Executive Summary: Key Legal and Evidentiary Issues

• Sniper Pressure Services Ltd. experienced two roof collapses (March 4, 2020 and January 17, 2022) on its commercial building in Woodlands County, giving rise to multiple overlapping lawsuits.

• Northbridge, as Sniper's insurer, paid approximately $2,000,000 in insurance proceeds and commenced three subrogated actions to recover its insured losses from alleged tortfeasors.

• Sniper applied for conduct and carriage of Northbridge's three subrogated actions under s 546 of the Insurance Act, RSO 1990, c I.8, seeking consolidation or a stay of those proceedings.

• Under common law, the insured (Sniper) retains control of litigation as dominus litis unless fully indemnified, but the Court found this principle alone did not end the analysis.

• Potential conflicts of interest between Sniper and Northbridge — arising from simultaneous coverage disputes and subrogation proceedings — undermined Sniper's ability to faithfully protect Northbridge's interests.

• The Court dismissed Sniper's application, ordering instead that the parallel actions proceed distinctly under proper case management to preserve each party's unique interests.

The roof collapses and resulting claims

Sniper Pressure Services Ltd. owned land and a commercial building in Woodlands County. The roof of the building collapsed on March 4, 2020. A second roof collapse occurred on January 17, 2022. Sniper was insured with Northbridge for both losses. Following the first collapse, Sniper sued the alleged tortfeasors — including Ken's Custom Wood Work Ltd., MTN Engineering & Design Inc., William A. Kazoleas, A. Martens, Alberta Truss Ltd., Woodlands County, and others — for $5,000,000 in damages. Northbridge paid approximately $2,000,000 to Sniper and, in turn, Northbridge commenced proceedings against the alleged tortfeasors for its subrogated claims arising from the loss. Sniper also commenced an action against Northbridge claiming $650,000 which is alleged to be due to it under its insurance claims.

The second collapse and expanding litigation

With respect to the second roof collapse, Northbridge sued the alleged tortfeasors for $2,670,000 for its subrogated claims arising from the loss. Northbridge commenced a separate action against CEP Forensic Inc. ("CEP") for breach of contract and negligence for engineering services rendered, in which both Northbridge and Sniper are named plaintiffs. Sniper commenced a second action against Northbridge, CEP and other alleged tortfeasors for $6,500,000 in damages. These overlapping proceedings involved multiple dockets, numerous defendants, and third-party claims across three related actions.

Sniper's application for conduct and carriage

Sniper applied for conduct and carriage of the three subrogated actions being pursued by Northbridge, pursuant to s 546 of the Insurance Act, RSO 1990, c I.8. Sniper asserted that, under common law, it retains control of the litigation unless fully compensated for both insured and uninsured losses. Section 546 of the Insurance Act only shifts control to the insurer in limited situations where the insured's interest is confined to the deductible or co-insurance, which is not the case here. Sniper requested conduct and carriage of the actions to protect its interests, avoid conflict, and ensure efficiency by consolidating Northbridge's actions with its own.

Northbridge's position

Northbridge contended that an insured does not automatically have the right to conduct and carriage of litigation, and that s 546 does not apply when subrogated and uninsured claims are being pursued separately by the insurer and insured. Northbridge argued that if Sniper is granted control of the litigation, dominus litis, it must act in good faith to protect Northbridge's interests in its proceedings. If Sniper is given conduct and carriage over Northbridge's subrogated claims, the scope of Sniper's obligations and Northbridge's rights must be clearly defined. Northbridge conceded that s 546(4) of the Insurance Act can be engaged by Sniper from time to time on an issue-by-issue basis with or without Northbridge's consent.

The legislative framework under section 546

The Court examined s 546 of the Insurance Act. Section 546(1) establishes that an insurer that makes any payment or assumes liability for making any payment under a contract is subrogated to all rights of recovery of the insured against any person and may bring an action in the name of the insured to enforce those rights. Section 546(3) gives the insurer control of the action when the interest of an insured in any recovery is limited to the amount provided under a deductible or co-insurance clause. Since Sniper's interest in recovery exceeds the $2,500 deductible for each building and personal property, s 546(3) does not apply. The Court further noted it was not contested that the insurance policy does not mention any right for Northbridge to control or manage the litigation if Sniper has not been largely compensated. However, s 546(4) empowered the Court to make any order it considers reasonable having regard to the interests of the insured and the insurer in any recovery, where the insured and the insurer cannot agree as to the conduct and carriage of the action or any related matters.

The Court's analysis and conflict of interest concerns

Justice Kelsey L. Becker Brookes was satisfied that by default to the common law, Sniper is dominus litis. However, the Court held that this did not end the analysis. Section 546(4) applies because Sniper's interest in recovery exceeds the $2,500 deductible, and it empowers the Court to intervene where fairness and reasonableness require a different result. The Court identified a significant potential for conflict: Northbridge is simultaneously pursuing the subrogated claims in Sniper's name and defending Sniper's coverage action arising from the same losses, as well as defending Sniper's recovery action with respect to the second roof collapse. In the coverage action, Sniper seeks indemnity for its loss, while Northbridge seeks to minimize or deny payment. In the subrogated action, Northbridge has an incentive to attribute responsibility to Sniper, as opposed to third-party tortfeasors, a litigation strategy which has the potential to impact Sniper's position in the coverage action. Given this conflict, the Court was not convinced Sniper could pursue Northbridge's interests as diligently and faithfully as Sniper pursues its own interests.

Ruling and outcome

The Court dismissed Sniper's application for conduct and carriage of Northbridge's subrogated actions. Justice Becker Brookes determined that both parties have significant claims and that it makes sense for both sides to retain their own counsel and pursue their own actions. This prevents potential conflicts regarding solicitor-client communications and privilege, ensures lines of communication will be clear, and prevents accusations that the controlling party is acting in a way that favours one side over the other. The Court noted that two parallel actions can proceed in an efficient manner if properly case managed, including procedural orders directing the claims to proceed together and imposing conditions on discovery to ensure defendants are not unnecessarily subjected to duplicative litigation steps. The successful party in the application was Northbridge, whose position was upheld by the dismissal of Sniper's application. No specific monetary amount was awarded in this decision, as it pertained solely to the procedural question of conduct and carriage. The parties were permitted to provide written cost submissions no longer than three pages, excluding attachments, within 30 days of the decision if they could not agree on costs.