"Blinkmanship" In Overlapping Coverage And Insurer Disputes: Aviva v. Lombard 2013 ONCA 416

In January 1995 a fire destroyed a Toronto apartment building. Eight legal proceedings were brought against various defendants including the building's owner, Axes Investment Inc. ("Axes") and the property manager, Tandem Group Management Inc. ("Tandem").

Three policies of insurance were available to Axes and Tandem to respond to the loss; two with Lombard and one with Aviva:

1. A Lombard primary policy, with limits of $1 million, insuring both Axes and Tandem;
2. A Lombard umbrella policy, with limits of $9 million, insuring both Axes and Tandem; and
3. An Aviva policy with limits of $5 million insuring Tandem only.

In the tort action Lombard acknowledged that its primary policy was the first to respond and retained counsel to defend both Axes and Tandem and funded this defence. Although entitled to do so, Aviva did not participate in the defence of the tort actions or retain its own counsel for that purpose.