Superior Court declines to decide whether professional liability insurer had duty to indemnify

In a case involving two professional liability policies, the Ontario Superior Court of Justice found it premature to determine whether an insurer had an obligation to indemnify and which policy or liability limit would apply, if any. 

Krandel v. CPA Professional Liability Plan Inc. et al, 2026 ONSC 262, revolved around the following professional liability policies the respondent insurance company had issued to the applicant, a chartered professional accountant who had ceased his practice in 2023: 

• the 2018 policy, with a $1 million liability limit, for the period of July 3, 2018, to July 3, 2019 
• the 2021 policy, with a $2 million liability limit, for the period of July 3, 2021, to July 3, 2022 

The intervenors in this case were D. Herzog and M. Pearl. In 2019, Herzog and other plaintiffs commenced an action against the applicant. In 2021, Pearl initiated an action against the applicant. 

The applicant applied for a declaration that the insurer had a duty to indemnify him. He alleged that the intervenors’ actions constituted distinct claims under the 2018 and 2021 policies. He added that he could avail of the liability limits of both policies. 

The insurer countered that the application was premature. The insurer argued that: 

• The applicant was seeking a declaration before the court had decided the intervenors’ actions and thus before any obligations to indemnify had arisen 
• To decide the present application, the court would have to make factual findings regarding the relationship between the intervenors’ two actions and the circumstances in which they arose 
• There was a risk of inconsistent and prejudicial findings 

Alternatively, the insurer alleged that the intervenors’ actions constituted a single claim and that any indemnity owed to the applicant in connection with the actions was subject to the 2018 policy’s $1,000,000 liability limit. 

The insurer explained that: 

• Under the policy, all demands or allegations arising from a common set of circumstances constituted a single claim, deemed to be first made and reported when those circumstances were first reported 
• The intervenors’ actions arose from a common set of circumstances that the applicant first reported to the insurer within the 2018 policy period 
• The 2018 policy did not exclude the Pearl action from coverage merely because Pearl had filed the action after the 2018 policy’s expiry 

The intervenors asserted that: 

• The policies were “claims made” policies requiring the making and reporting of claims within their respective policy periods 
• The 2018 policy applied to the Herzog action, as Herzog made and reported the claim during the 2018 policy period 
• The 2021 policy applied to the Pearl action, as Pearl made and reported the claim during the 2021 policy period 

Alternatively, the intervenors contended that they had two separate claims because their actions contained factually distinct allegations in terms of the relevant taxpayers, the time periods, and the subject matter, with the professional negligence claims against the applicant being the only commonality. 

Application found premature

According to the Ontario Superior Court of Justice, under the correct interpretation, the 2018 policy considered all demands or obligations arising from a common set of circumstances as a single claim, regardless of when the claimants made and reported them. 

Thus, the court deemed it premature to make factual findings regarding whether there was a common set of circumstances giving rise to the intervenors’ actions. 

Based on its review of the relevant cases, the court ruled that answering the questions of whether an insurer had the obligation to indemnify and under which policy or liability limit, if any, would depend on the policy’s specific wording and the particular facts. 

While it would be possible, in some cases, to answer those questions based on the allegations, the court said it would be premature to do so in this case. The court explained that it would have to tackle factual issues that might also be in issue in the underlying litigation and that might impact the defence. 

The court held that the underlying litigation, with its complete evidentiary record, was the proper forum for making factual findings about the circumstances giving rise to the claims. The court noted that the insurer might adjust its coverage position based on those findings. 

Lastly, given its determination that this application was premature, the court found it unnecessary to decide whether the intervenors’ actions constituted a single claim under the 2018 policy.