





CITATION: 1562860 Ontario Ltd. (Shoeless
      Joes) v. Insurance Portfolio Inc., 2011 ONCA 180





DATE: 20110307



DOCKET: C50400



COURT OF APPEAL FOR ONTARIO



Winkler, Rosenberg and Goudge JJ.A.



BETWEEN



1562860 Ontario Ltd. carrying on business as Shoeless Joes



Plaintiff (Appellant)



and



Insurance Portfolio Inc. and Christopher Coniglio



Defendants (Respondents)



and



The Dominion of Canada General Insurance Company



Third Party



Katherine I. Henshell and M. Dylag, for the appellant



Mikel C. Pearce, for the respondents



Christopher I. R. Morrison and Stephanie R. Quesnelle, for the
          third party



Heard: February 25, 2011



On appeal from the order of Justice Thomas A. Bielby of the
          Superior Court of Justice dated April 1, 2009.



BY THE COURT:



[1]

At the conclusion of argument, the court ordered that the appeal be
    allowed to the extent of lifting the stay of the main action so far as it is
    based on the claim that the respondents caused the appellant to be
    underinsured. The court indicated that reasons would follow, which would also
    deal with costs. These are those reasons.

[2]

The respondents arranged business loss insurance for the appellant. The
    third party was the insurer. When the appellant called on that insurance, it
    was told that there was insufficient coverage. Without the assistance of the
    respondents, it settled with the third party for less than the value of its
    loss, and signed a release in favour of the third party, agreeing not to make a
    claim against anyone who might claim contribution or indemnity from the third
    party.

[3]

The appellant then sued the respondents, who claimed indemnification
    against the third party. The third party moved to stay the appellants action
    and the respondents claim for indemnification, on the basis of its release.
    The motion judge stayed both the main action and the third party claim, finding
    that the action and the third party claim were clearly linked, and that the
    appellant must live with the consequences of its release.

[4]

Both the appellant and the third party have appealed.

[5]

In our view, it is plain and obvious that the respondents third party
    claim for indemnification arising from the appellants underinsured claim
    cannot succeed. The appellants allegation in the main action is that the
    respondents left the appellant underinsured. The respondents third party claim
    arising from this is founded on the allegation that the appellant was not
    underinsured, but was properly insured, and the third party was negligent in
    adjusting the claim and in paying less than it should have.

[6]

If the appellant succeeds in the main action and proves that it was
    underinsured, the basis of the respondents third party claim falls away. It
    cannot succeed because it cannot establish that the appellant was properly
    insured. On the other hand, if the appellant fails, it has suffered no loss due
    to underinsurance, and there is nothing for which the respondent can claim
    contribution or indemnity. In either case, the third party claim arising from
    the underinsured claim in the main action cannot succeed. It is not just
    clearly linked with the appellants claim. It is incompatible with it. A stay
    of the third party proceedings arising from the underinsured claim is therefore
    appropriate and, in those circumstances, permitting the main action to proceed
    based on this claim no longer engages the appellants release of the third
    party. To that extent, the stay of the main action ordered at first instance
    must be lifted.

[7]

As the respondents point out, the appellant has also claimed that the
    respondents were negligent and in breach of their fiduciary duty in failing to
    assist the appellant in settling its insurance claim with the third party. The
    appellant seeks general damages as a result. The respondents deny this claim
    and claim indemnity from the third party for breaching the duty of care
    requiring it to settle the appellants insurance claim on a reasonable basis.

[8]

Although the motion judge did not expressly deal with this aspect of the
    matter, we see no reason to interfere with the stay of the main action and the
    third party arising from this claim. Both raise issues of negligence arising
    from the way the insurance claim was settled and are not incompatible with each
    other. The claim in the main action based on the manner of the appellants
    settlement of its insurance claim and the claim of the respondents for
    indemnity from the third party based on this, must remain stayed. For this claim
    in its main action, the appellant must live with the consequences of its
    release of the third party. Indeed, in argument, the appellant did not oppose
    this.

[9]

We would therefore allow the appeal in part and amend the order below
    consistent with these reasons.

[10]

We would alter the costs order at first instance to provide that the
    appellant recover a portion of its partial indemnity costs at first instance
    from the respondents fixed at $6,000 inclusive of disbursements and applicable
    taxes. This reflects the appellants significant but only partial success. The
    amount of the third partys costs ordered below should not be altered but
    should be paid jointly and severally by the appellant and the respondents in
    light of their joint responsibility for the outcome.

[11]

In this court, the same costs considerations should apply. The appellant
    should recover a portion of its partial indemnity costs to be paid by the
    respondents, fixed at $6,000 inclusive of disbursements and applicable taxes.
    The third parties should recover its partial indemnity costs jointly and
    severally from the appellant and the respondents fixed at $10,000 inclusive of
    disbursements and applicable taxes.

RELEASED:  MAR 07 2011 (S.T.G.)

Winkler C.J.O.

M. Rosenberg J.A.

S. T. Goudge
    J.A.


