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Court of Appeal confirms that insurers that sell insurance in Ontario should litigate coverage issues in Ontario

In its recent decision in Vale Canada Limited v. Royal and SunAlliance Insurance Company of Canada, Ontario’s top court confirmed what a layperson would think to be obvious: that an insurer that chooses to underwrite and insure Ontario risks can expect to be required to litigate resulting coverage disputes in Ontario.

The above simple proposition was somewhat complicated by the complex factual and insurance background to the case.

In particular, Vale, a mining company with international operations, had  placed some 92 policies of insurance worldwide with 24 primary and excess insurers over the course of several decades of operations in Canada and elsewhere around the world. The insurance policies were occurrence-based and had the potential for long-tail liabilities – ­liabilities that would not be engaged until beyond the policy periods. The coverage issues stemmed from  environmental expenditures in relation to 26 sites around the world for which Vale claimed insurance coverage. Of those, 22 sites are in Canada, and 19 are in Ontario. Vale also has claims for sites operated through subsidiaries in Japan, Indonesia, New Jersey, and Wales.

In Ontario, in particular, Vale incurred costs and losses in six major class actions and putative class actions for environmental damage caused to property in Ontario from operations in Port Colborne and in Sudbury. All these actions are completed now. Vale sought the costs of defence and indemnity for these very large losses from its primary insurers, including RSA, and, if necessary, its excess insurers.

The dispute among Vale and numerous insurers led to multiple coverage actions being commenced in Ontario and one insurer, Travelers, sued Vale in New York for a declaration that there was no coverage.  Travelers and some of the other insurers moved to dismiss or stay the Ontario actions for lack of jurisdiction or alternatively on the basis that Ontario is not the convenient forum. In response to Travelers’ New York proceeding, Vale and one of the insurers, RSA, moved in New York to dismiss Travelers’ complaint and other crossclaims against Vale, based on the doctrine of forum non conveniens.

On January 4, 2022,  Justice Fred Myers held that Ontario’s Superior Court of Justice largely had jurisdiction simpliciter over the Vale and RSA actions and that Ontario was not forum non conveniens. At around the same time, the New York Court similarly refused to dismiss or stay the New York litigation on the basis of forum non conveniens, stating that:

“This is a dispute involving insurance policies procured in New York, underwritten in New York, issued in New York, delivered to Inco Limited’s New York Office (which is the address identified on almost every single policy at issue [NYSCEF Doc. No. 155]), where notice of claims were to be provided in New York and whether coverage exists under those policies. The Canada court in the later filed actions dismissed the claims against North River because it is not subject to jurisdiction in Canada. Wausau also specifically negotiated to exclude Canada risks such that to make them litigate there is particularly inappropriate. Thus, it can not be said that Canada presents the more comprehensive actions. The Commercial Division in New York regularly adjudicates insurance coverage disputes where the events underlying the coverage issue occurred elsewhere, and this Court is often called to interpret foreign law. Indeed, this is part of this Court’s jurisdictional mandate. Stated differently, the burden on the Court is small. Given the proximity between Canada and New York, it simply can not be said that the burden on the Defendants is significant.”

In finding that Ontario has jurisdiction simpliciter, the Court of Appeal reaffirmed that carrying on business in Ontario is on its own a presumptive connecting factor sufficient to justify  Ontario courts assuming jurisdiction:

“The same rationale warrants treating carrying on business in the jurisdiction as a presumptive connecting factor in a contract case. Carrying on business in Ontario might link the subject matter of the litigation and the defendant to Ontario as a forum, even if the contract is not made in Ontario, depending on the relationship between the business activities, the contract, and what the contract and the claim are about. The connection will be especially strong where the business activities give rise to or are reflected in a contract that in whole or in part relates to property, interests, or activities in Ontario, that contemplates some aspect of contractual performance in Ontario, or that is aimed at protecting a person from harm that might otherwise be suffered in Ontario.”

The Court of Appeal also affirmed the motion judge’s reliance on the reasonable expectations of the parties that they would have to litigate coverage disputes in Ontario as being an appropriate consideration:

“The motion judge’s findings that, regardless of where they were negotiated or delivered, all of the insurers knew that the policies would be received and acted on in Ontario, that ‘all of the insurers participated in a global insurance program for an Ontario-based company with its mining assets largely held in Ontario’, that the policies related to ‘Ontario liabilities’, and that the subject matter of the claim involved the insurers being ‘sued on those policies in relation to those very liabilities’ were findings that properly supported the existence of jurisdiction on the basis of carrying on business in Ontario.”

The Court of Appeal went on to reject the insurers’ motion to stay the Ontario actions on the basis of forum non conveniens, finding that the motion judge’s exercise of discretion not to decline jurisdiction in favour of New York as the clearly more convenient forum was entitled to deference.

Finally, the existence of concurrent litigation in both New York and Ontario was noted by the Court of Appeal but was not determinative. While the Court acknowledged that the possibility of inconsistent results in courts of two different jurisdictions is something to be avoided, it also noted that “the parties have given us no reason to anticipate that the New York and Ontario courts would reach inconsistent outcomes.”

In the result, the Court of Appeal decided that “the outcome of the jurisdiction simpliciter analysis, coupled with the assessment of forum non conveniens, means the litigation will continue in Ontario. That result is not affected by the possibility that litigation might also continue in New York.”

Again, the complexities of the underlying action and its parties belie the simplicity of the rationale for the Court of Appeal’s decision: When you carry on business in Ontario and have a dispute with your Ontario insured or client, you should expect to litigate that dispute in Ontario. It remains to be seen what the New York appeal court will do with the companion litigation on the other side of the border.

Kenneth A. Dekker
Affleck Greene McMurtry LLP

Kenneth A. Dekker

Kenneth Dekker, a partner of the firm, is a successful trial and appellate lawyer who is valued by his clients as a resourceful and practical litigation counsel.

Over more than two decades, Ken has litigated noteworthy cases in a range of fields that include class action defence, securities and broker-dealer litigation and regulatory defence, corporate and shareholder disputes (including oppression and winding up cases), defamation, civil fraud litigation, disputes over contracts, injunctions, professional liability litigation, employment litigation and cross-border litigation issues.

Ken has appeared before all levels of courts in Ontario, including the Ontario Court of Justice, the Superior Court of Justice, the Divisional Court and the Court of Appeal for Ontario, as well as before the Supreme Court of Canada. Ken also represents and advises clients in regulatory matters before the Investment Industry Organization of Canada (IIROC), the Mutual Fund Dealers Association of Canada (MFDA) and the Ontario Securities Commission (OSC).

Ken has been ranked as Repeatedly Recommended for Securities Litigation by Lexpert, for Corporate and Commercial Litigation by Best Lawyers of Canada, and he has been given the highest available rating of AV, or pre-eminent, by his peers on Martindale-Hubbell.

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