Written By Christine Viney, Ian Thompson and Hana Syed
In Vale Canada Limited v Royal & Sun Alliance Insurance Company of Canada, 2022 ONCA 862, the Ontario Court of Appeal distilled a 70-page decision about a multi-jurisdictional insurance coverage dispute into one straightforward conclusion: "A comprehensive general liability insurer, underwriting primary or excess insurance coverage for Ontario risks, connects itself to Ontario for jurisdictional purposes". In addition to this clear statement on jurisdiction over insurers who issue policies to Ontario businesses and residents, the decision affirms that the jurisdiction framework set out by the Supreme Court of Canada in Club Resorts Ltd v Van Breda, 2012 SCC 17 [Van Breda] applies equally to contract disputes and tort claims.
Background
Vale Canada Limited (Vale) is an Ontario-based mining company. It faced class actions in Ontario relating to environmental claims connected to mines in Port Colborne and Sudbury.
Over the course of several decades, Vale obtained 92 insurance policies from 24 primary and excess insurers. Vale sought indemnity for the losses it incurred in the environmental class actions and for defence costs from its insurers.
Disputes about coverage led to lawsuits in New York and Ontario. In Ontario, some of Vale's excess insurers tried to stay the proceedings, arguing that the Ontario court did not have jurisdiction, and that Ontario was not the most convenient forum. In New York, Vale and other insurers asked the court to dismiss the action by Vale's excess insurers because New York was forum non conveniens.
The Ontario and New York courts both held that their respective matters could proceed. In Ontario (Vale Canada Limited v Royal & Sun Alliance, 2022 ONSC 12), the Court found it had jurisdiction based on a real and substantial connection between Ontario and all but one of the insurers and that Ontario was not forum non conveniens. In the parallel American proceeding, the New York courts have held that New York is not forum non conveniens.
The excess insurers appealed in Ontario, pointing to the ongoing proceedings in New York as reason to consider Ontario forum non conveniens.
The Appeal Decision
The Court of Appeal dismissed the appeal based on the framework set out in Van Breda. This framework centres on establishing a "real and substantial connection" between the forum and the subject matter of the dispute; the forum and the defendants; or both. Van Breda sets out four presumptive connecting factors: (1) whether the defendant is domiciled or resident in the province; (2) whether the defendant carries on business in the province; (3) whether the tort was committed in the province; or (4) whether a contract connected with the dispute was made in the province.
The insurers argued against applying the Van Breda factors to contract disputes, submitting that without consent or presence-based jurisdiction, a court should assume jurisdiction over a foreign defendant only if the relevant contract was made in Ontario. The Court rejected this view, finding that the rationale for applying the "carries on business" factor applies to contract disputes, even though what constitutes carrying on business might be different in tort and contract cases.
The Court also rejected the insurers' submission that a defendant must be carrying on business in Ontario when the action is commenced to ground jurisdiction. As part of this, the Court found that imposing this temporal limit would make the factor redundant with presence-based jurisdiction. The Court also noted that the insurers' argument conflicted with Van Breda, which involved a foreign defendant that had carried on business in Ontario at some point before the tort in issue occurred—not when the claim was launched.
The Court of Appeal ultimately concluded that the insurers had been carrying on business in Ontario when they issued their respective policies to Vale and that this was enough to satisfy the presumptive Van Breda factor.
Carrying on (an Insurance-Related) Business in Ontario
The Court of Appeal also explored what constitutes carrying on business in the insurance context. In Vale, the policies in dispute were not made in Ontario, and the insurers argued that they could not be considered to have been carrying on business in Ontario since the activities that gave rise to the contracts occurred elsewhere.
The Court held that determining what constitutes carrying on business is contextual, with the answer dependent on the nature of the business. In this case, the Court of Appeal accepted that registration and licensing related to Ontario-based insurance activities was relevant, but not determinative. In the Court's view, the more important consideration for determining location was the subject matter of the insurance contract, particularly the location of the object of insurance.
In Vale, all the policies related to Ontario liabilities. The subject matter of the claims at issue related to those very liabilities and the Court found that this was enough to ground jurisdiction.
Having concluded that there was jurisdiction simpliciter over all the insurers, the Court of Appeal considered whether Ontario was forum non conveniens. As part of this analysis, the Court bluntly rejected the argument that none of actions should proceed in Ontario because at the time, the New York proceeding was still ongoing. The Court held that this would lead to "perverse effects" that would prevent Vale, an Ontario entity, from using the Ontario courts to litigate Ontario-based liabilities under Ontario-based insurance policies. The Court of Appeal had no interest in ousting these "natural" claims from Ontario, even though the New York court had also assumed jurisdiction.
The Court of Appeal was alive to the problems inherent in multiplicity. That said, the Court confirmed that assumption of jurisdiction by a foreign court does not mean that a Canadian court should defer automatically and decline to assert its own jurisdiction. While courts are generally loath to allow a multiplicity of proceedings, the Vale decision endorses assumption of jurisdiction over disputes with a strong connection to the forum, even when a foreign court also asserts jurisdiction.
Takeaways
The affirmation that Van Breda applies to contract disputes is a useful clarification. The Vale decision also explains what constitutes carrying on business in a jurisdiction in the context of insurers and insurance policies. Finally, the decision leaves open the possibility that other new connecting factors may be considered, as long as the new factor makes it reasonable for the court to assume jurisdiction.
If you would like more information about the issues discussed here or other matters pertaining to your insurance coverage, our experienced coverage counsel would be pleased to assist.
Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.
For permission to republish this or any other publication, contact Amrita Kochhar at kochhara@bennettjones.com.