BC Court has jurisdiction for coverage dispute between American company and American insurer

Insurer’s territorial competence motion for US-made policy relating to losses in BC was dismissed

Insurance law – Liability insurance – Pollution – Breach of policy – Practice – Jurisdiction – Location of contract

International Raw Materials Ltd. v. Steadfast Insurance Co., [20023] BCJ No. 1589, 2023 BCSC 1389, British Columbia Supreme Court, August 10, 2023, W.P. Riley J.

The insured, a company incorporated in Pennsylvania, was the subject of 11 vehicle damage claims in BC arising out of multiple chemical spills. The insurer, a company incorporated in Illinois, provided the insured with pollution liability coverage. The insurer initially denied coverage for the spills but then later changed its position to say its liability was only in excess of other liability insurance. The insured brought an action for breach of contract against the insurer in BC. The insurer brought a preliminary motion to determine territorial competence. The insurer argued that the action was effectively a contractual dispute between two US-based companies about a contract entered into in the US. The court found in favour of the insured on several bases.

First, the court found there was a good and arguable basis of a real and substantial connection between BC and the facts on which the action was based under s.10(e)(i) and (h) of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c.28 (“CJPTA”), for which the insurer had failed to rebut on a plain and obvious test. In particular, the court noted that jurisdiction where contractual obligations are to be performed is not necessarily limited to where the contract was executed and that the duty to defend contemplated the insurer’s active participation in litigation where a claim arose such that the court was not convinced by the insurer’s argument that it could simply fulfill its contractual obligations by paying out funds in the US. Further, the court concluded that the facts alleged in the pleadings and the supporting affidavits by the insured supported that the insurer was carrying on business in BC, notwithstanding that it was incorporated and entered into the contract in the US.

Second, the court found that the insurer had submitted to the jurisdiction of the court in BC because it had filed a response to a civil claim which included both a plea of jurisdiction and substantive defences to the coverage claim before filing a jurisdiction response, contrary to the rules, and then filed its jurisdictional response four months later with no explanation for the delay. On these bases, the court concluded the insurer could not take the benefit of an exception under Rule 21-8(5)(a).

Third, the court was not satisfied that it should otherwise decline to exercise jurisdiction under s. 11 of the CJPTA. In coming to this conclusion, the court noted the policy did not identify the governing law, the policy offered “worldwide” coverage without a forum selection clause, and that it was more appropriate for the same court to determine the quantum of the insured’s liability for the vehicle damage claims and extent and limits of the indemnity owed by the insurer to the insured.

This case was digested by Michael J. Robinson, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Michael J. Robinson at [email protected].

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