Covenants to insure: "All insurance" may not mean "fully covered"

6 minute read
05 July 2023


In Jakab v Clean Harbors Canada Inc[1]., the Ontario Court of Appeal considered contractual provisions regarding insurance for a commercial vehicle. This case highlights the importance of reviewing insurance coverage obtained pursuant to the terms of a commercial agreement.


The appellants, Gergely Jakab and his corporation, Ontario Heavy Xpress Ltd. (collectively, Mr. Jakab) owned and operated a truck to work exclusively for the respondent, Clean Harbors Canada Inc. (Clean Harbors).

In 2017, Mr. Jakab and Clean Harbors entered into a National Transportation Lease Agreement (the Contract), Mr. Jakab agreed to provide freight haulage and furnish trucking equipment to Clean Harbors.  The Contract expressly provided as follows with respect to insurance:

  1. Clean Harbors will make all insurance, except non-owned trailer legal liability coverage, available to the Contractor for the purpose of insuring the Equipment and the Contractor under policies of insurance obtained and maintained by Clean Harbors. The insurance made available to the Contractor by Clean Harbors shall only provide coverage for claims or losses arising while the Contractor is performing obligations or services under this Contract.
  2. The insurance coverage made available by Clean Harbors to the Contractor shall be subject to (a) a limit of coverage not exceeding $5,000,000, and (b) the terms and conditions of the policies of insurance from time to time obtained by Clean Harbors, including without limitation, all exclusions of liability contained in such policies. Clean Harbors makes no representation or warranty with respect to the extent or adequacy of the insurance coverage made available by it and assumes no responsibility for the adequacy of such insurance. The Contractor shall be solely responsible to satisfy himself as to the adequacy of the coverage afforded by such insurance.

Mr. Jakab claims that sometime after the Contract was executed, he asked a representative of Clean Harbors if the truck was "fully covered" and that he was told that it was. Mr. Jakab did not request to review copies of the insurance.

In 2018, the truck caught fire, and was destroyed. Mr. Jakab retained a lawyer to assist in recovering the value of the truck from Clean Harbors or its insurer. Clean Harbors' insurer responded that there was no comprehensive or all perils coverage under the Clean Harbors' policy to cover damage to the truck.

Mr. Jakab sued Clean Harbors for damages, alleging:

  1. Breach of contract because the Contract provided that Clean Harbors would make all insurance available to Mr. Jakab.
  2. Negligent misrepresentation because, after the Contract had been completed, a Clean Harbors employee represented to Mr. Jakab that he was "fully covered."

Breach of contract

The Trial Judge dismissed Mr. Jakab's claim with respect to breach of contract.[2]  The Trial Judge found that Mr. Jakab did not meet his onus of establishing that the Contract obligated Clean Harbors to purchase first-party property damage insurance coverage for the truck.

The trial judge concluded, and the Court of Appeal affirmed, the Contract could be interpreted to mean "make available", suggesting an obligation to provide access to something already held (i.e. insurance held by Clean Harbors) as opposed to an obligation to obtain and maintain something new.

The Court further observed that the contractual requirement for Mr. Jakab "to satisfy himself as to the adequacy of the coverage afforded by such insurance", would be rendered meaningless if Clean Harbors was required to secure and maintain insurance for all risks. Finally, an affirmative obligation for Clean Harbors to secure and maintain comprehensive or all perils coverage would conflict with a term that imposed the sole responsibility for loss or damage of the truck to Mr. Jakab, suggesting that Mr. Jakab might obtain his own insurance.

The Court concluded that there was no breach of contract in Clean Harbors failing to arrange comprehensive coverage for the truck.

Negligent misrepresentation

The Trial Judge also dismissed Mr. Jakab's claim with respect to negligent misrepresentation.  The Trial judge was "not convinced" that there was a duty of care based on a special relationship necessary to make out negligent misrepresentation.  The Trial Judge also held that Clean Harbors could not be seen to have acted negligently in stating Mr. Jakab was "fully covered" as there was no evidence as to what the Clean Harbors representative meant in making this statement. 

On appeal, the Court of Appeal found that the Trial Judge made errors in principle in applying the test for negligent misrepresentation.  A new trial was ordered with respect to material misrepresentation.

Key takeaways

Where a commercial agreement requires one party "make…available" insurance, the insurance obtained and maintained will, subject to other contract terms, be sufficient, even if it does not cover all damage.  The party ultimately responsible for the property insured and favoured by such a clause should review the coverage actually obtained with their insurance broker or other insurance professional to insure that it is adequate, not only for the business terms under the commercial agreement but the value of the property insured. 

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