Source: https://theallgrouponlinejournal.com/category/insurance/page/3/
Timestamp: 2019-04-18 20:21:15+00:00

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The Ontario Court of Appeal has again confirmed that an insurer’s contractual right to control a defence must yield to the interests of its insured where its coverage position creates a reasonable apprehension that defence counsel would be in a conflict of interest.
In Hoang v. Vicentini, the Ontario Court of Appeal ordered an insurer to relinquish control over the defence of its insured and pay for the insured’s independent counsel. The Court confirmed that if a fact affecting your coverage is disputed in the underlying litigation, a conflict of interest arises.
The decision in Hoang v. Vicentini was the result of a chambers motion to remove counsel due to a possible conflict of interest.
The underlying litigation was based upon tragic circumstances. Can Hoang, the insured, dropped off his son, Christopher, at the intersection of Queens Quay and Yonge Street in Toronto, Ontario. Unfortunately, Christopher’s hat blew off and he chased it into the intersection. Christopher was severely injured when he was struck by a vehicle.
Christopher (by his litigation guardian) sued his father as well as the driver and the owner of the vehicle that struck him. The action was tried before a jury which found Mr. Hoang solely responsible. The action against the driver and owner of the vehicle was dismissed.
As part of the decision, the jury specified that Mr. Hoang’s negligence included his “unsuitable choice of unloading area.” On the basis of a prior decision of the Court, Justice Laskin recognized that this finding of fact could give rise to coverage under Mr. Hoang’s liability policy.
The plaintiff launched an appeal of the decision seeking to overturn the dismissal as against the driver and owner. Mr. Hoang’s counsel responded with a notice of cross-appeal on his behalf requesting the court set aside all particulars of negligence, including his “unsuitable choice of unloading area”.
Justice Laskin recognized that, for Mr. Hoang, a decision overturning the finding of “unsuitable choice of unloading area” yet leaving in place the findings of negligent parental supervision, would be a disastrous result. He would be left without any prospect of indemnification and his son would be left without any hope of recovery.
Relying on an earlier decision of the Court in Brockton (Municipality) v. Frank Cowan Co., Justice Laskin confirmed that where a conflict of interest arises, the insurer may be required to relinquish control of the defence and pay for independent counsel for its insured. To that end, Justice Laskin recognized that while “not every potential conflict … requires the insurer to yield the right to control the defence”, an insurer is required to yield where there is “a reasonable apprehension of conflict”.
Justice Laskin held that the conflict was “readily apparent”. He held that a reasonable bystander might think that counsel appointed by the insurer would focus on overturning the one finding for which the insurer could be liable to indemnify the insured. Justice Laskin noted that this finding was not intended to impugn counsel’s integrity, but that “appearances count”. The test is not “actual” conflict but the “reasonable apprehension” of one.
Because that appearance was alive in the case before him, Justice Laskin ordered the insurer to be added as a party to the appeal, to yield control of Mr. Hoang’s defence, and to pay for his independent counsel.
The conclusion in Hoang v. Vicentini is short, clear, and effective. Here, the Ontario Court of Appeal has confirmed that an insurer’s right to control a defence is not sacred. Defence counsel’s primary obligation is to the insured and this takes primacy over the interests of the insurer. This decision dispels the suggestion that defence counsel must evenly balance the interests of the insured and insurer when defending a case. Where the insurer’s interest comes into conflict with the insured’s, and where that conflict is an issue in the litigation, independent counsel is necessary to safeguard the insured.
 Hoang v. Vicentini, 2015 ONCA 780.
 Ibid at para. 8. See also Lefor (Litigation Guardian of) v. McClure (2000), 49 O.R. (3d) 557 (C.A.).
 Brockton (Municipality) v. Frank Cowan Co. (2002), 57 O.R. (3d) 447 (C.A.).
In Unifund Assurance Company v. D.E., the Ontario Court of Appeal ruled that the parents of a school-age bully are not covered for their negligent supervision under their home insurance policy.
We recently reported on D.E. v. Unifund Assurance Company, a trial level decision where the Court declared that an insurer, Unifund, had to defend and indemnify parents of an alleged school-age bully. The decision was overturned and the Court of Appeal’s reasoning is precedent-setting and instructive to both insurers and policy holders.
A claim was brought against the minor daughter of D.E. and L.E. (the “parents”), and two other Grade 8 students, for allegedly bullying a fellow classmate, causing her physical and psychological injuries. The parents were also sued for their alleged failure to control their daughter and prevent the bullying.
The parents were insured under a comprehensive homeowners’ policy that provided for liability coverage if their personal actions unintentionally caused bodily injury or property damage. The parents successfully obtained a declaration that Unifund had a duty to defend and indemnify them in the underlying action. Unifund appealed.
On appeal, the primary issue was whether either of two exclusion clauses in the policy saved Unifund from having to defend and indemnify the parents.
whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend.
Justice MacPherson found that the first two criteria were easily met, so he zeroed in on the third part of the test: whether the properly pleaded, non-derivative claims against the parents triggered Unifund’s duty to defend. He noted that the claims against the parents were described in terms such as “failure to take disciplinary action” and “failure to discharge their duty to prevent the continuous physical and psychological harassment.” When compared with the dictionary definition of negligence, which includes “failure to take proper care over something”, he found that the claims against the parents were squarely grounded in negligence.
failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment.
He dismissed the lower court’s finding of ambiguity, which was based on the lack of “express language” addressing whether “negligent failure to prevent physical abuse or molestation” was excluded under the policy. In support of this finding, he referred to a similar decision, where it was held that the policy excluded coverage for precisely the type of claim made against a babysitter for negligent supervision.
Justice MacPherson concluded that the exclusion clause was clear on its face and it applied to the claims as pleaded against the parents. As a result, he declared that Unifund did not have a duty to defend or indemnify the parents in the underlying lawsuit.
This decision makes it clear: neither school-age bullies nor their parents will be covered under a homeowners’ insurance policy that contains this specific exclusion. As bullying, and now particularly cyber-bullying, remains a sensitive issue for many Canadian schools, we expect this decision will have a precedential effect on similar claims. While insurers are entitled to choose what they cover, these cases always raise the question of how a policy that does not cover negligence that causes bodily injury can be referred to as “comprehensive”. It is also notable that at least one other insurer’s standard policy exclusion simultaneously refers to “the failure to supervise and the negligent supervision of any person”.
Carefully Consider That Additional Insured Endorsement – It May Still Protect You!
The Ontario Superior Court of Justice recently held that an additional insured was covered by a policy, where there was no direct claim against the named insured, even though the coverage was limited to claims arising from the negligence of the named insured. The most common additional insured endorsements are generally speaking very restrictive in their application. As this case demonstrates, such an endorsement may still provide protection to an additional insured even where the plaintiff has no direct claim against the named insured.
Posted on July 7, 2015 September 24, 2017 Author TheallGroupLLPCategories Commercial Litigation, InsuranceLeave a comment on Carefully Consider That Additional Insured Endorsement – It May Still Protect You!
Insurance Clauses: Priceless Or Worthless?
Contracts provide an ideal opportunity for the efficient allocation of risk, and insurance clauses can cover much of this ground, often with no concessions from your client. This opportunity can be lost when the clause does not really fit the particular transaction, or where the coverage is not available when later required. Even a carefully drafted clause may be worthless, if the parties do not turn their minds to how it will apply to the specific circumstances and avoid some common traps, as discussed below. For a more thorough discussion, please sign up for our upcoming CBA webinar “Negotiating and Drafting Effective Risk Allocation: Integrated Liability and Insurance Clauses” (Fall 2015).
Certificates rarely contain key provisions, such as critical exclusions.
While they identify policy limits, they give no indication of whether or not those limits have been, or are at risk of, being eroded. It does not matter what coverage the policy provides, if its limits have been exhausted when the claim arises.
If multiple claims arise against a Named Insured, as a result of a defect, one or two settlements could quickly erode the policy limits, leaving nothing to pay any future claims against the additional insured.
Subsequent modifications/cancellation: The subsequent modification or cancellation of a policy can also be a problem. Clauses often contemplate that the insurer will be obliged to advise of material changes, but frequently it is not endorsed on the policy, and is therefore ineffective.
Additional insured: Adding a party as an “additional insured” is probably the most commonly used, and a largely misunderstood, risk allocation provision. There are two common misconceptions which often result in these clauses not achieving their desired goal. First, unless otherwise provided, the “additional insured” endorsement will provide that the party is only added for vicarious liability (i.e. the Named Insured’s acts and omissions). It is far better if the endorsement makes the company an additional insured with respect to all claims arising from or relating to the nature of the business being transacted, which will then cover claims arising from the company’s negligence. The second common misconception is that it is always good to be an additional insured. For many errors and omissions policies, as well as some general liability policies, this is not the case. These policies may contain an “insured versus insured” exclusion, which removes coverage for any claims asserted by one insured against another insured.
Stand Alone Policies: One solution to some of these issues is having a dedicated policy. Whether this is practical will vary from business to business. The construction industry frequently uses dedicated, project-based policies. These are intended to avoid disputes relating to who is at fault, ensuring the project can continue to completion when a claim does arise. It is also a good example of the economically efficient allocation of risk. Other businesses have similar opportunities. For example, while dedicated policies may not be as common in supply agreements, it is an option worth exploring. Another option to consider may be excess or umbrella policies, which may or may not be dedicated.
Posted on April 21, 2015 November 13, 2017 Author TheallGroupLLPCategories InsuranceLeave a comment on Insurance Clauses: Priceless Or Worthless?

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