Canadian Real Estate Law Blog

January 2009

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Title Insurers' Duty to Defend An Important Aid With Property Litigation Costs

A recently reported case Hanis v. Teevan, 92 O.R. (3rd) 594 is an October 2008 Court of Appeal decision that examined the "duty to defend" obligations under two general liability insurance policies.

Dr. Hanis was hired in 1972 by the University of Western Ontario, fired in 1986 and charged with a criminal offence in 1987. He sued Western and most of the Hanis claims, such as the one on which Hanis obtained judgment, wrongful dismissal, were not covered by the insurance policies. Hanis alleged conflict of interest, infringment of copyright interests, unfair treatment as an employee, wrongful dismissal, misappropriation of property, interference with ongoing contractual relationships and malicious prosecution. Hanis lost on all claims but the one for wrongful dismissal.

After the trial, the insurer argued that the only matter for which it was obliged to bear costs was malicious prosecution and felt that a fair allocation of the cost was 80% to Western and 20% to the insurer. The trial judge held that the factual foundation underlying the claims was the same and it was impractical, artificial and next to impossible to allocate, with any precision, the legal expenses incurred with respect to what the insurer had called “covered, mixed and uncovered” claims. The lower court judge found that only a small portion of the defense clause related exclusively to uncovered claims and allocated 95% of the defense costs to the insurer.

The Court of Appeal held that the allocation of defense costs is not about a question of fairness or equity but rather of what an insurer agreed to do in its insurance policy. The insurance policy in question obliged the insurer to defend in the name and on behalf of the insured, any civil action that may be brought against the insured on account of and had a list that included malicious prosecution. Once the obligation to defend existed, the fact that there was no express language in the policy that qualified that obligation or suggested it did not apply to “mixed claims” mean that the insurer was responsible for all costs, except for those entirely unrelated to the claim it was obliged to defend. That resulted in the extreme allocation of 95% to the insurer and 5% to the insured while most of the trial focused on other matters.

When I think of the case in the context of title insurance policies, it becomes clear that a title insurer’s duty to defend adds a very significant advantage when title insurance coverage is purchased by a home purchaser or lender.

The provision in the title insurance policy is relatively simple:

“The Company will also pay the costs, legal fees and expenses incurred in defence of the title, as insured, but only to the extent provided in the Conditions and Stipulations”.

While the Conditions and Stipulations provide that the insurer controls the action, can settle claims and can pay the total amount outstanding on the policy or the diminuation in value of the property to limit its litigation costs, they do not include provisions for any allocation of costs. The coverage provided in the policy and normally acquired endorsements is so broad-reaching that there is very little affecting title or use of the property that the duty to defend would not extend to.

Since there is no provision in a title insurance policy for the allocation of costs on “mixed claims”, the Court of Appeal in the Hanis case will govern and a title insurer will pay the cost of defending almost any claim affecting the property. The obligation of the insured to contribute to that expense will be minimal.

Bruce McKenna

January 31, 2009 in Title Insurance | Permalink | Comments (0)

Notices of Renewal and the Doctrine of Waiver: Case Comment on 1651788 Ontario Inc. v. 1628093 Ontario Inc.

Under the legal doctrine of waiver, a landlord’s failure to insist upon a tenant’s compliance with certain conditions of the lease may lead to the landlord being precluded from asserting that such original conditions are still operative and binding. An argument of waiver arose in the recent case of 1651788 Ontario Inc. v. 1628093 Ontario Inc. (2008 CanLII 45395 ON S.C.), where the Subtenant alleged that the Sublandlord’s oral agreement to renew the sublease was sufficient to waive the requirement in the sublease for renewal by written notice.

In that case, the parties entered into a sublease for a 145 square foot space in a shopping mall used by the Subtenant for the rental and sale of DVD's. The sublease contained a renewal clause under which the Subtenant could renew the term for a further period of 3 years at a rental rate to be agreed upon, so long as written notice of the renewal was given to the Sublandlord 60 days prior to the expiration of the term (which was by May 28, 2008). Failing agreement on the rental rate, rent for the renewal  period was to be determined by arbitration.


The Subtenant and Sublandlord had a cordial and informal relationship. The Subtenant alleged that it had discussions with the Sublandlord in April 2008 in which the Sublandlord acknowledged that the sublease would be renewed, although rent remained to be determined. The Subtenant further alleged that similar discussions took place again in mid and late May 2008, in which the Sublandlord confirmed renewal but would not commit to a rental rate for the renewal term.


In mid June the Sublandlord referred the Subtenant to the Sublandlord’s solicitor, who informed the Subtenant that as no written renewal notice had been given, a new Sublease was required. Following the meeting, the Subtenant wrote a letter to the Sublandlord requesting confirmation that the sublease had been renewed and claiming that the requirement for a new sublease was unfair. In mid July the Subtenant’s solicitor sent a further letter to the Sublandlord stating that a renewal had already been effected and including rent for July 2008.


In late June the Sublandlord entered into a new sublease with a new subtenant at an above market rental rate (although the parties agreed that the tenancy would be carried over until the litigation with the Subtenant was resolved).


At trial, the Sublandlord denied that there were any discussions or verbal agreements with the Subtenant regarding renewal of the sublease, and claimed that no part of its conduct could be interpreted as a waiver of the required term of 60 days written notice of renewal.


After hearing the parties’ evidence, Gilmore J. held that a renewal of the sublease took place during the discussions between the Sublandlord and Subtenant in April and May of 2008. The Subtenant’s actions in requesting that a contract be drafted and rental amount agreed upon reflected that the Subtenant was under the impression that the renewal was decided until the Subtenant met with the Sublandlord’s solicitor in June. Further, even if the communications of the Subtenant were insufficient to constitute an unequivocal renewal, the conduct of the Sublandlord was sufficient estoppel with respect to its right to rely on the strict terms of the renewal. Gilmore J. ordered the renewal of the sublease in accordance with the renewal option, and that rent for the renewal term be determined by arbitration in the event the parties were unable to reach agreement.


From a landlord’s perspective, this case demonstrates how a failure to insist on strict compliance with the terms of the lease may lead to waiver of the landlord’s rights. To the tenant, this case is a reminder of the importance of providing notice in writing where required so that debates such as occurred here are avoided.

Bob Fraser

January 25, 2009 in Leasing | Permalink | Comments (1)