Long-tail claims over multiple policy periods? Look to Loblaws

November 05, 2025

By Megan Chan

In the recent Ontario Superior Court decision in His Majesty the King in Right of Ontario v. Royal & Sun Alliance Insurance Company of Canada et al., 2025 ONSC 5670, the Court confirmed that the proper method of allocation of defence costs as between insurers who insured the same party for consecutive (and not concurrent) coverage periods is based on time on risk.

This is another case applying the Ontario Court of Appeal’s decision in Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada, 2024 ONCA 145.

Underlying Action and Facts

On February 23, 2018, a dump truck was crossing a bridge in Catfish Creek, Elgin County, when the bridge collapsed. The bridge was built in 1964. Ontario transferred jurisdiction and responsibility for the bridge to Elgin County in March 1997.

After the bridge collapsed, the Corporation of the County of Elgin sued Ontario and others, alleging that Ontario and others were responsible for the costs of replacing the bridge, including costs associated with removing debris from the collapse, and damages from the loss of use of the bridge such as installing and monitoring new traffic controls (the “Elgin Action”).

The owners and operators of the dump truck sued the County of Elgin. Elgin commenced a third-party claim against Ontario and many of the other defendants in the first action (the “Jones Action”).

Issues

  1. Do Aviva and/or RSA have a duty to defend Ontario in the two actions?
  2. If yes, should the defence costs be allocated equally or on a “time on risk” basis?

Law

The Court reiterated the general principles of interpretation of insurance policies, as articulated by the Supreme Court in Progressive Homes, 2010 SCC 33.

An insurer owes an insured a duty to defend where the facts alleged in the pleadings, if proved at trial, would require the insurer to indemnify the insured. The “mere possibility” of coverage is enough to trigger the duty to defend. The pleading must be read generously, and the true nature and substance of the claim must be considered.

Analysis

The Insuring Agreements

The Aviva and RSA policies had almost identical insuring agreement language (additional language present in Aviva policy in parentheses):

BODILY INJURY AND PROPERTY DAMAGE

To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured or assumed by the Insured under contract for damages because of:

… (b) property damage (as defined herein – Aviva) caused by accident.

DEFINITIONS

Accident: Wherever used in this Policy, other than in the Pollution exclusion, the word “accident” includes continuous or repeated exposure to conditions which results in property damage neither expected nor intended from the standpoint of the Insured.

Property Damage: “Property Damage” means:

(a) injury to or destruction of tangible property which occurs during the Policy period, including loss of use thereof at any time resulting therefrom, or

(b) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an accident occurring during the Policy period.

Ontario’s insurance coverage was as follows:

  • Aviva provided coverage for 3 of the 54.2 years of the bridge’s lifespan.
  • RSA provided coverage for 6 of the 54.2 years of the bridge’s lifespan.
  • AIG provided road liability policies that were in effect from March 31, 1990 to March 30, 1998.
  • St. Paul issued a CGL policy that was in effect from March 31, 1998 to March 30, 2003.
  • From 1984 to 1990, Ontario was insured by a corporation that is now bankrupt.
  • For the remainder of the 54.2 years, Ontario was self-insured.

The Elgin Action

The Elgin Action alleged that the bridge collapsed due to structural defects within the bridge, including corrosion and fatigue damage to the anchor rods, leading to the anchor rods’ failure.

The Elgin Action also alleged that Ontario:

  • was responsible for the design and construction of the bridge;
  • was responsible for the inspection, maintenance, and repair of the bridge from its construction until March 31, 1997;
  • made representations to Elgin County at or around the time of the transfer of the bridge to Elgin County, regarding the design, construction, maintenance, repair, general condition, and lifespan of the bridge;
  • was negligent in the design and construction of the bridge, including by having designed and constructed the bridge in a manner that raised a reasonably foreseeable risk of the anchor rods being damaged or failing, and being concealed from inspection;
  • at the time of its unilateral transfer of the bridge to Elgin County, was in a better position to know of any defects (latent or otherwise) in the bridge;
  • that despite same, Ontario failed to alert Elgin County of the potential for serious structural defects within the bridge that could not be detected by any reasonable inspection;
  • negligently misrepresented to Elgin County that the bridge was in good condition, had no significant structural problems, and would have a substantial lifespan.

The Elgin Action alleged that Elgin County sustained damages for:

  • demolishing the bridge because the collapse rendered the bridge totally unusable;
  • rebuilding the bridge to ensure access to Port Bruce;
  • removing and demolishing the bridge’s remnants;
  • installing and maintaining new traffic controls;
  • installing a temporary bridge.

The Jones Action

The Jones Action alleged that Elgin County negligently and in breach of its statutory duties, failed to maintain the bridge in a safe manner, which caused the accident/bridge collapse, and also alleged that Elgin County failed to use reasonable care and skill in designing the bridge.

The Jones Action sought damages for:

  • the loss of the truck;
  • towing and storing costs;
  • costs for removal of debris, remediation, and environmental clean up;
  • out of pocket expenses;
  • business interruption loss.

In the Jones Action, Elgin County claimed for contribution and indemnity from Ontario and others, with allegations reflecting the statement of claim in the Elgin Action.

The True Nature and Substance of the Claims

The Court found that the substance of the claims against Ontario were:

  • a claim for property destruction of the anchor rods and consequent loss of use of the bridge;
  • that there were problems with the bridge’s construction and structure;
  • that the bridge’s collapse was the result of the anchor rods’ failure due to corrosion and fatigue damage to the anchor rods.

The Court found that the claims alleged that this corrosion of the anchor rods occurred between 1964 (when the bridge was constructed) and the time the bridge collapsed in 2018. Despite the claim alleging that Ontario’s negligent conduct occurred between 1964 and 1997, the property damage was alleged to have continued throughout the lifespan of the bridge and the loss of use of the bridge occurred in 2018, as a result of the failed anchor rods, which were alleged to have failed throughout the lifespan of the bridge. Corrosion is a process that occurs over time.

The Court acknowledged that at trial, expert evidence may assist in determining the precise timing of the corrosion damage, but given that the matter was at the pleadings stage, it was too early to say whether the precise timing would/could be known down the line.

Grant of Coverage

The Court held that the claims in both actions fell within the grants of coverage under the Aviva and RSA policies.

The language of the insuring agreements required the insurers to pay for property damage caused by accident, which was defined to include continuous or repeated exposure to conditions which result in property damage neither expected nor intended from the standpoint of the Insured.

The claims against Ontario did not allege intentional acts. The Court found that the corrosion would have occurred by accident, as defined in the policies. The Court further found that the claim alleged property damage, as defined, which included injury to or destruction of tangible property, which occurred during the Policy period.

The Court found, based on the plain language of the insuring agreement, that the addition of the words “at any time resulting therefrom” meant that the insuring agreement contemplated and included damage that occurred in the future, outside of the policy period. Nevertheless, the loss of use had to arise from injury or destruction of the property that occurred during the policy period.

Accordingly, the Court found that it was possible that a finding will be made that the corrosion that occurred between March 31, 1981 and March 31, 1984 (with respect to Aviva) and April 7, 1975 and March 31, 1981 (with respect to RSA) resulted in the loss of use of the bridge in 2018. Thus, the Court found that the claims fell within the grants of coverage.

Exclusions

The policies contained similar exclusion clauses (differences in Aviva policy in parentheses):

3. This insurance does not apply to:

(a) Property damage to

(1) property owned or occupied by or rented to the Insured…

(2) property used by the Insured (Aviva policy only); or

(3) property in the care, custody or control of the Insured or property over which the Insured is for any purpose exercising physical control, …

…

(c) property damage to work performed by or on behalf of the Named Insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith (Aviva policy only).

This insurance does not apply to claims arising out of: …

(f) Defects in maps, plans, designs or specifications provided by or for any Consulting Engineer and/or Consulting Architect, but this Exclusion shall only apply to such Engineer and/or Architect (Aviva policy only).

The Court found that none of the exclusions clearly and unambiguously excluded coverage.

First, there was some uncertainty, based on the facts, as to whether Ontario owned the bridge prior to 1997, thus whether the first exclusion applied or not was not clear.

Second, with respect to the exclusion for “property in the care, custody or control of the Insured or property over which the Insured is for any purpose exercising physical control”, the Court noted that the time frame to be applied was of “critical importance”.

The Court agreed with Aviva and RSA, that the pleading alleged that the corrosion of the anchor rods was a process across the lifespan of the bridge, from 1964 to 2018. This included damage both within and outside of Aviva and RSA’s policy periods. The Court explained that it was the loss of use (from the damage that occurred during the respective policy periods) that was alleged to have occurred beginning in 2018. At that point in time, the bridge was no longer in the care, custody, or control of Ontario. Accordingly, the Court found that the “care, custody or control” exclusion did not clearly and unambiguously exclude coverage.

Third, the Court found that the professional liability exclusion did not apply, as same would only apply to the engineer or architect, and not Ontario.

Finally, the Court found that the “work exclusion” did not apply as the claim was not limited to damages for only repairing the defective anchor rods or for pure economic loss, but also for damages for consequential damage, such as installing and maintaining new traffic controls. Accordingly, the exclusion did not apply.

Conclusion with Respect to the Duty to Defend

Ultimately, the Court found that Aviva and RSA’s duties to defend were triggered with respect to both actions, as the claim fell within the grant of coverage and was not clearly and unambiguously excluded by any exclusion in the policies.

Proper Allocation of Defence Costs Between Aviva and RSA

As one might anticipate, both Aviva and RSA relied on Loblaws Companies Limited v. Royal & sun Alliance Insurance Company of Canada, 2024 ONCA 145 to argue that their obligations with respect to defence costs should be allocated based on a pro rata “time on risk” calculation.

Ontario argued that the insurers should share equally in the defence costs, subject to the right to seek re-allocation of costs after the litigation concluded.

Ultimately, the Court agreed with the insurers and found that the defence costs were to be allocated based on the insurers time on risk.

The underlying action was a case involving progressive injury that spanned consecutive (and not concurrent) time periods. Accordingly, Loblaws applied.

The time limits set out in the policies were bargained for, by the parties. In contrast, if the Court were to apply the “all sums” approach, the insurers would be placed in a position of defending for corrosion that occurred outside the time frame of their respective policy periods. The policies provided coverage for future damage, but only for future damage that was tied back to their respective policy periods. The Court stated that it would be “arbitrary and grossly disproportionate” to require the insurers to bear the burden of the duty to defend for the entire length of the damage alleged.