A forestry company is planning its next major project in a northern region of the province. It obtains the required permits and engages in what it believes to be consultation with Aboriginal communities in the affected region. Aboriginal leaders are informed of the project’s scope and duration, and all signs point towards a mutually beneficial relationship in moving forward with the project.
Preparations are made and the harvesting operations commence. The project is moving along according to plan. However, two weeks into harvesting operations, the company is served with a Statement of Claim where an Aboriginal group is seeking an injunction on harvesting operations, the quashing of all forestry permits, and most alarmingly, substantial monetary compensation for impacting Aboriginal or Treaty rights.
The project now faces a challenge. Uncertainty abounds. Will the litigation be successful and the permits quashed? Will the company have to pay the Aboriginal group damages for breaches of Aboriginal or Treaty rights? If so, how much? How long will the litigation take? What effect will this challenge have on the long term viability of the entire project?
But, there is a more immediate matter. Litigation costs money. Regardless of the strength of the company’s case, does it have enough funds to engage in litigation at all? The prospect of the company spending its funds on defending litigation is hardly appetizing, but is there any other option?
One possible option is to look at the insurance policy (sometimes known as a Commercial General Liability or CGL policy) that most companies have. Does that insurance policy have any role to play in this saga? In looking at whether an insurance policy would respond to a claim for impacts on Aboriginal and Treaty rights, there are three issues to consider:
- Is the claim for damages (i.e. money)?
- Is an impact on Aboriginal or Treaty rights “property damage” under the policy?
- Did any property damage arise because of an “accident”?
First, as a general rule, insurance only covers claims for damages. As such, if a statement of claim is seeking only an injunction and the quashing of permits, the insurance policy would likely not be triggered. However, if the statement of claim only seeks damages or damages in addition to an injunction or quashing of permits, there is a very strong argument that the insurance policy could be triggered.
Second, in order for there to be coverage under a standard insurance policy, there must be some type of “property damage” alleged. The average liability policy requires that property damage be either physical injury to personal property or loss of use of tangible property. Aboriginal and Treaty Rights are by their nature property rights. The clearest example is Aboriginal title where an Aboriginal group could, in essence, “own” the land on which a resource company is attempting to operate. Further, an Aboriginal right or Treaty right to hunt for food is proprietary in nature as well. The right allows an Aboriginal person to go onto land and harvest animals (animals can be considered property). It could be said that if a resource development interferes with game, then there is a property damage to the Aboriginal group.
Third, the real issue is whether the “property damage” is an “accident.” If there is no accident, then there is no insurance coverage. If there is an accident, then there very well may be insurance coverage. As noted by the Supreme Court of Canada in the case of Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada , 2010 SCC 33, accidents are normally seen as events that are neither expected nor intended by an insured.
It is arguable that the normal day-to-day operations of a forestry company are not an “accident.” If, in the course of harvesting trees, a machine caught fire and burned down the trees in the area, that can clearly be seen as an accident. Can the same be said where a forestry company goes out to harvest trees which, it is alleged by an Aboriginal group, then impacts on their Aboriginal or Treaty right? It could be said that resource developments do not happen by “accident.”
It can be said in response that the company had no intention of harming Aboriginal and Treaty rights and acted in good faith on what it believed were the appropriate permits. As such, any impacts on Aboriginal and Treaty rights were not intended when the company went forth to harvest trees. In this way, while the resource developer intended to harvest trees, it did not intend or expect that its actions would cause harm to an Aboriginal group. As such, the actions of the company were “accidental” under an insurance policy.
In the end, if an insurance policy is triggered, the insurer would likely be responsible to pick up the tab of the legal costs in defending the claim and the costs of any settlement or judgment (if any). However, it would normally be the case that the insurer, and not the company, would control the defence. This may not be appetizing for a resource developer, as the insurer may want to take a strong position in the litigation with an Aboriginal group. This, in turn, may pose issues for any relationships the resource developer is seeking to develop with the Aboriginal group.
Risk is inherent in business. Any business does what it can to mitigate risk– be it through safeguards in its operations and/or purchasing insurance. In recent times, the risk that a resource developer will be sued in damages for interfering with Aboriginal and Treaty rights has increased. How resource developers deal with this risk remains a challenging question, especially where it is not manifestly clear that the standard insurance policy would apply to assist a resource developer.
This article was originally written for the Mid-Canada Forestry & Mining Magazine and is re-published with permission.
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