In GE Canada Equipment Financing G.P. v. ING Insurance
Co. of Canada, [2009] O.J. No. 748 (ONCA), GE appealed from the dismissal of its application for a declaration that its security interests had priority over those of ING, the insurer, in respect of two highway tractor trucks , and a declaration that it was entitled to the return of the vehicles or the proceeds of sale thereof. GE financed the two vehicles for a leasing and rental company (Brampton), and it registered its security interests in the vehicles. Brampton then leased the vehicles to third parties who obtained insurance from ING, with the third parties named as lessees and Brampton as lessor, with no mention of GE. GE had taken all necessary steps under the Personal Property Security Act (PPSA) to perfect its purchase money security interests (PMSIs) in the trucks and their proceeds. The vehicles were stolen. Brampton submitted proof of loss forms to ING in respect of the stolen trucks. After the vehicles were recovered, ING took possession and sold one of the trucks. In granting the appeal, the Court of Appeal held that Statutory condition 6(7) conferred on ING only those rights to salvage possessed by Brampton prior to ING’s payment of the actual cash value of the trucks. Absent express statutory language to the contrary, Statutory condition 6(7) was not to be interpreted so as to confer on Brampton’s insurer greater rights to salvage in the trucks than were held by Brampton. Subrogation is a derivative right that rests on the principle of indemnification. It contemplates that on full indemnification of an insured by an insurer for an insured loss, the insurer becomes entitled to exercise a right belonging to the insured. Under the principle of subrogation, the insurer succeeds only to the exact right otherwise enjoyed by its insured. An insurer’s exercise of the right of subrogation under statutory condition 6(7) recognizes that prior to the insurer’s election to trigger statutory condition 6(7), the right to salvage in an insured vehicle is a property right of the insured. Where, however, the insurer pays the insured’s total loss claim in respect of the insured vehicle, it becomes entitled to all the salvage rights that the insured possessed in respect of the insured vehicle. Brampton’s interests in the Trucks were subject to GE’s perfected PMSIs. Statutory condition 6(7) conferred on ING only those rights to salvage possessed by Brampton prior to ING’s payment of the actual cash value of the Trucks. Absent express statutory language to the contrary, statutory condition 6(7) should not be interpreted so as to confer on Brampton’s insurer greater rights to salvage in the Trucks than were held by Brampton.

Unique Labeling Inc. v. Gerling Canada, [2008] O.J. No. 4090, deals with the unique issue of attempting to enforce a jury award pursuant to s. 132(1) of the Insurance Act. The Plaintiff obtained a judgment against the Defendants in Oregon for damages arising  from the negligent supply of bottled water. The Plaintiff was ultimately awarded $1.5 million in damages by a jury. It then sought to recover the judgment in Ontario, under s. 132(1), against the Defendants’ commerical liability insurers. The insurers denied liability on the basis that the Oregon judgment did not impose liability for damage to property, as required by s. 132(1). Instead, they argued that the jury simply awarded damages for pure economic loss. The Plaintiff argued that the requirement in s. 132(1) of “injury or damage to property” creates a much lower threshold than “physical injury to tangible property”, the latter being a term relevant to the CGL policies. It further argued that injury or damage to property includes both tangible and intangible property. The Plaintiff submitted that there could be no dispute that its property was damaged. Its bottled water, supplied by the Defendants, was contaminated and had to be destroyed. 

The parties were unable to find any caselaw in which an Ontario court had determined a judgment creditor’s right to successfully invoke the provisions of s. 132(1) where the underlying judgment follows upon a jury verdict on liability and damages issues. The Court observed that the Oregon jury had issued no reasons; it simply answered the questions put to it following the completion of the trial. The Court stated that any review of evidence, of arguments by counsel and/or of directions given the jury by the trial judge would pre-suppose that such matters influenced the jury. One might thereby come to a firm but entirely inaccurate understanding of the outcome of the trial below. Thus, the Court held that a better approach would be to consider the judgment and the jury questions and answers within it in the context of the claims, as framed by the pleadings in the Oregon action. The Court ultimately found that the Oregon jury had indeed only awarded damages for economic losses, and thus not for damage to property. Without more in the way of clarity in the jury questions, the Court was not satisified that liability had been imposed for property damage. Thus, inter alia, the Court dismissed the action.

The Court in Unique Labeling Inc. was clearly troubled by the exact nature of the damages awarded by the Oregon jury. The decision is instructive as clearer jury questions and pleadings in the underlying action would have given the Court much more assistance in its analysis under s. 132(1). In trying an action before a jury, and in contemplation of a potential s. 132(1) proceeding, Unique Labeling Inc. illustrates that it is vital that an eye is kept on creating a record, specifically by way of clear jury questions, that will satisfy the requirements of s. 132(1).   

Jim Davidson