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Vol. 5, Iss. 5
April 29, 2016
 
 


Heather Sanderson: Practising Coverage Law In Canada

For this installment of “The Four Questions,” a new column highlighting unique coverage lawyers, I reached out to Heather Sanderson, of Sanderson Law, Calgary, Alberta, Canada. That’s right. Canada. You know, like Dudley Do-Right. A lawyer practicing (or, practising, I should say) coverage law in Canada, with lots of involvement in U.S. coverage too, is right in the T4Q wheelhouse. Plus, now Coverage Opinions is officially an international publication. If a need should arise for coverage counsel in Canada, well, now you know.

About Heather Sanderson

Here’s how Heather described her background to me.

A native of Quebec, Heather came to Alberta in 1981 after undergraduate and law school at McGill University in Montreal. At that time, Alberta was the land of the so-called “blue-eyed shieks.” Four thousand people a month were landing in Calgary and Heather was one of them.

Alberta’s strong spirit of entrepreneurship helped Heather establish her practice. But without any ties of any kind to the province, it definitely wasn’t easy–particularly when the oil boom ended about eighteen months after she arrived.

Having landed in a defence insurance litigation firm, and being asked to research what seemed like every nitpicky detail of the CGL, without a textbook to look to for guidance, she decided to return to school and do a Masters in order to write Canada’s missing text book on the CGL policy. When Heather finished, Alberta’s economy seemed to be less filled with doom and gloom. She returned to practice in Calgary and saw to the publication of her thesis, which became a staple text in liability insurance courses across Canada.

It wasn’t long before Alberta adopted Heather or, maybe she adopted Alberta – a province she describes as “a little bit of heaven” – and she has remained there practicing defence insurance law for the last 35 years.

Heather has provided coverage advice to insurers on all types of commercial lines and personal lines policies but her preferred area is liability. In addition to her Masters’ Thesis, she substantially wrote and edited another text on the CGL, in addition to many articles.

Heather isn’t just an academic – she has litigated cases before all levels of Alberta’s Courts and before a full panel of the Supreme Court of Canada.

Heather’s years in the trenches has earned her a reputation for being one of Canada’s leading coverage counsel. In 2012, Canadian Defence Lawyers recognized her exceptional contributions by awarding her the Lee Samis Award for Excellence.

Heather is a member and director of the Canadian Defence Lawyers, an active member with the Insurance Committee of DRI and a member of FDCC. Sanderson Law regularly provides coverage advice on policies issued in all of Canada’s provinces and territories.

What are some of the principal differences between U.S. and Canadian Property-Casualty coverage law?

Let’s start with insurance regulation. Federal regulation is largely limited to solvency control. The provinces and territories manage the day-to-day business of insurance that is conducted within their borders.

In comparison to the United States, the Canadian auto insurance market is highly regulated by all provinces and territories. Personal and commercial vehicles usually carry $1 million of third party liability coverage (no fault jurisdictions advocate coverage for out-of-province travel in excess of basis plate coverage); some carry $500,000 even though in most provinces and territories the statutory minimum is $200,000. Most commercial vehicles carry far more than $1 million and some industries are legislated to carry more than $1 million.

Canadian non-auto P&C claims handling is largely unregulated. In fact, following the epic flooding of the Bow and Elbow Rivers that devastated the river valleys of southern Alberta in June 2013, resulting in the costliest insured disaster in Canadian history, the Alberta government did not intervene and legislate how the claims for this catastrophic event would be handled. This is in stark contrast to the response of the State of New York as to the management of claims from Hurricane Sandy.

Non-auto P&C policies in common law Canada are similar in many respects to those used in the United States – in some cases, they are identical – and, with the exception of Quebec, their content is largely unregulated. Canadian and American courts apply largely the same rules (with some very limited differences) to the interpretation of non-auto P&C policies.

A Canadian first-party insurer, that fairly investigates a situation and determines that there is an absence of coverage, will be required to pay the court costs of the policyholder’s successful action seeking to enforce coverage on a full indemnify basis. In the third-party case, an insurer has a greater exposure, as the insurer must pay the judgment, plus costs and pre-judgment interest against the insured in the underlying case and the full costs on an indemnity basis for the coverage lawsuit.

However, the insurer is at little risk of being held liable in bad faith. The Supreme Court effectively limited bad faith first-party claims to cases of very serious, egregious conduct and in the same case allowed a lower court award of $1 million, but noted that award to be extremely high. As to liability claims, there are only a handful of third-party cases finding bad faith liability in failure to settle cases.

The likely explanation for the differing “bad faith” culture is the fact that overall, limits are higher in Canada and damage claims are lower: In Canada, non-pecuniary general damages, for the most grievous injury, was set by the Supreme Court of Canada in 1978 at $100,000 (now worth about $360,000); the range for aggravated damages is between $10, 000 and $100,000 and the range for punitive damages–rarely awarded–is between $50,000 and $1 million. Another factor is that the Canadian version of UIM coverage does not stack; if the insured’s limits are equal to or less than the tortfeasor’s limits, then the insured has no claim against his or her own insurer. Finally, Canadian Courts seem to have set a higher standard as to what constitutes egregious conduct on the part of an insurer.

Are there any overarching differences between the U.S. and Canadian legal systems that have an impact on coverage disputes?

The overwhelming majority of civil disputes are heard by a judge alone, rendering liability and damage assessments somewhat more predictable. It is easier to assess both the obligation of a liability insurer to indemnify and whether there is a real risk of an over-limits judgment.

There is no constitutional right in Canada to a civil jury trial. In fact, they were abolished in Quebec several decades ago. A party wishing a jury trial must apply to the court for permission to have a trial by jury. It is almost inconceivable that a court would order a jury trial to determine a coverage case.

An inordinately low or high award is appealable and, if overturned on appeal, then the matter goes back to the trial judge for assessment. As Canada has a loser pays cost recovery system, the loser pays the court costs throughout. Consequently, proceeding with a civil jury is a very expensive option with difficult odds. There is public debate as to whether to abolish civil juries in common law Canada.

My observations are that the civil discovery process is far more controlled and streamlined in Canada than in the United States, which impacts coverage issues in myriad ways, starting with cost reduction. It is also my experience and observation that, with the exception of regions in Ontario, Canadian lawyers are collegial in their dealings with each other and there are comparatively fewer interlocutory applications prior to setting a case down on the trial list than there are in the United States. May it’s the court robes we wear.

Are there differences in the substantive law of the two countries that impacts coverage?

All Canadian provinces and territories have workers’ compensation legislation that eliminates workplace injury actions by all workers against all employers – not just a particular worker’s employer. This controls a significant area of potential civil liability which has an impact on the nature of coverage that any given business holds.

EPLI coverage applies differently in Canada due to significantly different employment requirements in Canada, including the fact that Canadian employees are not employed “at will.” In Canada, an employer must have cause to dismiss, failing which the employer is obligated to provide reasonable notice that the job is ending or provide compensation in lieu of notice.

The differing substantive law in the area of intellectual property rights has a real impact upon the interpretation of Coverage B of the CGL, which is arguably the most common coverage carrying international exposure.

The American ISO form covers the infringement of copyright, trade dress or slogan in the insured’s advertisement. Trade mark infringement is excluded – even if it occurs in an advertisement. The same form is used by the vast majority of Canadian P&C insurers.

There is no Canadian cause of action for infringement of “slogan” per se; a slogan is a form of trade mark. Further, Canadian law does not recognize actions for the infringement of “trade dress.” The closest Canadian causes of action to infringement of trade dress is infringement of “distinguishing guise,” which is a form of trade mark infringement and “industrial design,” which has elements of patent and copyright and refers to the visual features of a finished article. “Distinguishing guise” and the “industrial design” are registerable and infringement can be enforced. Accordingly, in Canada, an action for infringement of a trademark, in the form of infringement of “slogan” or “distinguishing guise” or for the infringement of an “industrial design” in an advertisement is potentially covered by Coverage B of the CGL, given that the policy covers the infringement of “trade dress” and “slogan” in the insured’s advertisement. Given these issues, it is an open question as to how a Canadian court would apply the Coverage B exclusion for trademark infringement.

What cross-border issues have you encountered in your practice?

Cross-border litigation is increasing -- Canadian courts can take jurisdiction over American policies issued to the directors and officers of Canadian subsidiaries of American companies, if the Canadian subsidiary is sued in Canada; Canadian courts will accept jurisdiction over actions instituted in Canada, by U.S. companies, to obtain the proceeds of Canadian policies to satisfy American judgments issued against Canadian defendants; American courts will require proof of Canadian law to interpret the policies of Canadian policyholders sued in the United States.

I have dealt with various cross-border issues throughout my practice. On behalf of a Canadian insurer, I monitored a California class action, against a multitude of defendants, including my client’s Canadian insured doing business in California. [I marveled at the amount of motion practice going on – the lawyers spent so much time on the freeways attending court, to spar over the ridiculous, I wondered how they had time to move the file.] Similarly, I have monitored many U.S. product claims for Canadian insurers, where the raw materials were manufactured in Canada, assembled off-shore and sold in the United States. On several occasions I have acted for American insurers who have claimed contribution from Canadian insurers of a common insured. I have also acted as an expert witness in American proceedings, as to Canadian law on a given topic, but none of the cases that I have been involved with in that vein have proceeded to trial.

 
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