Law Times

PAGE 12 FOCUS January 16, 2012 • Law Times Court clarifies duty to defend Ontario case deals with couple's action against real estate lawyer BY KENNETH JACKSON For Law Times A title insurance company says it welcomes an On- tario court's direction on its duty to defend. "We appreciate and will follow the guidance the court has pro- vided," said Sandra Thwaites, vice president of claims and compli- ance at Stewart Title Guaranty Co. The comments come as a court decided a real estate law- yer facing a lawsuit by his for- mer clients in a residential trans- action won't have to pay for his defence costs. Henri Charlebois allegedly acted as the lawyer for both the sellers and buyers of a lakefront property that backed onto Lake Ontario in Burlington, Ont., only to find out aſter the deal that the prior owners had built a retaining seawall without a permit. The local conservation au- thority issued a work order re- quiring the construction of an- other seawall out of the buyers' pocket. The buyers, Jill and Paul Hardy, said they incurred signifi- cant costs in doing so. The Hardys had obtained title insurance through Stewart Title. They subsequently sued Char- lebois and others, including their agent, in December 2007. They allege Charlebois is re- sponsible because he failed to un- dertake searches that may have detected the problem with the seawall in the first place prior to the deal's close. In the meantime, Charlebois launched his own action to de- termine Stewart Title's "duty to defend pursuant to an agreement entered into by Stewart Title with the Law Society of Upper Canada," according to a decision in December by Superior Court Justice Sidney Lederman. Lederman agreed that the title insurance policy covered the claim against Charlebois. As a re- sult, he determined Stewart Title had an obligation to indemnify Charlebois and pay his defence costs in responding to the claim against him by his former clients, says Toronto lawyer Gavin Tighe, who acted on behalf of Char- lebois along with James Cook of Gardiner Roberts LLP. "In a nutshell, the case is an application between a real estate lawyer and Stewart Title," says Tighe. "Pursuant to an agreement between the LSUC on behalf of all lawyers in the province and each of the title insurers, including Stewart Title, title in- surers agreed to indemnify and CANADIAN Gavin Tighe represented lawyer Henri Charlebois on the court appli- cation related to defence costs. save harmless any lawyer who is sued by their clients relating to a title-insured transaction for any claim that could be covered under the title insurance policy, including defence costs." For its part, Stewart Title says it appreciates the court's direc- tion on the issue. "However, we can advise that in the majority of cases, the indemnity's applicability is straightforward and it serves its intended purpose," said Thwaites. "In rare circumstances such as this where, based on the facts present- ed, it is unclear as to whether the indemnity coverage is triggered, guidance from the courts is re- quired as to its applicability. " To date, the Hardys have in- curred engineering costs of ap- proximately $175,000 to conduct the shoreline repair work, ac- cording to the statement of claim filed on Dec. 17, 2007. The Hardys allege Charlebois breached his duty of care and con- tractual obligations because he didn't give them any advice about the necessity of having the approv- al of the conservation authority, nor did he review or discuss with them the risks of closing without such an inquiry. None of the alle- gations have been proven in court. But prior to their action, they LAW LIST 2012 YOUR INSTANT CONNECTION TO CANADA'S LEGAL NETWORK Inside you will find: of more than 58,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. MORE THAN A PHONE BOOK Prices subject to change without notice,to applicable taxes and shipping & handling. Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation CANADIAN LAW LIST CLL_LT_Feb_12.indd 1 www.lawtimesnews.com 12-01-12 9:42 AM had Charlebois contact Stewart Title to seek coverage under the policy for the costs to fix the sea- wall. According to Tighe, Stewart Title responded a week later say- ing the policy didn't cover the claim on the basis that there was no evidence that a local authority search would have revealed any adverse matters; it didn't provide coverage for issues relating to fu- ture use; and it excluded coverage relating to any environmental is- sues. The Hardys then sued Char- lebois and the others. Cook wrote Stewart Title on Feb. 15, 2008, to say the com- pany had to cover his client un- der the indemnity agreement. A few weeks later, Stewart Title re- sponded that it wouldn't extend the indemnity to Charlebois be- cause further use of the property wasn't a "covered title risk" under the policy. It argued as well that Charlebois ought to have been aware that an inspection by the conservation authority was nec- essary and that the Hardys' claim dealt with "legal services provid- ed" rather than a title defect. Charlebois then sought a dec- laration that the insurance com- pany was responsible under the indemnity agreement. Tighe notes Lederman re- ferred to previous case law in coming to the decision, including a 2009 matter "wherein which it was held that the obligation to save the lawyer harmless encom- passes the duty to pay defence costs of any claim arising under the title insurance policy. To save a person harmless does not mean restoring a person to his or her former state aſter suffering harm. Saving someone harmless is an obligation that goes beyond the obligation to indemnify." LT

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