Executive Summary: Key Legal and Evidentiary Issues

• Procedural propriety of adding the professional liability insurer, Continental Casualty Company (CCC), as a defendant in an ongoing professional negligence action.
• Justiciability of a coverage declaration in this standalone action, where the insurer’s “common set of circumstances” analysis depends on facts that remain to be determined in both the Pearl and Herzog actions.
• Effect of Justice Merritt’s prior ruling dismissing an insurance coverage application as premature, and whether that decision forecloses the relief sought in this motion.
• Availability of declaratory relief on policy limits and erosion of coverage in the absence of pleaded facts about the separate Herzog claim.
• Risk of inconsistent factual findings on the relationship between the Pearl and Herzog claims, given that Herzog is not a party to this action.
• Application of the high threshold for denying amendments to pleadings where the proposed claim for declaratory relief is found to be “impossible of success.”

Factual background

The underlying dispute arises from a professional negligence action brought by the plaintiff, Melvin Pearl, against the defendant, Morris Krandel, a professional insured under a liability policy issued by Continental Casualty Company (CCC). The plaintiff is pursuing damages against Mr. Krandel in court file CV-21-672311 for alleged professional misconduct. Separately, another client, Herzog, has brought a distinct action against Mr. Krandel under court file CV-19-00620130 (the Herzog action), also involving alleged professional negligence but concerning different taxpayers, time periods, and subject matter. The two actions share the same professional defendant but are otherwise advanced by unrelated clients with different factual matrices. Against this backdrop, the insurer CCC has taken the position that the Pearl claim and the Herzog claim together constitute a single “Claim” for the purposes of the professional liability policy issued to Mr. Krandel. Treating both as one claim potentially compresses the available insurance limits, because a single policy limit may respond to both sets of allegations, thereby reducing what insurance coverage remains to answer any judgment in the Pearl action. The plaintiff’s own recovery from Mr. Krandel in damages would not, as the court notes, change in principle; what may be affected is the amount of insurance available to indemnify the defendant for any judgment.

The plaintiff’s motion to add the insurer

Concerned about CCC’s one-Claim position, the plaintiff brought a motion seeking leave to amend his statement of claim to add CCC as a defendant in this action. Through the proposed pleading, he sought a series of declaratory orders regarding coverage under CCC’s policies. Specifically, the proposed amendments asked for a declaration stating the limits of coverage available under the policies and a determination of any conditions or exclusions affecting the availability of payment. The plaintiff also sought a more pointed declaration that the events giving rise to the Pearl action constitute a “separate, standalone Claim as defined in the Policies” and that no claim by any other insured, including Herzog, could erode the coverage available to indemnify Mr. Krandel for this action. In addition, the plaintiff asked for a declaration and determination of his rights to payment under the policies issued by CCC, effectively positioning himself to have coverage and limits issues decided within his own negligence action rather than through a separate coverage proceeding or after the Herzog action concludes. This was framed as an effort to resolve uncertainty about how much insurance might be available to respond to any ultimate judgment he may obtain.

Relevant insurance policy concepts and prior coverage litigation

The insurance issue turns on language in the professional liability policy that contemplates whether different claims may arise from a “common set of circumstances” for the purposes of defining a single “Claim.” If both the Pearl action and the Herzog action are ultimately found to arise from such a common set of circumstances, the insurer could treat them as one Claim within a single policy period, subject to one limit of liability. Conversely, if they are distinct Claims, each may attract separate coverage limits (subject to the policy wording). This precise point had already been the subject of earlier litigation. In February 2024, the defendant commenced an application seeking a declaration that the Pearl and Herzog actions constituted separate claims for coverage purposes. Both the plaintiff and Herzog were granted intervenor status on that application and argued that the actions were factually distinct and therefore separate claims. The application was heard on 9 December 2025, and Justice Merritt dismissed it in Krandel v. CPA Professional Liability Plan Inc. et al., 2026 ONSC 262. Justice Merritt held that, while in some cases coverage obligations could be decided based on the allegations alone, this was not such a case. Determining whether the Pearl and Herzog actions arose “from a common set of circumstances” under the policy language required factual findings that would only be available once both actions were tried and the evidence fully developed. She found the application premature because the court would have had to resolve factual issues that overlapped with, and could affect, the defence in the underlying actions—precisely the type of determination that should await trial findings.

Impact of Justice Merritt’s decision on the present motion

Associate Justice Jolley viewed Justice Merritt’s decision as central to the viability of the plaintiff’s proposed amendment. Justice Merritt had already decided that it was premature to rule on whether the Pearl and Herzog actions arose from a common set of circumstances, because such a ruling would require findings of fact better left to the underlying trials. She emphasized that the proper forum for determining the circumstances giving rise to the claims, and their commonality if any, was the underlying litigation, based on a complete evidentiary record. In the present motion, the plaintiff sought to accomplish, through the back door of pleadings in a standalone action, what Justice Merritt had said could not properly be done at this stage. Associate Justice Jolley found that a trial judge presiding only over the Pearl action would be in no better position than Justice Merritt had been to decide whether the Pearl and Herzog claims arise out of a “common set of circumstances.” Critically, there would be no evidence before that trial judge about the facts of the Herzog claim, making any attempt to resolve the coverage question speculative and incomplete. The coverage determination, therefore, remained premature until both underlying actions were decided.

Assessment of the proposed amendment and evidentiary shortcomings

When considering amendments to pleadings, the threshold for refusing leave is high, and courts ordinarily allow amendments unless they are plainly doomed to fail. Here, however, Associate Justice Jolley concluded that this high threshold was met. She found that the declaratory relief the plaintiff sought against CCC was “very likely not relief the trial judge could grant in this standalone action,” given the necessity of factual findings from both the Pearl and Herzog actions to resolve the insurer’s “common set of circumstances” position. On a more granular level, she held that, even taken on its face, the proposed amended claim did not plead facts that could support a determination that the Pearl claim is a “separate, standalone Claim as defined in the Policies” or that no other insured’s claim could erode the available coverage. The allegations did not provide a factual foundation on which the trial judge could responsibly make the coverage findings being sought. Accordingly, she concluded that the proposed claim for declaratory relief was “impossible of success,” borrowing the language from Plante v. Industrial Alliance Life Insurance Co. This finding justified refusing leave to amend, despite the usual permissive approach to amendments.

Risks of inconsistent findings and non-parties

Associate Justice Jolley also identified a structural concern arising from the fact that Herzog is not a party to the Pearl action. Any determination in this case about the relationship between the Pearl and Herzog claims, or about how their factual circumstances interrelate for coverage purposes, would not be binding on Herzog. This raised a real risk of inconsistent findings: one court in the Pearl action could make one set of factual determinations, while another court in the Herzog action, with Herzog properly before it, could reach different conclusions about the same underlying circumstances. Such inconsistency would be particularly problematic when the issue is whether separate client claims should be aggregated into one Claim under a single policy limit. This risk of fragmented and conflicting factual determinations reinforced the conclusion that coverage issues premised on the interaction between the two actions should not be decided solely within the Pearl action at this stage.

Outcome and costs award

In the result, Associate Justice Jolley dismissed the plaintiff’s motion to add CCC as a defendant and to seek declaratory relief on policy coverage within this action. She held that the relief sought was premature, that it could not properly be determined in a standalone action confined to the Pearl claim, and that the proposed claim against CCC was effectively impossible to succeed given the absence of necessary factual findings and the constraints imposed by Justice Merritt’s prior decision. The successful party on the motion was CCC, appearing as the proposed defendant and responding party. The court ordered the plaintiff to pay CCC its costs on a partial indemnity basis in the amount of $15,000, representing the total monetary award in favour of the successful party in this decision.