





CITATION:
The Sovereign General Insurance
          Company v. Walker, 2011 ONCA 597



DATE: 20110919



DOCKET: C52325



COURT OF APPEAL FOR ONTARIO



OConnor A.C.J.O., Laskin and MacPherson JJ.A.



BETWEEN



The Sovereign General Insurance Company



Defendant (Appellant)



and



Marie Walker and Albert Walker



Plaintiffs (Respondents)



William S. Chalmers, for the appellant



Stephen B. Abraham and Michael G. Emery, for the respondents



Heard: March 30, 2011



On appeal from the order of Justice
          C. William Hourigan of the Superior Court of Justice dated June 7, 2010.



Laskin J.A.:



A.

INTRODUCTION

[1]

The respondents, Marie and Albert Walker, obtained a judgment against
    Sun Shelters Industries Inc., a property maintenance company, for damages
    resulting from a slip and fall accident in a parking lot.  However, Sun Shelters
    went bankrupt and could not pay the judgment.  The Walkers, therefore, brought
    an action under s. 132 of the
Insurance Act,
R.S.O. 1990, c. I.8,
    seeking recovery of their judgment against Sun Shelters insurer, the
    appellant, the Sovereign General Insurance Company.

[2]

The Walkers moved for summary judgment on their claim and Sovereign
    brought a cross-motion to dismiss the action.  The main issue on the motions
    was whether Sovereign had received notice of the claim against Sun Shelters in
    accordance with the conditions of the insurance policy.

[3]

The motion judge, Hourigan J., held that although Sun Shelters itself
    had not given Sovereign notice of the claim, Sovereign had received notice from
    the owner of the parking lot, a co-defendant in the original action, and this
    notice complied with the policy conditions.  Alternatively, the motion judge
    held that the Walkers were entitled to relief from forfeiture under s. 129 of
    the
Insurance Act
.  Accordingly, he granted the Walkers motion and
    dismissed Sovereigns cross-motion.

[4]

Sovereign appeals on three grounds:

(1)

The motion judge erred in holding that the notice provision in the statutory
    conditions of the insurance policy applied to the Walkers claim;

(2)

The motion judge erred in finding that the notice given by the property
    owner was effective notice under the policy conditions for liability coverage;
    and

(3)

The motion judge erred in granting relief from forfeiture because such relief
    is available only for imperfect compliance with a policy condition, and not for
    what occurred here - total non-compliance.

B.

BACKGROUND

(a)
The accident

[5]

On January 30, 1999, the Walkers went to a movie
    with their grandchildren at the Power Centre in Burlington, Ontario.  On the
    way back to their car after the movie was over, Marie Walker slipped on some
    ice in the parking lot and fell.  She sustained permanent injuries, including a
    serious head injury.

(b)
The first action

[6]

The Walkers sued Emshih Developments Inc., the
    owner of the Power Centre, and Sun Shelters, the maintenance company retained
    to keep the property clear of ice and snow.  Emshih cross-claimed against Sun
    Shelters for contribution and indemnity.

[7]

As Sun Shelters had gone bankrupt, it did not
    defend the action.  However, Emshih discovered that Sun Shelters was insured by
    Sovereign.  Emshihs counsel notified Sovereign of the Walkers claim,
    forwarded all the pleadings to it, and even arranged for a lengthy adjournment
    of the trial to permit Sovereign to participate in the action.  After taking
    legal advice, Sovereign declined to participate.

[8]

The Walkers settled with Emshih.  They then obtained
    a judgment against Sun Shelters for $100,000 in general damages and related
    relief.  In her reasons, Mossip J. found that the parking lot was completely
    treacherous and unfit for use by pedestrians  that day, that Mrs. Walkers
    fall was horrific, and that no amount of care by Mrs. Walker could likely
    have prevented her fall.

(c)       The second action

[9]

The Walkers then brought the action against Sovereign which is the
    subject of this appeal.  They claimed damages of $145,793.95,
[1]
under s. 132 of the
Insurance Act
, which allows a third-party to recover
    against an insurer where its insured has failed to satisfy a judgment for
    damages. Alternatively they relied on s. 129 of the Act, which gives a court
    jurisdiction to grant relief from forfeiture, where there has been imperfect
    compliance with a condition in an insurance policy.

(d)       The motion judges
    decision

[10]

In granting summary judgment to the Walkers, the
    motion judge held that because Emshih had cross-claimed against Sun Shelters,
    it may have been entitled to part of the insurance proceeds and therefore it
    had standing to give notice of the claim.  The motion judge held that under
    either of the notice provisions in the policy, Emshihs notice was effective
    notice to Sovereign. Accordingly, the Walkers were entitled to judgment under
    s. 132 of the
Insurance Act
.

[11]

Alternatively, the motion judge held that the
    Walkers were entitled to relief from forfeiture under s. 129 of the Act.  He
    found that to the extent that there has been a breach of a condition, such
    breach amounts only to imperfect compliance with the policy.  Further, he
    found no evidence of bad faith on the part of Sun Shelters, the Walkers or
    Emshih.  And finally, he found that Sovereign has suffered no prejudice. 
    Therefore, forfeiture would be inequitable.

C.

ANALYSIS

(a)

Section 132 of the
Insurance Act

[12]

Section 132(1) provides that a person who has a
    judgment for damages against an insured person, which  has not been satisfied,
    may recover from that persons insurer the amount of the judgment up to the
    face value of the policy:

Where a person incurs a liability for injury or
    damage to the person or property of another, and is insured against such
    liability, and fails to satisfy a judgment awarding damages against the person
    in respect of the persons liability, and an execution against the person in
    respect thereof is returned unsatisfied, the person entitled to the damages may
    recover by action against the insurer the amount of the judgment up to the face
    value of the policy, but subject to the same equities as the insurer would have
    if the judgment had been satisfied.

[13]

The concluding words of s. 132(1)  subject to
    the same equities as the insurer would have if the judgment had been satisfied
     are important.  Persons, such as the Walkers, seeking recovery under s. 132
    can stand in no better position than the insured.  So, if the insurer,
    Sovereign, had a defence against its insured, Sun Shelters, that defence would
    apply to the Walkers claim: see
W.R. Scott Equipment v. Guardian Insurance
    Co. of Canada
(1998), 157 D.L.R. (4
th
) 227 (Alta. C.A.), at
    paras. 40-41.

[14]

Sovereign contends that Sun Shelters breached
    the statutory conditions of the policy requiring it to give notice and co-operate
    in the defence.  Compliance with the policy condition to give timely notice of
    a claim was a condition precedent to Sovereigns liability to Sun Shelters. 
    Because of the non-compliance, Sovereign was not required to defend the
    original action or indemnify Sun Shelters.  It is equally not required to
    satisfy the Walkers claim under s. 132.

[15]

The terms of the policy provide the necessary context
    to Sovereigns argument.

(b)

The insurance policy

[16]

Sovereign insured Sun Shelters under a
    commercial insurance policy.  Sovereign admits that the policy covered the
    Walkers claim.  The policy provides the following coverages:

A.

fire and extended coverage;

B.

multi-peril;

C.

burglary and robbery; and

D.

comprehensive general liability

[17]

In other words, as counsel for Sovereign points
    out, the policy provides all the coverages that a business like Sun Shelters
    would need: property, theft and comprehensive general liability.  The policy
    limit for liability for bodily injury was $2 million.

[18]

The policy contains two sets of conditions; a
    set of statutory conditions and a set of policy conditions.  The statutory
    conditions begin with the following statement: The Statutory Conditions apply
    to the peril of fire and as modified or supplemented by riders or endorsements
    attached apply as Policy Conditions to all other perils insured by this
    policy.

[19]

Section 8 of the statutory conditions deals with
    who may give notice of a loss:

Notice of loss may be given, and
    proof of loss may be made by the agent of the insured named in the contract in
    case of absence or inability of the insured to give the notice or make the
    proof, and absence or inability being satisfactorily accounted for, or in the like
    case, or if the insured refuses to do so, by
a person to whom a part of the
    insurance money is payable
.  [Emphasis added.]

[20]

The motion judge relied on this section to find
    that Sovereign had been given effective notice of the Walkers claim.  He held
    that because Emshih had cross-claimed against Sun Shelters, Emshih was a
    person to whom a part of the insurance money is payable.

[21]

The policy conditions follow the Comprehensive
    General Liability Coverage Rider.  These policy conditions have a different
    notice provision from that in the statutory conditions. The notice provision is
    found in s. 3(a). The policy conditions also impose (in s. 3(b) and especially
    in s. 3(c)) a duty of cooperation on the insured:

3. Insureds Duties in the event
    of Accident, Occurrence, Claim or Suit:

(a)     In the event of an accident or occurrence, written notice
    containing particulars sufficient to identify the Insured and also reasonably
    obtainable information with respect to the time, place and circumstances thereof,
    and the names and addresses of the injured and of available witnesses, shall be
    given promptly by or for the Insured to the Insurer or any of its authorized
    agents.

(b)       If claim is made or suit is brought against the Insured,
    the Insured shall immediately forward to the Insurer every writ, letter,
    document or advice received by him or his representative.

(c)       The Insured shall co-operate with the Insurer and, upon
    the Insurers request, assist in making settlements, in the conduct of suits
    and in enforcing any right of contribution or indemnity against any person or
    organization who may be liable to the Insured because of injury or damage with
    respect to which insurance is afforded under this policy; and the Insured shall
    attend hearings and trials and assist in securing and giving evidence and
    obtaining the attendance of witnesses.  The Insured shall not, except at his own
    cost, voluntarily make any payment, assume any obligation or incur any expenses
    other than for the first aid to others at the time of accident.

[22]

Section 4 states that compliance with the terms
    of the policy  which includes s. 3  is a condition precedent to an action
    against Sovereign:

No action shall lie against the Insurer
    under any Insuring Agreement of this policy including the Insuring Agreement
    relating to Defence  Settlement  Supplementary Payments unless, as a
    condition precedent thereto, there shall have been full compliance with all of
    the terms of this policy.

[23]

Sovereign maintains that ss. 3 and 4 of the
    policy conditions apply to the Walkers claim, and that notice was not given in
    accordance with s. 3(a).  The motion judge held, without analysis, that
    effective notice had been given, not only under s. 8 of the statutory
    conditions, but also under s. 3(a) and (b) of the policy conditions.

[24]

I turn now to the issues on the appeal.

(c)       The issues on the
    appeal

I.         Did the motion judge err in holding that s. 8 of the statutory
    conditions applied to the Walkers claim?

[25]

As I have said, the statutory conditions, including
    s. 8, applied to  all other perils insured by this policy.  The motion judge
    concluded that this phrase was sufficiently broad to cover the Walkers loss.  Either
    the Walkers loss was a peril to which s. 8 applied or the applicability of s.
    8 to the Walkers loss was ambiguous, in which case the ambiguity would be
    construed against the insurer, Sovereign.

[26]

Even if s. 8 did apply, Sovereign does not
    accept that Emshih could give effective notice.  However, its main submission
    is that the motion judge erred in concluding that s. 8 applied to the Walkers
    loss.  Sovereign says that these statutory conditions apply to property losses
    such as fire and theft, but not to liability or losses to third parties.  I
    agree with this submission.

[27]

Perhaps in isolation, the word perils is broad
    enough or ambiguous enough to support the motion judges conclusion.  But, the
    policy must be read as a whole.  And when it is read as a whole, there is no
    ambiguity.  The policy contains two separate sets of conditions.  Each set must
    be given scope and meaning.

[28]

Viewed in this light, it is apparent that the statutory
    conditions apply only to the
property
coverages in the policy  for
    example fire and theft  and any other
property
related perils that may
    be added by rider or endorsement.  Several other provisions in the statutory
    conditions support this interpretation.  For example, s. 2 dealing with Property
    of Others, ss. 11 and 12 dealing with Appraisal and When Loss Payable, and
    s. 13 dealing with Replacement have no relevance to third party liability
    claims.  They address coverage for direct loss to an insureds property, not
    coverage for loss or liability to a third party.

[29]

The policy conditions, which follow the Comprehensive
    General Liability Coverage Rider, apply to third party liability claims such as
    the Walkers claim against Sun Shelters.  This is evident from the other terms
    of the rider.  The rider provides that the insured agrees, among other things,
    to the liability insurance conditions attached to the policy and such
    additional declarations, exclusions, limitations, conditions and other terms of
    this rider.  This provision includes the policy conditions.

[30]

Moreover, the Insuring Agreement in the
    liability section of the rider states that this policy is subject to the terms
    and conditions set forth herein. Immediately following, it reads: 
see conditions on reverse side
.  The
    conditions referred to are the policy conditions, which include the notice and
    duty to co-operate requirements in s. 3.  It is these conditions that apply to
    losses or liability to third parties.

[31]

In summary, the insurance policy between
    Sovereign and Sun Shelters contains two stand alone coverages: A-C for property
    coverages, and D for liability coverage.  Each of the coverages has its own set
    of conditions.  The statutory conditions apply to the property coverages, and
    the policy conditions apply to liability coverage.  I therefore agree with
    Sovereign that the motion judge erred in holding that s. 8 of the statutory
    conditions was the notice provision applicable to the Walkers loss.

II.         Did the motion judge err in finding that the notice
    given by Emshih was effective notice under s. 3(a) of the policy conditions for
    liability coverage?

[32]

The notice of loss requirement applicable to the
    Walkers claim is s. 3(a) of the policy conditions for liability coverage. For
    convenience, I reproduce s. 3(a):

(a)       In the event of an accident or occurrence, written notice
    containing particulars sufficient to identify the Insured and also reasonably
    obtainable information with respect to the time, place and circumstances
    thereof, and the names and addresses of the injured and of available witnesses,
    shall be given promptly by or for the Insured to the Insurer or any of its
    authorized agents.

[33]

The motion judge held that the notice of the
    Walkers claim given to Sovereign by Emshihs counsel was effective notice
    under s. 3(a).  Sovereign submits that the motion judge erred in this holding. 
    It argues that only its insured, Sun Shelters, could give notice under s.
    3(a).  As Sun Shelters did not do so, it breached the policy condition. Therefore,
    in accordance with s. 4, Sovereign was not obligated to indemnify its insured
    or pay the Walkers judgment.  Sovereign also makes a secondary argument: Sun
    Shelters breached its duty to co-operate under s. 3(c) of the policy
    conditions.  I do not accept either of Sovereigns arguments.

[34]

Notice under s. 3(a) can be given by or for the
    insured.  Thus, on the plain wording of the provision, notice may be given by
    a person other than the insured.  The section does not, however, define the
    class of persons capable of giving notice on behalf of the insured.

[35]

Section 3(a) should be interpreted in the light
    of its purpose. Like any notice provision in an insurance policy, the purpose
    of s. 3(a) is to make Sovereign aware of a claim against its insured so that it
    has the timely opportunity to deal with it. The delivery and content of the notice
    is important to Sovereign because the notice triggers Sovereigns duty to
    defend and to act in good faith toward its insured. Typically, once served with
    notice, Sovereign will have to open a file, retain an adjuster, and take any
    other steps necessary to respond to the claim against its insured.

[36]

Given its purpose and importance, if the notice
    is to be given for an insured instead of by the insured itself, the person
    giving it should have sufficient proximity to the claim to have knowledge of
    the information required by s. 3(a).  Emshih was just such a person. It owned
    the property where the accident occurred; it was a defendant in the original
    action; and it cross-claimed against Sovereigns insured. In giving notice to
    Sovereign, Emshih was giving notice
for
Sun Shelters as contemplated by
    s. 3(a) of the policy.

[37]

At the very least, the class of persons capable
    of giving notice under s. 3(a) is ambiguous.  In accordance with well accepted
    principles of interpretation of insurance contracts, that ambiguity must be
    construed against Sovereign: see
Consolidated-Bathurst v. Mutual Boiler
,
    [1980] 1 S.C.R. 888.  Therefore, I agree with the motion judge that Emshihs
    notice was effective notice to Sovereign under s. 3(a) of the policy conditions
    for liability coverage.

[38]

The motion judge also found the argument that
    Sun Shelters failed to co-operate in the defence of the original action is
    entirely without merit.  This is a finding of fact, which is supported by the
    record and warrants deference on appeal.  As the motion judge noted, Sovereign
    made no effort to contact its insured or seek its assistance in defending the
    action.  Instead, it took the position that it would not participate in the
    action at all.  It cannot now complain that Sun Shelters breached its duty to
    co-operate.

[39]

I would not give effect to this ground of
    appeal.

III.      Did the motion judge err in granting relief from
    forfeiture?

[40]

My disposition of the second issue is sufficient
    to decide this appeal.  However, even if I am wrong in holding that Emshih
    could give notice under s. 3(a) of the policy conditions for liability
    coverage, I agree with the motion judge that the Walkers would, be entitled to
    relief from forfeiture under s. 129 of the
Insurance Act
.

[41]

Section 129 provides:

Where there has been imperfect compliance with a
    statutory condition as to the proof of loss to be given by the insured or other
    matter or thing required to be done or omitted by the insured with respect to
    the loss and a consequent forfeiture or avoidance of the insurance in whole or
    in part and the court considers it inequitable that the insurance should be forfeited
    or avoided on that ground, the court may relieve against the forfeiture or
    avoidance on such terms as it considers just.

Relief from forfeiture under s. 129 applies both
    to statutory and policy conditions: see
Falk Bros. Industries Ltd. v. Elance
    Steel Fabricating Co.
, [1989] 2 S.C.R. 778, at paras. 10-16.

[42]

The two issues under this ground of appeal are:
    first, whether this is a case of imperfect compliance, as the Walkers maintain,
    or total non-compliance, as Sovereign maintains; and second, if this is a case
    of imperfect compliance, whether forfeiture of the insurance proceeds would be
    inequitable.

[43]

The law has treated the failure to give timely
    notice of a claim as imperfect compliance, not non-compliance: see
Falk
    Bros. Industries Ltd. v. Elance Steel Fabricating Co.
,
supra
, at
    para. 18.  However, Sovereign submits that this principle does not apply on
    these facts.  It says that because Emshih was not entitled to give notice under
    s. 3(a) of the policy conditions for liability coverage, then in substance no
    notice was given, rendering this a case of non-compliance, not imperfect
    compliance.

[44]

It seems to me that Sovereigns position is far
    too rigid.  As I said earlier, the question of compliance has to be looked at
    in the light of the purpose of a timely notice provision.  Notice gives the
    insurer an opportunity to investigate the merits of a claim, negotiate a
    settlement, and if necessary, defend the action.  Sovereign had that
    opportunity.  It chose not to exercise it.

[45]

In other words, this is not a case where the
    insured had no actual notice of the claim or loss - Sovereign did have actual
    notice and made a conscious decision not to participate in the litigation. 
    Even if the notice should have come from Sun Shelters, the notice from Emshih
    makes this a case of imperfect compliance, not non-compliance.

[46]

As this is a case of imperfect compliance, the
    only remaining question under s. 129 is whether forfeiture of the insurance
    proceeds would be inequitable.  The motion judge held that it would be, and
    made two key findings of fact in support of that holding:

1.

There was no bad faith by Sun Shelters, the
    Walkers or Emshih; and

2.

Although Emshih gave Sovereign notice of the
    Walkers claim over five years after the accident occurred, Sovereign suffered
    no prejudice from the late delivery of the notice.  In the motion judges
    words: Whether the insurer received notice six months or six years after the
    accident it is difficult to imagine that it would have acted any differently.

[47]

Sovereign does not challenge these findings of
    fact, and I have no basis to interfere with them.  On these findings,
    forfeiture would be inequitable.

[48]

I would, therefore, not give effect to this
    third ground of appeal.

D.

CONCLUSION

[49]

The motion judge did not err in holding that
    Emshihs notice to Sovereign was notice in accordance with s. 3(a) of the
    policy conditions for liability coverage.  Nor did he err in holding that, in
    the alternative, the Walkers would be entitled to relief from forfeiture.

[50]

I would dismiss the appeal with costs fixed in
    the agreed-upon amount of $20,000, inclusive of disbursements and applicable
    taxes.

RELEASED:  Sept. 19, 2011                                               John
    Laskin J.A.

JL                                                                                      I
    agree D. OConnor A.C.J.O.

I
    agree J.C. MacPherson J.A.





[1]
The amount of their judgment against Sun Shelters less Emshihs contribution.


