The Supreme Court of Canada has provided some welcome guidance on the law of causation, with the release of its decision in Clements v. Clements, 2012 SCC 32.
As much as the Court insisted before that decision that there was only one test for factual causation, the cases actually articulated two tests: the “but for” test, and the “material contribution” test.
Proof that the Plaintiff’s damages would not have arisen “but for” the Defendant’s negligence has been the primary test for causation, but the Courts have continually stated that under certain circumstances, the Plaintiff can succeed by showing that the Plaintiff’s negligence “materially contributed” to the damages.
What that has meant, and when it applies has been the subject of some debate.
Where an insured receives a demand that specific action be taken, failing which remedies will be pursued in court, this is sufficient notice of a potential claim, within the terms of an errors and omissions policy, such that if the claim is ultimately pursued in court, no duty to defend will be triggered.
Hemeon v. District of West Hants, 2008 NSSC 234 examines the interplay between section 69.4 of Canada’s Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”), and section 28 of Nova Scotia’s Insurance Act, R.S.N.S. 1989, c. 231.
The BIA provides for an automatic stay of proceedings in all litigation against a person who makes an assignment in bankruptcy, but then permits that stay to be lifted if the applicant can demonstrate that it will be “materially prejudiced” by the stay, or that lifting the is “equitable on other grounds”.
The Insurance Act provides that if a person obtains judgment against another for which there is insurance, and execution against the judgment debtor is returned unsatisfied, then the judgment creditor can bring the same action against the insurer, and the insurer will be liable up to the face value of the policy.
Although the case is based on Nova Scotia legislation, most provincial insurance legislation contains provisions similar to those interpreted in this case.