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Timely Notification Essential

Published in the November 2006 issue of Litigation Notes - View Article

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Ideal Roofing Company Ltd. (“Ideal”) sold roofing products and services in Canada and the Untied States under the name “Heritage”. In March of 1999, an American company known as Tamko asked Ideal to cease using the name “Heritage”, as it was a trademark held by Tamko. Attempts to resolve the dispute were unsuccessful and Tamko commenced an action in August of 1999 in New Hampshire. In August of 2000, following a 7 day trial, Tamko was awarded injunctive relief and damages of more than one million dollars plus costs.

In May of 2000 Tamko commenced an action in the Federal Court of Canada relating to the infringement of the Heritage trademarks in Canada. This action was eventually settled pursuant to an agreement dated October 13, 2004. Ideal sought reimbursement of the defence expense incurred in the Canadian litigation from its insurer Royal and Sunalliance (“Royal”). Royal declined to pay, because it had not been provided with timely notification of the claim, which had occurred in May of 2000. Ideal offered varying explanations for this delay, initially saying that they didn’t feel that they could lose the lawsuit or negotiate a reasonable settlement and later explaining that they didn’t know that they had available insurance coverage until May of 2000.

Ideal argued that it should be entitled to relief from forfeiture with respect to its failure to provide timely notification of the claim. Royal cited caselaw to the effect that where prejudice has been suffered, relief from forfeiture should not be available. The Court held that there was overwhelming prejudice to the insurer, because it had lost the opportunity to attempt to negotiate a reasonable settlement of the claim by Tamko. The argument that timely notification had been given with respect to the Canadian lawsuit was not relevant because an insurance policy “…cannot be resorted to by the insured in regard to one particular lawsuit as distinct from another, when both have a common genesis as is the case here…it is the claim that triggers the notice provisions of the insurance contract, not the Canadian lawsuit which was simply an extension of rights already litigated in the U.S.A.”.