Indemnity & Insurance Provisions in the Occupiers’ Liability Context

Indemnity & Insurance Provisions in the Occupiers’ Liability Context Miriam Tepperman Isaacs & Co., Partner Direct: (416) 601-6805 miriam@isaacsco.ca

Table of Contents Occupiers’ Liability Framework in Ontario Indemnity Clauses Insurance Clauses Conclusion Q&A

Part I – Occupiers’ Liability Generally

Occupiers’ Liability Act Section 1 of the Occupiers’ Liability Act defines “occupier” as follows: “‘Occupier’ includes: A person who is in physical possession of premises, or A person who has responsibility for and control over the condition of premises or the activities there carried on, or control over persons allowed to enter the premises, despite the fact that there is more than one occupier of the same premises”.

Occupier • An occupier may be an owner. • An occupier may be a different entity ie. a contractor who assumes responsibility for the condition of the premises. • There can be more than one occupier.

Duty of Care Section 3(1): “An occupier of a premises owes a duty to take such care as in all the circumstances of the case is reasonable to see that persons entering on the premises, and the property brought on the premises by those persons are reasonably safe while on the premises.”

Duty of Care Ontario’s Occupiers’ Liability Act imposes a duty on occupiers of a premises: Duty of occupier to take reasonable care. Duty to keep those on the premises reasonably safe.

Waldick v Malcolm Waldick v. Malcolm, [1989] 70 OR (2d) 717, para. 19. [affirmed by the Ontario Court of Appeal and the Supreme Court of Canada] The plaintiff slipped on ice on the laneway of a rural property. There was an ice storm 4 days before the date of loss. The defendants did not take any steps to clear the ice. The plaintiff was aware the laneway was icy.

Waldick v Malcolm • The Duty of Care: • Affirmative duty; • Reasonably safe; • Not an absolute duty; • Occupiers are not insurers; • Occupiers are not liable for risks “willingly assumed”. • The Court held that the defendants breached the duty of care by failing to salt and sand 4 days after an ice storm.

Delegation of the Duty 6. (1) “Where damage to any person or his or her property is caused by the negligence of an independent contractor employed by the occupier, the occupier is not on that account liable if in all the circumstances the occupier had acted reasonably in entrusting the work to the independent contractor, if the occupier had taken such steps, if any, as the occupier reasonably ought in order to be satisfied that the contractor was competent and that the work had been properly done, and if it was reasonable that the work performed by the independent contractor should have been undertaken.” Subsection 6(1) permits an owner/occupier to transfer its responsibility over making the occupied premises safe to contractors so long as the occupier acts reasonably and takes steps (one or more) to ascertain the contractor’s competence.

Delegation of the Duty An owner/occupier may avoid liability by hiring a contractor to do whatever is required to make the premises safe if the owner/occupier: 1. Acted reasonably in entrusting the work to the contractor; 2. Took steps to be satisfied that the contractor was competent; 3. Took steps to be satisfied that the work had been properly done; 4. Ensured that the work undertaken by the contractor was reasonably necessary.

Gardiner v. Thunder Bay Regional Hospital Gardiner v. Thunder Bay Regional Hospital [1999] O.J. No. 833 Gardiner slipped on ice in a parking lot and sued the hospital. The hospital hired a winter maintenance contractor. There was a written contract requiring the contractor to remove snow if there was a buildup of 5 cm or more. Hospital presented evidence that the parking lot was inspected in the morning and that it would respond to any reports by users that the lot was in dangerous condition. The contractor was not a party to the action.

Gardiner v. Thunder Bay Regional Hospital The court summarized the duties of owner/occupiers as follows: The owner should take reasonable care, considering all of the circumstances, to see that persons on the premises are reasonably safe; Where there is a known danger, such as ice and snow conditions, the owner must have a reasonable system in place to ensure users will be reasonably safe on the premises; It is not enough to merely establish a system – the system must be functioning properly.

Gardiner v. Thunder Bay Regional Hospital “The defendant had a winter maintenance system in place which, while not foolproof, was reasonable under all of the circumstances, as was its implementation.”

Contracting out of Liability Not only is it possible for an owner to transfer its responsibility under the Occupiers’ Liability Act to a contractor, but it may be able to contract out liability altogether.

Part II – Indemnity Provisions

Indemnity Clauses A common tool to limit an owner’s liability is to include a clause into the contract between the owner and the contractor that indicates that contractor must release the owner of all claims and indemnify the owner for all losses. An indemnity clause is essentially a promise by one party to pay for any loss, damage or liability that has been or may be incurred by another party. The extent of the obligation to indemnify is determined from the wording of the clause.

Indemnity Clauses The Supreme Court of Canada cases: City of Toronto v. Lambert, 1916 CanLII 18 (SCC) and Consumers’ Gas v. Peterborough, 1981 CanLII 66 (SCC) The Court set out that for an indemnity clause to apply, it must state in clear unambiguous terms that the party is being indemnified from its own negligence.

Interpretation of Indemnity Clauses An indemnity clause is a contractual provision and regular rules of contract interpretation will apply: 1. If there is no ambiguity in the meaning of the clause, it will be given its literal meaning; 2. Words must be given their plain, ordinary meaning; 3. The contract should be construed as a whole; 4. Because indemnity clauses shift liability from one party to another, generally they are construed narrowly against the party seeking to rely on the clause.

Indemnity Clauses and Negligence Generally, an indemnity clause would not apply to the owner’s own negligence unless the wording of the clause itself expressly included owner’s negligence.

Potvin v. Canadian Museum of Nature Potvin v. Canadian Museum of Nature, [2003] O.J. No. 2020 The Canadian Museum of Nature had rented a portion of its facility to Royal LePage for a Christmas function. The plaintiff sued the Museum for personal injuries after falling down marble stairs at the Museum’s main entrance during the function. A standard form rental agreement had been signed by the Museum and Royal LePage in which Royal LePage agreed to indemnify and save harmless the Museum with respect to any claims made against it.

Potvin v. Canadian Museum of Nature • The indemnity clause in the contract stated: • “The Renter shall indemnify and save harmless the Museum from and against any and all claims, damages, suits, and actions whatsoever, including any claims for any personal injury (including death resulting therefrom) or any loss of or damages to property which arise out of or in connection with the entry onto and use of the Museum's facilities on the date(s) specified in this agreement or which arise out of said event…”

Potvin v. Canadian Museum of Nature “Unless an agreement clearly expresses an intent to transfer all of the occupier's negligence liability to a renter, the indemnity will apply only to negligence with a causal connection to the renter's use and activity.” “Here, while the injury followed the entry and attendance of one of Royal LePage's invited guests on the Museum's premises, that temporal connection alone is insufficient connection to say that it arises out of or in connection with the entry onto and use of the Museum's facilities.” Therefore, the Museum was found liable for the plaintiff’s injuries.

Harris v. Memorial Boys’ and Girls’ Club Harris v. Memorial Boys’ and Girls’ Club Inc., [2008] O.J. No. 2750 Plaintiff was injured in a park owned by the City of London while the plaintiff was attending the Rib Fest operated by the Club. Prior to the Rib Fest, the City and the Club had executed a facility rental contract and the Club in turn rented space to various vendors. The plaintiff was injured while using a horizontal bungee amusement. The City settled the plaintiff’s personal injury claim and then issued a crossclaim against the Club seeking indemnification for the settlement.

Harris v. Memorial Boys’ and Girls’ Club • The rental contract between the City and the Club contained a promise by the Club to indemnify the City and to hold it harmless: • “...the Applicant will indemnify and save harmless the Corporation of the City of London against all loss, costs, claims, damages, actions, suits of any nature and kind whatsoever which may arise as a result of the use of the facility or area granted under this agreement.” [emphasis added]

Harris v. Memorial Boys’ and Girls’ Club The court ruled that the clause was sufficiently broadly to require the Club to indemnify the City. The court distinguished this case from the Potvin decision. In Harris v. Memorial Boys’ and Girls’ Club the plaintiff’s injuries were causally connected to the activities of the Club and its vendors.

Beatty v Waterloo Beatty v. Waterloo (Regional Municipality), 2011 ONSC 3599 Recent case on the subject of owner/occupier’s own negligence. The plaintiff was involved in an MVA near a residential housing project. The plaintiff sued the municipality and the grading contractor of the housing contract. The grading contractor was found NOT to be negligent. The municipality sought to rely on an indemnity clause in the contract with the contractor.

Beatty v Waterloo • The indemnity provision read: “The said Contractor shall indemnify and save harmless the Owner, his agents or such Municipality as aforesaid, from any claims or actions for loss or damages whatsoever that may result from any of the Contractor’s operations.” • The court construed the language strictly and held that it was not clear enough to provide for the municipality’s own negligence.

Neely v. MacDonald Neely v. MacDonald, 2014 ONCA 874 The plaintiff was injured in a golf cart accident at ClubLink’s golf course during a tournament put on by Canadian Litigation Counsel (“CLC”). The plaintiff sued ClubLink who in turn crossclaimed against CLC for indemnity under their “Special Function Contract”. A motions judge granted summary judgment against CLC obliging it to indemnify ClubLink for all of the plaintiff’s personal injury claims. CLC appealed.

Neely v. MacDonald The basis for ClubLink’s indemnification claim against CLC was the following provision in the contract between them: CUSTOMER IS LIABLE FOR ALL DAMAGE CAUSED BY CUSTOMER AND/ OR THEIR GUEST(S) The Customer and/or their guest(s) agree to hold ClubLink Corporation and its officers and employees free and harmless from any damage or claims of any nature whatsoever that may arise from or through the use of a golf cart. It is the Customer's and/or their guest(s) responsibility to fully understand the safe operating instructions of the golf cart and to return it immediately following the completion of the round of golf in as good condition as it was received.

Neely v. MacDonald The Court of Appeal held that there was a significant distinction between the negligence of a guest operating a golf cart and the negligence of ClubLink relating to the design and operation of the golf course. The indemnity provision did not clearly extend to ClubLink’s negligence and therefore ClubLinks was not protected by it.

Part III – Insurance Clauses

Insurance Clauses A contractual promise to indemnify is only as good as the assets owned by the party making the promise. A common solution to impecunious contractors is the requirement that the contractor maintain a certain level of insurance and name the owner as an additional named insured. An insurance clause is a companion to the indemnity clause: first, the indemnifying party agrees that it will be liable for the other party’s liability and, second, the indemnifying party agrees to secure insurance to cover that liability. It can be a powerful mechanism for immunizing the contracting parties from liability.

Failure to Name as Additional Insured What happens when a contractor fails to name the owner-occupier as an additional insured under its general liability insurance contract contrary to the contractual arrangement between the owner and the contractor?

Papapetrou v. 1054422 Ontario Limited Papapetrou v. 1054422 Ontario Limited et al, 2012 ONCA 506 Plaintiff was injured in a slip-and-fall accident on black ice that had accumulated on the stairs of a building. The owner of the building had a contract with a contractor for winter maintenance and snow removal services at the building. The contractor was contractually obliged to indemnify the owner against all claims arising from the contractor’s performance of the contract and to name the owner as an additional insured on the contractor’s general liability insurance policy. The contractor breached its obligation to name the owner as an additional insured.

Papapetrou v. 1054422 Ontario Limited • The indemnity provision in the contract read as follows: • “The Contractor assumes sole responsibility for all persons engaged or employed in respect of the Work and shall take all reasonable and necessary precautions to protect persons and property from injury or damage. The Owner shall not be responsible in any way for any injury to or the death of the Contractor's employees . . . or to any other person . . . in any way resulting from any act or omission of the Contractor . . . . The Contractor shall indemnify and save harmless the Owner . . . against all claims, losses, liabilities, demands, suits and expenses from whatever source, nature and kind in any manner based upon, incidental to or arising out of the performance or non-performance of the contract by the Contractor.”

Papapetrou v. 1054422 Ontario Limited • The contractor had agreed to obtain comprehensive general liability insurance: • "covering the liability of the Contract [sic], his employees, agents and representatives for bodily injury . . . for a minimum of $2,000,000" as well as to "include the Owners as an additional insured" on the policy. • Contrary to its obligations under the service contract, the contractor obtained an insurance policy covering liabilities of up to a maximum of $1 million, instead of a minimum of $2 million. • The contractor also failed to name the owner as an additional insured.

Papapetrou v. 1054422 Ontario Limited • The court stated that the motion judge’s order that the contractor indemnify the owner prior to determining whether the contractor’s contractual obligation to indemnify has been triggered was premature: • “…contrary to the motion judge's finding, the service contract does not provide that [the contractor] will "assume sole responsibility . . . to protect persons and property from injury and damage". Rather, it provides that [the contractor] "assumes sole responsibility for all persons engaged or employed in respect of the Work" and that it shall "take all reasonable and necessary precautions to protect persons and property from injury and damage". • In addition, [the contractor’s] obligation to indemnify the owner under the terms of the service contract is not absolute. It is limited to claims "based upon, incidental to or arising out of [Collingwood's] performance or non-performance of the [service] contract".

Defence Costs Papapetroualso considered whether a duty to defend the owner arose because the contractor failed to name the owner as additional insured as was ordered by the motions judge. The Court of Appeal ruled that the contractor’s breach of the contractual obligation to name the owner as additional insured did notcreate a duty to defend, but such breach did give rise to a remedy in damages. The quantum of such damages is the amount the owner will be required to pay for a defence of the claims the contractor’s insurer would have been obliged to defend on the owner’s behalf had the contractor fulfilled its contractual obligations.

Conclusion Right to delegate duty under Occupiers’ Liability Act to a contractor. By contract an owner can have contractor indemnify it for its negligence. To do so contractual wordings should be explicit. By contract a contractor may have a duty to insure the owner under certain circumstances. Those terms should be set out explicitly. Failure to insure creates a remedy in damages.

Questions?

Thank you Miriam Tepperman miriam@isaacsco.ca

Indemnity & Insurance Provisions in the Occupiers’ Liability Context