Lester Wins Insurance Coverage for School Board
White Macgillivray Lester founding partner Dan Lester was recently successful for a local Northwestern Ontario school board in a case where insurance law and commercial leases intersect.
In Paulin v. Keewatin Patricia District School Board, the Defendants, the Keewatin Patricia School Board and the Municipality of Red Lake, each sought the court’s ruling on the meaning of the insuring provisions of a commercial lease that was in effect at the time the Plaintiff, Ms. Paulin, slipped and fell while working as an early childhood educator for the Municipality of Red Lake.
The slip and fall occurred at a municipally run day care located at the Red Lake Madsen Public School . The Municipality leased the day care from the Keewatin Patricia School Board. Pursuant to the lease agreement between the parties, each undertook to obtain insurance coverage on the property for certain risks in favour of the other.
The Insuring Provisions
As Landlord, the School Board agreed to maintain insurance coverage that insured against, among other things, bodily injury or death or property damage sustained by third parties.
As Tenant, the Municipality agreed to keep the School Board indemnified against all claims and demands whatsoever by any person, whether in respect of damage to person or property, arising out of or occasioned by the maintenance, use or occupancy of the Premises.
Further, the Municipality also agreed to maintain comprehensive general liability insurance in the amount $2 million per occurrence, and agreed to name the School Board as an additional insured in the CGL policy.
Position of the Parties
Mr. Lester, lawyer for the School Board, argued that as an additional insured under the Lease Agreement, it was entitled to coverage for any liability posed on it by law. It was entitled to a defence from the Municipality’s insurer. It was entitled to indemnification for any damages imposed by a liability finding against it. Having been sued for negligence by Ms. Paulin, coverage was triggered and a defence and indemnification was owed to it by the Municipality’s insurer.
Finally, the School Board argued that Red Lake, being a sophisticated commercial client at the time it entered the lease, was free to allocate risk however they so chose, and did not choose to limit its liability in any way, did not choose to include an indemnifying provision in its favour, and did not choose to add itself as an additional insured to the School Board’s liability policy.
The School Board relied on the Ontario Court of Appeal decision in Deslaurier v. 1728106 Ontario Inc., 2016 ONCA 246 in support of its position.
The Municipality argued that the Municipality’s CGL policy was ancillary to the School Board’s specific covenant to insure against the risk of bodily injury. The Municipality further argued that the Municipality’s indemnity covenant in favour of the School Board was not triggered in this case as the loss fell within the School Board’s insurance covenant.
Alternatively, the Municipality argued that if its indemnity covenant was triggered, the wording was not clear and unambiguous language required to encompass the School Board’s negligence, which was the only claim being asserted by the Plaintiff Ms. Paulin in her slip and fall action.
Justice Platana agreed with the School Board and found that the lease agreement required the Municipality to defend and indemnify the School Board with respect to the claims made by the Plaintiff against it.
In arriving at his decision, Justice Platana found that the wording in the lease before him was virtually identical to the wording of the indemnity clause at issue in the Deslaurier case. As in Deslaurier, the Muncipality had covenanted to indemnify the School Board for personal injury damages arising out of the maintenance of the premises, which was the very loss being claimed for.
Justice Platana accepted Mr. Lester’s argument that, as the School Board was an additional insured under the Municipality’s policy, the School Board was entitled to the same rights and obligations as the Municipality and was therefore entitled to a defence and indemnification.
The Municipality has appealed the decision, so it may be that we have not had the last word on this case yet!