Risks and trends 2020: Emerging areas of directors and officers liability north and south of the border and key takeaways

1. Introduction

As modern day business practices evolve, the scope of director and officer liability expands. Directors and officers have a common law and statutory duty to exercise reasonable care and diligence.[1] In the era of the digital age and emerging technologies, along with the growing trend for seeking action for failure to follow regulations and standards, directors and officers must ensure they have adequate coverage for unanticipated claims.

This article will discuss emerging risks for directors and officers in attracting liability, along with statistics and recent developments in some keys area both north and south of the border.


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New uncertainty for auto insurers: Limitations for insurers voiding a policy ab initio due to a misrepresentation in an application

Republished with permission from the Insurance Brokers Association of Alberta’s magazine – The Alberta Broker (August 2019)

Insurance contracts are contracts requiring the utmost of good faith.  At common law, automobile insurers can typically rescind (i.e., treat as void ab initio or ‘from the beginning’) an auto insurance policy based on a misrepresentation or material non-disclosure of the insured who is applying for insurance.  Comparatively, an automobile insurer cannot rescind a contract if it discovers a misrepresentation or non-disclosure on an insurance application after a collision has already occurred.    

However, in Merino v. ING Insurance Company of Canada,[1] the Ontario Court of Appeal ruled that an insurer, despite having elected to rescind an auto insurance policy prior to any accidents occurring, could still be sued by a third-party claimant for compensation for injuries sustained in a subsequent motor vehicle accident caused by its insured.

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Off-roading injury leads to on-side claim for Ontario statutory accident benefits coverage

Republished with permission from the Insurance Brokers Association of Alberta’s magazine – The Alberta Broker (December 2019)

To the layperson, the equation is often simple: “Automobile insurance coverage applies to automobile accidents, so if I’m in an accident involving an automobile, I will have insurance coverage”.  However, for those working in the insurance industry, we know that the equation is actually much more nuanced—we ask: “What is an ‘automobile’ exactly, and what qualifies as an ‘accident’?”  In reality, the nuanced semantics of insurance coverage can make simple algebra look a lot more like complicated calculus.

The Ontario Court of Appeal’s decision in Benson v Belair Insurance Company Inc[1] is a case in point. 

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Homeowners policy: Are policy holders covered when a family member residing in the home is injured?

In Traders General Insurance Company v Gibson, 2019 ONCA 985,the Court of Appeal for Ontario concluded that an insured is not eligible for coverage under a homeowner’s insurance policy when another family member who resides in the home sustains injuries on the premises.


Ms. Gibson was insured with Traders General Insurance Company. Her 60-year-old daughter commenced an action against her for damages resulting from a fall from the porch of the house. Both mother and daughter were tidying the porch.

Ms. Gibson’s policy contains an exclusion of coverage for claims made against her arising from “bodily injury to … any person residing in your household other than a residence employee.”

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On the hook for a crook: Broker liable for part of fraudster’s fraud based on failure to place adequate crime coverage

Reprinted with permission from the Insurance Brokers Association of Alberta’s magazine – The Alberta Broker (January 2020)

Over a period of six years, Elaine Badry stole over $500,000 from her employer, Duraguard Fence Ltd. (“Duraguard”).  Bit by bit, the ‘well-liked’ employee processed numerous fraudulent refund transactions into accounts that she held or controlled.[1]  When her employer discovered her scheme, Ms. Badry was charged and convicted with fraud.  She was sentenced to three years in jail, and the Court ordered her to pay $250,000 in restitution. 

In response to its loss, Duraguard started a lawsuit.  In addition to naming Ms.

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In a priority dispute, an out-of-province insurer was required to respond pursuant to legislative priority scheme

Coseco v Liberty, [2019] ONSC 4918 involved an appeal arising from an arbitrator’s decision concerning the priority provisions found in s. 268 of the Ontario Insurance Act, R.S.O. 1990, c. I-8 (Insurance Act), and whether it applied to an out-of-province insurer for an accident that took place in Ontario.

Justice Nakatsuru upheld the arbitrator’s decision and dismissed the Appeal, finding that the out-of-province insurer whose policy covered the claimant, and who was a signatory to the Power of Attorney and Undertaking (PAU), was bound by section 268 of the Insurance Act in its entirety.  


The claimant was a resident of the State of New York; insured under New York motor vehicle insurance policy, GMAC Insurance Company (GMAC).

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ABQB: Limitation periods may not always begin when insurers say so

Since July 2012, insurers in Alberta have been subject to a statutory requirement to give written notification to insureds/claimants of the “applicable limitation period” when one of four instances arises. The failure to do so may entitle an insured/claimant to an extension of that limitation period on application to the court.

Until recently, the Court of Queen’s Bench of Alberta had not considered the scope of that standard. Was it simply enough to reference a limitation period, with a Proof of Loss form, in response to an insured’s Notice of Claim? Master Farrington in Statt v SGI Canada Insurance Services Ltd, 2019 ABQB 828, recently answered that in the negative.

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