Often lawyers, architects, engineers, accountants, real estate agents and brokers or other professionals are sued for professional malpractice and want to assert a counterclaim against the claimant for unpaid fees.

In an American professional liability case, the insurance company agreed to defend the insured corporation against a lawsuit alleging discrimination by reason of age. The insured corporation also demanded that the insurance company proceed with a counterclaim against the former employee for misappropriation of company funds. The insurance company refused to pay for any such counterclaim or to have its defence counsel pursue that counterclaim.

The American court found that the insurance company’s duty to defend the corporation did not include an obligation to proceed with a counterclaim. The insurance policy only required that the insurance company defend E&O claims made against the insured firm.

The court rejected the insured corporation’s argument that the claim against it and the counterclaim were inextricably intertwined. The court found it was not necessary to defend the age discrimination claim by necessarily bringing the counterclaim. In other words, even if the employee misappropriated corporate monies, he still may have been discriminated against by reason of age. It would be up to the corporation to bring its own claim for misappropriation of corporate monies at its own expense and with its own counsel.

Further, there was no conflict of interest between this division of responsibility of defence and prosecution of a counterclaim between the insured corporation and the insurance company. (Mount Vernon Fire Insurance Company v. Visionaid Inc.) Full case summary.

Restrictive covenant unenforceable 

In a B.C. case, a restrictive covenant was registered against strata lots in a resort hotel, providing that no lot could be rented to the public except in accordance with a rental pool management agreement. In other words, the resort’s rental manager would rent out the units.

The defendant, who owned one of the lots, began renting privately. An action was brought for an injunction against the defendant.

The Court of Appeal in British Columbia held that restrictive covenants must be “clear” and one prohibiting rental of units to the public stated it must be done in accordance with an agreement between the owner of the unit and the rental manager.  The court found that the agreement was not attached or incorporated into covenants for the lots and the agreement did not exist when the covenant was created. There was no certainty as to the terms of the agreement and there was no determination by which units could be identified to be rented. Therefore, this agreement was simply an agreement to agree, which is unenforceable.

The court noted that the rental manager under the covenant could have unilaterally changed the terms on which units could be rented and therefore there was lack of certainty. (585582 B.C. Ltd. v. Anderson, 2015 BCCA 26) Full case summary at www.canlii.org.


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