in the supreme court of british columbia - Clark Wilson LLP

IN THE SUPREME COURT OF BRITISH COLUMBIA 

Citation: British Columbia Medical Association v. 

Aviva Insurance Company of Canada, 

2011 BCSC 1399 

Between: 

And 

British Columbia Medical Association 

(Canadian Medical Association - B.C. Division) 

Aviva Insurance Company of Canada 

Date: 20111019 

Docket: S110215 

Registry: Vancouver 

Plaintiff 

Defendant 

2011 BCSC 1399 (CanLII) 

Docket: S110213 

Registry: Vancouver 

Between: 

Geoffrey Marsden Appleton, Brian David Brodie, William John Riddell Cavers, 

Bradley Allen Fritz, Michael John Golbey, Nasirmohamed Jetha, Margaret 

Anne MacDiarmid, John William Mackie, Robin David Saunders, Mark David 

Schonfeld, Barry John Turchen, John Michael Morris Turner, Geraldine Vance, 

and Carole Lynn Williams 

Plaintiffs 

And 

Aviva Insurance Company of Canada 

Defendant 

Corrected Judgment: The text of the judgment was corrected on page 1 

and at paragraph 26 on October 20, 2011. 

Before: The Honourable Madam Justice Ross 

Reasons for Judgment 

Counsel for the Plaintiff British Columbia 

Medical Association in Action #S110215: 

Richard J. Berrow 

Gavin R. Cameron 

Counsel for Plaintiffs in Action No. S110213: 

Counsel for the Defendant: 

Place and Date of Hearing: 

Place and Date of Judgment: 

Andrea N. MacKay 

Scott G. Cordell 

Vancouver, B.C. 

August 2, 3 and 5, 2011 

Vancouver, B.C. 

October 19, 2011

British Columbia Medical Association v. Aviva Insurance 

Company of Canada Page 2 

Introduction 

[1] These actions are the result of a coverage dispute between the insurer Aviva 

Insurance Company of Canada (“Aviva”), and both the British Columbia Medical 

Association (Canadian Medical Association - B.C. Division) (“BCMA” and the plaintiff 

in Action No. S110215), and Geoffrey Marsden Appleton, Brian David Brodie, 

William John Riddell Cavers, Bradley Allen Fritz, Michael John Golbey, 

Nasirmohamed Jetha, Margaret Anne MacDiarmid, John William Mackie, Robin 

David Saunders, Mark David Schonfeld, Barry John Turchen, John Michael Morris 

Turner, Geraldine Vance and Carole Lynn Williams (the “Individuals” and the 

plaintiffs in Action No. S110213). It is common ground that BCMA and the 

Individuals (the “Insured”) are insured under several policies issued by Aviva. 


[2] The coverage dispute relates to an action brought by Dr. Caroline Wang, a 

former member of the BCMA board, against the Insured (the “Underlying Action”). In 

the Underlying Action, Dr. Wang alleges that the defendants defamed her on 

numerous occasions. The defamatory publications were said to be part of a 

“campaign of vilification”, published by the defendants with an intent to injure her and 

with knowledge of their falsity. 

[3] The relevant insurance provides for coverage for defamation claims, but 

excludes coverage for acts of intentional wrongdoing. The Insured have taken the 

position that Aviva has a duty to provide a defence for both BCMA and the 

Individuals because the Statements of Claim in the underlying action all contain a 

pleading of defamation. Hence, they submit that there is a prospect that Dr. Wang 

could recover at trial for defamation simpliciter, absent a finding of intentional 

wrongdoing by any or all of the defendants. 

[4] Aviva has taken the position that because Dr. Wang has alleged that all of the 

defamatory publications were published with the intention to harm and with 

knowledge that they are false, the claims against the Insured with respect to direct 

liability are excluded from coverage. Accordingly, Aviva says there is no duty to 

defend the Insured on this basis. Aviva acknowledges the pleading that BCMA is



vicariously liable for the Individuals’ acts imposes a duty on them to defend BCMA in 

that regard. 

[5] The second issue is with respect to the control of the defence. The Insured 

assert that Aviva and the Insured are in a position of conflict arising from conduct 

that will be litigated in the Underlying Action. In their submission, it follows that Aviva 

is not entitled to control the defence. Aviva asserts that there is no conflict that would 

necessitate the loss of their ability to control the defence. 

Relief Sought 

[6] There are three applications before the Court, each seeking summary 

judgment pursuant to Rule 9-7: 


(a) 

the Individuals seek the following relief: 

1. A declaration that the Respondent Aviva Insurance Company of 

Canada (“Aviva”) is, and at all material times has been, under an 

obligation to pay for the defence of certain directors, executive officers, 

employees and volunteer workers of the British Columbia Medical 

Association (“BCMA”), namely Geoffrey Marsden Appleton, Brian 

David Brodie, William John Riddell Cavers, Bradley Allen Fritz, Michael 

John Golbey, Nasirmohamed Jetha, Margaret Anne MacDiarmid, John 

William Mackie, Robin David Saunders, Mark David Schonfeld, Barry 

John Turchen, John Michael Morris Turner and Geraldine Vance (the 

“Individuals”) against the claims brought against them by Caroline 

Wang as set out in the Statement of Claim filed August 7, 2009 in the 

Supreme Court of British Columbia, Vancouver Registry Action No, 

509577 (the “Wang Action”), and as set out in the Consolidated Notice 

of Civil Claim filed September 27, 2010 in the Wang Action (together, 

the “Claims”).



2. A declaration that Aviva is not entitled to exercise any right to 

control or participate in the defence of the Individuals against the 

Claims. 

(b) 

3. A declaration that Aviva is not entitled to exercise any right that 

it might otherwise have enjoyed in connection with the conduct of the 

defence of the Individuals against the Claims, including as to the 

approval of any defence costs or settlement opportunity. 

BCMA seeks the following relief: 

1. A declaration that the Respondent Aviva Insurance Company of 

Canada (“Aviva”) is, and at all material times has been, under an 

obligation to the British Columbia Medical Association (“BCMA”) to pay 

for the defence of BCMA and certain of its directors, executive officers, 

employees and volunteer workers, namely Geoffrey Marsden 

Appleton, Brian David Brodie, William John Riddell Cavers, Bradley 

Allen Fritz, Michael John Golbey, Nasirmohamed Jetha, Margaret 

Anne MacDiarmid, John William Mackie, Robin David Saunders, Mark 

David Schonfeld, Barry John Turchen, John Michael Morris Turner and 

Geraldine Vance (the “Individuals”) against the claims brought against 

them by Caroline Wang as set out in the Statement of Claim filed 

August 7, 2009 in the Supreme Court of British Columbia, Vancouver 

Registry Action No. S09577 (the “Wang Action”), and as set out in the 

Consolidated Notice of Civil Claim filed September 27, 2010 in the 

Wang Action (together, the “Claims”). 


2. A declaration that Aviva is not entitled to exercise any right to 

control or participate in the defence of BCMA and the Individuals 

against the Claims. 

3. A declaration that Aviva is not entitled to exercise any right that 

it might otherwise have enjoyed in connection with the conduct of the



defence of BCMA and the Individuals against the Claims, including as 

to the approval of any defence costs or settlement opportunity. 

(c) 

Aviva seeks the following relief: 

1. A declaration Aviva is not responsible for any defence costs 

incurred by BCMA in respect of Vancouver Registry Action 

No. S095777 (the “Underlying Proceeding”) from January 13, 2010 to 

the date of this application. 

2. A declaration Aviva does not owe a duty to defend BCMA 

pursuant to the Aviva Policies with respect to those claims made 

against BCMA in the Consolidated Notice of Civil Claim filed 

September 27, 2010 in the Underlying Proceeding, other than the 

claim it is vicariously liable for Unlawful Expression. 


3. A declaration Aviva has the right to direct and control the 

defence of BCMA in the Underlying Proceeding, and the right to select 

and retain counsel of its choice pursuant to the Building Policy, subject 

to its reservation of rights and BCMA’s right to associate in the 

Defence. 

4. A declaration the cost of defending BCMA in the Underlying 

Proceedings be apportioned between Aviva, BCMA, and/or BCMA’s 

other insurers, at the conclusion of the Underlying Proceeding. 

Facts 

The Parties 

[7] BCMA is a voluntary association of British Columbia's physicians, medical 

residents, and medical students. It has over 11,000 members with about 8,500 

inactive medical practitioners, representing approximately 95% of practicing 

physicians in British Columbia. BCMA is governed by a Board of Directors, currently 

consisting of 37 members. Its work is carried out and supported by its Officers, and



an Executive Committee of the Board, consisting of the Officers, two elected 

Directors, and the elected Chair of the Board, working with the CEO and other senior 

staff. The governance structure of BCMA includes a number of committees, 

including the Audit and Finance Committee, Governance and Nominating 

Committee, Human Resources and Compensation Committee, Negotiating 

Committee, Tariff Committee and Review Committee. 

[8] BCMA negotiates on behalf of physicians for their compensation. It is also 

responsible for setting medical service fee schedules and negotiating schedules of 

benefits paid by the Medical Services Plan, as well as representing sessional, 

salaried, and other alternate payment physicians. BCMA has a role with respect to 

efforts to improve medical education, health care legislation, and the delivery of 

hospital and other healthcare services. Meetings of the Board and other bodies 

within the governance structure of BCMA, including the General Assembly, involve 

discussion and debate about the affairs of BCMA and its members, including the 

manner in which physicians in different areas of practice are to be compensated, 

and the conduct of negotiations between BCMA and the provincial government 

concerning compensation. 


[9] The Individuals are certain executive officers, directors, employees and 

volunteers of BCMA who were named as defendants in the Underlying Action. 

[10] BCMA has had a relationship with Aviva and its predecessors since 2002. 

BCMA purchased insurance coverage from Aviva for its own benefit and for that of 

its directors, officers, and others. The insurance coverage was purchased through 

an insurance brokerage firm known as Mardon Group Insurance (“Mardon”). 

The Policies 

[11] The applications of the Insured address the commercial general liability 

coverage (“CGL”) under three Aviva policies: the BCMA Package Program Policy; 

the Commercial Umbrella Policy; and the Prime Realty Policy. (collectively, the 

“Aviva Policies”).



[12] The key terms of the Aviva Policies are: 

(a) the coverage grant for third party claims alleging libel, slander, or 

disparagement of a person’s services, including the duty to defend such 

claims, 

(b) exclusions for knowing violation of the rights of another, publication 

with knowledge of falsity, and breach of contract. 

[13] Pursuant to the CGL sections of the Aviva Policies, the Insured enjoy 

coverage in respect of claims against them for, inter alia, “Personal and Advertising 

injury”, which is defined in each of the Aviva Policies as: 


“Personal and advertising injury” means injury, including consequential 

“bodily injury”, arising out of one or more of the following offenses: 

(a) False arrest, detention or imprisonment; 

(b) Malicious prosecution; 

(c) The wrongful eviction from, wrongful entry into, or invasion of the right 

of private occupancy of a room, dwelling or premises that a person 

occupies, committed by or on behalf of its owner, landlord or lessor; 

(d) Oral or written publication, in any manner, of material that slanders or 

libels a person or organization or disparages a person’s or 

organization’s goods, products or services; 

(e) Oral or written publication, in any manner, of material that violates a 

person’s right of privacy; 

(f) The use of another’s advertising idea in your “advertisement”; or 

(g) Infringing upon another’s copyright, trade dress or slogan in your 

“advertisement”). 

[14] In particular, the Aviva Policies provide coverage for Personal and Advertising 

injury as follows: 

COVERAGE B - PERSONAL and ADVERTISING INJURY LIABILITY 

1. Insuring Agreement 

(a) We will pay those sums that the insured becomes legally obligated to 

pay as “compensatory damages” because of “personal and advertising injury” 

to which this insurance applies. We will have the right and duty to defend the 

insured against any “action” seeking those “compensatory damages”. 

However, we will have no duty to defend the insured against any “action” 

seeking “compensatory damages” for “personal and advertising injury” to



which this insurance does not apply. We may, at our discretion, investigate 

any offense and settle any claim or “action” that may result. ... 

(b) This insurance applies to “personal and advertising injury” caused by 

an offense arising out of your business but only if the offense was committed 

in the “coverage territory” during the policy period. 

2. Exclusions 

This insurance does not apply to: 

(a) Knowing violation of rights of another “Personal and advertising injury” 

caused by or at the direction of the insured with the knowledge that the act 

would violate the rights of another and would inflict “personal and advertising 

injury”. 

(b) Material published with knowledge of falsity “Personal and advertising 

injury” arising out of oral or written publication of material, if done by or at the 

direction of the insured with knowledge of its falsity. 

(f) Breach of Contract 

“Personal and advertising injury” arising out of a breach of contract, except an 

implied contract to use another’s advertising idea in your “advertisement”. 


[15] The Aviva Policies define the terms “Compensatory damages” and “Action”, 

respectively, as follows: 

“Compensatory damages” means damages due or awarded in payment for 

actual injury or economic loss. “Compensatory damages” does not include 

punitive or exemplary damages or the multiple portion of any multiplied 

damage awards. 

“Action” means a civil proceeding in which “compensatory damages” 

because of “bodily injury”, “property damage” or “personal and advertising 

injury” [or an act, error or omission] to which this insurance applies are 

alleged . . . 

[16] In respect of the defence of claims, the Aviva Policies state that Aviva will 

have “the right and duty to defend the insured against any ‘action’ seeking those 

‘Compensatory Damages’”, i.e. for “Personal and Advertising injury”, excluding those 

“to which this insurance does not apply”. 

[17] The term “Coverage Territory” is defined in the BCMA Package Program 

Policy and the Realty Policies as: 

“Coverage territory” means: 

(a) Canada and the United States of America (including its 

territories and possessions).



[18] And the term “coverage territory” is defined in the Commercial Umbrella 

Policy as meaning “anywhere in the world”. 

[19] For the purpose of CGL coverage, the Aviva Policies define “Insureds” as 

including directors, officers, employees, volunteer workers, and shareholders. For 

example, the BCMA Package Program Policy provides: 

SUB-SECTION 2 - WHO IS AN INSURED 

1. If you are: 

(d) An organization other than a partnership, limited liability partnership, 

joint venture or limited liability company, you are an insured. Your “executive 

officers” and directors are insureds, but only with respect to their duties as 

your officers or directors. Your shareholders are also insureds, but only with 

respect to their liability as shareholders. 

2. Each of the following is also an insured with respect to all coverages 

except Coverage F — Employee Benefits Liability: 

(a) Your “volunteer workers” only while performing duties related to the 

conduct of your business, or your “employees”, other than either your 

“executive officers” (if you are an organization other than a partnership, 

limited liability partnership, joint venture or limited liability company) or your 

managers (if you are a limited liability company), but only for acts within the 

scope of their employment by your or while performing duties related to the 

conduct of your business. However, none of these “employees” or “volunteer 

workers” are insured for: 

(1) “Bodily injury” or “personal and advertising injury”: 

(i) To you, to your partners or members (if you are a partnership, limited 

liability partnership or joint venture), to your members (if you are a limited 

liability company), to a “co-employee” while in the course of his or her 

employment or performing duties related to the conduct of your business, or 

to your other “volunteer workers” while performing duties related to the 

conduct of your business; 


[20] The Aviva Policies define the terms “executive officers”, “volunteer workers” 

and “employees” as follows: 

“Executive Officer” means a person holding any of the officer positions 

created by your charter, constitution, by-laws or any other similar governing 

document. 

“Employee” includes a “leased worker”. Employee does not include a 

“temporary worker”. 

“Volunteer worker” means a person who is not your “employee”, and who 

donates his or her work and acts at the direction of and within the scope of



duties determined by you, and is not paid a fee, salary or other compensation 

by you or anyone else for their work performed for you. 

The Underlying Action and Coverage Dispute 

[21] In September 2008, Mardon provided David Porter of Advance Claims (the 

outside adjuster appointed by Aviva), with notice that Dr. Wang was threatening to 

commence a defamation action against BCMA and some of its directors. 

[22] Dr. Wang commenced the Underlying Action by Writ of Summons and 

Statement of Claim filed August 7, 2009 (the “Initial Statement of Claim”). The 

defendants named are BCMA, the Individuals and a series of unknown defendants. 

Under the heading “Campaign of Vilification Actuated by Malice and Bad Faith”, 

paras. 24 to 27 provided in part: 


24. Commencing on or about February 2, 2008 the defendants have each in 

bad faith engaged in a campaign of malicious public attacks on the plaintiff 

characterized by the defamatory expression, injurious falsehoods and 

negligent misstatements (collectively hereinafter referred to as the “Unlawful 

Expression”) particularized in paragraphs 57 to 174 of this statement of claim. 

25. The defendants and each of them maliciously published the Unlawful 

Expression for which each is responsible with the knowledge that the 

meanings conveyed by that expression were false, or alternatively, with 

reckless indifference whether those meanings were true or false. 

26. The defendants, and each of them, have been guilty of reprehensible, 

insulting, high-handed, spiteful, malicious and oppressive conduct and such 

conduct by the defendants justifies the court in imposing a substantial penalty 

of exemplary damages on the defendants plus an award of special costs in 

favour of the plaintiff, in addition to an award of general damages for injury to 

reputation. The plaintiff will rely upon the entire conduct of the defendants 

before and after the commencement of this action to the date of judgment in 

this action. 

27. The said defendants published the Unlawful Expression for which each is 

responsible for the dominant purpose of: 

(i) Inflicting injury upon the plaintiff because of personal spite or 

animosity, or a desire to obtain revenge; and/or 

(ii) destroying her reputation so that the plaintiff would have no 

professional and political credibility with the BCMA membership 

thereby. 

[23] Under the heading “The Unlawful Expression - Particulars”, Dr. Wang alleged 

instances of allegedly defamatory and disparaging expressions published by various



defendants and one instance of alleged slander. In the alternative, the publications 

are alleged to have constituted injurious falsehoods. In the further alternative, 

Dr. Wang pleaded that the publications were negligent misstatements. BCMA is 

alleged to be both directly and vicariously liable. 

[24] With respect to all of the instances of Unlawful Expression, Dr. Wang 

pleaded: 

177. The Unlawful Publications complained of in this statement of claim have 

caused injury, loss and damage to the plaintiff, and were deliberately 

calculated by the defendants to expose the plaintiff to contempt, ridicule and 

hatred, and to cause other persons to shun or avoid the plaintiff, and to lower 

the plaintiff’s reputation in the eyes of right-thinking members of the 

community. 

178. The defendants were motivated in publishing the words complained of in 

this statement of claim and in their subsequent and related conduct, by actual 

and express malice, which increased the injury to the plaintiff, and by 

increasing the mental distress and humiliation of the plaintiff. 


[25] Mardon provided the Initial Statement of Claim to Aviva through Mr. Porter, its 

adjuster. 

[26] The Insured denied all allegations of wrongdoing. BCMA retained Howard 

Shapray, Q.C. of the firm Shapray Cramer to defend it jointly with the Individuals. 

[27] The Statement of Claim was provided to Aviva sometime in October 2009. By 

letter dated January 13, 2010, Aviva, inter alia: 

a. denied coverage to the Individual Defendants on the bases the claims 

against them related to damage caused intentionally by a purposeful and 

malicious campaign to injure Dr. Wang, or were derivative of such claims, and 

i. Aviva’s policies provided coverage only for fortuitous events; 

ii. the material insuring agreement in each Aviva policy required 

that the Unlawful Publication arise out of the conduct of BCMA’s 

business, and intentionally caused damages resulting from a



purposeful and malicious campaign to injure were not related to any 

bona fide object of BCMA. 

b. denied coverage to BCMA on the same bases, save for the Vicariously 

Liability Claim, for which it acknowledged a duty to defend; 

c. reserved its rights to deny coverage on a number of additional bases 

and indicated it would be appointing defence counsel to defend all of the 

claims against BCMA, associating with BCMA in the conduct of the defence, 

and reserving its rights to seek an apportionment of defence costs. 


[28] Aviva identified Eric Dolden of the firm Dolden Wallace Folick LLP as the 

counsel it wished to appoint to defend BCMA. 

[29] On January 29, 2010, Mardon provided Aviva with the Court of Appeal 

Reasons in Wang v. BCMA, 2010 BCCA 43, issued in respect of an appeal of Wang 

v. BCMA, 2008 BCSC 1559. 

[30] By letter dated February 2, 2010, Aviva advised through its counsel that the 

Reasons did not alter its position with respect to coverage. 

[31] On May 5, 2010, Mardon provided Aviva with a Writ of Summons and 

Statement of Claim in Caroline Wang v BCMA, Registry No. S013019 (the “Breach 

of Contract Claim”). On July 6, 2010, Aviva denied coverage with respect to the 

claims advanced in the Breach of Contract Claim. 

[32] By Order dated August 26, 2010, Mr. Justice Truscott ordered the Underlying 

Proceeding and the Breach of Contract Claim to be consolidated and a Consolidated 

Notice of Civil Claim filed. BCMA then received a Consolidated Notice of Civil Claim 

dated September 27, 2010 (the “Current Pleading”). 

[33] Mardon provided Aviva with the Current Pleading on October 5, 2010. By 

email dated October 26, 2010, Aviva advised that the Current Pleading did not alter 

Aviva’s position with respect to coverage.



[34] The Current Pleading repeats allegations of a campaign of overt vilification 

which included unlawful publications concerning Dr. Wang. It alleges that the 

unlawful publications were defamatory and constituted injurious falsehoods. 

Negligence and negligent misstatement are no longer pleaded. Dr. Wang alleges 

that the defendants breached the provisions of the Society Act, R.S.B.C. 1996, 

c. 433 and the terms of the contract between BCMA and its members. Dr. Wang 

alleges that the defendants published the unlawful publications knowing they were 

false or with reckless indifference to the truth. 

[35] Dr. Wang also pleads that the defendants published the unlawful publications 

for the dominant purpose of injuring Dr. Wang and or destroying her reputation. 

BCMA is alleged to be both directly and vicariously liable. 


[36] By letter dated June 16, 2011, Aviva set out its position with respect to 

coverage. The letter stated in part: 

Aviva acknowledges receipt of the Consolidated Notice of Civil Claim (the 

“Consolidated Action”) filed on September 27, 2010 consolidating B.C.S.C. 

Vancouver Registry Action No. S095777 (the “Original Unlawful Expression 

Action”) with B.C.S.C. Vancouver Registry Action No. S103019 (the “Original 

Breach of Contract Action”). 

Aviva is treating delivery of the Consolidated Action to it as a report of claim 

on behalf of the BCMA and each of the personal defendants named in the 

Consolidated Action (the “Individual Defendants”), under each of the following 

policies: 

1. Aviva Policy No. 81215079 (the “Doctor’s Office Policy”); 

2. Aviva Policy No. 81332521, which is an umbrella policy over 

the Doctor’s Office Policy (the “Umbrella Policy”); 

3. Aviva Prime Realty Policy No. REA 81357445 (the “Building 

Policy”); and 

4. Any applicable Homeowner Policy held by a personal 

Defendant in the Consolidated Action. 

Each of these policies (referred to collectively as the “Aviva Policies”) was 

issued to the BCMA as the names insured, and in effect at the material 

times... 

[37] Aviva reiterated the position it took in its letter of July 6, 2010 that there was 

no coverage for the claim advanced for breach of contract.



[38] With respect to the claims in relation to the alleged Unlawful Publications, 

Aviva stated there is no coverage under any of the Aviva Policies for the Unlawful 

Expression claims advanced against the Individual Defendants in the Consolidated 

Action: 

These claims are for damage caused intentionally by a purposeful and 

malicious campaign to injure Dr. Wang and destroy her reputation. Coverage 

for the unlawful expression claims against the Individual Defendants is 

vitiated by the doctrine of fortuity. It falls to the each of Individual Defendants 

to defend all of the claims against them and pay any damages which may be 

awarded against them. Aviva will not be doing so. 

For the same reason, there is no coverage under any of the Aviva Policies for 

any of the unlawful expression claims advanced against the BCMA, except 

for the Vicarious Liability Claim. No indemnity will be provided to the BCMA in 

respect of the claims other than the Vicarious Liability Claim. The cost of 

defending the claims other than the Vicarious Liability Claim is the 

responsibility of the BCMA. 

Aviva’s coverage position remains consistent with its coverage position for 

the claims in the Original Unlawful Expression Action, communicated to the 

BCMA through Mardon Group Insurance in our correspondence of January 

13, 2010. 

Aviva continues to assert that it has the right to control the defence of the 

BCMA in the consolidated Action and seek an apportionment of defence 

costs. 


Duty to Defend 

[39] The parties are in substantial agreement with respect to the relevant legal 

principles. The general principles concerning the interpretation of insurance policies 

were set out by the Supreme Court of Canada in Progressive Homes Ltd. v. 

Lombard General Insurance Co. of Canada, 2010 SCC 33 [Progressive], at 

paras. 22-24. I have summarized some of them here: 

(a) 

(b) 

the primary interpretive principle is that when the policy is 

unambiguous, the court should give effect to the clear language of the 

policy, reading the policy as a whole. The focus of the exercise is on 

the language of the policy; 

where the language of the policy is ambiguous, the general rules of 

contract construction are to be employed. These include preferring



constructions that are consistent with the reasonable expectations of 

the parties, avoiding constructions that would not have been in the 

contemplation of the parties, and ensuring that similar policies are 

interpreted in a consistent fashion; 

(c) where these rules of construction fail to resolve an ambiguity, the 

principle of contra proferentem is applied against the insurer. One 

corollary of this rule is that coverage provisions are to be construed 

broadly and exclusion clauses are to be given a narrow interpretation. 

[40] Also, policies are to be interpreted as they would be understood by the 

average person applying for insurance not as they might be viewed by someone 

“versed in the niceties of insurance law” (see National Bank of Greece (Canada) v. 

Katsikonouris, [1990] 2 S.C.R. 1029 at p. 1043). 


[41] The pleadings govern the duty to provide a defence (see Monenco Ltd. v. 

Commonwealth Insurance Company, 2001 SCC 49 at para. 28). An insurer, under a 

liability policy stating a duty to defend, is required to provide for a defence where 

facts alleged in the pleadings, if proven to be true, could require the insurer to 

indemnify the insured for the claim. The duty is triggered by the mere possibility that 

a claim within the policy may succeed (see Progressive and Nichols v. American 

Home Assurance Co. (1990), 68 D.L.R. (4 th ) 321 at p. 326 (S.C.C.)). In this regard, it 

is the true nature of the substance of the claim that is to be determined, not the 

particular labels used by the pleader (see Progressive and Conservation Council of 

New Brunswick v. Encon Group, 2006 NBCA 51). 

[42] In Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 

551 [Scalera], the Supreme Court of Canada outlined a three step process to be 

applied in determining whether a duty to provide a defence arises. First, the court is 

to determine if the plaintiff’s legal allegations are properly pleaded. In doing so the 

court is to look beyond the choice of labels and examine the substance of the 

allegations.



[43] The second stage is a determination if any claims are entirely derivative in 

nature. Where the pleadings are found to contain properly pleaded allegations of 

both intentional and non-intentional torts, the court must decide whether the harm 

allegedly inflicted by the negligent conduct is derivative of that caused by the 

intentional conduct. 

[44] In this regard, a claim will be derivative where both torts arise from the same 

actions and cause the same harm. If the non-intentional claim is found to be 

derivative, it will be subsumed into the intentional tort for the purpose of the 

exclusion analysis. If the underlying elements of the two claims are sufficiently 

disparate, the non-intentional claim will not be derivative and the duty to defend will 

apply. 


[45] The third stage is a determination of whether there are any properly pleaded, 

non-derivative claims that could fall under the policy’s coverage. 

[46] The Insured submit that the application of these principles require Aviva to 

afford both BCMA and the Individuals with a defence to Dr. Wang’s claims. In 

particular, they submit that: 

(a) 

(b) 

At all material times, BCMA was the “Named Insured”, and each of 

BCMA and the Individuals were “Insureds” within the meaning of the 

Aviva Policies. 

The Claims represent an “Action” against BCMA and the Individuals for 

“compensatory damages” falling within the coverage grants found in 

the Aviva Policies, and in particular, within the wording of the coverage 

grant for claims alleging “[o]ral or written publication, in any manner, of 

material that slanders or libels a person or organization or disparages 

a person’s or organization’s goods, products or services” and “arising 

out of [BCMA’s] business” (the “Disparagement Coverage”).



(c) 

Dr. Wang’s pleadings allow for findings of liability against the 

Individuals and BCMA on a basis falling within the Disparagement 

Coverage and not falling within any of the exclusions. 

[47] Counsel for the Insured submits that the Statements of Claim each plead a 

claim of defamation against BCMA and the Individuals. As discussed in Grant v. 

Torstar Corp., 2009 SCC 61, at paras. 28-29: 

A plaintiff in a defamation action is required to prove three things to obtain 

judgment and an award of damages: 

(1) that the impugned words were defamatory, in the sense that 

they would tend to lower the plaintiff’s reputation in the eyes of 

a reasonable person; 

(2) that the words in fact referred to the plaintiff; and 

(3) that the words were published, meaning that they were 

communicated to at least one person other than the plaintiff. 

If these elements are established on a balance of probabilities, falsity and 

damage are presumed...The plaintiff is not required to show that the 

defendant intended to do harm, or even that the defendant was careless. The 

tort is thus one of strict liability. 

If the plaintiff proves the required elements, the onus then shifts to the 

defendant to advance a defence in order to escape liability. 


[48] Defamation is a tort of strict liability, and in a defamation case, unless there is 

a plea of privilege or fair comment, the law looks at the tendency and consequences 

of the publication, rather than the motive or intention of the publisher. The court is 

not concerned with “what the motive of the person publishing the libel was, or 

whether he intended it to have libellous meaning or not” (see Gatley on Libel and 

Slander, 11th ed. (London: Sweet & Maxwell, 2008) at pg. 14; Nevill v. Fine Arts Co., 

[1895] 2 Q.B. 156 at p. 168 (Eng. C.A.); Newton v. Vancouver (City), [1932] 46 

B.C.R. 67 at p. 72 (C.A.)). 

[49] Counsel for the Insured notes that the exclusions in the Aviva Policies with 

respect to defamation or disparagement are “knowing violation of the rights of 

another” and publication “with knowledge of falsity”. However, a defamation plaintiff 

does not have to show that the defendant had knowledge of the falsity of the



utterances or that the defendant had any blameworthy mental state in order to 

succeed. The Aviva Policies in this regard do not exclude intentional publication. 

[50] The Insured submit that if they were found liable for every instance of 

“Unlawful Expression” raised in the Consolidated Claim on the basis that these 

words were defamatory or disparaging of Dr. Wang, but these words were not 

published with knowing falsity or with foreknowledge that the publication violated 

Dr. Wang’s rights, Aviva would be required to indemnify. 

[51] The Insured submit that even if the court were to find that the Insured were 

actuated by malice, Dr. Wang’s claims could still result in coverage for indemnity 

under the Aviva Policies. “Malice” can be established even where the defendants did 

not know the falsity of their statements, or did not know they were violating the 

plaintiff’s rights. In Smith v. Cross, 2009 BCCA 529, Madam Justice Kirkpatrick says 

at para. 34: 


A defendant is actuated by malice if he or she publishes the comment: 

i) Knowing it was false; or 

ii) With reckless indifference whether it is true or false; or 

iii) For the dominant purpose of injuring the plaintiff because of spite or 

animosity; or 

iv) For some other dominant purpose which is improper or indirect, or 

also, if the occasion is privileged, for a dominant purpose not related 

to the occasion. 

[52] The Insured note that while the Current Pleading contains allegations of 

breach of contract, the alleged breaches are linked to the damage allegedly suffered 

because of the defamation. Therefore, the essential character of the claim is one of 

defamation and disparagement. 

[53] Counsel cited a number of American decisions in which the pleading of 

intentional misconduct did not relieve an insurer of the duty to defend where the 

insured could be found liable without proof of intentional misconduct; in other words, 

where the plaintiff could succeed without proving intentional misconduct (see Aearo 

Corporation v. American International Specialty Lines Insurance Company, 2009



U.S. Dist. LEXIS 117823, 676 F.Supp.2d 738 (S.D. Ind.); Orlando Nightclub 

Enterprises, Inc. v. James River Insurance Company, 2007 U.S. Dist. LEXIS 88320 

(M.D. Fla.); Cincinnati Insurance Company v. Trosch, 2008 U.S. App. LEXIS 5865, 

271 Fed. Appx. 205 (3rd Cir.) (applying Pennsylvania law); Park Place 

Entertainment Corporation v. Transcontinental Insurance Company, 2002 U.S. Dist. 

LEXIS 18772, 225 F.Supp.2d 406 (S.D.N.Y.); Utica Mutual Insurance Company v. 

The David Agency Insurance, Inc., 2004 U.S. Dist. LEXIS 12434, 327 F.Supp.2d 

922 (N.D. Ill)). 

[54] Aviva submits that for the purpose of the present analysis, Dr. Wang’s 

Current Pleading includes clear factual allegations that the Unlawful Expressions 

were part of a “campaign of vilification and malicious public attacks”, characterized 

by the Insured’s publications. Dr. Wang alleges that each instance of publication 

occurred with those responsible acting maliciously, knowing the meanings conveyed 

were false or not caring if they were, for the dominant purposes of injuring her and 

destroying her reputation. 


[55] Aviva argues that the pleadings must be taken as true, that they are quite 

precise, and that they do not include alternative pleadings as to intent. The 

gravamen of Dr. Wang’s complaint is that the individual intentional actions to injure 

her were part of an organized effort to cause her the very harm for which relief is 

sought. In these regards, the Current Pleading is not materially different than the 

claims advanced against the Insured in the original Statement of Claim. 

[56] Aviva does not dispute that an action in defamation may succeed without 

evidence that the defendant published defamatory words with intention to injure. 

However, it submits that in this case, Dr. Wang did plead such an intention in clear 

and explicit terms. She alleges that everything that occurred was part of a purposeful 

campaign to cause her the very injury for which she is seeking damages. 

[57] Counsel submits that the Insured’s submission in effect seeks to have the 

court assume only some of the pleaded facts are true. However, it is submitted that



in conducting the analysis, the court must assume the truth of all of the factual 

allegations. 

[58] Aviva relied upon a number of American authorities which support the 

proposition that claims of libel and slander which are alleged to be part of a 

deliberate and knowing plan to injure, do not trigger a duty to defend under typical 

“personal injury” wordings. These typically recognize a distinction between an 

intentional act and an intended injury, finding there is no coverage for defamation 

pleadings related to the latter based upon explicit provisions recognizing the fortuity 

principal fundamental to every policy of liability insurance, or public policy 

considerations related to fortuity (see Insura Prop. & Cas. Ins. Co. v. Ashe, 2003 WL 

253255 (Tenn.Ct.App.); Monumental Life Insurance Company v. US F & G, 94 Md. 

App. 505 (1993); Cincinnati Ins. Co. v. Shanahan, 2008 WL 4426116 (C.D.Ill.); 

Continental Casualty Co. v. Schaubel, 380 So.2d 483 (1980 Fla.App.3rd)). 


[59] Finally, Aviva submits that the allegations of negligence which were contained 

in the original Statement of Claim are derivative of the clear allegations of an 

intentional campaign to injure. 

[60] In my view, Aviva’s contention that, for purposes of the present analysis, the 

court must proceed on the assumption that all the facts in the alleged underlying 

Claim will be made out is overly restrictive. To my mind, it is also inconsistent with 

the principle reiterated by the court in Progressive that a duty to defend exists if 

there is a possibility that the claims could fall within the insurance coverage. I think 

that it is implicit in that test that in considering the issue, the court should address 

possible outcomes at trial based upon the claims alleged in the statement of claim. 

In other words, in order to determine if there is a possibility of coverage, the court 

should consider the possibility that some but not all of the plaintiff’s allegations will 

succeed at trial. 

[61] I note that in Scalera, the majority in addressing the question of whether there 

was a duty to defend considered what the possible outcomes could be and whether 

the policy provided coverage for either eventuality. Concluding at paras. 43 and 44:



I conclude that there is no justification in cases of battery of a sexual nature 

for departing from the traditional rule that the plaintiff in a battery action must 

prove direct contact, at which point the onus shifts to the defendant to prove 

consent. To do so would be to place a burden upon plaintiffs in battery 

actions of a sexual nature which plaintiffs in other battery actions do not bear. 

I see neither the need nor the justification for doing this on the material before 

us in this case. 

This said, I agree fully with Iacobucci J. that the law will not permit a 

defendant in an action for sexual battery to say that though he might be found 

to have committed the battery, he did not intend any harm. This leaves the 

defendant with two alternatives discussed in Williams, supra. Either the 

plaintiff consented, in which case no action lies, or she did not consent and 

the defendant is deemed to have intended to injure her. In neither case does 

the policy provide coverage. 


[62] Further, in Scalera, Mr. Justice Iacobucci characterized the task as follows at 

paras. 93 and 94: 

Our task, therefore, is to decide which of the plaintiff's legal allegations are 

properly pleaded, whether any of them are derivative, and whether any of the 

surviving claims evince an intention to injure, thus triggering the exclusion 

clause. To do this, it is necessary to understand precisely what the elements 

of the various torts alleged against the appellant are. If the elements of a tort 

claim require proof of conduct that also proves an intent to injure, there will be 

no duty to defend because any potentially successful claim would fall under 

the exclusion clause. 

As will be seen from the following discussion, I conclude that each of the 

plaintiff's properly pleaded claims necessarily involves an intent to injure, 

because each requires proof that the appellant either knew, or should have 

known, that the plaintiff did not validly consent to sexual activity. Given this 

actual or constructive knowledge of non-consent, the law will not permit the 

appellant to claim that he did not intend any harm. The exclusion therefore 

applies because there is no claim against the appellant that, if successful, 

could potentially fall within coverage. There being no potentially indemnifiable 

claim, the respondent has no duty to defend. 

[63] In The Co-operators General Insurance Company v, Morrison, 2004 NBCA 62 

[Morrison], the plaintiff claimed for damages arising from a motor vehicle collision 

and subsequent assault at the hands of the defendant. The original statement of 

claim had alleged that both acts were intentional. It was conceded that the original 

statement of claim did not raise any claims which would be payable under the 

insurance and hence there would be no duty to defend. A subsequent amendment 

alleged that the collision was the result of negligence and therefore raised the



possibility that some or all of the damages sustained were caused by negligence 

with respect to the collision. 

[64] The Court concluded that there was a duty to defend, rejecting the 

submission that the negligence claim was purely derivative. The Court considered 

the possible outcomes at trial in the course of its analysis at para. 29: 

Having said all this, I am not convinced that, in a case such as this, a plaintiff 

could not claim that Mr. Morrison intentionally caused the collision in an 

attempt to stop the Dedam vehicle from leaving his property or, in the 

alternative, that he caused the injuries by driving his vehicle in a negligent 

manner. It is arguable, in my view, that the two torts involve different acts or 

conduct based upon Mr. Morrison's state of mind, one being an intentional 

tort and the other a non-intentional tort. The Statement of Claim would 

obviously contain a claim potentially within coverage. At trial, the claim based 

upon the intentional tort could fail and the negligence claim succeed. This is 

different from the allegations in Scalera where it was alleged in the Statement 

of Claim that the defendant had caused damages to the plaintiff by engaging 

in non-consensual sexual intercourse. In that case, the negligence claim was 

not legally viable because on the facts as alleged, there was no possibility 

that a claim within coverage could succeed. That is so because "[e]ither there 

was consensual sexual intercourse, in which case the claim would be 

dismissed, or there was non-consensual intercourse, in which case the claim 

in battery would succeed." In the latter case, the claim would not be within the 

coverage provided by the policy (see G. Hilliker, Liability Insurance Law in 

Canada, 3d ed. (Toronto: Butterworths, 2001), at pp. 69-71). 


[65] In the present case, addressing the first stage of the Scalera analysis, it is 

clear that Dr. Wang has properly pleaded a claim of defamation with respect to the 

Unlawful Expressions. Dr. Wang has alleged that the Unlawful Expressions formed a 

part of the Individuals’ campaign of overt vilification and that all of the defendants 

published the Unlawful Expressions with knowledge of their falsity or with reckless 

indifference to their truth, for the dominant purpose of inflicting injury upon Dr. Wang 

and or destroying her reputation. It is clear that if the latter allegations were to be 

made out at trial, the claims would fall outside of coverage. In the alternative, 

Dr. Wang also advances a claim of malicious falsehood, which if made out at trial, 

would also fall outside of the coverage. 

[66] Are the defamation claims derivative? In Scalera, Mr. Justice Iacobucci 

concluded that the allegation of breach of fiduciary duty was derivative since there 

was nothing to suggest that the breach was anything but intentional and the harm



caused was identical to that of the sexual battery. He concluded that the plea of 

negligent misrepresentation was “entirely subservient’ to the sexual battery. At 

para. 85 he stated that: 

A claim should only be treated as "derivative", for the purposes of this 

analysis, if it is an ostensibly separate claim which nonetheless is clearly 

inseparable from a claim of intentional tort. 

[67] In the present case it cannot be said that the plea of defamation is in any way 

subservient to the allegations of intentional misconduct. Rather, those allegations 

can be seen as aggravating factors with respect to the defamation. Further, it is clear 

that the elements of the defamation claim do not require proof of conduct that proves 

intent to injure. Accordingly, the allegations, while related, are in my view sufficiently 

disparate such that it cannot be said that the defamation is derivative. If the 

allegations of intent to injure and knowing publication of falsehood are removed, 

sufficient facts remain to support a pleading of defamation (for further examples of 

these principles, see Unrau v. Canadian Northern Shield Insurance Co., 2004 BCCA 

585 and Rocky Mountain House (Town of) v. Alberta Municipal Insurance Exchange, 

2007 ABQB 548 at paras 68-75). 


[68] A plaintiff alleging defamation does not have to establish that the defendant 

had any level of knowledge or blameworthy mental state. Here, the policy exclusions 

address such blameworthy mental states but do not exclude publications that were 

made intentionally; in the sense that the defendant meant to state the words used 

and did not publish by accident. Nor does the coverage expressly exclude situations 

in which malice is alleged. 

[69] Aviva has taken the position that because the allegations relate to a 

purposeful campaign to intentionally injure Dr. Wang, they are wholly removed from 

the bona fide objects and activities of BCMA and therefore do not fall within the 

coverage provided in the Aviva Polices. However, the pleadings present the 

possibility of defamations in the absence of knowing violation, knowledge of falsity or 

other form of intentional misconduct that would take the Insured’s conduct out of the 

“business of BCMA”.



[70] I agree with the submission of counsel for BCMA that the business of BCMA 

includes the expression of different and opposing views and promoting vigorous 

debate. It is possible for Dr. Wang to succeed against the defendants without a 

finding that the alleged defamation occurred outside the scope of the business of 

BCMA, which include its governance and election processes. 

[71] Finally, with respect to the third stage, the defamation plea is a properly 

pleaded, non-derivative claim that could potentially trigger indemnity if it were to 

succeed at trial. Accordingly, I conclude that Aviva is required under the terms of its 

policies to provide a defence to both BCMA and the Individuals. 


Conduct of the Defence 

[72] In general, when the insurer defends against a claim it has the right to control 

the defence, including the right to appoint and instruct counsel. However, the right of 

the insurer to control the defence is not absolute (see Brockton (Municipality) v. 

Frank Cowan Co. (2002), 57 O.R. (3d) 447 (Ont. C.A.) [Brockton]. In Brockton, 

Goudge J.A., referencing the judgment in Zurich of Canada v. Renaud & Jacob, 

[1996] R.J.Q. 2160 (C.A.), stated the test to be, at para. 41: 

...that the potential tension which inheres in the relationship between the 

insurer and the insured and which is manifested by the reservation of rights 

by the insurer is not per se sufficient to require the insurer to surrender 

control of the defence. It would too quickly cost the insurer the right it 

contracted for. Rather, the focus must be on the mandate given by the insurer 

to the counsel it appoints to conduct the defence. Do the circumstances of 

the particular case create a reasonable apprehension of conflict of interest if 

that counsel were to act for both the insurer and the insured in defending the 

action? If the insurer puts counsel in a position of having conflicting 

mandates it must surrender control of the defence to an insured who wishes 

to retain its own counsel paid for by the insurer. [Emphasis added.] 

[73] In Brockton, the Court noted that the fact that the insurer had reserved rights 

would not in itself be sufficient to give rise to a conflict of interest. Rather, as noted at 

para. 42, citing with approval the California Court of Appeal decision in Foremost 

Insurance Co. v. Wilks, 253 Cal. Rptr. 596, (1988): 

[I]n Foremost Insurance Co. v. Wilks, 253 Cal. Rptr. 596, (1988), the 

California Court of Appeal made clear that not every case where the insurer



elects to defend the insured under a reservation of rights creates a conflict of 

interest requiring the insurer to furnish independent counsel. If the reservation 

of rights arises because of coverage questions which depend upon an aspect 

of the insured’s own conduct that is in issue in the underlying litigation, a 

conflict exists. On the other hand, where the reservation of rights is based on 

coverage disputes which have nothing to do with the issues being litigated in 

the underlying action, there is no conflict of interest requiring independent 

counsel paid for by the insurer. 

[74] The Insured take the position that there is such a conflict in the present case, 

in that the coverage questions will depend upon aspects of the Insured’s conduct at 

issue in the litigation, in particular to the intention, knowledge and purpose of the 

defendants in the Underlying Action. Counsel cites the decisions in Conservation 

Council of New Brunswick v. Encon Group, 2005 NBQB 105, aff’d 2006 NBCA 51 

[Encon]; Morrison; and Wilkinson v. Security National Insurance Co., 1999 ABQB 

675, as support for the proposition that Aviva is not entitled to control the defence in 

the circumstances. 


[75] Aviva’s position is that there is no such conflict in the present case and 

counsel cites PCL v. Lumbermen’s Casualty Co. (2009), 81 C.L.R. (3d) 186, and 

Brockton as authorities. They submit that it is in the interest of both BCMA and Aviva 

that: 

a. each Unlawful Expression was not published at all (it appears there is 

no substantial issue about this, save one allegation of slander); or, it 

was not defamatory; or, if it was defamatory, that a defence is 

available; 

b. each instance of Unlawful Expression was not an injurious falsehood; 

c. to the extent any Individual Defendant may have liability, that no 

vicarious liability should be imposed upon BCMA. 

[76] This submission, however, presumes that Aviva succeeded in its argument 

that there was no duty to provide a defence for the Individuals. Aviva notes that the 

counsel who acts in this dispute is not the counsel identified by Aviva to provide the



defence against the Underlying Action, and submits that any conflict issues could be 

resolved through a “Chinese Wall”. 

[77] In my view, this is a case in which, as stated in Brockton, the reservation of 

rights arises with respect to coverage questions which depend upon the Insured’s 

conduct at issue in the underlying litigation. In Encon, the insurer had argued that 

the appointment of separate coverage counsel addressed and resolved any conflict 

of interest. Russell J. rejected this contention, stating at para. 24: 

Even though[...] Co-Operators have apparently appointed separate coverage 

counsel and defence counsel, the insured is entitled to appoint its own 

counsel at the expense of Co-Operators to defend the action. I say that 

because whether or not there was publication or broadcasting by or on behalf 

of the defendants may well become an important evidentiary component of 

the trial. Even though the trial counsel appointed by the insurer would not be 

retained to canvas coverage issues it is too substantial a conflict to ignore. 


[78] Likewise, in the present case, it is my conclusion that the Insured’s 

knowledge, purpose and intention will be a central issue at trial in the Underlying 

Action and the conflict presented between the interests of Aviva and the Insured in 

this regard is, to quote Russell J., “too substantial to ignore”. In the result, I have 

concluded that Aviva is not entitled to exercise any right to control the defence of the 

Insured. 

[79] The Insured submit, citing Cansulex Ltd. v. Reed Stenhouse Ltd., [1986] 70 

B.C.L.R. 273, that because of Aviva’s conduct in denying coverage, it is not entitled 

to exercise any right that it might have otherwise enjoyed in connection with the 

conduct of the defence, including approval of defence costs or settlement 

opportunities. In the case cited, the insurers had denied coverage in a commercial 

claim. Cansulex had settled the claim and sought to recover from the insurer. Chief 

Justice McEachern held that Cansulex was entitled to recover, stating at p. 316 that: 

In other words, it is my view that an insured in the position of Cansulex need 

only establish the fact of coverage, the denial of liability by the insurer and the 

reasonableness of the settlement, subject, of course, to any other policy 

defences which may be available to the insurers. 

It follows, in my view, that an insurer may only deny coverage at its peril and 

at the risk of being required to pay without there being perfect compliance



with all the provisions of the policy for there is no other way of putting the 

insured into the position it would be in if coverage had not wrongly been 

denied: Shore Boat Bldr. Ltd. v. Can. Indemnity Co., [1975] 2 W.W.R. 91. 

[80] In Cansulex, the plaintiff had concluded a settlement of the underlying claim 

before the determination of the coverage dispute. I note that in Encon, as here, that 

is not the case; the coverage dispute was litigated in advance of the underlying 

claim. In Encon, the orders made by Russell J. did not go as far as those sought 

here by the Insured. Rather, the orders were, at para. 27: 

1. Co-Operators is ordered to defend the defendants in the action. 

2. The defendants are permitted to appoint their own solicitor. 

3. The defendants will have the conduct of the action subject to the 

following caveat. 

4. Co-Operators will pay all reasonable fees and disbursement of the 

solicitors appointed by the defendants. 

5. The solicitors so appointed shall report to Co-Operators with respect 

to matters not in dispute between the defendants and Co-Operators. 

6. In particular, the solicitors so appointed shall communicate any 

settlement offer to Co-Operators. 

7. The defendants shall not settle any claim without the written consent 

of Co-Operators. 

8. If the defendants shall refuse to consent to any settlement consented 

to by Co-Operators and shall elect to continue to defend the action 

then Co-Operators' liability (should there be coverage) shall not 

exceed the amount for which the action could have been settled plus 

the reasonable defence costs incurred up to the date of such refusal. 


[81] With respect to the particular provisions dealing with settlement, Russell J. 

noted that there was evidence of a concern of the insurer that, given the mandate of 

the insured, any counsel appointed by it might choose to ignore a reasonable 

settlement offer and proceed to trial for philosophical reasons, expecting that the 

insurer would bear the final cost. No such evidence was adduced in the present 

case. 

[82] The declarations sought by the Insured in this regard go beyond the relief 

granted in Morrison in which, the Court of Appeal upheld the application judge’s 

order at para. 24 that:



The Applicant is permitted to conduct his own defence to this action with legal 

counsel of his choosing and the Co-Operators is responsible for paying all 

fees of such counsel on a solicitor/client basis and disbursements incurred to 

date together with all future fees and disbursements at the hourly rate 

normally charged by such legal counsel. Counsel chosen by the Applicant is 

not required to report to the Co-Operators with respect to any matters bearing 

on the issue of liability. 

[83] In my view, the relief granted in Morrison is appropriate for the circumstances 

in the present case. Here, unlike Cansulex, the coverage dispute is being resolved in 

advance of settlement of the Underlying Claim. Here, as in both Morrison and 

Encon, there is a conflict that necessitates the insured being granted conduct of the 

defence. However, unlike the situation in Encon, there is no evidence of concern 

with respect to settlement; rather, the concern is with respect to conflict going to 

liability. 


Disposition 

[84] In the result I grant the following relief: 

(a) 

(b) 

(c) 

the application of Aviva is dismissed; 

a declaration that Aviva is, and at all material times has been, under an 

obligation to pay for the defence of the BCMA and Individuals against 

the claims brought against them by Caroline Wang as set out in the 

Statement of Claim filed August 7, 2009 in the Supreme Court of 

British Columbia, Vancouver Registry Action No, 509577, and as set 

out in the Consolidated Notice of Civil Claim filed September 27, 2010 

in the Wang Action; 

BCMA and the Individuals are permitted to conduct the defence to this 

action with legal counsel of their choosing and Aviva is responsible for 

paying all fees of such counsel on a solicitor/client basis and 

disbursements incurred to date together with all future fees and 

disbursements at the hourly rate normally charged by such legal 

counsel. Counsel chosen by BCMA and the Individuals is not required



to report to Aviva with respect to any matters bearing on the issue of 

liability; and 

(d) 

BCMA and the Individuals are entitled to their costs. 

“Ross J.” 

2011 BCSC 1399 (CanLII)

in the supreme court of british columbia - Clark Wilson LLP

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