Executive Summary: Key Legal and Evidentiary Issues

• Dispute over whether a professional liability insurance policy covers a $3.2 million settlement for alleged surveying errors

• Determination of the applicable policy period based on when the insured received notice of the claim

• Analysis of policy wording to interpret whether late notice invalidates coverage

• Examination of the insurer’s argument that the existence of other insurance (Lloyd’s policy) precludes liability

• Assessment of whether the insured breached its duty to cooperate with the insurer during litigation

• Ruling on entitlement to costs based on party conduct and partial indemnity principles

Background and facts of the case

Monteith & Sutherland Limited, a land surveying company, held a professional liability insurance policy with Novex Insurance Company through its association with the Association of Ontario Land Surveyors. This policy covered claims made during the coverage period and required timely notice to the insurer.

In January 2022, Monteith & Sutherland was hired by Earth Boring Co. Limited to provide surveying services for a wastewater project in Halton Hills. On June 9, 2022, Earth Boring notified the company of its intent to claim damages for allegedly deficient work. Monteith & Sutherland formally reported this to Novex on July 12, 2022. Around the same time, Earth Boring filed a separate claim related to a different project, the Port Lands Claim, which Novex later paid $5 million toward under the policy period of July 2022 to July 2023.

Monteith & Sutherland eventually settled the Halton Claim for $3.2 million and sought indemnification under the Novex policy. Novex declined full payment, asserting the claim either fell under the wrong policy period or was excluded due to other insurance coverage, and further alleged that the insured failed to cooperate during the defence process.

Legal issues and analysis

The dispute centered on three issues: whether the Halton Claim fell within the scope of the Novex policy, which policy period it belonged to, and whether Monteith & Sutherland breached its duty to cooperate.

On the first issue, the court found that the claim clearly fell within the scope of the Novex policy, as it directly arose from land surveying services. The existence of a separate Lloyd’s policy that excluded coverage for land surveying did not displace the Novex obligation. The judge highlighted that the policy wording was unambiguous and provided indemnity for claims related to the insured’s surveying services.

On the second issue, the court interpreted the policy language to determine when a claim is considered “first presented.” Since the insured was notified of the Halton Claim during the July 2021 to July 2022 policy period (PP1), the judge found that this was the relevant period—even though Novex was notified slightly later, during the next policy period. The court also applied the policy’s curative clause, which allows late notification to be excused if no prejudice results and the policy remains active. As no prejudice was proven, the policy’s coverage for PP1 was upheld.

On the third issue, the court rejected Novex’s claim that Monteith & Sutherland had substantially breached its duty to cooperate. While the company failed to directly respond to a May 2023 letter offering defence counsel options, it had otherwise cooperated throughout the litigation. Novex had access to pleadings, attended the judicial pre-trial, and suffered no demonstrated prejudice. The court emphasized that mere lack of communication in response to a non-critical letter did not rise to a substantial breach.

Outcome of the proceeding

The court ruled in favor of Monteith & Sutherland, ordering Novex Insurance Company to indemnify the full $3.2 million settlement amount related to the Halton Claim under the policy period of July 2021 to July 2022. It also awarded the applicant $75,000 in costs on a partial indemnity basis, noting Novex’s non-compliance with procedural rules and the relatively straightforward nature of the case.