The Ontario Court of Appeal's decision in Van Huizen v. Trisura Guarantee Insurance Company, 2020 ONCA 222 underscores the distinction between an insurance policy and an insurance contract; particularly the importance this difference has in determining whether an insurer's duty to defend is engaged for individuals participating in a group insurance program.
Trisura Guarantee Insurance Company ("Trisura") issued a professional liability insurance policy (the "Master Policy") to the Appraisal Institute of Canada ("AIC"). The Master Policy pertained to claims made against AIC members, their personal corporations, employers, and the AIC, for the negligent provision of professional appraisal services.
Coverage was extended to individual members of the AIC under the Master Policy by way of individual application. An individual certificate of insurance was issued to each member.
Mr. Van Huizen, a professional appraiser and member of the AIC, made a claim under the Master Policy and his individual certificate of insurance (the "Van Huizen Insurance Contract") for coverage in respect of three proceedings (two actions and a third party claim), which were brought against Mr. Van Huizen and a business style, Hastings Appraisal Services (collectively referred to as "Van Huizen").
These proceedings arose from an allegedly negligent property appraisal performed by another AIC member, Mr. Barkley. Mr. Barkley was also insured under the Master Policy and had his own individual certificate of insurance issued by Trisura (the "Barkley Insurance Contract"). Mr. Barkley passed away in October 2016.
Before Trisura could issue its coverage position in respect of the Van Huizen claim, Van Huizen commenced an action against Trisura seeking a declaration that Trisura had a duty to defend and indemnify them under the Van Huizen insurance contract for the three proceedings.
The Summary Judgment Motion
Trisura brought a summary judgment motion to dismiss the action on the basis that it owed no duty to defend. In particular, Trisura took the position that, among other things, no coverage was available under the Van Huizen Insurance Contract because it did not provide coverage for Mr. Barkley's alleged professional negligence.
The motion judge dismissed Trisura's motion and granted judgment in favour of Van Huizen. In reaching this conclusion, the motion judge adopted a broad interpretation of the Master Policy and concluded that "Mr. Van Huzien has coverage for a legal claim arising from his own actions and also when it flows from his legal status as an employer of the alleged wrongdoer [Mr. Barkley]." The motion judge also found that Trisura had a duty to defend Van Huizen on the basis that such an interpretation was necessary for the vicarious liability provision to have any practical effect.
Trisura appealed the motion judge's decision.
The primary issue on appeal was whether the motion judge erred in finding that Trisura's duty to defend Van Huizen was engaged under the Van Huizen Insurance Contract.
While the motion judge correctly identified the relevant interpretative principles in determining whether there was a duty to defend, the Court found the motion judge erred by treating the Master Policy as the entire insurance contract for all AIC members.
The Court's decision turned on the differences that separate insurance policies from insurance contracts as recognized by the statutory definitions of "contract" and "policy" in the Insurance Act, RSO 1990, c. I.8.1 The Court noted insurance policies are instruments that do not create legal obligations simply through their existence. Without an added contractual relationship, a policy is merely a recitation of terms and conditions that does not attach to a particular person or item.
In contrast, an insurance contract creates contractual obligations between parties. Like any contract, there must be an offer, acceptance, and agreement on all material terms. Premiums, the nature and duration of risks, and the extent of liability, are all material terms in an insurance contract.
The motion judged interpreted the Master Policy as if it constituted a binding agreement between Trisura and all members who had been issued certificates. Since both Mr. Van Huizen and Mr. Barkley each held certificates under the Master Policy, the motion judge incorrectly concluded they were both “Insureds” and entitled to coverage.
The Court explained that the Master Policy did not constitute a binding agreement on its own and merely set out the terms of the professional liability insurance being offered to the AIC members. Each AIC member who desired coverage must apply and, provided the member and the insurer come to an agreement on the remaining essential terms (e.g. premium to be paid and the term of insurance), a certificate of insurance must be issued to the member to confirm the existence of the insurance contract. Thus, the certificates issued to Mr. Van Huizen and Mr. Barkley were evidence of separate insurance contracts.
In light of this, the individual certificate issued to Mr. Van Huizen should have been used to determine whether Trisura had a duty to defend. Since the motion judge erred by finding a duty to defend based solely on the Master Policy, the Court reconsidered the issue based on an interpretation of the true contractual relationship between the parties.
As Mr. Barkley's certificate did not form part of the Van Huizen Insurance Contract, only Van Huizen would be captured under the definitions of "Member", "Insured" and "Wrongful Act". In other words, coverage was only available for claims against Van Huizen respecting Mr. Van Huizen's provision of professional services. Consequently, there was no coverage under the Van Huizen Insurance Contract for Mr. Barkley's alleged professional negligence.
Ultimately, the Court found Trisura's duty to defend was not engaged and the motion judge's order was set aside.
The appeal decision in Van Huizen v. Trisura serves as a useful reminder of the important distinction between an insurance contract and an insurance policy, particularly where coverage is offered under a group insurance program. It is the insurance contract, not the insurance policy, which must be considered when determining an insurer's liability.
1 Section 1 of the Insurance Act defines "contract" to mean "a contract of insurance, and includes a policy, certificate, … evidencing the contract …" and "policy" to mean "the instrument evidencing a contract".
Originally published by Clyde & Co, August 2020
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Ms Julia Vizzaccaro
Clyde & Co
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