Rent It! But Beware!!

From a claim perspective, or for that matter from insurance perspective, the first thing that comes to one’s mind is how to recover those monies paid on an insurance claim. In insurance terms, as we all know, this is known as subrogation. An insurer’s bottomline could dramatically vary based on how knowledgeable, competent and successful their recovery team is. And its not always about pursuing an action, its usually about pursuing the right action, meaning, a recovery agent should know which action to pursue and which one to let go based on the merits of the claim. The cost benefit analysis needs to be completed as well. Basically, one must choose his/her battles while pursuing such recovery actions. Having handled recovery claims myself, sometimes its not an easy or straightforward choice. Like in the case this article will discuss. Until I became aware of this case, I would have not known that this case is not worth pursuing.

In Rocky Heights v. Biber, 2019, Ontario Superior Court of Justice denied the insurer’s rights to pursue subrogation against a corporate tenant in a residential fire claim.


The plaintiff/applicant is a corporate entity that rented an owned residential premise to one of its officers (defendant/respondent) in Kenora, Ontario.


A fire incident occurred in April 2015 at the rental property. The cause of the fire was attributed to the respondent leaving a boiling pot of oil unattended.


The case does not talk about the lease agreement. Apparently, the same was irrelevant in arriving at the decision.


The corporate entity had effected a CGL policy with an Insurer that had a waiver of subrogation clause against any corporation, firm, individual, or other interest with respect to which CGL insurance is provided. It appears the policy provided by the Insurer was a package commercial policy that had first party property as well as CGL coverage.



The applicant took the position that the respondent is insured on the CGL policy only in respect of her duties as an officer and that a subrogated claim can be maintained in respect of negligence outside her duties as an officer.


The respondent submitted that she is an insured on the applicant’s commercial general liability policy and that the applicant cannot bring a subrogated claim against her.


Relying on Tony and Jim’s Holdings Limited v. Silva, 1999 ONCA, (“Silva”), the court ruled in favor of the respondent, dismissing the subrogated action.

In Silva, a similar situation arose where the plaintiff rented a commercial restaurant premise to a corporate tenant. The appeal concerned the subrogated right of an insurer to recover moneys paid to a landlord under a fire insurance policy for damage to the leased premises caused by the actions of an employee/director of a corporate tenant. It was alleged that the fire occurred as a result of Silva's negligence in leaving the gas stove on "high" under a pot of butter while he went next door for a cup of coffee. Silva submitted that the action cannot be brought by the landlords, or by anyone whose rights are subrogated to their interest, because the tenant (the restaurant), by the terms of its leasing agreement, was responsible for payment of the insurance premiums. Silva further maintained that he (president and directing mind of the corporate tenant) and the tenant are one and the same for this purpose and that no action can be brought against him. Further, while the lease contained no express covenant to insure, it did provide for any insurance /premiums to be paid by the tenant. The lease also contained the usual tenant's covenant to repair, "reasonable wear and tear, and damage by fire, lightning and tempest only excepted". The appeal was dismissed, and summary judgment was up-held in favor of the defendant in this case.

J.E. Ferguson J., writing for the Ontario Superior Court of Justice, in the present case stated:

I agree that at all material times the respondent was an officer of the applicant, and as such would fit the description of an insured person pursuant to the Optimum policy. I further agree that any ambiguity between these clauses should be in interpreted in favour of the insured pursuant to the contra proferentem rule. Any subrogated action against the respondent is therefore prohibited.


To say the least, I am confused by this decision. Two things. Why the court is not talking about lease in this case. Secondly, I do not understand how the CGL policy came into play and the relevant subrogation clause of the Commercial Building, Equipment and Stock Broad Form of the CGL policy (which is again confusing) barred the subrogated action when there was no claim put in the policy for fire to begin with.

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