Executive Summary: Key Legal and Evidentiary Issues

• Determination of whether Aviva and Royal & Sun Alliance (RSA) owe Ontario a duty to defend in two lawsuits arising from a bridge collapse.

• Interpretation of comprehensive general liability policy terms, including the scope of coverage and relevant exclusions.

• Assessment of whether property damage and resulting loss of use, alleged to have occurred over decades, trigger coverage under historical policies.

• Evaluation of whether exclusions for property owned, occupied, or controlled by the insured, or for work performed by the insured, bar coverage.

• Decision on the appropriate method for allocating defence costs among insurers, specifically whether to use a “time on risk” formula.

• Consideration of whether other insurers (AIG and St. Paul) should contribute to defence costs, contingent on the outcome of the primary applications.

Facts of the case

On February 23, 2018, a bridge in Elgin County, Ontario, collapsed while a dump truck was crossing it. The bridge, originally designed and constructed in 1964 under Ontario’s jurisdiction, was transferred to Elgin County in 1997. Following the collapse, two lawsuits were initiated: one by Elgin County against Ontario and various engineering firms, seeking damages for the bridge replacement and related losses, and another by the dump truck owners against Elgin County, which in turn brought a third-party claim against Ontario for contribution and indemnity. Ontario denied liability in both actions.

Insurance policies and parties’ positions

Ontario sought court orders requiring Aviva Insurance Company of Canada and Royal & Sun Alliance Insurance Company of Canada (RSA) to defend both lawsuits and to share defence costs. Both Aviva and RSA had issued comprehensive general liability (CGL) policies to Ontario for certain periods between 1975 and 1984. Other insurers, AIG and St. Paul, also provided coverage during different periods, while Ontario was self-insured for the remaining years. Ontario argued that Aviva and RSA’s policies covered property damage and loss of use arising from damage that occurred during their policy periods, even if the loss of use manifested later. Aviva and RSA contended that their policies did not cover damages occurring after their coverage ended and that, if any duty to defend existed, it should be allocated based on the proportion of time they were “on risk.”

Discussion of policy terms and clauses at issue

The court examined the wording of the CGL policies, focusing on the insuring agreements and exclusion clauses. The policies covered property damage caused by accident, including continuous or repeated exposure to conditions resulting in property damage not expected or intended by the insured. “Property damage” was defined to include injury or destruction of tangible property during the policy period, as well as loss of use resulting from such damage at any time. The court found that the claims against Ontario alleged corrosion and fatigue damage to the bridge’s anchor rods, a process occurring over many years, including during the insurers’ policy periods. The court also considered exclusions for property owned, occupied, or controlled by the insured, and for work performed by or on behalf of the insured. It concluded that these exclusions did not clearly and unambiguously bar coverage, particularly as Ontario no longer owned or controlled the bridge at the time of the collapse.

Ruling and outcome

The court held that both Aviva and RSA owed Ontario a duty to defend in both lawsuits, as the claims alleged property damage during their respective policy periods, with loss of use manifesting later. However, the court rejected Ontario’s argument that defence costs should be shared equally among the insurers. Instead, it adopted a “time on risk” approach, allocating costs in proportion to the number of years each insurer provided coverage relative to the total period of alleged damage. Specifically, Aviva was ordered to pay 5.5% and RSA 11.1% of the defence costs. Applications by Aviva and RSA to require contributions from AIG and St. Paul were dismissed as moot, since the court did not order equal sharing of defence costs. The successful party in this decision was Ontario, which secured a partial order requiring Aviva and RSA to defend the claims and contribute to defence costs, though not on an equal basis. The exact monetary amount to be paid by each insurer was determined as a percentage, not a fixed sum, and will depend on the total defence costs incurred.