Millennium Insurance Corporation v Kapeluck, 2025 ABCA 82 (CanLII)
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By: Fiona Costello
The original action giving rise to this appeal involved homeowners, James & Joanne Kapeluck’s seeking damages for negligence and breach of contract relating to the construction of their home. The Kapeluck’s pursued their claim against multiple defendants, among which were the builders and Millennium Insurance Corporation, the builder’s home warranty insurer.
By May 2023, Millennium had paid approximately $140,572 on account of the respondents’ home warranty coverage. The respondents subsequently reached a settlement with certain construction defendants through a Pierringer agreement. Under this agreement, the settling defendants were released from the litigation and the remaining defendants remained liable only for their proportionate share of any loss. The chambers judge approved the settlement and Millennium appealed, contending that the agreement prejudiced its right of subrogation against the settling defendants. Millennium’s appeal was ultimately dismissed.
The court found no evidence that Millennium intended to advance a subrogated claim or expected the respondents to assert one on its behalf. In fact, Millennium did not involve itself in any aspect of the prosecution of the respondents’ action—including contribution toward legal fees—until the respondents sought court approval of the Pierringer agreement.
Millennium argued it was not required to actively pursue any subrogated claims or provide notice of its intention to assert those claims. Millennium submitted that its right of subrogation was “inherent” in the respondents claims and that the pleadings were so “broad and all-encompassing” that they should be read to subsume or include its claims.
The court rejected this argument. Millennium was named as a defendant, and the statement of claim referenced nine notices the respondents filed with Millennium, stating that “the Defendant Millennium has not remediated the Defects or the damage despite repeated requests.” These aspects of the claim demonstrated that the respondents were not advancing any subrogated claim on Millennium’s behalf. Millennium’s assertion of a right of set-off against the respondents further confirmed that the parties were adverse in interest.
The court relied on Tree-Techol Tree Technology v VIA Rail Canada Inc, 2017 ONSC 755, aff’d 2017 ONCA 876, for the proposition that an insured has no contractual or statutory obligation to include an insurer’s subrogated interest in its own action; only when an insurer chooses to pursue such a claim is an insured required to cooperate and refrain from any steps that may compromise the insurer’s claim. Applying these principles, the court concluded that an insurer cannot remain inactive for years while its insured prosecutes a claim at its own expense and later assert a right to recover amounts paid under the policy once a third-party settlement is reached.
The decision underscores that subrogation rights are not self-executing. An insurer must clearly and timely assert its intention to pursue a subrogated claim; otherwise, it risks undermining its ability to recover.
