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Civil Litigation - Settlement - Claim-Over and Indemnity Terms. McCartney v. CDSPI Advisory Services Inc.
In McCartney v. CDSPI Advisory Services Inc. (Ont CA, 2026) the Ontario Court of Appeal, in the context of multiple (both individual and class) proceeding litigation, dismissed an appeal by a non-settling class defendant (Aviva), here where the "motion judge approved the settlement in the class action and denied Aviva’s motions for a stay".
Here the court considers the appellant's argument that a partial settlement precluding 'claims-over' against other parties is prejudicial to them:2. APPROVAL OF THE SETTLEMENT: THE BAR ORDER
[46] Aviva submits that the motion judge erred by approving the class action settlement that contains a term precluding Aviva from claiming over against CDSPI, irrespective of the potential for claims brought by class members who opt out of the class action settlement or by the individual plaintiffs who elect not to participate in the settlement (“the bar order”). Aviva argues that it is prejudiced by the bar order because it subjects Aviva to potential joint liability without the right to claim over against CDSPI, even though CDSPI may claim over against Aviva. Aviva further argues that the motion judge erred in failing to address this prejudice in his reasons.
[47] I see no error in the motion judge’s decision to approve the settlement on terms including the bar order. He applied well-settled principles in concluding that the terms of the class action settlement fell within the zone of reasonableness. As for the bar order specifically, he found that the settlement resulted in no real or practical economic prejudice to Aviva. Whether or not the class action settlement is approved, the entire $10 million in CDSPI’s insurance coverage will be paid out to the individual plaintiffs and there will be no more money available for the class action settlement. As a result, CDSPI’s “financial well will have already run dry” when the class action is partially settled against them. As he put it at paras. 67-68 of his reasons:If the [class action representative plaintiff] and class are successful at trial, CDSPI’s financial well will have already run dry; and if it is dry for the [class action representative plaintiff and class], it will be equally dry for Aviva if it were to claim over against CDSPI for contribution and indemnity. Thus, while the bar order protecting CDSPI is in theory a limitation on rights that Aviva would otherwise have, it is a justifiable limitation under the circumstances. From an economic point of view, it barely, if at all, changes Aviva’s circumstances or chances of achieving financial participation by CDSPI.
....
In all, I see no rationale for interfering with a proposed settlement due to notional prejudice to the non-settling Defendant that has little practical import. [48] As for potential claims by the class action members and individual plaintiffs who opt out, the bar order does not change Aviva’s economic exposure. If Aviva is found to be jointly liable with CDSPI for those claims, Aviva will have no practical recourse against CDSPI because its well will still be dry. That CDSPI may claim over against Aviva for those claims causes no prejudice to Aviva if Aviva is found to be jointly liable with CDSPI.
[49] Aviva does not dispute that the individual plaintiffs have priority to the $10 million in insurance proceeds. Nor was there any evidence put before the motion judge that CDSPI had other sources of funds. Although it was given confidential, “for counsel’s eyes only” disclosure of CDSPI’s financial state, Aviva never sought to put that information before the motion judge.
[50] I would reject this ground of appeal. . Wiener v. Strickland
In Wiener v. Strickland (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a solicitor's negligence action, here regarding 'claims-over and indemnity' terms as authorized (and assumed) terms of a settlement:[22] The appellant argues that, irrespective of whether Mr. Gunn was referred to, the reference to a “standard form release” would have included a “no claims over” clause unless specifically carved out, relying on Terranata Winston Churchill Inc. v. Teti Transport Ltd. et al., 2020 ONSC 7577, 16 C.L.R. (5th) 315, at para. 52. In that case, Vella J. observed, “[i]n my view, claims over/contribution and indemnity clauses are usual elements of a standard general release. The court will therefore imply these types of provisions as terms of standard general releases, unless expressly carved out or narrowed by the parties prior to reaching a settlement.” In Haider v. Rizvi, 2023 ONCA 354, at para. 32, however, this court clarified that the intention of Vella J. in this analysis “was not to default to a standard form of release, but rather to determine the objective intentions of the parties based on the settlement they had concluded.”
[23] In this case, the objective intention of the parties was to require the beneficiaries to sign releases releasing the estate and the estate trustees. Not only was the specific form of the release (and whether it would include a no claims over clause) not discussed at the time of settlement, as noted above, Ms. Farrell was clear in her evidence that she never intended a release of Mr. Gunn. If she had insisted on a release that had the effect of precluding a claim against Mr. Gunn, Mr. Strickland’s evidence was clear that the release of Gunn was never part of the settlement and the motion to enforce the settlement would have failed. Against this backdrop, the appellant abandoned his opposition to the motion to enforce because no such release was being insisted upon.
[24] With respect to the second issue, the fact that Mr. Gunn may have had defences to such subsequent litigation, if brought, including a potential limitations argument, has no bearing on whether such litigation was left open by the settlement document. The trial judge did not err in declining to determine the limitations issue that might arise in litigation against Mr. Gunn if such litigation were pursued by the appellant. She also did not err in concluding that a potential limitations defence would in no way preclude the appellant from pursuing litigation against Mr. Gunn if he wished.
[25] In short, there was no basis in the record before the trial judge to find that Mr. Strickland had failed to follow the appellant’s instructions or that Mr. Strickland bound Mr. Wiener to any settlement provisions without instructions. We reject the appellant’s submission that the trial judge misapprehended the record in reaching the conclusions she did. . Haider v. Rizvi
In Haider v. Rizvi (Ont CA, 2023) the Court of Appeal dealt extensively and usefully with the law and circumstances of a typical settlement 'release', including 'claims-over' and indemnity terms.
This case situation arose due to the all-too-common practice of leaving the drafting of the release document to 'later', or - as here:[6] Paragraph 11 of the Minutes of Settlement provided for the parties and the respondent’s wife to enter into a Full and Final Mutual Release, to be held in escrow by the lawyers for the appellant, with a true copy of the release to be delivered to the respondent’s lawyer upon payment of the settlement funds. The form and content of the release were not prescribed. In this case neither party promptly pursued the final drafting of the release, likely feeling assured that all material terms had been negotiated in the written Minutes of Settlement. So when the appellant sued a third party, who in turn sued the respondent (a classic 'claim-over') [para 10], the stage was set for an salutory illustration of 'release law'. I urge anyone facing a several page (so-called) 'standard' release form, to review this entire case to aid in understanding what they are likely reading.
Here, the Court of Appeal addressed a lower court's ordering that a plaintiff execute and serve a settlement release that "contain(ed) a clause, barring claims-over":[1] The appellant appeals the order of the motion judge requiring him to “execute a standard form Full and Final Mutual Release, which releases all claims arising out of the subject matter” of Actions CV-13-480703 and CV-16-547391 in the Superior Court (the “Actions”) “and containing a clause, barring claims-over”. ... 'Claims-over' are a common issue in settlement. They relate to the possibility that (even though the parties may settle all matters strictly between themselves) some of them may continue to litigate against third parties regarding the same fact situation and those third parties may re-involve the settling parties in litigation by third party claims. Settlements often bar parties who may otherwise make a 'claim-over' as an assurance that a settlement is truly 'the last of it', at least legally.
Here's a definition from the internet of a 'claim-over':Claim-Over means a Claim asserted by any entity that is not a Releasor against a Releasee on the basis of contribution, indemnity, or other claim-over on any theory relating to Claims arising out of or related to Covered Conduct (or conduct that would be Covered Conduct if engaged in by a Releasee) asserted by a Releasor. [LawInsider - https://www.lawinsider.com/dictionary/claim-over] Essentially, 'claims-over' contractually bar the identified parties from commencing legal proceedings against third parties which might cause a third party to sue one of the settling parties, again. That is, to re-involve them in litigation that they were trying to put behind them, completely.
A close relative to a 'claim-over' in the settlement context is that of the "indemnity", though an indemnity is broader in terms of liability coverage. While a 'claims-over' bar can (and usually does) prohibit the parties to the settlement from making any claim-over, an indemnity also attempts to cover the situation where any third party initiates litigation without a claim-over by a settling party. In short, an indemnity attempts to protect it's beneficiary from all further liability respecting the factual subject matter of the litigation, even attempting to protect them against independent third party behaviour - at least as far as that's possible.
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