Personal injury suffered rather than economic loss raises personal liability for director's negligence
The Alberta Court of Appeal (ABCA) in Hall v. Stewart recently confirmed that a director can be held liable for a workplace accident where the director had a certain degree of participation in, and no workers’ compensation board (WCB) coverage for, the incident. In this case a director of a company was performing work in a negligent manner, which caused personal injury to other workers, and was held personally liable for the resulting injuries. Companies with boards of directors are reminded that directors may be held personally liable in torts for workplace accidents. This case emphasizes that employers and directors should consider purchasing additional coverage from the WCB, particularly when directors have a degree of supervision or oversight over certain workplace tasks.
Background
Doug Stewart was a director of DWS Construction (DWS), which acted as a sub-contractor in the construction of a new home. DWS installed a staircase that was prefabricated offsite by a third party, which later collapsed on the claimants, who were employees of another sub-contractor, causing them injuries. Stewart both participated in and supervised over the installation of the staircase.
Under the WCB system in Alberta, there exists a dual regime of statutory no-fault compensation and immunity from suit, wherein injured claimants lose their cause of action against employers and fellow employees and are instead compensated by the WCB. This regime does not apply to directors unless they purchase additional coverage from the WCB, pursuant to section 15 and 16 of the Act. Stewart did not purchase additional coverage.
As DWS was an employer, WCB was prohibited from suing it. WCB brought an action for subrogation against Stewart individually to recover the amount paid by WCB to the claimants.
Summary dismissal application
Stewart applied for summary dismissal of the action against him, on the basis that any alleged negligence committed by him would have occurred as part of his duties as an employee of DWS and not as an officer. A master in chambers granted that application on the basis that there was no conduct by Stewart that went beyond the scope of his employment. On appeal, a chambers judge agreed.
The ABCA decision
On appeal, the central issue was whether Stewart was personally liable for tortious conduct committed in his capacity as a director or employee of DWS. In setting aside the summary dismissal of the action, the ABCA held that Stewart could not escape personal liability for any personal injuries caused to the claimants as part of a negligent act, even where his involvement was part of the business of DWS. The ABCA left the remaining issues as to whether the staircase was negligently installed, whether the negligence caused it to fail and if the claimants’ injuries resulted from that negligence were left for trial or another dispute resolution forum.
The court confirmed that both DWS and Stewart owed a duty of care in tort with respect to the installation of the staircase, however, DWS was immune due to the operation of the Act where it might otherwise potentially be liable, while Stewart did not benefit from such immunity.
The court held that the deciding factor of the case was the nature of the damage: personal injury. This case turned on the facts, as it was critical that the harm done involved physically injured plaintiffs, rather than pure economic loss.
The court found that the work that caused the injury was done on behalf of the corporation, was in the best interest of the corporation, and did not reflect any personal interest of the respondent. It could not be said that the respondent’s allegedly negligent conduct was in any respects “independent” of the business of the corporation. Despite these negating factors, the court found that there was clearly a duty of care owed to those using the installed staircase. Due to public policy reasons, the Court stated that DWS could not be used as a method for providing immunity to corporate actors for losses of this nature. The court found Stewart personally liable for the claimants’ injuries.
Takeaways
This case serves as a reminder that directors may be personally liable in torts for workplace accidents. As such, directors and employers should consider purchasing additional coverage from the WCB to be classified as workers when they know they will be engaging in work or supervision on job sites. Another option is to obtain general commercial liability insurance specifically for personal injury and property damage, where applicable or necessary. These additional steps to protect directors may prove critical as Hall has confirmed increased exposure to liability.
Danielle Douglas is an associate with McCarthy Tétrault's Labour and Employment Group in Calgary. She can be reached at (403) 260-3650 or [email protected].
Simran Choongh co-wrote this article. She is an articling student with McCarthy Tétrault in Calgary and can be reached at [email protected].
