Overview and Executive Summary
So-called “long-tail claims”, i.e. claims where the alleged damage spans a number of years, pose various coverage challenges for insurers and policyholders.
On February 27, 2024, the Ontario Court of Appeal released its decision in Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada, 2024 ONCA 145 (CanLII) (“Loblaw”), where it tried to bring some clarity to some of the material coverage issues that arise with these types of claims.
The decision arose out of the various opioid class actions in Canada. The policyholders sought coverage for the defence of the class actions from their various liability insurers, spanning several years. The issues on appeal were whether the “all sums” approach taken by the application judge was preferred over the time-on-risk approach advocated for by the insurers, the application of the self-insured retentions (“SIRs”) over multiple insurers, pre-tender costs, and a defence reporting agreement. Briefly, the Court of Appeal rejected the all sums approach, endorsed a time on risk approach, held that SIRs had to be exhausted before each insurer’s defence obligations commenced, applied pre-tender costs to the SIRs, and endorsed, but did not require, the defence reporting agreement.
What underscored much of the Court of Appeal’s reasoning was that multiple insurers over multiple policy periods did not have concurrent coverage obligations as multiple insurers on one overlapping policy period would. As such, the Court differentiated the concepts of equitable contribution from equitable time-on-risk allocation.
Both insurers and policyholders should carefully review the Loblaw decision as it touches not only on these issues, but on a number of coverage issues which are often hotly contested. Retainer of coverage counsel is strongly recommended when analyzing these issues as they often depend on the terms of the applicable policies and the analysis of a complex set of case law.
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