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Insurance - Excess Insurance. Rodriguez-Vergara v. Lamoureux
In Rodriguez-Vergara v. Lamoureux (Ont CA, 2025) the Ontario Court of Appeal dismissed an MVA appeal, this relating to the priority that excess MVA insurance policies stood in respect to each other:(a) After The Primary Policy Has Paid Its Limits, Which Policy Responds First?
[12] RSA submits that the motion judge was incorrect in his interpretation of s. 7(a) of Vergara’s OPCF 44R. Section 7(a) provides that coverage under the OPCF 44R is “excess to” (i.e., ranks later in priority than) “insurers of the inadequately insured motorist”. Any insurance coverage included in s. 7(a) must be exhausted before anything is payable under the OPCF 44R.
[13] The motion judge found that the word “insurers” in s. 7(a) included only motor vehicle liability insurers. The PLUP is not a motor vehicle insurance policy, and the motion judge held that D’Souza’s PLUP does not fall under s. 7(a). RSA submits that this was an error and s. 7(a) applies to all insurers, because in other parts of s. 7 there is reference to motor vehicle liability policies while in s. 7(a) it simply says “insurers”. According to RSA, the word “insurers” ought to be given its plain meaning, including other non-motor vehicle insurance policies. RSA submits that on a plain reading of the section, D’Souza’s PLUP is included in s. 7(a) and therefore ranks earlier in priority to Vergara’s OPCF 44R.
[14] I do not accept this submission. I agree with the motion judge that the issues to be determined must be assessed in the context of the nature of the automobile insurance legislation in Ontario, which is highly regulated under the Act. The standard automobile policy in Ontario is subject to minimum third-party liability limits. There are statutorily mandated first party or “no fault” benefits which are set out in the legislation. The Commissioner of Insurance approves the forms of the policies and endorsements that can be purchased by owners of automobiles. The OPCF 44R is such an endorsement and provides for indemnification to an insured who is injured or killed by an inadequately insured motorist. It is commonly referred to as the underinsured endorsement. Both the standard automobile policy and the OPCF 44R attach to a specific vehicle.
[15] A PLUP is a different kind of insurance policy that falls outside Ontario’s motor vehicle insurance regime. A PLUP is not a first loss policy. Rather, a PLUP provides coverage over and above the coverage limits of certain underlying insurance policies. It is an excess policy of insurance that does not attach to a specific automobile as the OPCF 44R does. As this court concluded in Keelty v. Bernique, 2002 CanLII 22040 (ON CA), 2002, 57 O.R. (3d) 803 (C.A.) CanLII 22040 (ONCA), at para. 25, while a PLUP may, in some circumstances, provide coverage for motor vehicle accident injuries, it is not a motor vehicle insurance policy. This context must inform the interpretation of the OPCF 44R.
[16] The relevant sections of the OPCF 44R provide as follows:LIMITS OF COVERAGE UNDER THIS CHANGE FORM
4. The insurer’s maximum liability under this change form, regardless of the number of eligible claimants or insured persons injured or killed or the number of automobiles insured under the Policy, is the amount by which the limit of family protection coverage exceeds the total of all limits of motor vehicle liability insurance, or bonds, or cash deposits, or other financial guarantees as required by law in lieu of such insurance, of the inadequately insured motorist and of any person jointly liable with that motorist.
[…]
AMOUNT PAYABLE PER ELIGIBLE CLAIMANT […]
7. The amount payable under this change form to an eligible claimant is excess to an amount received by the eligible claimant from any source, other than money payable on death under a policy of insurance, and is excess to amounts that were available to the eligible claimant from
(a) the insurers of the inadequately insured motorist, and from bonds, cash deposits or other financial guarantees given on behalf of the inadequately insured motorist;
(b) the insurers of a person jointly liable with the inadequately insured motorist for the damages sustained by an insured person;
(c) the Société de l’assurance automobile du Québec;
(d) an unsatisfied judgment fund or similar plan in a jurisdiction other than Ontario, or which would have been payable by such fund or plan had this change form not been in effect;
(e) the uninsured automobile coverage of a motor vehicle liability policy;
(f) an automobile accident benefits plan applicable in the jurisdiction in which the accident occurred;
(g) a law or policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits;
(h) any applicable Workers’ Compensation Act or similar law of the jurisdiction in which the accident occurred;
(i) the family protection coverage of another motor vehicle liability policy.[Emphasis added.] [17] I agree with the interpretation of the motion judge that s. 7 refers to matters covered in the automobile regulations or motor vehicle liability policies. The language of s. 7 makes it clear that amounts available to the claimant from “insurers of the inadequately insured motorist” mean amounts from the total motor vehicle liability insurance or funds in lieu of insurance, not any and all types of insurance such as a PLUP. The motion judge made no error in his interpretation of s. 7 (a).
[18] The motion judge’s interpretation of s. 7(a) is supported by Smith v. Taylor 2024 ONCA 223, 495 D.L.R. (4th) 104. In Smith, at para. 60, this court held that the words “insurance in any policy in the name of the eligible claimant” in s. 18(a)(ii) of the OPCF 44R included only motor vehicle insurance policies, and not an excess liability endorsement under a homeowner’s insurance policy. The homeowner’s insurance therefore did not fall within the s. 18(a)(ii) priority scheme: “[t]he intent of para. 18 in the OPCF 44R is to govern priorities among OPCF 44R endorsements or similar automobile policies. Unlike the OPCF 44R, [the homeowner’s insurance policy] is not part of the automobile liability policy regulatory scheme.” [Emphasis added.] Smith, at para. 64. Like s. 18, s. 7(a) governs priorities between the OPCF 44R and other insurance policies. The motion judge correctly applied the reasoning in Smith when he interpreted s. 7(a).
[19] The motion judge’s interpretation is consistent with s. 4 of the OPCF 44R, which makes reference to the maximum liability of an insurer pursuant to a family protection endorsement having regard to “the total of all limits of motor vehicle liability insurance” available to respond to the claims of an inadequately insured motorist. It makes no sense that the OPCF 44R’s maximum coverage under s. 4 would include only motor vehicle insurance policies, while the priority of the OPCF 44R under s. 7 would rank behind any insurance policy available to respond to a loss.
[20] Furthermore, the motion judge did not err in finding that a PLUP responds only after the limits of the motor vehicle liability policy have been exhausted or if the underlying insurance policy does not provide coverage for the loss. This approach has been confirmed by this court in Benson v. Walt 2018 ONCA 172, 141 O.R. (3d) 220, at para. 13, where the court held that a PLUP did not fall within the priority scheme of motor vehicle insurance policies under the Insurance Act:[The PLUP] does not fall within … Ontario’s “highly regulated” scheme of motor vehicle insurance. It only responds after the limits of the required underlying policy are exhausted, or if the underlying insurance does not provide coverage for the loss. Subsection 277(1) deals with the priorities as between primary motor vehicle insurance policies and its reach does not extend to any and every other type of policy that might have to respond once the policy limits of applicable motor vehicle policies are exhausted. [Emphasis added.] (2) The motion judge did not err in finding that RSA could not deduct the PLUP policy limit from the amounts paid under the OPCF 44R:
[21] The motion judge was correct in his determination that the OPCF 44R insurer RSA could not reduce its limits by or deduct from its payment any amounts under D’Souza’s PLUP. This argument also ultimately hinges on whether the PLUP falls within s. 7(a) of the OPCF 44R. For the reasons noted above, s. 7(a) refers to motor vehicle liability insurance policies. The PLUP is not such a policy and therefore cannot be deducted by the OPCF 44R. To accede to the appellant’s argument would render the sections of the Act regulating automobile insurance meaningless.
(3) The motion judge did not err in finding that RSA could not issue a third-party claim or subrogate against Certas for payments under Vergara’s OPCF 44R held by RSA
[22] There is no merit to RSA’s submission that it can subrogate against Certas or issue a third-party claim for payments made under its policy with. The motion judge made no error in dismissing these submissions. What RSA seeks to do by way of this submission is to pay its limits to Vergara, the injured party, pursuant to the RSA OPCF 44R, and then claim against D’Souza’s PLUP for the $700,000 it paid. I agree with the motion judge that this approach would lead to an absurd finding, with the reversal of the OPCF 44R’s priority to respond to the claims of the injured party as set out in the statute. To accede to RSA’s argument would enable RSA as the OPCF 44R carrier to “get through the back door of subrogation what it cannot get through the front door of priority.” para. 46. The OPCF 44R can subrogate against the at-fault party D’Souza, who was inadequately insured, for its payout to Vergara, to the extent that their liability to Vergara exceeds the defendant’s $300,000 limit and the PLUP’s liability limit.
[23] RSA has no cause of action in tort or in contract against Certas as the motion judge correctly observed. It cannot bring itself within r. 29.01(c) of the Rules of Civil Procedure and as a result, as the motion judge found, it has no right to issue a third-party claim against Certas. . Kestenberg Siegal Lipkus LLP v. Royal & Sun Alliance Insurance Company of Canada
In Kestenberg Siegal Lipkus LLP v. Royal & Sun Alliance Insurance Company of Canada (Ont CA, 2024) the Ontario Court of Appeal considers the 'following form' structure of excess liability insurance:[51] As can be seen from the extract above, the insuring agreement clause in the Second Excess Policy uses a “follow form” structure. A follow form structure in an excess insurance policy means that the insurance coverage is intended to be the same as the underlying policy (in this case, the First Excess Policy), but with coverage limitations that are prescribed by the excess policy: see Cronos Group Inc. v. Assicurazioni Generali S.p.A., 2022 ONCA 525, at footnote 1 at para. 1; and Vale Canada Limited v. Royal & Sun Alliance Insurance Company of Canada, 2022 ONCA 862, at footnote 5 at para. 7 (both citing Allmerica Financial Corp. v. Certain Underwriters at Lloyd’s, London (2007), 449 Mass. 621, 87 N.E. 2d 418).
[52] The impact of the follow form structure of the insuring agreement in the Second Excess Policy is that in order to understand the triggers to coverage under the policy, one looks not only to the coverage provided by the underlying First Excess Policy, but also to coverage limitations contained in other provisions of the Second Excess Policy.
[53] It is not necessary to come to a firm conclusion on the nature of the First Excess Policy in order to interpret the Second Excess Policy.[6] Even if the appellants are correct that the First Excess Policy is a claims made policy, the terms of the Second Excess Policy modify the language of the coverage grant in the First Excess Policy to clearly include claims made and reported triggers to coverage.
[54] Consistent with its follow form structure, the insuring agreement clause in the Second Excess Policy refers back to the coverage clause in the First Excess Policy and provides that coverage is subject to limits set out in the Second Excess Policy.
[55] After stating that coverage is in accordance with the terms and conditions of the First Excess Policy, the insuring agreement clause in the Second Excess Policy continues that coverage is “subject to the terms and conditions otherwise provided herein”. That is, the insuring agreement clause of the Second Excess Policy expressly conditions the grant of coverage on further terms and conditions in the Second Excess Policy. The insuring agreement clause in the Second Excess Policy is not simply a duplicate of the coverage clause in the First Excess Policy. The follow form language of the insuring agreement clause in the Second Excess Policy specifically anticipates that coverage triggers may be located in other provisions of the Second Excess Policy.
[56] The “terms and conditions otherwise provided” in the Second Excess Policy include a claims made and reported clause. Clause D of Part IV of the Second Excess Policy provides as follows:This policy only covers claims first made against the Insured and reported to the Insurer during the policy period and provided that such claim arises out of an act, error or omission committed or alleged to have been committed on or after the retroactive date set forth at Item. 6 of the Declarations. [Bold in original; underlining added.] [57] Reading together the insuring agreement clause of the Second Excess Policy and clause D of the policy, the terms are clear that the policy “only covers claims” which are both made against the insured and reported to the insurer “during the policy period”. In other words, clause D clearly indicates that to trigger coverage under the Second Excess Policy, a claim must be both made and reported during the policy period.
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[63] Second, the follow form nature of the insuring agreement clause in the Second Excess Policy and its specific wording explain why the triggers to coverage are not express in the insuring agreement clause. Although it is not essential that a claims made and reported clause be contained in the insuring agreement clause of a policy, in a primary policy, typically, the triggers to coverage are included in the insuring agreement clause for reasons of clarity.
[64] In a follow form excess insurance policy like the Second Excess Policy, the insuring agreement clause departs from the typical language of an insuring agreement clause. A comparison between the insuring agreement clauses in the First Excess Policy and the Second Excess Policy demonstrates the difference. The First Excess Policy sets out both the grant of coverage and the limitations on coverage:To pay on behalf of the ASSURED all sums in excess of the Retention or any Underlying Insurance (including a compulsory policy) (as described in the Conditions), and which the ASSURED shall become legally obligated to pay as DAMAGES as a result of CLAIMS first made against the ASSURED during the POLICY PERIOD… [Emphasis added.] . Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada
In Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada (Ont CA, 2024) the Court of Appeal considered an insurer appeal of a complex interlocutory application to declare 'duties to defend' and if so, the allocation of legal expenses between defendants, in five merged opioid class actions against several retailers, each with multiple insurers.
Here the court contrasts primary with excess insurers:[250] I will start with the role of excess insurers. In Trenton Cold Storage Ltd. v. St. Paul Fire and Marine Insurance Co. (2001), 2001 CanLII 20561 (ON CA), 146 O.A.C. 348 (C.A.), a contribution dispute between insurers, Charron J.A. described the distinction between primary and excess insurers, at para. 24:The distinction between primary and excess insurance is succinctly set out in St. Paul Mercury Insurance Company v. Lexington Insurance Company, 78 F. 3d. 202 (5th Cir. 1996) at footnote 23, quoting from Emscor Mfg. Inc. v. Alliance Ins. Group, 879 S.W. (2d) 894 at 903 (Tex. App. 1994, writ denied):Primary insurance coverage is insurance coverage whereby, under the terms of the policy, liability attaches immediately upon the happening of the occurrence that gives rise to the liability. An excess policy is one that provides that the insurer is liable for the excess above and beyond that which may be collected on primary insurance. In a situation where there are primary and excess insurance coverages, the limits of the primary insurance must be exhausted before the primary carrier has a right to require the excess carrier to contribute to a settlement. In such a situation, the various insurance companies are not covering the same risk; rather, they are covering separate and clearly defined layers of risk. The remote position of an excess carrier greatly reduces its chance of exposure to a loss. [Emphasis in original.] See also Markham, at paras. 50-52. . Northbridge General Insurance Company v. Aviva Insurance Company
In Northbridge General Insurance Company v. Aviva Insurance Company (Ont CA, 2022) the Court of Appeal considered an issue of excess insurance between two insurers, and whether 'equitable insurance' principles applied:[5] The Northbridge and Aviva Policies each include “other insurance” clauses that provide that their policies are excess to any other valid and collectible insurance.
[6] The parties do not dispute the availability of the doctrine of equitable contribution where two policies are irreconcilable – that is, where both cover the loss at issue and neither is clearly excess to the other. In those circumstances, both insurers may be required to contribute equally to an insured’s defence and indemnification. That is what Northbridge argues applies in this case. Aviva, by contrast, argues that the policies are reconcilable. Its policy clearly is excess to any professional liability policy that provides coverage to Mr. Daneshvari, and, consequently, it only has an obligation should the amount of the loss covered by Northbridge’s insurance be exceeded.
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B. ANALYSIS
[11] The appellant argues that the application judge erred in his interpretation of the Northbridge and Aviva Policies as irreconcilable, while the respondent contends that the application judge made no errors which would warrant appellate intervention.
[12] The parties take different views on the applicable standard of review for this appeal. According to the appellant, the application judge’s interpretation of the insurance policies is subject to a standard of correctness, based on Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23.
[13] In Sattva, the Supreme Court held that contractual interpretation is a question of mixed fact and law, which attracts deference. In Ledcor, however, Wagner J., writing for the majority, recognized an exception to this principle, noting that where an appeal involves “the interpretation of a standard form contract, the interpretation at issue is of precedential value and there is no meaningful factual matrix that is specific to the parties to assist the interpretation process,” the interpretation is better characterized as a question of law: at para. 24.
[14] The respondent argues that, as the application judge had to interpret two different policies with differently worded “other insurance” clauses in light of a specific factual matrix, this court should only interfere with his decision if he committed palpable and overriding errors.
[15] We do not agree that the “other insurance” and other relevant provisions of the policies at issue in this case are “standard form contracts” or contracts with significant precedential value. Rather, the wording of these provisions and interplay of the two policies makes the application judge’s interpretive decisions distinct. As such, the standard of palpable and overriding error applies.
[16] That said, for the following reasons, whether on this standard or the standard of correctness, we see no error in the application judge’s decision.
[17] The applicable legal standard for equitable contribution was set out in Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, [2002] 2 S.C.R. 695, at paras. 14-15, and is based on the principle that parties under “coordinate liability,” to make good a loss, must share that burden on a pro rata basis. The policies must cover the same risk for the same insured and must not exclude one another. In short, the policies must both apply to an insured’s loss and be irreconcilable.
[18] The application judge found that the policies at issue in this case met these criteria, at paras. 21-22:[I am satisfied that both policies cover the same risk. The Northbridge Policy provides coverage for the professional liability of pharmacists who are members of the Ontario Pharmacists Association. The Aviva Policy, through the Pharmacy Professional Liability Endorsement, provides coverage for the professional liability of pharmacists employed with Ayda Pharmacy. At the time of the loss, Mr. Daneshvari was a member of the Ontario Pharmacists Association and an employee of Ayda Pharmacy. He was an insured under both policies. Both policies provide coverage for claims for bodily injury arising out of professional services.
I am also satisfied that both policies provide coverage at the same layer of coverage. [19] The application judge instructed himself on the interpretation of the “other insurance” provisions, at para. 27:In determining the intention of the insurers to limit their obligations, the court is to consider only the policy wording. The analysis is not to be based on the surrounding circumstances or which policy is more specific or closer to the risk. If the intention to limit the obligations is not clearly set out in the policy, or if the competing intentions of the insurers cannot be reconciled, the principles of equitable contribution require the parties to equally share the costs of defence and indemnity: Family Insurance, at paras. 19, 23-28. [20] We agree with the application judge’s conclusion that the “other insurance” clause in both the Northbridge and Aviva Policies was intended to achieve the same goal. The “other insurance” clause in the Northbridge Policy included a provision that it did not apply if the insurance purchased by the “insured” was an excess policy. The “insured” under the Northbridge Policy was Mr. Daneshvari. The Aviva Policy, however, was not purchased by Mr. Daneshvari but rather by Ayda Pharmacy. The Aviva Policy was not a true excess policy (relying on the importance of a contextual analysis of the “other insurance” clause as reiterated by this court in McKenzie v. Dominion of Canada General Insurance Company, 2007 ONCA 480, 86 O.R. (3d) 419, at para. 39).
[21] Nor do we accept the appellant’s argument that the reference in the Aviva Policy’s “other insurance” clause to the coverage being in excess of any valid and collectable policy available to “individual pharmacists” transformed the Aviva Policy into a secondary insurance policy. This language constituted a requirement that individual pharmacists covered under the general liability policy of the pharmacy were required to maintain a professional liability policy. The more specific language relating to individual pharmacists in the “other insurance” clause in the Aviva Policy did not alter its scope as compared to the general “other insurance” clause in the Northbridge Policy.
[22] The application judge correctly distinguished this case from Lawyers’ Professional Indemnity Company (LPIC) v. Lloyd’s Underwriters, 2016 ONSC 6196, relied upon by the appellants. In LPIC, the court found that the Lloyd’s policy, which provided general liability coverage, specifically provided that its coverage was excess to any professional liability coverage provided by any Law Society. The court contrasted this policy and the LPIC professional liability policy, which provided that if the insured had other insurance that was arranged to be excess insurance, the other policies were to be treated as excess. The court found that the Lloyd’s policy was a secondary policy in relation to the LPIC policy. Therefore, the two policies were not irreconcilable, and Lloyd’s was not required to contribute towards the defence or indemnity of the insured under the principle of equitable contribution.
[23] This court upheld the LPIC application judge’s decision, concluding, at para. 3, “Further, the appellant’s policy acknowledges that other policies, specifically arranged to apply as excess insurance over the appellant’s policy, were to be treated as being excess policies. We see no error in the application judge’s analysis”: 2017 ONCA 858.
[24] The application judge’s interpretations of the Aviva and Northbridge Policies were open to him, and the appellant has shown no error with his analysis or conclusion.
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