





CITATION:
Zurich Insurance Company Ltd v. Ison T.H. Auto
          Sales Inc., 2011 ONCA 663



DATE: 20111025



DOCKET: C53568



COURT OF APPEAL FOR ONTARIO



MacPherson, LaForme and Epstein JJ.A.



BETWEEN



Zurich Insurance Company Ltd and Chartis Insurance
          Company of Canada



Applicants (Appellants)



and



Ison T.H. Auto Sales Inc.



Respondent (Respondent)



Hillel David and Mark A. Mason, for the appellants



Theodore P. Charney and Michelle D. Kemper, for the respondent



Heard:
October 19, 2011



On appeal from the judgment of Justice Strathy of the Superior
          Court of Justice dated March 25, 2011.



ENDORSEMENT



[1]

The appellant insurers appeal from the judgment of Strathy J. of the
    Superior Court of Justice dated 25 March 2011, with reasons released on the
    same date and with supplementary reasons released on 21 April 2011.

[2]

The respondent Ison T.H. Auto Sales Inc., by way of cross-appeal, seeks
    leave to appeal from one component of the application judges supplementary
    judgment relating to costs dated 22 June 2011.

The appeal

[3]

The appellants are insurers and the respondent is an insured under their
    policy.  Following a large loss event, caused by a fire and explosion at an
    apartment building in Toronto, the appellants paid out $1.1. million to the
    respondent.

[4]

The respondent claims that it has an additional uninsured loss of
    $700,000.  The respondent commenced an action against the alleged wrongdoer and
    included in the action both its claim for its uninsured loss and the
    appellants subrogated claim (the Ison action).

[5]

A dispute between the appellants and the respondent subsequently arose
    regarding the carriage and control of the Ison action.  The appellants contend
    that they are entitled to have carriage and control of this action pursuant to
    the subrogation clause in the insurance policy.  Alternatively, they submit
    that they are entitled to have meaningful participation in the action and full
    control of their subrogated claim, except on issues of liability common to both
    parties.  Finally, the appellants argue that the respondent breached its duty
    of utmost good faith by barring the attendance of the appellants counsel at
    the examinations for discovery in the Ison action and by its subsequent
    conduct.

[6]

We do not accept these submissions.  On all of these issues, we agree
    with and adopt, in their entirety, the analysis and conclusions of the
    application judge which are, in a word, masterful.  In particular, we agree
    with the application judges careful discussion of the relationship between the
    decision of British Columbia Court of Appeal in
Farrell Estates Ltd. v.
    Canadian Indemnity Co.
(1990), 69 D.L.R. (4
th
) 735 and the
    subsequent decision of the Supreme Court of Canada in
Somersall v. Friedman
,
    [2002] 3 S.C.R. 109.

[7]

We make one other observation.  The appellants do not propose that the
    issue of carriage and control of the Ison action be determined solely on the
    basis of the interpretation of the subrogation clause in the insurance policy. 
    Rather, their suggested test, as set out in their factum and developed in oral
    submissions, is: The language of the policy provision should be considered in
    conjunction with the following fundamental issue: What is the fair and sensible
    result?

[8]

In answering this question, the appellants submit that the crucial
    factor to consider is the value of the claims by the insurer and the insured. 
    In this case, the insurers say that their claim is a hard $1 million whereas
    the insureds claim is a soft $700,000.  Accordingly, the insurer should have
    carriage and control of the Ison action.

[9]

Accepting, without necessarily agreeing with, the appellants proposed
    test, we think that the appellants focus on the factor of the monetary amount
    of the competing claims is too narrow.  If considerations relating to the fair
    and sensible result come into play, then attention must be paid to the conduct
    of the insured and the insurer in the context of the entire legislation.

[10]

In responding to this submission, the application judge said:

Counsel for the insurers submits that if I have
    discretion as to which party has carriage, it should be given to the insurers
    who have a larger ($1 million) hard claim for property damage as opposed to
    Toronto Hondas smaller ($700,000) soft claim for business losses. There is
    no evidence before me to show that Toronto Hondas business loss claim is any
    less recoverable than the property claim.

There are, as well, other factors, including:

·

the insured has been diligent in pursuing claims on behalf of
    itself and the insurers  this action was commenced almost two years ago and is
    well advanced;

·

the insurers delayed for over 15 months after the fire before
    opening up discussions about subrogation and these were prompted by the
    initiative of counsel for the insured;

·

this application was not commenced until August 4, 2010, more than
    two years after the fire;

·

a great deal of time and effort has already been expended by
    Toronto Honda, and its counsel, in pursuing the claim;

·

Toronto Honda, and the insurers, will benefit from the fact that
    Falconer Charney and Sutts Strosberg act as class counsel and have control of
    that litigation as well, resulting in cost-saving and other synergies; and

·

there is no suggestion that the insurers position has been or
    will be prejudiced in any way by leaving carriage with Falconer Charney and
    Sutts Strosberg, who are unquestionably qualified to act as counsel.

There may be cases where the insurers interest is
    so vastly disproportionate to the insureds interest that it would be
    unreasonable to allow the latter to have control of the litigation. This is not
    such a case.

[11]

We agree with this analysis.  We also note that the application judge is
    case managing, and will hear next autumn, both the class action and the Ison
    action relating to the fire and explosion at the apartment building.  He is
    well positioned to deal with any complaints about the insureds carriage and
    control of, and the insurers participation in, the Ison action as it moves
    forward.

The cross-appeal

[12]

The application judge awarded the respondent costs in the amount of
    $30,000.  The respondent seeks leave to appeal on the basis that the
    application judge erred by not awarding full indemnity costs against the
    appellants due to his misinterpretation of a costs of recovery provision in
    the subrogation clause in the insurance policy.

[13]

The application judge rejected the appellants interpretation of this clause. 
    However, in addition he said: Standing back and considering what is fair and
    reasonable, it is my view that the full indemnity claim is not only
    unwarranted, it is entirely out of proportion to what would be fair and
    reasonable for a claim of this kind.  We see no error in this conclusion.

Disposition

[14]

The appeal and cross-appeal are dismissed.

[15]

The respondent is entitled to its costs of the appeal fixed at $18,000
    inclusive of disbursements and HST.  The appellants are entitled to their costs
    of the cross-appeal fixed at $2000 inclusive of disbursements and HST.

J.C. MacPherson
    J.A.

H.S. LaForme
    J.A.

G.J. Epstein
    J.A.


