The case involved an incident where a concertgoer was allegedly injured by security personnel during a concert at Budweiser Stage in Toronto.
Live Nation, the operator of the venue, had contracted Northwest Protection Services LTD (NWP) to provide security services.
NWP had a commercial general liability insurance policy with Aviva, and Live Nation was named as an additional insured.
Aviva argued that it was only responsible for 50 percent of Live Nation's defence costs since it had a policy with Starr Indemnity and Liability Company, which Aviva believed should also provide coverage.
However, Starr's policy was considered excess, which means it would only apply once Aviva's policy was exhausted.
Aviva argued that the principle of equitable contribution should apply, which would require both policies to share the risk equally.
However, the court disagreed and found that the Aviva policy was not in excess over the other policy since Live Nation was named as an additional insured under the Aviva policy, protecting them against liability arising out of NWP's conduct.
The court further explained that NWP was the party with the most control over how it carried out its operations and whether it carried out its operations in a manner that reduced the risk of liability.
As a result, it was commercially sensible for NWP to assume that risk and to protect Live Nation from the risks arising out of NWP's operations, just as NWP protects itself from those risks by carrying commercial general liability insurance.
The court ruled that Aviva was responsible for 100 percent of Live Nation's past and future defence costs, subject to Aviva's right to apply to re-apportion those costs at the end of a trial or settlement.
The court found that adopting principles of equitable contribution in this situation would relieve Aviva of the contractual bargain it made with NWP and would not be consistent with the commercial concept underlying the inclusion of additional insureds in commercial general liability policies.
The ruling has significant implications for insurers and insured parties, particularly those who are named as additional insureds under commercial general liability policies. It emphasizes the importance of carefully reviewing insurance contracts and understanding the extent of coverage provided under each policy.
Insured parties must ensure that they are adequately protected against liability arising out of the operations of other parties with whom they contract.
Insurers, on the other hand, must be mindful of their obligations under the policies they issue and the potential for disputes arising out of competing insurance coverage.
