HERITAGE Case highlights insurance issues

The case of Ideal Roofing Company Limited v Royal & SunAlliance Insurance Co of Canada, underlines the importance of promptly putting one's insurance company on notice when infringement claims are made, if an insured hopes to be indemnified pursuant to an insurance contract.

In March 1999 Ideal Roofing Company Limited received a cease and desist letter demanding that Ideal Roofing refrain from using the trademark HERITAGE in Canada and in the United States. A lawsuit was later initiated in New Hampshire, resulting in a judgment granting an injunction against Ideal Roofing.

On May 1 2000 a Federal Court action was commenced in Canada against Ideal Roofing, which eventually settled.

Sometime between May 24 and May 29 2000 Royal & SunAlliance Insurance Company received notice of the claims made against Ideal Roofing. The notice was subsequent to the delivery of a statement of claim in the Federal Court of Canada and Ideal Roofing's filing of its statement of defence.

Among other things, the facts revealed that Ideal Roofing did not report to its insurance company earlier because (i) it did not feel it would lose the lawsuit, or (ii) it believed it could negotiate a settlement.

Ideal Roofing later indicated that the failure to notify was due to the fact that the company was unaware of its possible insurance coverage until sometime in May 2000.

The case at hand deals with a motion by the insurer, Royal & SunAlliance, for summary judgment dismissing the insurance claim for failure to provide timely notice of the claim. The insurer claims that Ideal Roofing's failure "to adhere to ... contractual notice obligations at the outset [had] caused irreparable prejudice". The court agreed and indicated that the insurer:

"had no opportunity to gauge its chances of success in the threatened action, consider the cost consequence of proceedings or of attempting to otherwise ameliorate the demands of [the plaintiff in the infringement case] in order to achieve a sensible compromise ... this lost opportunity resulted in obvious and overwhelming prejudice to the insurer."

This case is a good reminder to trademark owners to check the provisions of their insurance contracts to see if their policies provide for reimbursement of expenses in legal actions and, if so, to ensure that the appropriate timeframe for notice is met.

Toni Ashton, Sim & McBurney, Toronto