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Spring 2019 – Newsletter

Welcome to In|Sight, Rogers Partners’ quarterly newsletter that offers our unique perspective on relevant legal issues and the internal happenings of the firm.

The Duty to Disclose Material Changes in Risk

By David Rogers

There are a number of important milestones for a parent who is raising a child. Many of these milestones are celebrated with great joy.

Other milestones, however, can evoke considerable dread.  For many parents, the day their child first takes the family vehicle for a drive after obtaining a driver’s license is a fearful experience.

Unfortunately, those fears sometimes become reality and the child may be involved in a motor vehicle accident. This unfortunate reality can in turn become a nightmare when the parents’ insurer advises them there is no coverage under their motor vehicle liability policy, as they did not notify the insurer that their child had obtained a driver’s license.

This is a surprisingly common scenario, and one that played out recently in Seetaram v. Allstate Insurance Company of Canada, 2019 ONSC 683.

Background Facts

Zalimoon Seetaram and Lakeram Sitaram were insured under a motor vehicle liability policy with Allstate Insurance.  Their son, Avinash Sitaram, who lived with them, had obtained his G2 license in February of 2013.

The Allstate policy was set to expire on April 17, 2013, and Allstate sent a renewal offer to Zalimoon and Lakeram.  The renewal form confirmed that the only licenced drivers in the household were Zalimoon and Lakeram.

Further, in the driver information section, Allstate asked: “Are any other persons in the household or business licensed to drive?”  As Lakeram and Zalimoon had answered no to that question when the policy was first issued, a “no” was included in the policy renewal.

The policy was in turn renewed based on this information. The son, Avinash, was then involved in an accident, and Avinash and Lakeram were put on notice of a possible claim against them. They looked to Allstate for a defence and indemnity under the insurance policy.

Allstate began investigating the claim and determined that Avinash was a licensed driver in the household at that time of the policy renewal.

Ultimately, Allstate determined that, had it been aware of this fact, it would have charged an annual premium almost double what was actually charged.

The failure to advise that Avinash was licensed to drive was, according to Allstate, a violation of both the policy’s Statutory Condition 1(1), which required notification to the insurer promptly of any material change in risk in the contract, and Section 233(1)(a)(ii) of the Insurance Act, which deals with misrepresentation on an application for insurance.

That section provides that where an applicant for a contract for automobile insurance “knowingly misrepresents or fails to disclose in the application any fact required to be stated therein … a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited.”

Allstate then sent a registered letter to the applicants with the full refunded premium and advised that Allstate declared the policy void as of April 17, 2013, due to the failure to disclose facts material to the evaluation of the risk.

Zalimoon, Avinash and Lakeram in turn brought an application seeking a declaration that the Allstate policy remained valid and, in the alternative, relief from forfeiture from any breach of the policy.

The Decision

The applicants took the position that Allstate had a duty to explain to them what constituted a material change in risk and had failed to do so.

Further, that they had an honest but mistaken belief in coverage and any breach should in turn be excused, or alternatively, relief from forfeiture should apply to relieve the breach.

What is “Material” to the Risk?

The first issue to be considered was what should be considered a fact “material” to the risk. Justice Glustein confirmed that the law in Ontario is that the duty of utmost good faith between parties to an insurance contract requires the applicant to disclose all material facts to the insurer.

A fact will be material where, if properly disclosed, it would influence a reasonable insurer either to decline the risk or accept a different premium.

Is there a Duty to Explain what is Material to the Policy Holder?

The applicants argued that an insurer has a duty to explain to the policy holder what constitutes a material change in risk.  They relied on appellate authority from New Brunswick for this position.

However, Justice Glustein rejected this argument and confirmed that in Ontario, unlike other provinces in Canada, an insurer does not have a duty to explain to the insured what constitutes a material change in risk.  The duty is on the insured to disclose all material facts, even in the absence of questions from the insurer.

Does an Honest but Mistaken Belief in Coverage Excuse the Breach?

The applicants then argued that their honest but mistaken belief in coverage should excuse any beach of condition.

They relied on caselaw interpreting Statutory Condition 4(1), which found that an honest but mistaken belief in coverage can in some circumstances excuse a breach of that condition.

Justice Glustein rejected this argument as well.  Statutory Condition 4(1) requires an analysis of “whether the insured acted reasonably in all the circumstances”, thus importing a subjective view of the insured into the analysis.

However, this language is absent from Statutory Condition 1(1), which does not take into account the subjective view of the insured.

Instead, the test under Statutory Condition 1(1) is analogous to the test under Section 233(1)(a)(ii) of the Insurance Act.  That is, a fact will be material where, if properly disclosed, it could influence a reasonable insurer either to decline the risk or accept a different risk regardless of the subjective belief of the putative insured.

Does Relief from Forfeiture Excuse the Breach?

Finally, Justice Glustein considered the applicants’ request for relief from forfeiture.

In Kozel v. Personal Insurance Co., the Ontario Court of Appeal had determined that a court may grant relief from forfeiture “to prevent hardship to beneficiaries of an insurance contract where there has been a failure to comply with the condition for receipt of insurance proceeds and where leniency in respect of strict compliance with a condition will not result in prejudice to the insurer”.

 Justice Glustein clarified the important distinction, however, between imperfect compliance with a policy term and non-compliance with a condition precedent to coverage.

Where there is imperfect compliance with a policy term, such as a woman who drove without a license in Kozel, relief from forfeiture is available.

However, where the breach constitutes non-compliance with a condition precedent to coverage, such as non-disclosure on an application for insurance (pursuant to Section 233(1)(a)(ii)), or when the insured fails to advise the insurer of a change material to the risk (pursuant to Statutory Condition 1(1)),  the contract is not properly formed and as such the insurer is not bound by it.

This is, therefore, not a breach of the nature that can be addressed by relief from forfeiture.

Based on all of the above, Justice Glustein dismissed the entire application and awarded costs to Allstate.

Key Consideration for Insureds

The failure to properly disclose material facts when applying for insurance, or to promptly notify the insurer of a material change to the risk insured, is a surprisingly common error made by policy holders.

The impact of such an error can be devastating, leaving the policy holder with no coverage at all following a serious accident.

This underscores the unique relationship between the parties when forming an insurance contract, and the absolute obligation of good faith between those parties.

For policy holders, it is imperative that they are aware of their duty to notify their insurer of any change material to the risk, as well as their requirement not to misrepresent any fact during the application for insurance.  For example, if you child lives with you and gets their driver’s licence, advise your insurer.

A policy holder should never rely on the insurer to explain to them what would be material in that insurer’s assessment of the risk. Instead, they must be aware that a fact is considered material where, if disclosed, it would influence their insurer to either decline the risk or accept a different risk.

The best advice to policy holders or applicants for insurance is to be thorough and completely truthful when applying for insurance and to update their insurer with any factual change that may impact their policy in any way.

The insurer can then make the decision on whether the change is material to the risk insured or to be insured.

Key Consideration for Insurers

For insurers, a thorough investigation should always be undertaken following an accident to confirm that the risk underwritten is in fact fairly represented in the policy itself and in the premiums collected.

If not, and the insurer had in fact insured a risk different than what was understood, it may be that the insurance policy was not properly formed in the first place and it is in turn voidable.

Assuming the insurer properly follows the procedures for voiding the policy, the policy will be deemed void from inception. There would be no entitlement to indemnity thereunder, and relief from forfeiture would not be available to excuse the insured’s non-compliance with a condition precedent to coverage.

Claims Against Educational Institutions – It’s Not Just Academic Anymore

By Stephen G. Ross and Colleen Mackeigan, Student-at-Law

This paper seeks to explore an emerging area in education law, specifically, the right and ability of students to sue educational institutions in court for a compromised education.

What historically was considered an internal administrative law issue (at best) is now a recognized claim in tort and/or contract – universities, professors and teachers, beware.

In this paper we canvas the law as it relates to such academia based claims and then consider the kinds of situations and allegations which may support such a claim in court. Lastly, we provide some takeaways in terms of dealing with these issues going forward.


Historically, it was believed that students would have to pursue the internal administrative process of a university to seek redress for any grievances of an academic nature.

However, given recent developments in the law, it is now clear that students can sue an academic institution in a civil action for breach of contract and/or tort.

The evolution of this process, starting with the presumed jurisdiction of the court, as compared to that of academic institutions, is worthy of review.

Jurisdiction of the Court and Academic Institutions

The Superior Court is a court of inherent jurisdiction. As such, its powers and scope may be limited only by clear and express legislative or contractual provisions to that effect.[1]

An academic institution such as a university, however, derives its powers and jurisdiction from an enacting statute which bestows the university with the power to internally manage and control the institution’s affairs.

For example, the enacting statute of the University of Western Ontario states:

Except in such matters as are assigned by this Act to the Senate or other body, the government, conduct, management and control of the University and of its property and affairs are vested in the Board, and the Board may do such things as it considers to be good for the University and consistent with the public interest [emphasis added].[2]

As such, courts have held that universities enjoy “broad discretion” in respect of academic affairs.

Further, the Ontario Court of Appeal (“ONCA”) in Gauthier v. Saint-Germain held that by enrolling at a university, it is understood that the student implicitly agrees to be subject to the university’s discretion in resolving academic matters, including the assessment of the quality of the student’s work and the organization and implementation of university programs. [3]

The scope of this “broad discretion” is what drove the traditional view that academic institutions enjoyed exclusive jurisdiction over academic affairs. This traditional view has been challenged of late and, as such, the question of what role a court may play in resolving academic disputes requires greater scrutiny.

Can the court adjudicate civil claims arising from academic decisions?

The Supreme Court of Canada has long held that a contractual relationship exists between a university and its fee-paying students, giving rise to duties in both contract and tort.[4]

Nonetheless, courts have historically been hesitant to accept jurisdiction for actions arising out of disputes regarding academic decisions or activities of a university where no external legislative authority such as the Child Protection Act[5] or Consumer Protection Act[6]apply.

As such, Ontario universities often enjoyed success on early dispositive motions to have a plaintiff’s claim struck on the ground that it discloses no reasonable cause of action or that the court lacks jurisdiction over the subject matter.

Recent developments, however, reveal that a properly crafted claim will survive such motions going forward and should also support a successful claim for damages at trial.

In Lam v. University of Western Ontario, the ONCA recently held that so long as a plaintiff alleges the constituent elements of a cause of action based in tort or breach of contract while claiming monetary damages, the court will have jurisdiction even if the dispute stems from the scholastic and academic activities of the university in question.[7]

The court clarified that the “broad discretion” enjoyed by academic institutions did not provide exclusive jurisdiction over academic affairs, as long as damages are sought and a tort or breach of contract is asserted.

However, if the remedy sought by the plaintiff is the reversal of an academic decision, he or she must first exhaust the internal remedies available through the dispute resolution system of an academic institution before resorting to the courts and may then only do so by way of judicial review.

What constitutes a claim in breach of contract or negligence against an academic institution?

As indicated, it has been held that there exists an implied agreement between an institution and its students, a term of which is that the students agree to be subject to the institution’s discretion in resolving academic matters.

As such, a student will need to do more than argue that an academic result is wrong or that a professor is incompetent to successfully advance a breach of contract (or tort) claim against a university.

In other words, our courts have found that students have essentially agreed as a matter of contract law, that there are certain academic issues (like a bad grade) that you cannot sue over. As such, it is clear that the broad discretion enjoyed by institutions extends to basic academic decisions.

What is less clear, however, is the type of academic issues or matters students did not implicitly agree would be subject to the institution’s discretion pursuant to the implied student/university contract.

A review of the impugned conduct of academic institutions as alleged in recent cases is illustrative of this point.

Gauthier v. Saint-Germain

In Gauthier v. Saint-Germain, Ms. Gauthier, a graduate student, brought an action against the University of Ottawa alleging that the university breached its contract with her by failing to provide an appropriate thesis supervisor.

Ms. Gauthier alleged that her first thesis supervisor acted inappropriately towards her and made false representations about available funding.

Ms. Gauthier was subsequently assigned a replacement supervisor; however, she alleged the replacement was incompetent which delayed her studies further.

The decision in Gauthier was the first time an appellate court in Canada definitively stated that a court will have jurisdiction to hear a claim against an academic institution if the claim is framed in tort or breach of contract, even if the dispute arises out of the scholastic or academic activities of the institution.[8]

Jaffer v. York University

In Jaffer v. York University, a student with a developmental disability received a grade point average during his first year of studies which was below the minimum required to continue attending the university. [9]

The student sued the university for breach of contract for failing to provide proper academic accommodations.

The ONCA, following the reasoning of Gauthier, determined that the real issue in such cases is not whether the dispute is academic in nature, but rather whether the pleadings support a cause of action in either contract or tort.[10]

Lam v. University of Western Ontario

Mr. Lam, a former doctoral science student at the University of Western Ontario, alleged that he was knowingly misled as to the details, amount, and duration of his financial support in regards to his doctoral thesis, in breach of the university’s handbook and in violation of honest performance.

Mr. Lam argued that, contrary to the handbook, the institution agreed to supervise his project despite not having sufficient familiarity with the field of research or a willingness to gain it.

Mr. Lam also alleged that the university, through its faculty supervisors, purposefully pressured him to drop out of the PhD program.

The Court of Appeal found that the contract between Mr. Lam and the university consisted of a number of documents, including the university’s Graduate Student Handbook.

Additionally, the contract between Mr. Lam and the university was said to be subject to the general provisions of the law, including the general duty of honesty in contractual performance, as per Bhasin v. Hyrnew.[11]

The court held that an abuse of power, whereby an institution pressures a student to drop out of a PhD program, is not a matter that fits within the institution’s broad discretion and, as such, is not something that a student can be seen to have agreed to as part of the contract between the student and the institution.

Accordingly, the sort of conduct alleged in Lam, if proven, would support a claim in breach of contract with resulting damages.

Another case which demonstrates actionable conduct on the part of an academic institution is Tapics v. Dalhousie University.[12]

Tapics v. Dalhousie University

In Tapics, the plaintiff, a doctoral student at the defendant university, was working on her PhD thesis with an adjunct supervisor who left the university and took data essential to the research.

The student subsequently undertook to complete a different topic for her thesis with her faculty supervisor. However, the faculty supervisor withdrew from the project and the university was unable to find a suitable replacement.

This delayed the process associated with the student obtaining her PhD. The student sued the university as a result of these developments.

The Nova Scotia Supreme Court found that the University had contractual obligations to the student, a term of which was a “conflict of interest policy” found within the Dalhousie Faculty of Graduate Studies Handbook.

The court found that the University had breached its contract with the student by failing to enforce the conflict of interest policy and the student lost the opportunity to complete her PhD within the expected timeframe as a result.

The court quantified this loss at $48,750 and awarded damages to the plaintiff accordingly.

Current State of the Law – What the Case Law Tells Us

To be tenable at law, and subject to the jurisdiction of the court, the following must be satisfied as it relates to a claim arising from an academic dispute against an academic institution:

  • The action must be grounded in breach of contract or tort;
  • The plaintiff (i.e. the student) must be seeking monetary damages;
  • The alleged wrong must fall outside of the broad discretion enjoyed by the academic institution over basic academic affairs; and
  • The statement of claim must be pled with such particularity and clarity that the court is informed of the express or implicit contractual provision that has been breached and/or the way in which the tortious act exceeds the academic institution’s broad discretion.

 Further, a review of the case law reveals that the following conduct would likely be actionable as falling outside of the student/university contract:

  • Harassment by a thesis supervisor and broken promises regarding academic funding.[13]
  • Failing to provide academic accommodations as implicitly or explicitly agreed to by the university as part of the university/student contract.[14]
  • False representations regarding the type and scope of support to be provided as part of an academic program which are relied on to the student’s financial detriment.[15]
  • Agreeing to supervise a student’s studies without sufficient familiarity in the field or a willingness to gain it.[16]
  • An abuse of power, such as pressuring a student to drop or switch out of an academic program which the university no longer wants, or has the resources, to support.[17]


  • Academic institutions may be sued in court for claims arising from academic affairs. Claims by students with respect to academic decisions or activities are actionable, in certain circumstances, when the remedy sought is monetary damages.
  • Based on the terms of an implied student/university contract, a student will need to prove something beyond incompetence by a professor or a grade given below what was properly deserved, as the parties are seen to have agreed that such academic issues would be remediated through the institution’s internal dispute process.
  • Thus, in order to maintain an action and prove damages in court, a student will need to allege and eventually prove more. How much more is a new and developing area of the law.
  • The facts of Gauthier, Jaffer, Lam and Tapics reveal the nature of conduct which would, if proven at trial, likely support a claim in contract or tort against an academic institution.
  • Academic institutions should carefully consider what documents could be held to constitute the express or implied contract between the institution and its students. The courts have determined that terms within the institution’s student handbooks are contractual documents, the breach of which can give rise to a claim for monetary damages.
  • Academic institutions should consider which disputes are governed by their internal appeals processes. It may be worthwhile to consider including an express provision that states that claims for breach of contract (or tort) can be remediated only through the institution’s internal dispute resolution process.
  • In short, academic institutions may want to consider broadening the privity clause in the policy that governs their internal academic appeals process, so as to provide exclusive jurisdiction over said disputes to an administrative tribunal.
  • Indeed, it may be beneficial to consider incorporating an obligation to pursue arbitration under the Arbitrations Act, 1991 rather than resort to the courts in circumstances where monetary damages are being claimed by a student.
  • Such a provision would need to be carefully considered and drafted. For example, a court is likely to refuse to enforce an arbitral award against a minor and, as such, a clause requiring arbitration would likely not be open in the context of secondary schools or high school institutions.
  • Similarly, academic institutions must be careful to not make an arbitration clause so overreaching that arbitration would be, for all practical purposes, inaccessible and thus ‘unconscionable’, as a court will strike such a clause down.[18]
  • Nevertheless, universities and other academic institutions would be wise to consider this very recent and important development in education law and give careful consideration to the (express and implied) terms of the student/institution contract.
  • We hope this paper provides some assistance in that regard.

[1] Gauthier v. Saint-Germain, 2010 ONCA 309, para 29.

[2] An Act respecting The University of Western Ontario, Bill PR14, 1982, as revised by Bill Pr37, chapter Pr26, S.O., 1988, s.18.

[3] Supra, note 1 para 47.

[4] Young v. Bella, 2006 SCC 3, para 31.

[5] Ibid.

[6] Ramdath v. George Brown College, 2014 ONSC 3066.

[7] 2019 ONCA 82.

[8] Supra note 1 para 46.

[9] 2010 ONCA 654.

[10] Jaffer v. York University, 2019 ONCA 654, para 31.

[11] Supra note 9, para 41.

[12] 2018, NSCC 53.

[13] Supra note 1, para 58.

[14] Supra note 10.

[15] Ibid.

[16] Supra note 7.

[17] Supra note 7.

[18] The ONCA in Heller v. Uber Technologies (2019 ONCA 1) found the arbitration clause in the service agreement between Uber and its drivers to be unconscionable as it was inaccessible for drivers to commence an arbitration pursuant to the language of the clause.

When Neighbourly Play Turns Negligent

By Jocelyn Rose Brogan

Parents frequently allow their children to play at neighbouring properties. When this occurs, parents often mistakenly assume there is a mutual understanding on the acceptable standard of parental care, despite never discussing this issue with their neighbours.

This is what happened with the Lever and Katerberg families in Lever et. al. v. Katerberg, 2019 ONSC 48 (“Lever”).

In Lever, the neighbourhood children frequently played together on their lawns. The lack of communication with respect to the acceptable standard of parental care was never an issue until the leg of a 5 year old was accidentally mangled by a lawn mower while playing on her neighbour’s lawn.

This article will review the decision of Lever with respect to a summary judgment motion addressing the Occupiers’ Liability Act, R.S.O. 1990, c. O.2, and the liability of parents.

The Incident

On a Friday evening in the summer of 2004, Allen Katerberg (“Mr. Katerberg”) returned to his home after working for the day and decided to mow his lawn, a big open area, part of which could be seen from the neighbouring Lever property.

At that time, his 5 year old son, Thomas Katerberg, was playing on the Katerberg property, with his neighbours, Bronwen Lever, age 5, and William Lever, age 9. Mr. Katerberg was aware that the children were playing on his property.

While Mr. Katerberg was mowing his lawn with a riding lawn mower, his son climbed on the back of the mower and draped his body around Mr. Katerberg.

With his son still on the mower, Mr. Katerberg looked over his right shoulder while reversing in order to get up a small incline. At the same time, Bronwen Lever slipped and her left leg slid under the blade of the riding lawn mower.

Mr. Katerberg then went forward and noticed Bronwen Lever on the ground. He immediately picked her up and ran to his house.

Bronwen Lever sustained significant and disfiguring injuries to her left leg, ankle, and foot, which resulted in loss of bone, muscle, soft tissue and skin. She required several surgeries.

The Lawsuit, the Law & the Summary Judgment Motion

The Lever family, consisting of parents, Mary Beth Rutherford and Timothy Lever, and their two children, sued their neighbour, Mr. Katerberg.

Under the Occupiers’ Liability Act, Mr. Katerberg, as the owner and occupier of the property where the incident occurred, had an obligation to take such care as was reasonably necessary in all the circumstances to see that Bronwen Lever was safe while on his property.

Pursuant to section 3 of the Occupiers’ Liability Act, this duty applied whether the danger was caused by the condition on the property or activity carried out on the property.

Mr. Katerberg counterclaimed against the Lever parents, alleging that they were negligent in their duty to supervise and instruct their daughter.

The leading authority for the acceptable standard of care of parents is Arnold v. Teno, [1978] 2 S.C.R. 287 (S.C.C.). This decision provides that parents are under a legal duty to exercise reasonable care to protect their children from reasonably foreseeable dangers.

What is reasonable in the circumstances should be considered in light of the accepted standard of care by parents generally in the immediate community.

The Lever family brought a summary judgment motion on the issue of liability. They asked for judgment that Mr. Katerberg was 100% liable and that the counterclaim be dismissed.

The Disagreement as to the Standard of Care

The Lever parents believed that, when children were in a yard, the owner of that yard was responsible for supervising the children, based on the custom, habit, and routine of the neighbouring families.

In contrast, the Katerberg parents believed that it was the duty of each parent to be responsible for his or her own children, no matter what yard they were in.

This included the obligation to know where their children were, what activities they were involved in, and whether they were playing safely. They did not agree that supervision responsibilities aligned with property ownership.

Of interest, a third neighbouring family (whose children were younger) provided evidence that she had the responsibility as a parent to know where her children were; that they were playing safely; that it was custom of parents to regularly supervise their own children even when in a neighbour’s yard; and that other people’s children in her yard were not her responsibility.

Despite the disagreement regarding the acceptable standard of care of parents, Mr. Katerberg conceded that he was at least partially liable, but argued that the Lever parents should share in the liability.

The Outcome

Justice Braid granted partial summary judgment only by ordering that there was no genuine issue for trial with respect to the counterclaim against the father of the Lever children, and dismissed the claim against him.

The integral evidence that absolved Mr. Lever of liability in the counterclaim was that he was running errands when the accident occurred and was not present at his home.

Before Mr. Lever left to run errands, there was no indication that Mr. Katerberg had intended to mow the lawn while the children played in the yard. Therefore, it was not reasonably foreseeable to Mr. Lever that his daughter might encounter the riding lawn mower at the Katerberg property.

Justice Braid ordered that the claim against Mr. Katerberg and the counterclaim against mother of the Lever children must proceed to trial.

Justice Braid outlined an extensive list of unfavourable evidence against Mr. Katerberg that would assist a trier of fact in determining the extent of his liability.

When addressing the counterclaim against the mother of the Lever children, Justice Braid outlined the facts that differed from the father.

For example, the mother was home at the time of the incident.  She was aware that her daughter was playing and running on the Katerberg property, and that Mr. Katerberg was operating the riding lawn mower during that time.

Justice Braid indicated that, before the liability of the mother could be addressed, the acceptable standard of care of a reasonably prudent parent in the immediate community had to be determined.

Moreover, Justice Braid found that since there was conflicting evidence regarding the acceptable community standard, the court needed to assess credibility and make factual determinations at a trial to determine the issue of liability.

Justice Braid stated that, since fault can be expressed in fractional proportions in negligence actions, it was in the interests of justice that the conduct of Mr. Katerberg and the mother of the Lever children be assessed together at trial.


It would be a sad state of affairs if the fear of a lawsuit stopped people from permitting neighbouring children from playing on their property.

That being said, property owners need to ensure that people are reasonably safe while on their property.  This is particularly important in the case of young children, who are more vulnerable.

Further, parents who allow their children to play on neighbouring properties need to take steps to ensure their children are being appropriately supervised and to teach their children of potential dangers.

As long as appropriate precautions are taken, children should be allowed to be children.  As stated by Justice Braid, “parents cannot ensure that a child is safe from every peril.  All parents can do is inform and instruct, shelter and sustain”.

The Pitfalls of Adverse Cost Protection

By Thomas Macmillan

The courts and litigants continue to grapple with the evolving implications of after-the-event insurance (“ATE insurance”).

The Ontario Superior Court just recently released its decision in Peter B. Cozzi Professional Corporation v. Szot, 2019 ONSC 1274, which addresses the issue of how such funds are to be distributed following an award of costs against an unsuccessful plaintiff at trial.

The underlying trial decision in Cozzi resulted from a personal injury matter.  The plaintiff was awarded non-pecuniary damages for pain and suffering, but for an amount less than the statutory deductible.  After the deductible was applied, the plaintiff’s net recovery at trial was nil.

Furthermore, the trial judge ruled that the plaintiff’s injuries did not exceed the threshold for recovery of non-pecuniary damages, and ruled that the plaintiff could not recover such damages in any event.

The defendant at trial was awarded costs against the plaintiff.

The plaintiff had in place a policy for ATE insurance.  The insurance contract set out that it would cover the plaintiff for up to $100,000 in the event of an adverse costs award.

The policy also covered the plaintiff’s own disbursements, payable again in the event of an adverse costs award.  The policy set out that the proceeds of the insurance would be paid to the plaintiff.

The plaintiff’s retainer agreement with his lawyer was a contingency fee-type agreement.  One term of the retainer agreement was that the plaintiff agreed to pay all disbursements incurred by the plaintiff’s lawyer in relation to the matter.

The retainer agreement included an assignment by the plaintiff of the proceeds of his ATE insurance to his counsel for the purposes of paying for the incurred disbursements.

The wrinkle in Cozzi is that the plaintiff was at all material times under a disability, including at the times when he executed the retainer agreement and various addendums to the retainer agreement.

Plaintiff’s counsel at no time had the plaintiff’s litigation administrator present when he executed the retainer agreements or addendums, including the assignment of his insurance benefits to his lawyer.

After being notified of the adverse costs award, the plaintiff’s insurer, DAS, wrote to the plaintiff personally to advise that it would be paying out the proceeds of the policy to his lawyer, in trust.

After trial, the insurer for the tort defendant brought an application seeking an order that the proceeds of the policy are payable to the defendant in full, or in the alternative, on a pro-rata basis with the plaintiff’s disbursements.

Plaintiff’s counsel at the same time brought an application seeking an order that he was entitled to the insurance proceeds, based on the assignment by the plaintiff.

The court denied both applications, ruling that the funds belong to the plaintiff himself.

The court ruled that the assignment and retainer agreements were not valid, due to the plaintiff’s disability, that the defendant’s insurer had no privity of contract, and thus had no claim to priority over the proceeds.

Effect of Ruling

This is an unfortunate ruling for individuals who bring personal injury actions in the future.

One may be inclined to regard a ruling which grants agency over the proceeds of ATE insurance policies to the policy holders themselves as a win for those individuals.

However, the fact of the matter is that most members of the public are not aware of the legal implications of signing retainer agreements with their own lawyer, some of which may include assignments such that those at issue in Cozzi.

For a plaintiff who is the subject of a failed personal injury action, there is often a risk of personal exposure to adverse costs awards.

This is true whether or not the plaintiff has in place ATE insurance, because the cost consequences of even a short trial on a partial indemnity basis will typically exceed the insurance available to the plaintiff.

So, an unsuccessful plaintiff faces the prospect of the tort defendant’s insurer seeking its remedies against this individual personally.  If a plaintiff has assets, then the best protection against personal exposure is to hope that tort defendant’s insurer avoids pursuing the plaintiff.

Insurers will avoid seeking personal recovery where the expense is too high compared with the potential payout at the end of the day.  In other words, if the tort insurer is only entitled to a further $20,000 in costs, then it may not be interested in spending $10,000 on the chance of recovery.

If a plaintiff provides an assignment to her lawyer, however, for the proceeds of her ATE insurance, then that erodes that protection against personal exposure.

Suddenly it is worthwhile for the tort defendant’s insurer to attempt to enforce the costs award, because the plaintiff spent a portion of her coverage on her own disbursements before paying out to the defendant.  A tort defendant’s insurer may be interested in spending $10,000 to pursue the plaintiff, now that the payout is $60,000.

The response to the above often comes as a variation of the following: that unsuccessful plaintiffs are aware that they owe money in disbursements and the opposing party’s costs, and have insufficient insurance to cover both.

Individual Choice

Should it not be up to an individual to decide what should be paid first and in what quantities?

Answering ‘no’ to that question may smell of paternalism, but the fact is that individual plaintiffs are unfamiliar with the balance of risk when it comes to personal exposure following an unsuccessful trial.

They are inclined in these circumstances to turn to their own lawyer for advice, and may not be aware that their own lawyer has conflicting interests; as in Cozzi, a plaintiff’s own lawyer has a clear interest in ensuring that disbursements incurred by the plaintiff and paid by or promised by the lawyer’s office are paid by the plaintiff in full.

Furthermore, most retainer agreements specify that all disbursements incurred throughout the course of a file are the plaintiff’s disbursements, rather than the lawyer’s disbursements.

As such, it is unlikely that a court would permit a plaintiff’s lawyer from seeking to recover from the plaintiff by way of an action or application, amounts for outstanding disbursements.

The result is that an unsuccessful plaintiff is faced with the option of directing her insurance proceeds to paying the defendant’s costs, with effectively no risk of being pursued for unpaid disbursements, or paying her disbursements, with an increase in personal exposure to the tort defendant’s insurer.

Put this way, it is very hard to understand why a plaintiff would sign an assignment of the kind seen in Cozzi.

If a plaintiff has indeed been properly educated by her lawyer on the risks to both options, why would she not choose the option that comes with less risk of personal exposure?

Assignments such as the one seen in Cozzi strongly suggest that lawyers are not properly and objectively educating their clients on these risks.

Increase in Personal Exposure

From a public policy perspective, the ruling in Cozzi is unfortunate for individual plaintiffs.

While some may laud the court standing up for the autonomy of individuals in choosing how they may disperse their own insurance proceeds, the reality is that most individuals, when left only with the legal advice of their own conflicted lawyer, will be led to choose the path that actually increases their personal exposure.

The Insurance Act does allow for a party to seek damages directly from another party’s insurer (section 132), but this is limited to situations in which the damages sought arise from personal injury or damage to property.  This would likely not include an action or application for costs.

As a result, the court in Cozzi is likely correct in finding that there is no privity in contract for a tort defendant’s insurer in cases like this, and that successful defendants have no recourse to section 132.

Lawyer as Broker?

There are avenues, however, that future courts may take to protect individual plaintiffs where they face personal exposure as a result of a retainer agreement that includes an assignment.

Given that the court in Cozzi found that the contingency fee agreement and assignment between the plaintiff and his lawyer was of no force and effect, there was no need for the court to address the potential conflicts at issue where a lawyer in effect uses a retainer agreement to obtain priority of protection over the plaintiff’s own increased risk exposure.

This is a conflict that could, in other circumstances, cause a court to question the enforceability of a retainer agreement.  This conflict is even more pronounced if, as in Cozzi, the lawyer is also an “insurance intermediary.”

Separate business agreements are commonly in place between plaintiff lawyers and after-the-event insurers.

The plaintiff’s lawyer in Cozzi had entered into such an agreement with the insurer, DAS, the effect of which was to make the plaintiff’s lawyer an “insurance intermediary,” and to provide authority to the lawyer to issue insurance to the lawyer’s clients.

The court in Cozzi did not examine the implications of the term “insurance intermediary,” but in general parlance this position can best be compared to that of an insurance broker: a third party who is neither an insurer nor insured, and who acts in the placing and purchasing of an insurance policy, and who is authorized by the insurer to place such policies, often through delegated authority.

There is robust case law outlining the obligations of insurance brokers vis-a-vis their client insureds.

Much of the analysis in broker’s negligence cases focuses on the duty owed by brokers to explain in sufficient detail to the insureds the choices available to them, the implications of policy exclusions and coverages, and to disclose issues of transparency regarding the fees and relationships that the broker has with the insurers for whom they are placing policies.

One may question to what extent lawyers who are acting as “insurance intermediaries” for ATE insurers are meeting these standards.  Is it typical practice for such lawyers at present to, for example:

  • explain that there is a business relationship between the lawyer and the insurer, and provide the details of that relationship;
  • advise of other similar insurance products available from other ATE providers;
  • explain that the proceeds of the insurance belong to the individual, and not to any other party, including to the lawyer;
  • explain the personal conflict or potential conflict to the lawyer on the issue of disbursements; and most importantly,
  • explain the implications of the individual’s choices on her personal exposure to a tort defendant (as compared with the absence of such exposure by not paying disbursements), and how agreeing to an assignment with the lawyer may impact that exposure.

Perhaps there are lawyers who ensure that the above information is explained in detail to their clients.  It is hard to understand the assignment in Cozzi, however, in the context of the plaintiff having been explained all of the above.

Security for Costs

 Another impact of the Cozzi decision relates to the ability of plaintiffs to oppose motions for security for costs.

One line of case law that has developed recently stands for the proposition that if a plaintiff has a valid after the fact insurance policy, this can be a full answer to concerns by a defendant seeking security for costs.

The argument went that a defendant need not be concerned about not recovering costs from a plaintiff ordinarily resident in a jurisdiction other than Ontario, if that plaintiff has in place ATE insurance.  This policy, the argument went, would cover all or some of a defendant’s costs in the event that the defendant is successful at trial.

The Cozzi decision undermines that argument.  It should be clear now that a defendant has no right to the proceeds of the policy; all a defendant would have following a successful trial is an order for the recovery of costs.

The proceeds of an ATE insurance policy belong solely to the plaintiff, and can be disbursed at the plaintiff’s whim.  There is nothing to stop a plaintiff, for example, from assigning her rights to the proceeds of that policy to her lawyer to cover disbursements, and even incurring the full value of the policy in disbursements.

It can be expected that defendants bringing motions for security for costs will rely on the Cozzi case to rebut any presumption that after-the-event insurance provides any assurance of recovery to the defendant.


The development of the case law on ATE insurance could be seen as a win for the autonomy of individual plaintiffs.

Adopting this interpretation, however, requires faith that lawyers are transparently and fully explaining to their clients the implications of their choices on this issue.  The facts in Cozzi at the very least call into question such optimism.

Absent a fuller acknowledgment on the part of lawyers and the bench of the conflicts involved with ATE insurance, the Cozzi decision should be seen as one that will hurt future plaintiffs.

Subrogating in the Name of Bankrupt Insureds

By Christine Lau

This time last year, a rare five-member panel of the Ontario Court of Appeal rendered a decision in Douglas v. Stan Fergusson Fuels Ltd.[1] The decision involved the intersection of subrogation and bankruptcy law. The issue was whether an insurer has the right to bring a subrogated action in the name of its insured when its insured is an undischarged bankrupt.

The Court of Appeal dismissed the insurer’s subrogated action on the basis that, at the time the action was commenced, its insured’s cause of action had already vested in his trustee in bankruptcy (whom the insurer had failed to name as a plaintiff to the action).

The right of subrogation is derivative in nature. Since the insureds were not entitled to bring an action for recovery of the property remediation costs, State Farm, in turn, could not bring a subrogated claim in the name of the insureds. Only the trustee could bring a claim.

On January 31, 2019, the Supreme Court of Canada denied leave to appeal.


In Douglas, State Farm brought an action in the name of its insureds, the Douglases, against an oil company to recover the $800,000 that it had spent to remediate damage to the Douglases’ home caused by an oil escape incident, pursuant to its right of subrogation under its homeowner’s policy.

The Douglases had filed assignments in bankruptcy to the benefit of their creditors before State Farm issued its subrogated claim, which resulted in their property and causes of action vesting in their trustees.

State Farm did not consider naming the trustees as plaintiffs to its subrogated action until the opportunity had passed to amend its claim before the expiry of the limitation period.

The Right of Subrogation

Subrogation is a key aspect of insurance law. The doctrine relates to the principle of indemnification and ensures that the parties deemed responsible for a loss are held accountable.

An insurer, after indemnifying its insured for losses caused by third parties, is entitled to bring an action in the name of the insured to recover such payments from the third parties.

As the insurer has effectively stepped into the shoes of its insured in a subrogated action, the insurer also has the right to recover any losses incurred, which were not covered by the policy limits, from the third parties. This amount is payable to the insured.

Bankruptcy Law

Under the Bankruptcy and Insolvency Act (“BIA”), once an assignment in bankruptcy is filed, the bankrupt no longer has any capacity to deal with his/her property, which immediately vests in the bankrupt’s trustee in bankruptcy.[2] The definition of “property” is broad and can be extended to causes of action.[3]

Analysis of the Law

The Court of Appeal focused on whether State Farm was entitled to commence the action in Mr. Douglas’ name, only, as State Farm did not cross-appeal the Divisional Court’s decision that Ms. Douglas had no right of recovery for damages caused to the property.

The Court refused to permit Mr. Douglas’s cause of action to be assigned to State Farm.

The Court distinguished the vehicles of subrogation and assignment. While subrogation has assignment-like features to it, subrogation does not equate to assignment.

On this basis, the Court found that Mr. Douglas’ cause of action did not vest in State Farm before his bankruptcy by virtue of the doctrine of subrogation. Importantly and moreover, State Farm’s homeowner’s insurance policy did not contain an assignment clause.

The Court found that State Farm was required to commence the action in the name of Mr. Douglas’ trustee, not that of Mr. Douglas.

The subrogation clause in State Farm’s homeowner’s policy did not permit it to bring an action in the name of Mr. Douglas. The Court read the insurance policy as if Mr. Douglas’ name was replaced with that of his trustee’s for indemnification purposes, particularly as the trustee had taken the benefit of the policy.

The Court considered the interplay between the principles of the doctrine of subrogation and the established principles of bankruptcy law.

While subrogation is rooted in the idea of indemnification, bankruptcy law deems that only the trustee has the capacity to bring the action, as Mr. Douglas’ property vested in the trustee immediately upon bankruptcy.

The Court refused to allow State Farm to substitute the trustee as the plaintiff to the action. It was found that it would not be just in the circumstances to grant such relief.

The appellant oil company had incurred four years worth of legal fees in responding to State Farm’s flawed position that it could bring the action in Mr. Douglas’ name, knowing that he had filed for bankruptcy.

Further, this issue was never raised in the lower courts, and it would be unfair to resolve such issue on appeal.

State Farm was not only denied its right to recover the $800,000 that it had indemnified, but had to pay the oil company $83,500 in costs, approximately 10% of its subrogated claim, for failing to name the correct plaintiff.

Practical Considerations

As subrogation is increasingly retrofit into business models, the more value add there is for insurers to understand this niche area of law.

Subrogation is an important way to minimize expenditures for insurers. While insurers have traditionally created large pools of money and assumed the risk for everyday losses that cannot be predicted (other than on a statistical level), subrogation has afforded insurers the opportunity to balance out its income statements with subrogated recoveries.

On a practical basis, it would be prudent for insurers to incorporate the following risk management strategies into their business practices before commencing litigation:

  • Include an assignment clause in insurance policies, wherein the insurer is granted an assignment of their insured’s cause of action (before the insured makes an assignment in bankruptcy);
  • Conduct bankruptcy searches of the insured; and
  • If the insured is an undischarged bankrupt, bring the subrogated action in the name of the insured’s trustee in bankruptcy (with notice).

The courts look upon insurers as sophisticated parties and hold them to a higher standard.

[1] 2018 ONCA 192.

[2] Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 at s 71.

[3] Ibid at s 2.

Dual Retainers in Priority Disputes and First Party Claims

By Kevin Adams and Sara Baum, Student-at-Law

The recent Licence Appeal Tribunal (“LAT”) reconsideration decision in PYJ and LJ v. The Personal Injury Company (17-004636/AABS) may have troubling implications for insurers who retain the same counsel to pursue its interests in regards to both priority disputes and first party claims.


The applicants, family members of the deceased who died as a result of an accident, applied to The Personal for death and funeral benefits.

The benefits were denied as the insurer had not received any financial documentation demonstrating their dependency on the deceased, and as such, the insurer could not determine if the claimants were dependants on the deceased.

At the same time, The Personal initiated priority dispute arbitration against CAA Insurance. As part of the priority dispute and before applying to the LAT, the applicants participated in examinations under oath in which they described their relationship with the deceased.

Counsel for The Personal acted in both the priority dispute and the EUOs, as well as in the LAT dispute. He submitted the EUO transcripts from the priority dispute proceeding as part of The Personal’s Case Conference Summary and Brief in the LAT dispute, without notifying the applicants.

Preliminary Decision

On a preliminary motion decision, the LAT denied the applicants’ request to remove counsel for The Personal and to exclude the transcripts from the EUOs. The applicants then filed this request for reconsideration.

Reconsideration Decision

On reconsideration, the Vice-Chair agreed with the applicant, and concluded that counsel for the Personal should be removed as representative for the LAT proceeding.

She found that “the Tribunal erred in its characterization of the priority dispute as a proceeding that does not create an adversarial relationship between The Personal and the applicants”.

At paragraph 16, she states:

In the priority dispute, The Personal is seeking to prevent potential liability for paying any benefits to the applicants. This is in clear opposition to the duty of utmost good faith that The Personal owes to the applicants in the accident benefits context. In this way, the priority dispute creates a similar adversarial relationship between the insurer and the applicants as in a tort proceeding.

In doing so, the Vice-Chair relied on the decision in Dervisholli, stating that while it deals with counsel representing the insurer in both an accident benefits claim and a tort claim, the same rationale applies.

As such, a firewall should have been set up to prevent the transfer of confidential information between the accident benefit and priority dispute files or dialogue between the adjusters and counsel handling them, unless specifically consented to by the insured.

The Vice-Chair also agreed with the applicant that to admit the EUO transcripts into evidence would enable The Personal to circumvent the statutory requirements of s.33.

She found that, while Tribunal appropriately considered the relevancy of the evidence contained in the EUO transcript obtained as part of the priority dispute, the Tribunal failed to conclude that the relevancy of the evidence cannot override the requirements outlined in s.33.

At paragraph 25, she states:

When compelling an applicant to attend an EUO, the insurer, among other things, must provide the applicant with notice. Specifically, s.33(4) requires that the insurer provide reasonable advance notice of the reason or reasons for the examination and that the scope of the examination will be limited to matters that are relevant to the applicant’s entitlement to benefits.

The Vice-Chair ultimately held that despite the relevant information generated by the EUO, the applicants would suffer great prejudice if The Personal were permitted to rely on EUO transcripts that were not part of the accident benefits process and did not comply with the Schedule.


The rationale applied on reconsideration at the LAT seems clearly wrong for the following reasons:

  • The fundamental misunderstanding that priority disputes create adversity between the claimant and the handling insurer
  • The principles in Dervisholli were applied outside the context in which they were decided and intended
  • The priority EUO (conducted pursuant to O. Reg. 283/95) was misconstrued as a s.33 EUO to which the strict SABS rules and notice provisions apply
  • The concept of prejudice to the applicants was conflated with the notion that disclosure of sworn evidence may be contrary to their interests

We understand that The Personal is seeking judicial review of this decision.

The impact of this decision, if it is allowed to stand, will be significant, as not only might it require an insurer to retain separate counsel to pursue its interests in regards to priority disputes and first party claims, but it will also require multiple claims examiners to be appointed and separate files to be maintained by the insurer.

We believe that this duplication of effort and staffing and the significant additional expense it will create is unnecessary.

Despite the Vice Chair’s general statements regarding the adversarial nature of priority disputes, until clarification is provided on appeal/judicial review, we suggest that the impact of this decision can be confined to cases where the insurer has taken an off-coverage position and denied payment of accident benefits completely, while also pursuing a priority dispute against another insurer.

In the meantime, we look forward to further guidance from the Divisional Court.

The Blameless Elevator Accident

By Brian Sunohara

Elevator accidents in Ontario are fortunately rare. When such accidents do occur, finger-pointing often ensues. However, as a recent court decision shows, sometimes no one is to blame.


In Lebko v. Toronto Standard Condominium Corp. 1862, 2019 ONSC 1602, the plaintiff visited a condominium building in Toronto, Ontario.

As she was in the process of exiting an elevator, she violently tripped over something and fell. She did not know what she tripped on.

A witness observed that the bottom of the elevator was not level with the floor. There was a quarter to half-inch gap. However, other people were subsequently seen to exit the elevator without incident.

As a result of the fall, the plaintiff allegedly broke her left wrist and dislocated her right shoulder.

The plaintiff sued the condominium corporation, the building management company, an elevator company, and a security company.

On a summary judgment motion, Justice C.J. Brown dismissed the plaintiff’s lawsuit against all of the defendants.

Inspections of Elevator

There were complaints with the elevator in the days leading up to the incident.

Two days prior, there was a complaint of the elevator not stopping level with the floor. There were also complaints of the elevator making a squeaking noise and bouncing when stopping. The elevator was taken out of service.

On the day of the accident, an elevator technician serviced the elevator. He could not recall what work he performed.  However, his usual practice was to make sure that elevators were levelling properly.

Condominium Corporation

Justice Brown held that the condominium corporation and the building manager met the duty of care. They had a reasonable system to meet their statutory and regulatory duties to keep the premises reasonably safe for visitors.

The Canadian Standards Association code requirements were satisfied. The code requirements were approved by the Technical Standards and Safety Authority.

Justice Brown noted that “where governing legislation stipulates a specific standard of care to be followed, and the defendant complies with the government standard, the plaintiff bears a ‘heavy onus’ to prove negligence by the defendant, notwithstanding such compliance”.

Justice Brown further stated that, when an occupier demonstrates that it had a reasonable system of inspection, it will usually be inferred that the system was being followed, unless there is some evidence to the contrary.

The condominium corporation entered into service contracts to perform monthly preventative maintenance of the elevators. They also retained a security/concierge service to inspect the premises.

Justice Brown indicated that the condominium corporation and the building manager were able to successfully rely on the independent contractor defence in section 6 of the Occupiers’ Liability Act.

Elevator Company

Justice Brown held that the elevator company was not liable. There was no evidence to demonstrate that the elevator company’s maintenance regime was not code-compliant and was not being followed.

Moreover, there was no evidence that the technician who attended at the premises on the day of the incident permitted the elevator to run in an unsafe condition.

The unchallenged evidence was that the technician did not put the elevator back into service until he was satisfied that it was safe to do so.

In addition, the alleged mis-levelling was “barely negligible”.

Security Company

Lastly, Justice Brown found that the security company was not liable. After receiving complaints with the elevator, the security company took the elevator out of service and notified the superintendent.  The security company did everything required of it.


Although the plaintiff’s accident was unfortunate, no one was legally to blame.

Perfection is not required of an occupier. An occupier is not a guarantor or insurer of a visitor’s safety. The standard is reasonableness. An occupier needs to ensure that its premises are reasonably safe.

According to Justice Brown, as long as an occupier has a reasonable system of inspection, it will usually be inferred that the system was being followed, unless there is some evidence to the contrary.

When an accident occurs, the onus is on the plaintiff to prove that some act, or failure to act, caused the injury complained of. There is no presumption of negligence against an occupier.

When an occupier complies with a government standard, it is very difficult for a plaintiff to prove negligence.

If an occupier retains a competent contractor to perform necessary work, then the occupier can rely on the independent contractor defence in the Occupiers’ Liability Act, which is a complete defence.

Causation in SABS Claims: The Proper Test

By Alon Barda

The appropriate test for causation in statutory accident benefits (“SABs”) matters has been the subject of much confusion in recent years. Fortunately, the Divisional Court has recently provided required clarity, stating that the “but for” test applies, absent exceptional circumstances.

Prior Cases

In Monks v. ING Insurance,[1] the Ontario Court of Appeal held that the “material contribution” test applies to statutory accident benefits cases.

However, more recently in Blake v. Dominion of Canada General Insurance Co.,[2] the Court of Appeal signalled a shift away from the “material contribution” test towards a general application of the “but for” test in SABs matters.

Nevertheless, despite the shift away from the “material contribution” test, certain decisions at the Licence Appeal Tribunal (“LAT”) have often referenced both tests and then reached a determination on causation without specifically stating which one is the default test for causation in SABs matters.[3]

New Case

Accordingly, clarification on appeal/judicial review was needed. This has now been provided by the Divisional Court in the decision of Sabadash v. State Farm et al.[4]


In Sabadash, the applicant had various pre-existing injuries prior to the accident and evidence suggested that, as a result of the accident, he suffered a mild traumatic brain injury triggering his ongoing symptoms.

The applicant applied for SABs from State Farm, including IRBs. The insurer completed various insurer examinations and found that the applicant did not meet the test for entitlement to IRBs.

FSCO Arbitration

The matter proceeded to arbitration at the Financial Services Commission of Ontario. The arbitrator granted the applicant’s request for IRBs and other benefits.

In so doing, the arbitrator did not “accept State Farm’s submission that the ‘but for’ test endorsed by the Courts in accident negligence cases is to be applied to a determination of causation in the statutory accident benefit context.”

Instead, he applied a “material significant factor” standard.

Director’s Delegate

The matter was appealed by the insurer to the Director’s Delegate on the grounds that the incorrect test was applied by the arbitrator rather than the correct “but for” test.

The Director’s Delegate allowed the appeal on the basis that the “but for” test should have been applied.

Judicial Review

The applicant sought judicial review of the Director Delegate’s decision.

In the judicial review decision, the Divisional Court outlined that the parties agreed that the test to be applied to determine entitlement to benefits is the “but for” test as set out by the Supreme Court of Canada Clements v. Clements.[5]

Nevertheless, the parties sought articulation from the court of the causation analysis to be applied in an accident benefits claim.

At paragraph 31 of the decision, the Divisional Court set out the analysis to be used in accident benefits cases, including that the test for establishing causation is the “but for” test and that, as set out in Clements, it is a general rule that “a plaintiff cannot succeed unless she shows as a matter of fact that she would not have suffered the loss “but for” the negligent act or acts of the defendant.”[6]

Furthermore, as set out in Clements,[7] the court highlighted that the material contribution test should only be applied in “exceptional circumstances” and that “a material contribution to the risk of impairment is one that falls outside the de minimis range.”

The Divisional Court ultimately found that the arbitrator should have applied the “but for” test as set out in Clements and a failure to do so was an error of law.

Furthermore, while the Director’s Delegate was correct in applying the “but for” test, the Divisional Court found that he was incorrect in suggesting that the plaintiff must prove on a balance of probabilities that the accident alone could have caused the impairment  (i.e. that it was “the cause” as opposed to a “necessary cause”).

The court also held that the Director’s Delegate was incorrect in failing to find that the “but for” and “material contribution to risk or injury” tests are alternatives.

As such, the Divisional Court clarified that the “but for” test need not be proven in a “material contribution to risk” case.

The matter was ultimately remitted back to a different arbitrator to apply the correct “but for” test.


Accordingly, it is now clear that the “but for” test should be applied in SABs matters. The alternative “material contribution” test is only applicable in “exceptional circumstances” as set out in Clements. Adjudicators at the LAT are bound by this decision.

This is a necessary pronouncement that should settle the confusion regarding causation in SABs matters moving forward.

[1] 2008 ONCA 269

[2] [2015] O.J. No. 1218 (ONCA) – see para 71.

[3] See, most recently, S.A. vs. Aviva Insurance Canada, 2018 ONLAT 18-000651/AABS.

[4] 2019 ONSC 1121.

[5] 2012 SCC 32 (CanLII), [2012] 2 S.C.R. 181.

[6] See: Clements at para. 46.

[7] Ibid.

What’s Happening at Rogers Partners

  • In a decision released in January 2019, Brian Sunohara was successful at the Court of Appeal in the case of Zeppa v. Woodbridge Heating & Air-Conditioning Ltd., 2019 ONCA 47. The case involved an alleged faulty HVAC system. The majority of the Court of Appeal upheld a dismissal of the claim on the basis of the plaintiffs missing the limitation period.
  • Meryl Rodrigues was successful in a motion to enforce a settlement in the case of Holness v. Metrolinx, 2019 ONSC 349. The decision was released in January 2019.
  • Rogers Partners continues with its busy appellate practice. The firm has argued six appeals at the Court of Appeal in the last year and is also currently involved in three Supreme Court of Canada leave applications.
  • The Ontario government has invited The Advocates’ Society to provide submissions on issues relating to juror privacy. Stephen Ross is part of The Advocates’ Society’s task force on this topic.
  • Kevin Adams was a speaker at a Canadian Defence Lawyers conference in February 2019. Kevin spoke on the latest case law and emerging issues in loss transfer claims and priority disputes. Colleen Mackeigan assisted with this presentation.
  • In March 2019, Stephen Ross will be speaking at the Law Society’s “2nd Motor Vehicle Litigation Summit”. In conjunction with this presentation, Stephen Ross and Meryl Rodrigues have co-authored a comprehensive paper on collateral benefits.
  • In March 2019, Rogers Partners held a successful charity potluck lunch.
  • Stephen Ross was quoted in a Law Times article in March 2019 which addressed the Court of Appeal’s decision in Imeson v. Maryvale (Maryvale Adolescent and Family Services), 2018 ONCA 888. Stephen Ross and Meryl Rodrigues were counsel for the successful defendant in the appeal. The decision provides helpful guidance on the admissibility of evidence from participant experts at trial.
  • The Advocates’ Society will be holding a program on Licence Appeal Tribunal (LAT) Advocacy in April 2019. Stephen Ross will be co-chairing the program. Kevin Adams will be speaking on Top Cases and Recent Trends at the LAT. Alon Barda and Sara Baum are assisting Kevin.
  • In April 2019, Stephen Ross will be speaking at an Ontario Bar Association conference which will feature several judges and leading lawyers. The program is called “Anatomy of a Trial: A Deeper Dive Into Jury Trials”.  Stephen’s topic is post-verdict considerations relating to collateral benefits. Meryl Rodrigues is working with Stephen on this presentation.
  • Anita Varjacic will also be speaking at the conference “Anatomy of a Trial: A Deeper Dive Into Jury Trials”. Anita will be demonstrating an examination-in-chief of a defence engineer. In conjunction with this demonstration, Anita Varjacic and Colleen Mackeigan are co-authoring a paper on examinations-in-chief of expert witnesses.
  • In April 2019, Stephen Ross will be involved in a program by The Advocates’ Society called “Negotiation Strategies for Litigators”. Stephen will be on a panel entitled “Managing Client Expectations”.
  • Rogers Partners continues to participate in casual Fridays in support of charity. The partners of the firm are matching all donations. The firm is currently supporting GIST Sarcoma Life Raft Group Canada, which is a patient support organization for people with gastrointestinal stromal tumors.

From the Desk of Jocelyn Brogan

Fault in Fitness

Outside of work life, I often find myself noticing conditions or activities carried out on properties that have the potential of being the subject matter of a personal injury action.

However, just because I notice the vulnerabilities of occupiers in everyday life, this certainly does not mean that a potential lawsuit equates to a claim with merit.

The gym is a location that I frequently attend during my free time and I cannot help but notice that it is a haven for possible claims. I am passionate about the benefits of exercise but not oblivious to its potential for disaster, specifically when performed haphazardly.

At my gym, the workout of the day regularly consists of a combination of exercises usually programmed to be performed in large sets, under fatigue, and with a time cap.

The possibilities for injuries are endless, specifically when movements are executed poorly and mishaps occur with the equipment.

When reflecting upon the gym that I attend and its exposure to liabilities, I cannot help but compare my experiences to the recent decision of Hosseinkhani v. QK Fitness Inc., 2019 ONSC 70.

The Facts

In Hosseinkhani v. QK Fitness, the plaintiff had been attending a fitness class at QK Fitness approximately bi-weekly for 8 months. The equipment used in the class included two dumbbells and a low step.

Typically, the plaintiff would use the hexagonal dumbbells, although sometimes she would use circular dumbbells.

On the accident date, the plaintiff’s exercise class proceeded in the usual manner with a fitness instructor and approximately 25 members.

The members were instructed to position the dumbbells about 18 inches in front of each member and to the right. No instruction was provided on how the round dumbbells should be placed to prevent them from rolling.

About 20 minutes into the class, the instructor directed the class members to step off of their step to the right. When the plaintiff carried out this movement, she tripped over one or both of the circular dumbbells, which had rolled from their position and into her path of travel.

The plaintiff allegedly sustained a burst fracture of her T12 vertebrae in the accident.

Summary Judgment Motion

The defendant, QK Fitness, brought a summary judgment motion against the plaintiff. QK Fitness argued that it was not negligent because the plaintiff signed an enforceable waiver which excluded its liability, or in the alternative, the plaintiff was the author of her own misfortune.

QK Fitness also argued that the plaintiff made the simple mistake of placing the round dumbbells on their side rather than on their flat end, and that it should be obvious that a round object might roll if placed on its side.

The plaintiff argued that the waiver was unenforceable, mainly relying upon the exclusion of liability clause not having been specifically brought to her attention before signing.

In addition, the plaintiff argued that QK Fitness had a duty to properly instruct her on the safe use of the round dumbbells, which they failed to do.

The Outcome

Justice Charney granted the summary judgment motion and dismissed the plaintiff’s claim.

He found that the waiver was unenforceable, but regardless, QK Fitness was not negligent for failing to warn about an obvious risk.

With respect to the unenforceability of the waiver, Justice Charney advised that no evidence was presented to demonstrate that QK Fitness had taken any extra steps to bring the exclusion of liability clause to the plaintiff’s attention in order to satisfy the requirements under section 5(3) of the Occupiers’ Liability Act.

With respect to the negligence argument, Justice Charney stated that an 8 pound dumbbell is not a complicated exercise machine that may require instruction on proper use and safety.

The risk that a round dumbbell may roll if placed on its side is an obvious risk that an occupier does not have to warn an adult about.


Similar to QK Fitness, I was provided a waiver to sign upon joining the gym. After each clause, there was a space for me to initial.

However, the exclusion of liability clause was not brought to my attention any more than every other clause in the waiver.

Also, upon signing the waiver, no verbal exchange took place with respect to the exclusion of liability clause. For a member with no legal knowledge, I suspect there are strong arguments for the exclusion of liability clause being unenforceable.

Justice Charney described the dumbbell exercise performed at the time of the accident as rudimentary. At the gym I attend, not all but some of the exercises programmed are complex.

For example, the more complex exercises might involve lifting a barbell heavier than bodyweight overhead while squatting, using gymnastic rings for muscle-ups, or turning your body upside down to perform handstand push-ups or handstand walking.

However, whenever the more complex movements are involved, detailed instruction is always provided.

This brings me back to my initial assertion that just because an occupier has vulnerabilities, and just because a person is injured, this does not equate to a claim with merit.

There are risks in every recreational activity. Gyms and other recreational service providers should not have to fear being sued, but they should take adequate steps to inform participants of risks that may not be obvious, and they should supervise and provide instruction on complex activities.