



COURT OF APPEAL FOR ONTARIO

CITATION: Aviva Insurance Company of
    Canada v. Lombard General Insurance Company of Canada, 2013 ONCA
    416

DATE: 20130620

DOCKET: C55661

Blair, Tulloch and Lauwers JJ.A.

BETWEEN

Aviva Insurance Company of Canada
, Tandem
    Realty Administration Inc., Tandem Group Management Inc., Van Forbell and Paul
    Reid

Plaintiff
    (Respondent/

Appellant by way of cross-appeal)

and

Lombard General Insurance Company of Canada

Defendant (Appellant/

Respondent by way of cross-appeal)

Ronald G. Slaght, Q.C. and Dena N. Varah, for the
    appellant/respondent by way of cross-appeal

Steven Stieber and Elizabeth Bowker, for the respondent/appellant
    by way of cross-appeal Aviva Insurance Company of Canada

Heard: March 18, 2013

On appeal from the judgment of Justice A. Duncan Grace of
    the Superior Court of Justice, dated June 1, 2012, with reasons reported at
    2012 ONSC 3219.

Blair
    J.A.:

Overview

[1]

Aviva Insurance Company of Canada and Lombard General Insurance Company
    of Canada disagree over the ranking of policies required to respond to losses
    arising from a fire in a Toronto apartment building.  One of the corollaries to
    their respective manoeuvrings is this appeal.

[2]

The tragic fire occurred in January, 1995.  Six people died and numerous
    others were seriously injured.  Eight legal proceedings resulted, and among the
    various defendants held liable were the owner of the building, Axes Investments
    Inc., and the property manager, Tandem Group Management Inc.  Axes and Tandem
    were jointly represented by one counsel at trial and liability was not
    apportioned between them; instead, they were found liable as one defendant.

[3]

There were three policies of insurance available to respond to their liability:

(i)

a Lombard primary policy, with limits of $1 million, insuring both Axes
    and Tandem;

(ii)

a Lombard umbrella policy, with limits of $9 million, insuring both Axes
    and Tandem; and

(iii)

an Aviva policy, with limits of $5 million, insuring Tandem only.
[1]

[4]

It was clear early on that the extent of the plaintiffs claims in the
    tort actions would exceed the limits of the Lombard primary policy, and there
    was never any dispute about whether that policy would be responsible for the
    first $1 million in damages.  Since the outset, however, Aviva and Lombard have
    engaged in a sophisticated and protracted contretemps over which insurer was
    responsible for what portion of the excess losses.

[5]

Lombard took the position that the Aviva policy was required to respond next
    after the Lombard primary policy and that the Lombard umbrella policy was only
    triggered if and when the Aviva $5 million limits had been exhausted.  Aviva took
    the opposite position, maintaining that the Lombard umbrella policy was next to
    respond completely because it covered both the owner and the property manager.

[6]

Acting on the advice of experienced senior counsel, each insurer carefully
    planned its strategy and tactics to achieve their desired result, and much
    litigious ground has been ploughed to this end.  At the end of the day, however
     in the circumstances I will describe below  Aviva paid the entire amount of
    the excess claim to the tort plaintiffs.

[7]

In this action, Aviva submits that Lombard should be responsible for
    one-half of that payment because Avivas policy covered only Tandem (the
    property manager) whereas the Lombard umbrella policy covered both Tandem and
    Axes (the owner), and because Tandem and Axes were each liable to pay that
    portion of the damages assessed against them in the tort actions.  Lombard
    argues that, because a previous proceeding determined that Aviva was required
    to respond next after the Lombard primary policy to the liability of their
    joint insured, Tandem, and because Avivas payment satisfied the liability
    claim in full, Lombards responsibility under its excess umbrella coverage was
    never engaged, and full responsibility therefore lies with Aviva.

[8]

At trial, Grace J. agreed with Aviva and gave judgment against Lombard
    in the amount of $1,086,195.70 plus pre-judgment interest and costs,
    representing 50% of the amount paid by Aviva.

[9]

I too agree, although not entirely for the same reasons, and I would
    dismiss the appeal.  I would also dismiss Avivas cross-appeal in relation to
    costs.

Background

[10]

What
    happened is not in dispute and is well summarized by the trial judge in his
    reasons.

[11]

Lombards
    primary policy covered the first $1 million of the damages arising from the
    fire, and it paid that amount.  The debate is about who is responsible for the
    significant excess amount needed to satisfy the portion of the judgments
    obtained by the tort plaintiffs for which Axes and Tandem (as a single
    defendant) were found responsible.

[12]

The
    conundrum arises because of the way in which Aviva and Lombard decided to
    approach the defence of the tort actions.  Lombard acknowledged that its
    primary policy was first to respond; it retained experienced counsel to defend
    the owner and property manager  both covered under its policies  and funded
    their defence.  Although entitled to do so, Aviva did not participate in the
    defence of the tort actions or retain its own counsel for that purpose.

[13]

There
    has been much blaming and finger pointing in both directions regarding why
    Aviva (itself acting on the advice of experienced counsel) chose not to defend
    and whether Lombard was taking advantage of Aviva by solely defending the tort
    actions and not appointing separate counsel for Axes and Tandem. Was Aviva
    simply lying in the rushes awaiting the outcome and hoping, if necessary, to
    be able to raise its conflict of interest arguments against Lombard and thus
    avoid making any payments altogether?  Was Lombard attempting to take advantage
    of Aviva by bringing what is described below as the Priority Proceeding, to
    avoid paying anything over and above its primary policy limits?

[14]

Like
    the trial judge, I am somewhat puzzled by the rhetoric these issues have evoked. 
    As he aptly observed at para. 69:

Both insurers point self-righteous fingers at the other.  I do
    not know why.  They are sophisticated, knowledgeable and experienced.  They
    tried to outwit the other.  The priority proceeding made Avivas objective of
    paying nothing on account of the tragic fire unattainable.  The result of that
    proceeding before Hoilett J. seems to have been the catalyst for Lombards
    attempt to avoid paying anything beyond that expended under the primary policy. 
    I observe with interest but am unaffected by the insurers approach.

[15]

I
    am not persuaded that the allegations surrounding the parties respective
    tactical and strategic manoeuvres have much relevance to the ultimate
    resolution of the issues before us.  Each insurer was entitled to protect its
    own position.

[16]

What
    emerges from these tactics, however, is that the parties presented a unified
    defence in the tort actions, with only one counsel representing both owner and
    property manager.  They did not assert any cross-claims seeking an
    apportionment of liability as between them, should their insureds be found
    liable.  In the result, Lane J.  the trial judge in the test case that
    proceeded (called the
Bakhtiari
action)
[2]
 made no findings apportioning liability as between Axes and Tandem.  He found
    them liable, as one defendant, for a portion of the plaintiffs damages.

[17]

The
    judgment in
Bakhtiari
was appealed.  Before that appeal was heard, Lombard
    commenced the Priority Proceeding, seeking a declaration that, after Lombards
    $1 million payment under its primary policy, Avivas policy was next to respond
    to the damages.  On August 22, 2003, Hoilett J. ruled in Lombards favour,
[3]
finding that Avivas policy was a primary policy with an excess coverage clause
    ranking ahead of Lombards true umbrella policy.  Lombard reads this decision
    as establishing that Avivas policy is next to respond in relation to
all
of
    Lombards umbrella policy obligations with respect to the Axes/Tandem unit, up
    to the point where Avivas policy limits are exhausted.

[18]

While
    Aviva was appealing Hoilett J.s ruling in the Priority Proceeding, this Courts
    decision on the judgment of Lane J. in the
Bakhtiari
action was
    released, on February 6, 2004.  Lane J.s findings as to liability were upheld,
    but his judgment was varied to decrease the percentage of responsibility
    assigned to the defendant unit of Axes and Tandem from 70% to 45%.

[19]

At
    this point, the games between Aviva and Lombard peaked.  The tort plaintiffs
    demanded payment.  They could do so from either or both insurers.  Aviva
    proposed a joint payment, sharing the claim equally.  Lombard did not agree.

[20]

Ultimately,
    in the words of Lombards counsel  Aviva blinked.  Without a decision on the
    appeal in the Priority Proceeding and faced with (a) a clear order that it was
    next to respond in relation to Tandems liability, (b) the threat of
    enforcement and a potential claim for punitive and exemplary damages for
    failure to pay, and (c) Lombards refusal to agree to a joint contribution by
    both insurers, Aviva paid the Axes/Tandem portion of the plaintiffs damages.  The
    amount it paid was $2,493,343.13, including pre-judgment interest and costs.
[4]

[21]

After
    Avivas payment, this Courts decision in the Priority Proceeding was
    released.  This Court specifically varied Hoilett J.s order to clarify that
    Avivas exposure to respond next related solely to the liability coverage
    afforded to [Tandem].  This decision, as varied, is known as the Ranking
    Decision.
[5]


[22]

The
    Priority Proceeding and the Ranking Decision did
not
touch on whether,
    or to what extent, liability would be shared if Avivas payment on behalf of
    Tandem exhausted the liability of both defendants, jointly.  This unresolved
    matter brought Aviva before Grace J., seeking  and being granted  recovery from
    Lombard for one-half of its damages payment. Lombard now appeals this decision.

Analysis

[23]

For
    purposes of this analysis, it is significant that the two insurers agreed to
    present a common defence in the tort actions, with one set of counsel.  It may
    be that in agreeing to this approach, Avivas objective was to position itself
    so that it would end up paying nothing at all with regard to the fire losses.  Attaining
    this objective was precluded by the Ranking Decision, as it turned out.  At the
    same time, it can fairly be said that Lombards objective was the opposite  to
    position itself so that it would have to pay nothing over and above the limits
    of its primary policy.  As the trial judge observed, each tried to outwit the
    other.

[24]

The
    result of this manoeuvring was Aviva and Lombards decision to defend the tort
    actions as one defendant, without seeking any decision as to contribution and
    indemnity as between them.  As the trial judge correctly noted at para. 38:

[T]he owner and property manager were treated both at trial and
    on appeal as if they were one defendant.  No effort was made to distinguish
    between the acts or omissions of the owner and property manager.  In other
    words, the process of allocation of fault between the owner and property
    manager did not fail.  It was never engaged. By choice.

[25]

Contrary
    to Lombards contention, Aviva does not resile from that position here. 
    Rather, it relies upon the one defendant determination in the tort action. 
    It argues that because the tort action treated two distinct defendants (each
    with different insurers) as one defendant for the purpose of finding
    liability, and because the trial judge did not apportion liability as between
    them, the issue in this proceeding is not about how to apportion
liability
as between two defendants; it is about how to apportion
responsibility
for that one defendant liability as between the two insurers.

[26]

In
    my opinion, these issues are properly resolved in the final analysis through
    the application of notions of equitable contribution, or some combination of
    equitable contribution and the restitutionary principles of unjust enrichment 
    both simply examples of the fair play rules imposed by equity.  These
    principles operate to require Lombard to contribute to Avivas payment of the total
    loss.  Payment of the loss was in reality a payment on behalf of
both
Tandem and Axes.  Lombard insured both Tandem and Axes.  While Lombard was not
    required to respond next to the loss on behalf of Tandem (in view of the
    Ranking Decision), it
was
required to respond to the loss on behalf of
    Axes.  It should therefore contribute to the total loss on a 50/50 basis.

[27]

I
    arrive at this conclusion on the following basis.

a)

Equitable Contribution

[28]

The
    trial judge did not find contribution to be an appropriate basis for recovery. 
    In my view, however, principles of equitable contribution are germane to these
    circumstances.

[29]

The
    traditional criteria for applying the doctrine of equitable contribution as
    between insurers are the following:

(i)

All policies concerned must comprise the same subject-matter.

(ii)

All policies must be effected against the same peril.

(iii)

All policies must be effected by or on behalf of the same assured.

(iv)

All policies must be in force at the time of the loss.

(v)

All policies must be legal contracts of insurance.

(vi)

No policy must contain any stipulation by which it is excluded from
    contribution.

[30]

These
    criteria were confirmed by the Supreme Court of Canada in
Family Insurance
    Corp. v. Lombard Canada Ltd.
, 2002 SCC 48, [2002] 2 S.C.R. 695,  at para.
    15, adopting the criteria set out in E.R. Hardy Ivamys
General Principles
    of Insurance Law,
6th ed. (London: Butterworths, 1993), at p. 518.  I
    shall refer to them as the Ivamy criteria for purposes of these reasons.

[31]

Equitable
    contribution in the insurance context has traditionally been applied to prevent
    over-recovery by an insured with more than one insurer covering the same risk,
    and to do so by calling on all relevant insurers of that same risk to share pro
    rata in payment of that loss.  In her text,
General Principles of Canadian
    Insurance Law
, 1st ed. (Markham: LexisNexis, 2008), at p. 317, Barbara
    Billingsley explains the concept in this way:

Where a given loss is covered by more than one insurance
    policy, the principle of indemnity still applies.  In other words, despite the
    fact that the insured has multiple sources of insurance coverage, the insured
    is not entitled to recover more than the value of the loss.  In order to
    prevent over-recovery by the insured, the doctrine of contribution applies.
Contribution
    requires payment of the loss to be shared by the relevant insurers.
This
    sharing of the loss ensures that the insured is not over-indemnified by
    recovering the full amount of the loss from multiple sources.  Contribution
    also ensures that each insurer fulfills its indemnity obligation
and is not
    relieved of its payment obligations by the existence of other applicable
    insurance.
[Emphasis added.]

[32]

As
    the Supreme Court of Canada put it in
Family Insurance Corp.
, at para.
    14: [t]he selected insurer, in turn, is entitled to contribution from all
    other insurers
who have covered the same risk
 (emphasis added).

[33]

Here,
    Aviva is equivalent to the selected insurer because it has paid the damage
    claim in full; Lombard is another insurer who [has] covered the same risk,
    i.e. the risk of indemnifying against the losses associated with the one
    defendant award made against Axes/Tandem.

[34]

As
    I appreciate the way in which the doctrine of equitable contribution has been
    applied in the insurance context, two different considerations are at play. The
    first is the need to prevent over-recovery by an insured who can look to more
    than one insurer for payment.  The second is the need to avoid a windfall to
    insurers other than the selected insurer because that selected insurer paid
    in full a claim arising out of shared liability.  This latter goal is achieved
    by requiring the other insurers who cover the same risk to share pro rata in
    responding to that risk.

[35]

In
    this case, that risk is the equal obligation on the part of Aviva and Lombard to
    respond to the tort plaintiffs claim against the Axes/Tandem unit.

[36]

Lombard
    and Aviva chose to put forward a one defendant case to the tort action trial
    judge.  They invited and had a one defendant damage award made against them. 
    As a result, the tort plaintiffs were entitled to enforce the portion of the
    damage award allocated to the Axes/Tandem unit against either Axes or Tandem
    for the full amount, and threatened to do so.  To the extent they had sought to
    enforce the full amount of the claim against Axes alone, Lombard was obligated
    to respond in full because of its obligation to indemnify Axes; indeed, Aviva
    did not insure Axes at all.  To the extent the tort plaintiffs had sought to
    enforce the judgment against Tandem alone, Tandem could potentially look to
    either Aviva or Lombard, because Tandem was insured by both, but with the
    Ranking Decision putting Aviva next in line to respond following Lombards
    primary policy.  Although Lombard had the benefit of the Ranking Decision for
    purposes of its umbrella policy, that did
not
discharge its obligation
vis-à-vis Axes
in terms of responsibility for the Tandem payment.

[37]

In
    short, Lombard and Aviva were each equally obligated to respond to the
    plaintiffs claims in full.  The fact that Aviva blinked first does not
    detract from Lombards legal obligation to respond, had the tort plaintiffs
    pursued Axes alone. Blinking cannot be the defining principle of insurance
    law upon which the respective responsibilities of Aviva and Lombard for
    responding to the losses are determined.

(i)

The Ranking Decision

[38]

I
    do not think the Ranking Decision affects this result.

[39]

Much
    was said about that decision in argument.  Lombard contended that its effect
    was to eliminate any obligation on the part of Axes or Lombard to respond to
    the losses unless and until Avivas limits on behalf of Tandem had been
    exhausted.  I do not read the Ranking Decision in that way.  In my view its
    only effect was to settle that Aviva was required to respond next to satisfy
Tandems
liability.  That was the case because Avivas policy was a primary policy
    with an excess coverage clause, as opposed to a true umbrella policy. As such, it
    took priority over the Lombard umbrella policy also providing excess coverage
    to Tandem: see
Trenton Cold Storage Ltd. v. St. Paul Fire and Marine
    Insurance Co.
, 199 D.L.R. (4th) 654 (Ont. C.A.)
.
The Ranking
    Decision did not determine that Axes had no liability to pay until this had
    been done or that Lombard had no obligation to respond to the liability of
Axes
.  I do not accept Lombards submission to the contrary, and I do not
    think the Ranking Decision precludes the operation of the doctrine of equitable
    contribution here.

(ii)
         The Same Assured

[40]

I
    recognize that the third Ivamy criterion stipulates that [a]ll the policies
    must be effected by or on behalf of the same assured, and that there are two
    insured entities here, Axes and Tandem.  However, I do not see this criterion
    as a rigid impediment to extending the doctrine of equitable contribution to
    the circumstances found in this case.  Resort to principles of equity calls for
    flexibility.

[41]

At
    its heart, the doctrine of equitable contribution as between insurers turns
    less on the existence of a single insured than on the fact that multiple
    insurers are responsible for
the same liability
of that insured
    arising out of the same risk.  In
Family Insurance Corp
, at para. 14,
    the Supreme Court of Canada highlighted the basic principle underlying the
    doctrine of equitable contribution: [t]he doctrine of equitable contribution
    among insurers is founded on the general principle that
parties under a
    coordinate liability to make good a loss
must share that burden pro rata
    (emphasis added).

[42]

This
    is the rationale underpinning contribution as between insurers, which, in turn,
    is the means by which over-recovery is prevented.  When two insurers insure the
    same risk, and choose  as Aviva and Lombard did here  to present a united
    front as one defendant in the tort actions arising from the occurrence of
    that risk, the two insurers (the one defendant (Axes/Tandem)) may in effect
    be viewed as though they are subject to a coordinate liability and, therefore,
    as if they were the the same assured for purposes of that particular risk, in
    my view.

[43]

Just
    as it is not equitable to permit the second of two insurers to escape with no
    responsibility where the first insurer, covering the same loss on behalf of the
    same insured, pays the claim in full, it would be similarly inequitable to
    permit the second insurer to do so in the circumstances that exist here.

[44]

In
    these circumstances, the fact that Avivas policy was ranked ahead of Lombards
    with respect to Tandem is not determinative of the result.  In my view, the
    same result would flow if Lombard had only insured Axes and not Tandem at all. 
    By putting forward a one defendant stance in the tort action, and inviting
    the trial judge to impose a single damage award against them both, without any
    attribution of liability as between them, Aviva and Lombard effectively created
    one insured for purposes of responding to the damages awarded against
    Axes/Tandem.  They are equally obligated to pay the plaintiffs.  They should
    share that obligation equally, in the absence of any contractual or statutory
    provision to the contrary (neither of which has been brought to our attention).

[45]

In
    these circumstances, the Axes/Tandem defendant was liable to pay, and Aviva and
    Lombard had a coordinate liability to make good that loss in relation to that
    defendant.  I do not see why Lombard ought not to be required to fulfill[] its
    indemnity obligation or why it should be relieved of its payment obligations
    by the existence of other applicable insurance (Billingsley, p. 317).

[46]

Just
    as it does not lie in the mouth of an insurer covering the same risk in the
    single insured context to say there is nothing to pay because the selected
    insurer has paid the full amount and therefore there is no outstanding
    liability, it does not lie in Lombards mouth in these circumstances to say in
    effect, too bad, so sad: Aviva has paid the joint liability of Axes
and
Tandem by responding to the claim against Tandem, and as a result there is
    nothing left for Axes, nor therefore for us, to pay.

b)

Restitution

[47]

There
    is another basis for upholding Lombards responsibility to contribute equally
    to the damages awarded against Axes/Tandem, one that was relied upon by the
    trial judge in his alternative reasoning: the principle of restitution known as
    unjust enrichment.

[48]

Recently,
    in
Kerr v. Baranow
, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 31-32,
    Cromwell J. summarized the rationale and legal framework underlying the unjust
    enrichment concept as it has evolved in Canadian law:

At the heart of the doctrine of unjust enrichment lies the
    notion of restoring a benefit which justice does not permit one to retain:
Peel
    (Regional Municipality) v. Canada
, [1992] 3 S.C.R. 762, at p. 788.  For
    recovery, something must have been given by the plaintiff and received and
    retained by the defendant without juristic reason.  A series of categories
    developed in which retention of a conferred benefit was considered unjust. 
    These included, for example: benefits conferred under mistakes of fact or law;
    under compulsion; out of necessity; as a result of ineffective transactions; or
    at the defendants request: see
Peel
, at p. 789; see, generally,
    G.H.L. Fridman,
Restitution
(2
nd
ed. 1992), c. 3-5, 7, 8
    and 10; and Lord Goff of Chieveley and G. Jones,
The Law of Restitution
(7
th
ed., 2007), c. 4-11, 17 and 19-26.

Canadian law, however, does not limit unjust enrichment claims
    to these categories.  It permits recovery whenever the plaintiff can establish
    three elements: an enrichment of or benefit to the defendant, a corresponding
    deprivation of the plaintiff, and the absence of a juristic reason for the
    enrichment:
Pettkus; Peel,
at p. 784.  By retaining the existing
    categories, while recognizing other claims that fall within the principles
    underlying unjust enrichment, the law is able to develop in a flexible way as
    required to meet changing perceptions of justice:
Peel
, at p. 788.

See also
Rathwell v. Rathwell
, [1978] 2
    S.C.R. 436, at p. 455;
Sorochan v. Sorochan
, [1986] 2 S.C.R. 38, at p.
    44;
Pettkus v. Becker
, [1980] 2 S.C.R. 834; and
Peter v. Beblow
,
    [1993] 1 S.C.R. 980.

[49]

Cromwell
    J. also observed, at para. 34, that while the underlying legal principles of the
    law of unjust enrichment are the same for all cases, the courts must apply
    those common principles in ways that respond to the particular context in which
    they are to operate.  They must be applied with flexibility and common sense.

[50]

In
    my view, the trial judge was correct in concluding that these criteria have
    been met in the circumstances of this case.

[51]

Lombard
    argues that no case for a restitutionary remedy has been made out.  Mr. Slaght
    submits that Lombard did not receive any benefit from Avivas payment of the
    judgment because Lombard had no obligation to respond until after Aviva had
    paid on behalf of Tandem to the full extent of the Aviva policy limits.  Once
    Aviva paid, there was no further obligation to the tort plaintiffs for Lombard
    to discharge.  In these circumstances  so the argument goes  Aviva did not
    relieve Lombard from a legal burden that Lombard would otherwise have been
    obliged to assume; Aviva was simply complying with its own obligation to pay on
    behalf of Tandem.  On a similar analysis, Aviva was not deprived of anything,
    because Aviva was obliged to respond to Tandems obligation to the full extent
    of the Aviva policy limits as a result of the Ranking Decision.

[52]

I
    disagree.

[53]

As
    explained earlier in these reasons, the Ranking Decision did not negate
    Lombards obligation under its umbrella policy to cover the liability of Axes. 
    It simply ranked the competing policies in terms of responding to Tandems
    liability.  The variation of Hoilett J.s judgment by this Court, and Hoilett
    J.s reasons themselves, make this clear: Avivas obligation to respond next
    after the Lombard primary policy related to the liability coverage afforded to
    the defendant Tandem.

[54]

At
    the instance of the two insurers, Lane J. awarded damages against Axes/Tandem
    as one defendant, a single united tortfeasor.  The tort plaintiffs had the
    right to pursue enforcement against either or both of Axes and Tandem.  In this
    respect, it matters little whether that liability is described in the judgment
    as joint and several or not: both Axes and Tandem were obliged to pay the
    portion of the damages awarded against them in full.  Tandem had the right to
    be indemnified by both Lombard and Aviva, but as a result of the Ranking
    Decision, Aviva was next to respond to that indemnity claim.  At the same time,
    if the tort plaintiffs had decided to pursue Axes alone, as they would have
    been entitled to do, Axes was entitled to claim indemnity under the Lombard umbrella
    policy because Lombard remained fixed with the obligation to respond to that
    liability in relation to Axes.

[55]

In
    such an event, Lombard would have been in exactly the same position as an
    insurer who paid the claim of an insured who was able to choose from several
    insurers of the same risk; it would be entitled to seek contribution from those
    other insurers.  The reverse is true when the payment is made in these
    circumstances by Aviva.

[56]

I
    observe in passing that this analysis overlaps in some aspects with the
    analysis leading to the adoption of equitable contribution principles.  This is
    not surprising.  Both equitable contribution and unjust enrichment have their
    roots in notions of equity, and what is at issue here, at its core, is whether it
    would be unfair for Lombard to be relieved of its payment obligations by the
    existence of other applicable insurance, to adopt the equitable contribution
    language cited above from p. 317 of Billingsleys text.

[57]

For
    purposes of the unjust enrichment analysis, the point is that Lombard retained
    its obligation to pay on behalf of Axes, notwithstanding the Ranking Decision. 
    When Aviva covered that obligation  even though it did so in the course of
    covering its own obligation in relation to Tandem  it conferred a benefit on
    Lombard in the sense that the payment spared Lombard from incurring an expense it
    would otherwise have had to incur: see
Kerr
, at para 38.  Aviva also
    suffered a corresponding deprivation.  I agree with the trial judge at para. 80
    that [t]o the extent Aviva paid more than the property managers [Tandems]
    proper share, the payments were to Avivas detriment.  Had Lombard complied
    with its obligation to indemnify Axes for its share of the damage award, Aviva
    would not have had to cover Lombards share of the loss.

[58]

Nor
    can I see any juristic reason for conferring such a benefit on Lombard in these
    circumstances.  The Ranking Decision only resolved the issue of whether
    Lombards umbrella policy had to respond next (after its primary policy limits
    had been paid) for both Tandem and Axes, or whether Avivas policy stood next
    in line in relation to Tandems coverage. There could be no basis upon which
    Avivas policy could rank ahead of the Lombard umbrella policy in relation to
    the liability of Axes: Aviva did not insure Axes.

[59]

For
    the reasons expressed above, in the words of Cromwell J. in
Kerr
, at
    para. 40, there is no reason in law or justice for Lombards retention of the
    benefit conferred by Aviva.

[60]

I
    would therefore uphold the trial judges finding that Lombard is required to
    reimburse Aviva for one-half of the Axes/Tandem liability on unjust
    enrichment/restitutionary grounds.

c)

Aetna Insurance Co. v.
    Canadian Surety Co.

[61]

Both
    Aviva and the trial judge relied on a decision of the Alberta Court of Appeal
    in
Aetna Insurance Co. v. Canadian Surety Co.
(1994), 149 A.R. 321, to
    support the conclusion that responsibility for payment of the Axes/Tandem
    damages should be shared equally between Aviva and Lombard.

[62]

In
    that case, damages were awarded in Montana proceedings as a result of a fatal
    tractor-trailer accident involving a trucking unit owned by Alberta parties. 
    The tractor and the trailer were each insured by different insurers.  It was
    the drivers negligence that caused the accident, and there was no other basis
    for attributing negligence to the tractor or the trailer.  The Montana court
    made no apportionment of liability as between the two, in effect treating the
    tractor and trailer as one defendant for purposes of the damage award.

[63]

Aetna
    ultimately paid the claim on behalf of its insured, the owner of the trailer,
    and commenced proceedings in Alberta against the insurer of the tractor for
    contribution and restitution.  Acknowledging that it was impossible to
    apportion liability as between the owner of the tractor and the owner of the
    trailer, the Alberta Court of Appeal attributed half of the operators
    negligence to the tractor and half to the trailer.  The Court concluded that
    for the purpose of assessing ultimate responsibility (para. 119), the only
    reasonable solution [was] to apportion responsibility for that negligence
    equally (para. 121).

[64]

Lombard
    submits that the
Aetna
decision is not helpful, arguing that it is
    distinguishable on a number of factual and statutory grounds.  The trial judge
    recognized the factual distinctions, but concluded that the facts and analysis
    in the decision were analogous.  He pointed out at para. 53 that in
Aetna
,
    the allocation of responsibility involved the negligent operation of two
    things (the tractor and the trailer) by one person, whereas the case here
    involves negligence in relation to one thing (the property) by two people (the
    owner and property [manager].  He therefore found the Alberta Court of Appeals
    analysis with respect to the tractor and trailer applicable to Axes and Tandem
    here.

[65]

Whether
    the distinguishing features render the
Aetna
decision inapplicable in
    this case or not matters little, in my view.  It is simply an example of a
    decision that gives effect to the concept of coordinate liability in the
    context of equitable contribution.

[66]

I
    am satisfied that the appeal may be disposed of on the basis of the equitable
    contribution and restitution analyses set out above.

Cross-Appeal as to Costs

[67]

Aviva
    seeks leave to appeal and, if granted, to appeal from the trial judges failure
    to award its costs on a substantial indemnity basis.  He awarded $56,841.85
    inclusive of disbursements on a partial indemnity basis.

[68]

Avivas
    principal submission is that the trial judge erred in failing to consider a
    proposed resolution set in a letter of September 21, 2005, from Avivas counsel
    to Lombards counsel.  Aviva says the outcome at trial was essentially the
    proposed resolution contained in the letter, and that Lombard wrongly ignored
    the letter.  Lombard counters with the argument that the primary purpose of the
    letter was to initiate discussions about the quantum of damages, without
    addressing the issue of apportionment of responsibility between the insurers.

[69]

I
    do not read the letter in quite the same way as Lombard does.  In the letter,
    Mr. Stieber specifically outlined the principles upon which it is suggested
    that the
apportionment
be carried out  essentially a 50/50 split
    between the Aviva policy and the Lombard umbrella policy, after payment of the
    initial $1 million under the Lombard primary policy.  That said, the letter
    does not constitute an offer to settle on the basis outlined in it, only a
    suggestion as to how the apportionment should be carried out.

[70]

While
    the trial judge does not appear to have addressed his mind to the letter in his
    endorsement on costs, and although he may have been entitled to give it some
    weight, I do not think his failure to do so constituted an error in principle
    that would justify our interfering with his decision not to award substantial
    indemnity costs.  Nor do I think Lombards refusal to respond to the letter was
    conduct of such an egregious nature that would justify such an award.

[71]

Accordingly,
    while I would grant leave to appeal, I would dismiss the appeal as to costs.

Disposition

[72]

For
    the foregoing reasons I would dismiss the appeal and the cross-appeal.

[73]

Counsel
    have agreed on costs.  I would therefore fix Avivas costs of the appeal and
    the cross-appeal, together, in the amount of $12,500 all inclusive, in
    accordance with the agreement of counsel.

R.A. Blair J.A.

I agree M.H. Tulloch
    J.A.

I agree P. Lauwers
    J.A.

Released: June 20, 2013





[1]
In fact, the policies were with predecessors of Lombard and Aviva, but nothing
    turns on this distinction.



[2]

Bakhtiari v. Axes Investments Inc.,
[2001] O.J. No. 4720 (S.C.).



[3]

Lombard General Insurance Co. v. CGU Insurance Co. of Canada
, [2003]
    O.J. No. 3385 (S.C.).



[4]
This amount represents the outstanding portion of the damage award attributed
    to Axes/Tandem, after deduction of Lombards $1 million primary policy
    coverage.



[5]
Lombard
    General Insurance Co. v. CGU Insurance Co. of Canada
, [2004] O.J. No. 2269
    (C.A.).


