



COURT OF APPEAL FOR ONTARIO

CITATION: National Gallery of Canada v. Lafleur de la
    Capitale Inc.,

2017 ONCA 688

DATE: 20170906

DOCKET: C62922

Rouleau, van Rensburg and Roberts JJ.A.

BETWEEN

The National Gallery of Canada

Respondent (Applicant)

and

Lafleur de la Capitale Inc. and Intact Insurance
    Company

Appellants (Respondents)

Kelly Hart, for the appellants

Mark Charron and Stephanie Doucet, for the respondent

Heard: May 5, 2017

On appeal from the judgment of Justice C. MacLeod of the
    Superior Court of Justice, dated October 13, 2016.

REASONS FOR DECISION

Overview

[1]

The appellants appeal from an order requiring the appellant, Intact
    Insurance Company (Intact), to assume and fund the respondents defence to
    two actions.

[2]

Under a contract between the respondent and Lafleur de la Capitale Inc.
    (Lafleur) for landscaping and maintenance services at the respondents
    premises (the maintenance contract), the appellant Lafleur was required to
    add the respondent as a named insured under its comprehensive general liability
    (CGL) policy. Lafleurs CGL policy was with Intact. This policy provides for coverage
    of not less than five million dollars per occurrence of bodily injury or
    property damage.

[3]

A January 21, 2014 Endorsement to the policy adds the respondent as an
    additional insured but only insofar as [its] Legal Liability arises
    vicariously out of the operations of [Lafleur] in connection with [its
    landscaping and snow removal services].

[4]

The CGL policy contains numerous exclusions. Relevant to these
    proceedings are the exclusions for workers compensation claims and claims
    arising out of an employers liability for injuries to employees incurred in
    the course of employment.

[5]

In August 2013, an employee of Lafleur, Conrad Lafrenière, tragically suffered
    fatal injuries in the course of his employment. He was carrying out maintenance
    work on a vehicle ramp located on the respondents premises. When a vehicle
    approached to enter the underground garage, Mr. Lafrenière stepped back towards
    the ledge of the ramp and fell.

[6]

The two underlying actions were commenced against the respondent by the spouse
    of the late Mr. Lafrenière (the Arsenault action)
[1]
and other family members bringing claims under the
Family Law Act
, R.S.O.
    1990, c. F.3 (the Lafrenière action).

[7]

The respondent brought an application for an order and declaration that
    Intact and Lafleur are obliged to provide and fund its full defence in the
    underlying actions, relying on the terms of the maintenance contract and the
    CGL policy.

[8]

While the application judges reasons state that both appellants have a
    duty to defend, the order appealed from declares only that Intact has a duty to
    defend. It is trite law that an appeal is from the formal order and not the
    reasons:
Heston-Cook v. Schneider
, 2015 ONCA 10, [2015] O.J. No. 120,
    at para. 12. The parties agree that the issue of whether Lafleur has a duty to
    defend is not before us.

[9]

The appellants submit that the application judges brief reasons do not
    permit meaningful appellate review. Further, they assert that the claims in the
    two actions are not covered when the pleadings, maintenance contract and policy
    are considered. Even if the plaintiffs claims are covered under the initial
    insuring agreement, the appellants argue that the claims are nevertheless excluded
    because they are effectively workers compensation claims brought on behalf of
    the late employee and his survivors against his employer, Lafleur.

[10]

To dispose of this appeal, it is necessary to deal with only the first
    issue.  For the reasons that follow, we agree that the application judges
    reasons are inadequate and do not permit meaningful appellate review. In his
    brief reasons, the application judge did not conduct the necessary analysis of
    the pleadings, maintenance contract and policy, which were essential in this
    complex case, to address the coverage issue. We are also concerned that we did
    not have the benefit, in the appeal to this court, of full argument on all
    matters that are relevant to the disposition of the application. As a result, we
    allow the appeal and remit the application for a new hearing before a different
    judge.

Analysis

Adequacy of Reasons

General Principles

[11]

It is well-established that a judge is required to give reasons
    sufficient to permit meaningful appellate review of the correctness of the
    decision. This means that the judges reasons must allow the parties and the appellate
    court to discern why the judge reached his or her conclusions on key issues in
    circumstances which require an explanation:
R. v. Sheppard
, 2002 SCC
    26, [2002] 1 S.C.R. 869, at paras. 28 and 46.

[12]

The critical question is whether what the judge has stated is
    sufficiently intelligible in the context of the record, the issues and the
    submissions of counsel, to show that the judge has seized the substance of the
    matter and has addressed the critical issues that he was required to decided:
R.
    v. M. (R.E.),
2008 SCC 51
,
[2008] 3 S.C.R. 3, at paras. 37, 43
    and 57.

Application

[13]

In the present case, the application judge was required to decide whether
    or not Intact owed the respondent a duty to defend the Arsenault and Lafrenière
    actions. To determine this issue, the application judge had to undertake a
    detailed analysis of the pleadings, the insurance policy, including the
    Endorsement, and the maintenance contract, in the context of the following questions:

i.

whether the plaintiffs showed that the loss at issue is covered under
    the terms of the policy;

ii.

if the loss is covered, whether Intact demonstrated that an exclusion
    applies; and,

iii.

if an exclusion applies, whether the plaintiffs established that there
    is an exception to the exclusion.

See:
G & P Procleaners and General Contractors
    Inc. v. Gore Mutual Insurance Co.
, 2017 ONCA 298, [2017] O.J. No. 1871, at
    paras. 13-14.

[14]

The application judges reasons for finding that a duty to defend the
    respondent is invoked are contained in the following paragraphs:

I am of the view that the duty to defend is engaged because at
    least some of the allegations in these pleadings if proven could relate to
    issues of maintenance or of measures that should have been taken in the cause
    of maintenance. Accordingly there will be a finding that the duty to defend is
    engaged and that the respondents must fund the defence in the first instance.

This is subject to a right to seek
    to recover costs if ultimately liability is found only for aspects of the claim
    that are outside the scope of coverage. This issue is a live issue in the third
    party proceeding.

[15]

The respondent submits that although brief, the application judges
    reasons reveal that he was alert to the relevant legal principles to be applied
    in his consideration of whether Intact owed the respondent a duty to defend.

[16]

First, the application judge alludes in his reasons to the leading test
    for determining whether there is a duty to defend, namely, that if at least
    some of the allegations in the pleadings were proven to be true and relate to
    issues of maintenance under the maintenance contract between Lafleur and the
    respondent, they could fall within the applicable insurance coverage and Intact
    would be required to defend those claims:
Progressive Homes Ltd. v. Lombard
    General Insurance Co. of Canada
, 2010 SCC 33, [2010] S.C.R. 245, at para.
    19;
Monenco Ltd. v. Commonwealth Insurance Co.
, 2001 SCC 49, [2001] 2
    S.C.R. 699, at paras. 28-29.

[17]

Further, the application judges reasons also reference the following
    principles: coverage is not excluded for an entire action where only some of
    the claims in the pleadings are covered; and Intact could be required to defend
    the Arsenault and Lafrenière actions in their entirety and then seek an
    apportionment of its defence costs at the end of the proceedings to the extent
    that they deal solely with any uninsured claims:
Carneiro v. Durham
    (Regional Municipality)
,  2015 ONCA 909, 92 M.V.R. (6th) 179, at para. 28.

[18]

The difficulty with the respondents submissions is that, while the
    application judges reasons advert to the relevant principles, he did not
    engage in any analysis of the critical issues that had to be addressed and
    resolved in the application of these principles to the present case. The
    conclusion that some of the allegationscould relate to issues of maintenance
    did not address the following, which in our view (and without suggesting in any
    way how the application should be determined) are relevant and material to the
    determination of coverage in this case:

·

The
    allegations in the Arsenault and Lafrenière actions, while similar, are not
    identical. For example, the Arsenault statement of claim specifically frames
    the context of Mr. Lafrenières accident as a workplace accident, which on its
    face invokes the relevance of the exclusion clauses in the policy for workers
    compensation and employers liability.

·

The
    statements of claim do not explicitly plead fault or negligence on the part of
    Lafleur and vicarious liability of the respondent for such fault or negligence.
    The allegations in both actions could be read as allegations directly against
    the respondent for negligence in relation to structural or design defects,
    which appear to have nothing to do with its vicarious liability for the acts
    and omission of Lafleur under the maintenance contract for which coverage is
    provided under the policy. The analysis should consider the relevant provisions
    of the maintenance contract, the policy and the Endorsement, in determining the
    true nature of the claims and the scope of coverage.

·

The
    CGL policy contains exclusions, in particular for any obligation of the Named
    Insured under a workers compensationlaw and for bodily injury to an
    employee of the Insured arising out of and in the course of employment. The
    potential application of either or both of these exclusions should be
    considered.

Disposition

[19]

In our view, it is not appropriate for this court to determine whether
    Intact has a duty to defend the respondent. We lack a full argument on all of
    the essential points. Important issues relevant to the duty to defend, which
    may have far-reaching effect beyond the interests of the parties to these
    proceedings, were not fully argued.

[20]

Accordingly, we allow the appeal, set aside the order of the application
    judge, and order the rehearing of the application by a different judge.

[21]

The appellants, as the successful parties, are entitled to their partial
    indemnity costs of the appeal in the agreed-upon amount of $5,000, inclusive of
    disbursements and HST. We reserve the costs of the original hearing of the
    application to the judge re-hearing the application.

Paul Rouleau J.A.

K. van Rensburg J.A.

L.B. Roberts J.A.





[1]
As the statement of claim notes, the action is brought as a subrogated action
    in the name of the plaintiff by the Workplace Safety and Insurance Board.


