Indexed as:

Daher v. Economical Mutual Insurance Co.




Boulas Daher also known as Boulos Daher and Henriette Daher,

plaintiffs respondents, and

Economical Mutual Insurance Company, defendant appellant


[1996] O.J. No. 4394


31 O.R. (3d) 472


96 O.A.C. 255


[1997] I.L.R. 1-3414


67 A.C.W.S. (3d) 996


No. C18053



 Ontario Court of Appeal

 Toronto, Ontario


Catzman, Laskin and Rosenberg JJ.A.


Heard: November 1, 1996.

 Judgment: December 16, 1996.


(13 pp.)



Raymond Colautti, for the appellant.

Donald W. Leschied, for the respondent.





The judgment of the Court was delivered by

1     ROSENBERG J.A.:-- The issue in this appeal is whether the appellant insurer is obligated to defend the respondents under a storekeepers liability policy in respect of a third party claim against them. The appellant appeals on the ground that the motions judge erred in holding that it was obligated to defend the claim prior to the amendment of the claim on March 6, 1992. The appellant also submits that the motions judge erred in failing to allocate the defence costs between the appellant and the respondents.

The Facts

2     This appeal arises out of an action [the main action] commenced on October 7, 1987 by an infant plaintiff, Jerry Daher (by his litigation guardian, Henriette Daher), and Henriette Daher and Boulas Daher against the Windsor Roman Catholic School Board and its teachers, agents and representatives. The action was for damages arising out of an incident that occurred during a science class on April 13, 1987. Jerry Daher, the respondents' 12 year old son, was injured while working with Drano. The defendants in the main action denied any negligence and further alleged that Jerry Daher and the respondents were negligent or contributorily negligent.

3     On January 31, 1989 the defendants issued a third party claim against the manufacturers of Drano, the respondents, and Ted Daher, Jerry Daher's older brother.

4     The relevant parts of the third party claim are as follows:


4.            The Third Parties, Boulos Daher, Henriette Daher and Ted Daher, are the father, mother and brother of the infant Plaintiff, Jerry Daher, respectively. The mother and father operate a store in the Windsor area and sell Draino [sic] to the public and provided Draino to the infant Plaintiff, Jerry Daher. These Third Parties were negligent in that:

(a)          they failed to instruct Jerry Daher with respect to the safe use and the dangers of using Draino which they knew or ought to have known;

(b)          they failed to make enquiries from the suppliers, distributors or manufacturers of Draino as to the safe use thereof to prevent the alleged casualty;

(c)          they permitted the unsupervised use by the minor Plaintiff of Draino when they knew or ought to have known that they thereby created certain risks of harm, one of which is the alleged casualty;

(d)          they failed to instruct the minor as to substances which were safe for the use of the minor Plaintiff;

(e)          the Third Parties, Boulos and Henriette Daher, marketed for sale through their business "Draino" and knew or ought to have known of its propensities and failed to instruct the minor with respect to same;

(f)           they authorized the minor Plaintiff to use a dangerous substance or notoriously dangerous substance;

(g)          they authorized the minor Plaintiff to experiment with a dangerous substance or notoriously dangerous substance;

(h)          they permitted the minor Plaintiff to use and experiment with the substance with explosive, corrosive or thermal properties;

(i)           they authorized the minor Plaintiff to use or experiment with a substance with explosive, corrosive or thermal properties;

(j)           they failed to establish a system or set of procedures to ensure the safe and secure storage of dangerous substances to which the minor Plaintiff was allowed access;

(k)          they failed to observe and enforce handling of a dangerous substance such as the said Draino which are routinely observed and enforced with adult trained employees who handle Draino regularly;

5     On March 6, 1990 the respondents issued a statement of claim against the appellant seeking inter alia a declaration that the appellant is obliged to defend the respondents in the third party action. This claim is based on a storekeepers liability policy issued by Waterloo Insurance Company (now the appellant Economical Mutual Insurance Company). The face page of that policy describes the insured as "Paul's Imported and Canadian Foods O/A Boulos Daher and Henrietta [sic] Daher". The relevant parts of the policy are contained in the Storekeepers Liability Coverage Rider as follows:


I.              Coverages A and B - Storekeepers' liability


                 To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as compensatory damages because of bodily injury or because of property damage caused by accident and arising out of the ownership, maintenance or use of the insured premises and operations necessary or incidental thereto.

III. Defence - Settlement - Supplementary Payments


                 As respects insurance afforded by this policy, the Insurer shall:


(1)          defend in the name and on behalf of the Insured and at the cost of the Insurer any civil action which may at any time be brought against the Insured on account of such bodily injury or property damage but the Insurer shall have the right to make such investigation, negotiation and settlement of any claim as may be deemed expedient by the Insurer;

6     On March 6, 1992 the third party claim was amended to add two further paragraphs as follows:


7.            The Third Parties, Boulos and Henrietta Daher, carried on business under the name and style of Paul's Imported and Canadian Foods located 1005 Lincoln Road, Windsor, Ontario. This store was a retail grocery store which provided products to the public.

8.            The Defendant states and the fact [is] that in the course of their ownership, maintenance or use of the retail store premises and incidental to the operation of the retail store premises, they provided to Jerry Daher, a can of Drano.

In their amended statement of defence the respondents admitted the allegations in paragraphs 7 and 8.

7     The respondents had counsel conducting their action against the School Board and others. They retained separate counsel to defend the third party claim when the appellant refused to defend that claim. In the summer of 1993, following lengthy discoveries, the main action and the third party claim were settled. We were not provided with any details of the settlement. The appellant was not a party to the settlement.

The Reasons of the Motions Judge

8     On a motion brought by the respondents under rule 21.01(1)(a) of the Rules of Civil Procedure, Zalev J. held that the appellant was obligated to defend the claim made against the respondents. The question posed for determination pursuant to rule 21.01(1)(a) was in the following terms:


                 Was the defendant required, in the name and on behalf of the plaintiff and at the cost of the defendant to defend action 1878A/87 in the Supreme Court of Ontario according to the terms and conditions of a business insurance policy numbered 150318 issued by the Waterloo Insurance Company?

Zalev J. answered the question in the affirmative.

9     Applying the leading case of Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801, Zalev J. held that when the third party statement of claim and the statement of defence to that claim were examined, it was possible that a claim within the storekeepers policy might succeed. Accordingly, the appellant was obligated to defend the respondents in respect of the claim. Zalev J. held that the allegations in the original third party claim were capable of being construed as an allegation that the insured premises were "used for the storage of Drano as part of the stock in trade of the store and for the sale of such stock to the public." Thus the "giving of a bottle of Drano [by the respondents] out of stock to their son could constitute a 'use' of the premises" within the meaning of the policy. Zalev J. also held that if he were wrong in his conclusion with respect to the original pleadings, there was no doubt that the amended third party claim and amended statement of defence clearly alleged facts within the policy. Therefore, the insurer would be obliged to defend the respondents at least from the date of the amendments on March 6, 1992.

10     Zalev J. did not deal expressly with the question of apportioning the defence costs. However, I think it implicit in his reasons that since the appellant was obligated to defend the third party action, no question of apportioning costs arose. For the reasons that follow I agree with the disposition made by Zalev J. and I would dismiss this appeal.


The Duty to Defend

11     The appellant no longer disputes that the third party claim, as amended on March 6, 1992, asserts a claim that is within the policy. It submits, however, that its duty to defend only arose at that time and not under the original statement of claim. I disagree. While the claim is clearer as a result of the March 6, 1992 amendments, it is my view that the original third party claim alleges facts which assert a claim that potentially falls within the indemnity coverage of the policy.

12     Paragraph 4 of the original third party claim is open to the construction that in the course of operating their store and selling Drano to the public the respondents provided Drano to the infant plaintiff. The claim clearly makes allegations of negligence against the respondents in their role as parents. However, the claim is also capable of being construed as alleging that as a result of their operation of the store and the marketing of Drano, the respondents failed in their duties as shopkeepers to adequately warn the infant plaintiff of the dangers of using Drano. Paragraphs 4(j) and (k), in particular, make allegations referable to the respondents' operation of the store, rather than to their duties as parents. In my view, Zalev J. properly held that paragraph 4 of the third party claim asserted a claim potentially falling within the scope of the policy. As he pointed out, the mere possibility that a claim within the policy may succeed suffices to trigger the duty to defend.

Should Defence Costs be Apportioned?

13     The appellant submits that, even if there was a duty to defend the third party claim, the costs of the defence should be apportioned between it and the respondents. The appellant argues, that even if the claim alleges negligence on the part of the respondents as shopkeepers, the principal claim is against the respondents in their role as parents. The appellant submits that the issue should be referred to the Assessment Officer at Windsor to hear evidence and then apportion the defence costs.

14     In a proper case it may be possible to apportion the defence costs where only certain claims fall within the terms of the policy. See Gosse v. Huemiller, [1988] I.L.R. 9167 (Ont. H.C.J.) and Continental Insurance Co. v. Dia Met Minerals Ltd. (1996), 36 C.C.L.I. (2d) 72 (B.C.C.A.). This is not a case, however, of multiple causes of action where it is possible to divide the costs of defending the various causes of action. The third party claim alleges only a single cause of action with different theories of liability. The facts giving rise to the multiple theories of liability are so intertwined that I cannot see any principled basis upon which this court or an assessment officer could unravel them to apportion costs to one theory rather than another. The appellant did not place before us any material to demonstrate how this might be done and offered no theory upon which the assessment officer could fairly apportion the costs.

15     This very issue was before this court in Kerr v. Lawyers' Professional Indemnity Co. (1995), 25 O.R. (3d) 804 (C.A.). In Kerr, the amended statement of claim alleged various acts and omissions in connection with the appellant's work as corporate secretary and as the company's solicitor. The insurer submitted that defence costs should be split so that the appellant would pay for his defence as it related to allegations made against him as corporate secretary, and the insurer would pay defence costs related to allegations in his capacity as the company solicitor. Osborne J.A. held that since all of the pleaded acts and omissions directly related to the appellant's retainer as the company's solicitor, it was possible that the coverage provisions of the policy would be engaged. The fact that the various allegations of breaches of duty also implicated the appellant in his role as corporate secretary, still left it open to the court to connect all alleged breaches of duty to the appellant's retainer as solicitor providing professional services. Accordingly, the insurer was required to defend the claim made against the appellant and the defence costs were not split.

16     Admittedly, the facts in this case are somewhat different than in Kerr. It would appear that in Kerr, there was a complete overlap in that the same acts and omissions were alleged to underlie the appellant's liability as corporate secretary and as a solicitor. In this case not all of the alleged acts and omissions relate to the respondents' roles both as shopkeepers and parents. For example, the statements in para. 4(f) to (i) that allege that the respondents "authorized" or "permitted" the infant plaintiff to do certain things could not refer to the respondents' duties as shopkeepers. On the other hand, most of the alleged acts or omissions could relate either to the respondents' duties as parents or as shopkeepers. For example, para. 4(d) of the claim alleges that the respondents "failed to instruct the minor as to substances which were safe for the use of the minor plaintiff." With respect to this allegation and most of the alleged acts and omissions in para. 4, while the respondents may have failed in their duty as parents it is also "possible" that they failed in their duty as shopkeepers, thus triggering the duty to defend.

17     In my view, it is simply not practical to divide the defence costs in these circumstances. As Hardinge L.J.S.C. observed in St. Andrews Service Co. v. McCubbin (1988), 31 C.C.L.I. 161 at p. 165 (B.C.S.C.) "there is no means of readily distinguishing the costs of defence between the covered and not covered items. The possible ways to apportion an expense between two parties submitted by the third party cannot apply in these circumstances." Also see P.C.S. Investments Ltd. v. Dominion of Canada General Insurance Co. (1996), 34 C.C.L.I. (2d) 113 (Alta. C.A.) reversing in part (1994), 25 C.C.L.I. (2d) 119 (Q.B.).

18     Counsel for the appellant, in submitting that defence costs should be divided, relied upon the recent decision of this court in St. Paul Fire & Marine Insurance Co. et al. v. Durabla Canada Ltd. (1996), 92 O.A.C. 157 (C.A.). Durabla involved asbestos litigation in the United States. The respondent had insurance coverage for only some of the years during which some of the claims may have arisen. The court would have considered apportioning defence costs if it were possible to do so. However, the court declined to do so on the following reasoning at p. 159:


                 We do not find ourselves in a position to articulate an equitable formula for such proration at this stage of the proceedings. The impediments to a formulation that would fairly reflect the competing interests of the insurer and the insured at this stage of the proceedings are the imprecision of the allegations asserted by the claimants in the underlying actions and the absence of any firm factual foundation for whatever proration formula might be selected. [Emphasis added.]

The same considerations apply here. I can find no firm factual foundation for any proration formula. I do not consider it a sufficient answer to let the assessment officer in Windsor attempt to divide the defence costs without providing some basis to the officer for making that determination.

19     Accordingly, the appeal is dismissed with costs.


 CATZMAN J.A. -- I agree.

 LASKIN J.A. -- I agree.