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Insurance - Multiple policies - Priority between policies - Whether Family Insurance Corp. v. Lombard, [2002] 2 S.C.R. 695, applies to a resolution of priorities between a primary carrier and an umbrella carrier - Whether the principles set out in Family Insurance Corp. are of universal application or limited only to consideration of the priorities between primary policies - Whether there is a separate determination process for disputes between primary, umbrella, and excess carriers - What constitutes a coordinate obligation to make good the loss? - Whether there was a coordinate obligation to make good the loss between an umbrella and a primary carrier.

On August 16, 2002, a collision occurred between two boats. A number of actions for damages have been commenced against the driver of the boat. Three insurance policies provided coverage to the driver: (i) a boat owner’s liability policy issued by State Farm to the owner, (ii) a personal liability umbrella policy issued by State Farm to the owner, and (iii) a home owner’s policy issued by Dominion to the driver’s father. The boat owner’s liability policy provided primary coverage, but a dispute arose over which of the other two policies provided secondary coverage.

The home owner’s policy agreed to pay “all sums you become legally obligated to pay”, whereas the State Farm personal liability policy agreed only to pay “your net loss minus the retained limit”, where “net loss” was defined, in part, as “the amount you are legally obligated to pay as damages for personal injury or property damage”, and “retained limit” was defined, again in part, as “the total limits of liability of any underlying insurance you may collect”, the limits in the declarations being “the minimum you must retain”. The personal liability policy’s “other insurance” clause also provided that that policy “is excess over any other valid and collectible insurance”. The personal liability policy also required the existence of an underlying primary policy with minimum liability limits of $300,000 as a condition of coverage, whereas the home owner’s policy set out no similar conditions. The home owner’s policy had a liability limit of $1,000,000 and a premium of $659.34; the personal liability policy also had a liability limit of $1,000,000, but had a premium of $125.28.

Speigel J. ordered that, after the boat owner’s liability policy had been exhausted, the home owner’s policy and the personal liability policy were to contribute equally to the claims. On appeal, it was found that the home owner’s policy was prior to the personal umbrella.