November 14, 2024
In insurance litigation, “mixed claims” refers to an action which contains claims which are both insured and uninsured.
The issue of who pays the cost of defence of mixed claims often arises.
This issue has been considered by the Ontario Court of Appeal in Live Nation Ontario Concerts GP, Inc. v. Aviva Insurance Company of Canada.
In this case, the underlying action was a personal injury claim against Live Nation and its security contractor. The security company’s insurer was Aviva. The Aviva policy extended to protect Live Nation for claims against it derived from the fault of the security contractor, but not the direct negligence of Live Nation. The claim alleged both types of fault against Live Nation. Some of the claims were not covered under the Aviva policy. Others were, and some might depend upon findings at trial.
The question was whether or not Aviva was required to fund 100% of the costs of defence, or whether those costs ought to be funded 50/50 with Live Nation or its insurer. In either case, the costs might be reallocated after the trial decided fault in the underlying action. Aviva did not sue Live Nation’s insurer for equitable contribution (the principle under which two insurers which insure the same risk share the cost of defence).
This decision did not determine anything about equitable contribution between the insurers. It leaves the door open for Aviva to seek equitable contribution against Live Nation’s insurer.
In the background here is the fact that some of the claims against Live Nation might not be insured under either policy, but this could not be determined until the underlying action was decided.
What the case decides is that Live Nation can require Aviva to fund the cost of its defence up front, subject to reallocation. Equitable contribution may only be sought from another insurer, not from an insured. Live Nation has the right to decide which policy it wants to have cover the costs of its defence up front. Attempting to prorate the costs at this stage would be at best guesswork.
If it was possible to prorate the costs up front, the court might have made that order. However, the insurer was required to pay the entirety of defence costs up front, even if those defence costs also assisted the defence of the uncovered claims, subject to reallocation for costs solely relating to the uncovered claims. The basis for the court’s conclusion was that the factual narrative underpinning both claims was the same and it was not possible to separate them. In most cases, cost allocations between an insurer and an insured are conducted following trial because there is a clear record as to how defence costs were expended.
Because of the possibility of reallocation of costs, Live Nation was entitled to separate defence lawyers, and Aviva was required to follow a “split file” protocol” that prevented a single claims examiner from making biased decisions in the conduct of the defence.
WHAT WEILERS LLP CAN DO TO HELP YOU
Weilers LLP has throughout our 75 years represented insurers and insureds in insurance disputes. We know how to read and interpret a policy. We take a practical and assertive approach to resolving disputes, including trials when necessary. If you have a problem with your insurer, give us a call and see if we are the right lawyers for you.
We also continue to work for insurers when requested to do so, which improves our ability to navigate the claims and dispute resolution process.