OVERVIEW
On August 27, 2024, the Ontario Court of Appeal rendered its decision in Live Nation Ontario Concerts GP, Inc. v. Aviva Insurance Company of Canada, 2024 ONCA 634 (CanLII) (“Live Nation v. Aviva”). Live Nation v. Aviva arose out of a request for defence coverage by an additional insured. Live Nation put on a concert. A concert goer claimed she was injured in a security incident. Live Nation was named as an additional insured to the security company’s policy issued by Aviva. Live Nation and its own additional insured, the property owner, sought defence costs from Aviva by application.
Initially, the application judge held that Aviva owed the applicants 100% of their past and future defence costs in the action. Aviva appealed. One of the issues on appeal concerned how to deal with Live Nation’s $1,000,000 SIR. Aviva argued that there were mixed claims, and as such it was entitled to equitable contribution. Live Nation argued that the claims were not mixed, and all arose out of the security incident, but that in any event Aviva could not seek equitable contribution from them. Aviva argued that an insured with an SIR should be treated as an insurer for the purposes of equitable contribution.
The Court of Appeal decided that there were mixed claims, as there were claims for security negligence, as well as statutory negligence claims. Aviva was not responsible to indemnify the respondents for the latter. However, the Court held that Aviva could not seek equitable contribution from Live Nation despite the SIR. Aviva retained the right to seek reallocation of defence costs at the end of the underlying action.
This decision demonstrates that the concepts of risk allocation and equitable contribution are different. Assuming the risk of a certain amount of defence costs via an SIR does not turn an insured into an insurer. The concept of equitable contribution is a remedy between insurers and ought not to be applied between an insurer and an insured.
FACTS OF THE CASE
This case emerged from an incident at a concert at Budweiser Stage in 2016 where the plaintiff was allegedly injured during the removal of an unruly guest by security personnel hired by Live Nation through Northwest Protection Services Ltd (“Northwest”).
The plaintiff commenced the action in 2017 against Live Nation, Northwest, and others, alleging negligence in security operations related to the actions of Northwest’s staff, and statutory violations under the Liquor Licence Act and Occupiers’ Liability Act unrelated to the security personnel’s actions.
Live Nation was insured by Starr Indemnity & Liability (“Starr”), but subject to an SIR, while Northwest had a CGL policy with Aviva. Live Nation was an additional insured to the Aviva policy. This arrangement obligated Aviva to defend Live Nation for any claims arising from Northwest’s acts or omissions in providing security services.
Live Nation and its own additional insured brought an application against Aviva seeking defence of the underlying action on a 100% basis.
THE APPLICATION
The application judge ruled that Aviva was responsible for 100% of the applicants’ defence costs, with the possibility of future reallocation after trial.
THE APPEAL
Aviva appealed the decision, arguing that there were mixed claims, and that Aviva could seek equitable contribution for 50% of defence costs from Live Nation on account of its SIR.
On the first issue, the Court of Appeal determined that the application judge erred in combining the two types of claims. The Court held that there were mixed claims, as Aviva’s policy would not respond to the claims of statutory negligence.
However, on the issue of equitable contribution and costs allocation, the Court of Appeal clarified that the principle of equitable contribution applies between insurers covering the same risk, not between an insurer and its insured. Therefore, Aviva could not seek equitable contribution from Live Nation because the existence of Live Nation’s SIR did not turn Live Nation into its own primary insurer.
Consequently, the Court of Appeal agreed with the application judge and found Aviva responsible for 100% of the defence costs associated with these claims, subject to its ability to seek reallocation after the conclusion of the underlying action.
TAKE AWAYS
This decision is all about risk allocation. Live Nation allocated risk for security incidents by having a contractual arrangement in place whereby its security company would add it as an additional insured to its CGL policy. This was a form of contractual risk allocation. However, the Court did not extend this risk allocation to non-security liability.
That said, the Court would not go so far as to conclude that Live Nation’s risk allocation turned it into its own primary insurer. The Court was very clear that the concept of equitable allocation was one that existed between insurers. Implicitly, this is because insurers must result to equitable remedies between each other since there is no privity of contract between them. On the other hand, it would not make sense to apply the concept of equitable contribution to an insurer-insured relationship as that relationship is already governed by contract.
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