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Single Claim or Multiple Claims under a Liability Policy? General Similarities Not Determinative

3 minute read
Also authored by: Michael Dunk

The Ontario Superior Court recently released its decision in Continental Casualty Company et al. v Lawyers’ Professional Indemnity Company, 2020 ONSC 7131. This case provides guidance on assessing when multiple errors or omissions constitute a single claim, or multiple claims, impacting the amount of coverage available to the insured.

Background

The lawsuits underlying this claim for coverage involved the provision of legal advice to four clients on structuring donation plans and a life/disability plan in a tax effective manner. The recommended plans were implemented, but the CRA viewed them as shams and disallowed the deductions taken.

All four clients commenced suit against their former lawyer. LawPRO was put on notice of the actions. Under the LawPRO policy, coverage for a single claim was limited to $1 million, whereas an aggregate limit of $2 million was available for multiple claims. Three of the four clients settled, and LawPRO contributed $1 million to the settlement on the basis that their claims were related. The excess insurers contributed over $3.1 million, and commenced an application seeking a declaration that the settled claims did not constitute a single claim, such that LawPRO’s $2 million aggregate limit was available.

Analysis

With respect to a single claim, the LawPRO policy stated that:

all Claims or circumstances of an error, omission or negligent act … which arise from a single or related error(s), omission(s) or negligent act(s), shall be considered a single Claim regardless of the number of Insureds or the number of persons or organizations making a Claim; or the time or times the error(s), omission(s) or negligent act(s) took place.

In interpreting this provision, the court took direction from the 2014 decision, Simpson Wigle Law LPP v Lawyers’ Professional Indemnity Company, 2014 ONCA 492, in which the Ontario Court of Appeal considered the same wording. The general principles relating to determining whether multiple errors or omissions constitute a single claim are:

  • Two or more claims will be related when there is sufficient association or connection between them. In making this determination, the court must consider the similarities and differences between the nature of the alleged misconduct and the losses for which recovery is sought;
  • General relatedness between two claims does not necessarily mean that they are related. Claims may concern the same parties, acting in the same capacity, and have the same basis for liability but be unrelated under the meaning of the policy; and
  • The court is to consider whether the allegations of misconduct are different in nature, kind, and time. If two or more claims are “different in kind and substance,” they are not single or related claims.

The excess insurers argued that there were three separate errors made by the lawyer that caused the settled claims to be unrelated: 1) in one case, the lawyer failed to ensure that a charity involved in the donation plan was registered, 2) in the second case, the lawyer created a charity to be involved in the donation plan, and 3) in the third case, the lawyer failed to warn of the risks of the life/disability plan separate and apart from the risks of the donation plans.

The court disagreed with the excess insurers’ first two arguments, but accepted the third. Although distinct errors were made in respect of the multiple donation plans, they were all deemed to be shams by the CRA for the same reason, and as such, the donation plan claims are related. However, the life/disability plan was structured differently than the donation plans, with distinct objectives, and the relief sought arising out of the ineffective plan differed. The court found that the errors related to the life/disability plan and donation plans were unrelated and therefore the $2 million aggregate limit under the LawPRO policy was available.

Overall, determining whether errors or omissions constitute a single claim or multiple claims under a liability policy is a very fact driven exercise. It requires an involved assessment of the specific allegations pleaded – general similarities, such as multiple negligent acts of a similar nature committed by same professional, are not determinative.

Julia Boddy

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