Sole Consequence

Will one word – ‘solely’ — affect the scope of additional insured coverage?

In Brookfield Johnson Controls Canada LP v. Continental Casualty Company, Ontario Superior Court Justice Jane Ferguson considered the breadth of an insurer’s duty to defend an additional insured, potentially shedding new light on how extensive — or in this case, restrictive — that coverage can be.

Justice Ferguson found that an insurer did not have to defend an additional insured under a CGL policy because “the claims made against it are not, in substance, claims arising solely out of the operations of” the named insured.

The role that the inclusion of the term “solely” played in the reasoning of this decision appears significant. It remains to be seen whether, depending on how this and other cases unfold, this term will be adopted in other policies when including coverage for additional insureds.

THE BACKGROUND

A commercial contract between Olympic Dust Control and Brookfield Johnson Controls Canada, a property manager, obliged Olympic to supply rental floor mats for a variety of CIBC branch locations. The contract included a provision requiring that Olympic name Brookfield as an additional insured on Olympic’s insurance policy. Olympic was to obtain comprehensive liability insurance covering “all operations of the Olympic products and completed operations…”.

A certificate of insurance was issued to Brookfield purporting to add it as an additional insured under Olympic’s CGL policy. The certificate stated:

  “Brookfield Johnson Controls Canada LP […] are added as Additional Insured but only with respect to liability arising solely out of the operations of the Named Insured and only with respect to Commercial General Liability [my emphasis].”

The policy provided that “an additional insured is insured but only with respect to their acts within the scope of your business.”

Read the full article in the Digital Edition of the February 2018 Canadian Underwriter.

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-Michael S. Teitelbaum, Partner, Hughes Amys LLP