial list in the subsequent fourteen years.

In this case, there was evidence of actual prejudice as a result of the loss of witnesses, as well as a presumption of prejudice arising from the delay.

The action was dismissed and on appeal to the Court of Appeal, the appeal was dismissed with costs.

Notwithstanding efforts that have been made in the administration of our court system, there are delays inherit in the system. At the moment, in Toronto, it can take seven months to obtain time from the Court for the hearing of a Masters motion. A motion before a judge will take at least four months, and only if it is relatively short. So an action can still take a long time to get to trial, even if both sides move the case along in a reasonable way. But if the parties allow an action to languish, this case is a useful reminder that there is indeed a limit to how long that will be tolerated.

The Latest on Compensation When a New Highway Puts You Out of Business

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Aside from the nuisance caused during the construction process, the construction of new highways to replace routes through small towns is usually welcomed by motorists simply because it tends to expedite travel. Unfortunately, the rerouting of a highway will damage a business built along a well-traveled road if it depends on passing motorists for business, and if the road is no longer used.

The recent Supreme Court of Canada decision in Antrim Truck Centre v. Ontario (Minister of Transportation) provides an interesting insight into the law governing the circumstances under which such a property owner can obtain compensation.

In this case, the Plaintiff operated a truck stop on Highway 17 near the hamlet of Antrim from 1978 until 2004 when construction was completed on a new section of Highway 417 running parallel to Highway 17. Motorists travelling on the new highway did not have direct access to the truck stop and as a result, in effect, it was put out of business.

The Plaintiff brought a claim for damages against the Province before the Ontario Municipal Board under the Expropriations Act on the basis that the highway project substantially interfered with its use and enjoyment of its property. The OMB awarded damages of $393,000.00 for loss of business and the decrease to the value of the property.  On appeal, the Divisional Court affirmed the OMB’s decision. On further appeal to the Ontario Court of Appeal, the Board’s decision was reversed.  At the final appeal stage, before the Supreme Court of Canada, the Supreme Court restored the Board’s decision.

The legal doctrine governing the issue is the law of nuisance. The issue in the case was quite simply whether or not the rerouting of a highway constituted a nuisance as a matter of law, and if so, what right the Plaintiff might have to compensation.

The Court defined the main question in the case as how to decide whether an interference with the private use and enjoyment of land is unreasonable, and therefore a nuisance, when it results from construction that serves an important public purpose. The Court decided that one determines the reasonableness of such interference by balancing the competing interests of the public and the land owner. This involves answering the question of whether, in all of the circumstances, the private party has shouldered a greater share of the burden of construction then it would be reasonable to expect individuals to bear without compensation.

Given the public interest served in the construction of a new highway, if the penalty suffered by an individual land owner is no more than his or her fair share of the costs associated with providing a public benefit, there will be no recovery. In this case, the Court found that the interference with the truck stop caused by the construction of the new highway inflicted significant and permanent loss, and as a result, the Plaintiff was entitled to compensation.

There are a number of instances in common-law jurisprudence generally in which such a balancing of competing interests is required. This circumstance probably arises most frequently in the context of applications for injunctions. In such cases, the Court must consider a test known as the “balance of convenience” i.e. the Court must balance the apparent harm to the party seeking the injunction if the injunction is not granted against the apparent harm to the other party if the injunction is granted. This is often a particularly difficult exercise because in most injunction cases, the facts are heavily disputed and the Judge must make the decision without being able to determine exactly what did or did not happen. In many cases, this makes it very difficult for parties and their lawyers to be able to predict with any reasonable certainty what the outcome of an application for injunction is likely to be.

The outcome of this case would have been similarly difficult to predict. The Ontario Municipal Board and the Divisional Court balanced the competing interests of the truck stop owner and the Province in a particular way. The Ontario Court of Appeal had the opposite opinion of the same facts. The Supreme Court of Canada disagreed with the Ontario Court of Appeal. All of this serves to demonstrate quite clearly the difficulty faced by land owners having to decide whether or not to seek compensation from the Province in such circumstances.

Adding to the difficulty, of course, is the fact that if the construction of a new highway has effectively put the land owner out of business, the land owner might have difficulty being able to afford to fund an application for compensation – especially if the Province is intent on taking the dispute all the way up to the Supreme Court of Canada for a final resolution. Conversely, if the impact of the new highway is not so severe as to out the land owner out of business, so that the land owner can be expected to be able to fund an application for compensation, its case might not be as compelling simply because it has not been put out of business. Based on this case, however, it would appear that any time a land owner is victimized this way, some consideration should be given to an application for compensation.

The Latest on Facebook Photographs and the Litigation Process

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In the recent decision of a Superior Court Master in Garacci vs. Ross, the Court dealt with a motion by the Defendant in a personal injury action to force the Plaintiff to disclose photographs on the private portion of her Facebook account.

The Plaintiff had been involved in a car accident and claimed that she had sustained serious and permanent injuries to her left leg and ankle. At Discovery, she testified that she was now unable to pursue recreational activities that she previously enjoyed, including soccer, waterskiing, competitive dancing, and snowboarding. She admitted that she could still swim, go to the gym, and travel among other things.

The Defendant found a dozen pictures on public areas of her Facebook page showing the Plaintiff kneeling on the ground, climbing a tree, and wrestling a friend to the ground. The Defendant argued that there must be other similar photographs showing her engaged in similar activities among her 1,100 private photographs and asked that all of them be produced.

It appears that the Plaintiff either produced or provided the Court with access to these photographs and the Court reviewed about 10% of them at random. The Court concluded that none of them showed the Plaintiff engaged in any significant physical activity. The Court observed that most of the photographs were taken from the waist up and only showed her involved in low impact activities.

The Court dismissed the motion on a number of grounds.

Firstly, the Court did not consider the photographs to be particularly relevant.

Secondly, given the number of photographs involved, the Court considered the request that every single one taken since the accident be produced, to be “merely a high-tech fishing expedition” which was “not an appropriate or proportional form of discovery”.

This leaves one to wonder as to whether or not the result might have been different if instead of 1,100 photographs, there were perhaps two dozen.

Of more significance is the fact that in principle, private photographs on a Facebook account are not out of bounds in appropriate cases. If one of the photographs viewed by the Court had shown the Plaintiff involved in a significant physical activity, the result might have been different and it is possible that the Plaintiff would have had to produce all of them. This result would have been even more likely if the Plaintiff would have been foolhardy enough to post such photographs on the public portion of her Facebook account.

This case is yet another useful reminder to litigants to be extremely careful about how they manage their Facebook or other social media accounts, both with respect to photographs and texts, and both with respect to the public and private sections of their accounts.