Covenant To Insure Can Act As A Complete Bar To Subrogated Claims

On February 9, 2015, the Ontario Court of Appeal released a significant decision in Sanofi Pasteur v. UPS SCS, Inc., 2015 ONCA 88, which will severely restrict insurers from bringing subrogated claims where their insureds have covenanted to obtain insurance for their property.  Furthermore, the Court has extended the protection beyond the parties to the contract.

In Sanofi Pasteur, the Respondent stored the Appellant's vaccines in a dedicated, temperature-controlled warehouse. As required by the storage contract between them, the Appellant covenanted to insure its vaccines for the full replacement cost under an all-risks policy. Pursuant to the same contract, the Respondent was liable to a maximum of $100,000 solely due to its negligent acts or omissions.