New Subrogation & Recovery Blog!

Cozen O’Connor’s Subrogation & Recovery Blog is finally up!  The Blog deals with current issues and developing trends in the field of subrogation and recovery, both in Canada and the US. The contributors include some of the leading attorneys in this area.


Understanding the “Burden of Proof” in Subrogated Actions: A Brief Tutorial

As a lawyer once remarked when explaining his trial strategy to clients, “If the law is on your side, pound on the law. If the facts are on your side, pound on the facts. If neither is on your side, pound on the table.”  During the process of adjusting and investigating a claim, the notion of “proving one’s case” in a subrogated action for property damage may oftentimes appear to be an unlikely feat. Frequently, an adjuster or subrogation specialist will simply choose not to pursue a subrogated action for fear that the claim is a “table-pounder”; the claim initially appears weak or seems to be based on little or no evidence. The reality may be, however, that the claim gives rise to excellent recovery prospects.

Establishing whether the plaintiff or defendant will have the burden of proof in the subrogated action can mean the difference between winning and losing a case. In a claim for property damage it is usually the plaintiff, the insurance company suing in its insured’s name, who has the burden of proving that a defendant is responsible for the loss. However, the burden of proof is ultimately determined by the facts of each case and there are important exceptions to the general rule that the plaintiff has this burden.


The most commonly raised allegation in subrogated property damage actions, both in the United States and Canada, is that of negligence. Negligence is legally defined as the failure to use reasonable care. A person is considered negligent at law if he or she fails to act as a reasonable and prudent person and causes harm as a result. In other words, a negligent person has done something which a reasonable person would not do or has failed to do something which a reasonable person would do, which results in damage or loss.

The Reasonable Person: A Prudent ‘Joe Six-Pack’

The reasonable person is a legal fiction created by judges to set an objective standard against which a defendant’s conduct can be evaluated. Courts have said that this reasonable person is not superhuman. He or she is not a genius, nor able to predict the future. The reasonable person has a normal level of intelligence, and makes prudence a guide to his or her conduct.  His conduct is the standard adopted in the community by persons of ordinary intelligence and prudence.

It is important to keep in mind that one of the main purposes of our negligence law is to enforce reasonable standards of conduct to prevent reasonably foreseeable risks. The law seeks to impose a disincentive for people to engage in risk-taking behavior. At the same time, a law that requires people to be overly cautious is detrimental because it is inefficient. Accordingly, the law does not require defendants to take every possible precaution to prevent a risk of harm; rather it only requires defendants to take reasonable precautions, having regard to the circumstances.[2] As you may suspect, what is reasonable in the circumstances is the subject of much debate among opposing lawyers, and often necessitates the evidence of experts.

The Elements of a Negligence Action

In order to succeed in a negligence action, the following four elements must be established:

1)            A Duty of Care – A duty of care arises when a defendant can (or should) foresee that his or her failure to act ‘reasonably’ will expose another to a risk of harm. That is to say, if a reasonable person would anticipate that a defendant’s conduct would create a risk of harm to another person or their property, then the defendant is said to owe a duty of care to that person.

2)            A Breach of this Duty – A breach of a duty of care occurs when a defendant fails to act as a reasonable person would have acted in the same circumstances. Recall that the law does not hold defendants to the standard of perfection. For example, if there is a very small (but foreseeable) risk of a very small harm occurring, but the cost of implementing precautions to prevent that harm is high, it might be unreasonable to require a defendant to take the precautions. In such a case, a defendant might not be in breach of the duty of care.

3)            Causation – A negligence action will not be successful simply because a defendant has been negligent; the defendant’s negligent act must also be the cause of the loss or damage. At some point in our day to day lives, we have all taken unreasonable or ‘negligent’ risks – for example, talking on a cell phone while driving. However, the law will only hold a person responsible for unreasonable conduct that causes another person to suffer a loss or harm.

4)            Damages – The plaintiff is required to prove his or her damages. A defendant is usually only held liable for reasonably foreseeable damages, however the law recognizes that damage can be physical, economic or psychological.

It is usually, but not always, the plaintiff who must prove to a court that more likely than not, a defendant has been negligent.  If the evidence shows that it is just as unlikely as likely that a defendant has been negligent, a plaintiff has not proven its case. Furthermore, it is not uncommon in property damage claims that the cause of a loss is equivocal. Consider the facts of Canadian National Railways Co. v. Hammil:

The plaintiff sent a refrigerated railway car to the defendant to be loaded with potatoes. Before the defendant could finish loading the railway car, a fire occurred which destroyed the potatoes and damaged the car. Unfortunately, there was no evidence showing how the fire might have started except for the plaintiff’s unsupported suggestion that the defendant’s employees may have been smoking cigarettes while loading the car. The defendant denied all liability on the basis that it was just as likely that the fire started accidentally as by its negligence.

On the facts of this case, it would be extremely difficult for the plaintiff to convince a court that, more likely than not, the fire was caused by the defendant’s negligence because no one knew what caused the fire. However, if this were a case where the defendant had the burden of proof, then the plaintiff could relax – the defendant would have to show that more likely than not, it had not been negligent and did not cause the fire. The lack of evidence would become the ‘defendant’s problem’. In other circumstances, a defendant may be responsible for the damage even where it can prove that it was not negligent.

It is therefore important for subrogation professionals to be aware of cases where the burden of proving a case may rest with a defendant, rather than a plaintiff. A claim for property damage that initially appears weak or that seems to be based on little or no evidence may actually give rise to excellent recovery prospects.


A. Bailment

“Bailment” is a legal relationship that arises when a person, the “bailee” agrees to hold property belonging to another, the “bailor”, for a certain period of time and then return the property to the owner once that time has elapsed. When a person accepts payment for holding another’s property, they are held to a higher standard of care than a “gratuitous bailee” who holds property for another without benefit. A bailee who accepts payment is required to take the same care of the property in his or her possession as would a reasonable and prudent owner and will be responsible for any damage to the property caused by his or her negligence.

A bailee is not an insurer of property in his or her possession. However if the property is damaged, then the bailee is presumed to be responsible for the loss unless he or she can prove that the loss or damage was not caused by his or her negligence. This is essentially the reverse of the typical negligence action described above where the plaintiff must prove on a balance of probabilities that the defendant was negligent. The law’s rationale for placing the onus on the bailee is simply that as the person in charge of the property, the bailee is the one who has the best information about the loss. As a result, the bailee should have the burden of explaining himself when the property is damaged.

The case of Hammil, above, is an example of a bailment. The bailment was created when the defendant took possession of the plaintiff’s railway car for the purpose of loading it with potatoes. Accordingly, the plaintiff did not have to prove that the defendant had been negligent and that this caused the fire. Instead, it was the defendant who had to prove that the fire was not caused by its own negligence. The defendant could not give a sufficient explanation for the cause of fire and was accordingly held liable for the full amount of damages.

B. Carriage of Goods

A “carrier” is a party who contracts to transport goods. The common law distinguishes between a “common” carrier who carries goods for everyone on regularly scheduled routes and a “private” carrier who reserves the right to reject unattractive offers to carry goods. In either instance, a carrier has a duty to transport goods safely from the place of shipment to the place of delivery. In common law, a private carrier will be regarded as a bailee for any damage to property that has been entrusted to him for transit. However, a common carrier is liable almost to the degree of an insurer of the cargo. Regardless of whether a common carrier has caused the loss, he or she will be liable for damage to the cargo during transport unless he or she can establish that the loss falls within a relatively few classes of exemptions, as follows:

1)      Damage caused by an “Act of God”, an event of nature that is beyond the carrier’s power to predict or control;

2)      Damage caused by a “public enemy” (i.e. an act of terrorism);

3)      Damage caused by the fault of the owner, such as the owner’s failure to properly pack the goods before transport; or

4)      Damage caused by natural deterioration of the goods.

The policy reasons for imposing this level of liability on carriers are similar to those in cases of bailment. The carrier, as the party in possession of the goods, has the sole opportunity to protect the goods and has all the evidence about how the loss occurred.

However, the liability of carriers has been modified by various provincial and federal statutes which, depending on the context, may replace the common law. These statutes tend to broaden the categories of exemptions available to a carrier to exclude, for example, liability for damage resulting from riots or strikes, quarantine or the authority of law. These statutes may also impose monetary limits on a carrier’s liability based on the number of packages being carried or the weight of the goods. Carriers may also further attempt to limit their liability by contract. As a result of the complexities of this area of law, the advice of a lawyer who is experienced in handling carrier claims is usually necessary.

C. Nuisance

A person may commit a legal nuisance when he indirectly causes physical injury to another person’s land or interferes unreasonably with that person’s use or enjoyment of their land.[2] The question that is asked in a nuisance case is: “Is the defendant using his property in a reasonable manner, having regard to the fact that he has a neighbor?” To illustrate, in determining what constitutes “unreasonable” interference, Canadian courts have considered the following factors:

1)      The severity of the interference, having regard to its nature, duration and effect;

2)      The character of the locale;

3)      The usefulness of the defendant’s conduct; and

4)       The sensitivity of the property or use interfered with.

Examples of common nuisances include vibrations caused by construction work that damages the foundation of nearby buildings, or damage caused by burst water or sewage pipes. If a plaintiff can establish that a defendant has created a nuisance, the defendant may be liable for resulting damages even if the defendant has not been negligent.  Importantly, negligence is not a prerequisite to proving nuisance. Negligence examines the reasonableness of a defendant’s conduct, whereas nuisance law only considers whether the effect of the defendant’s conduct, from the plaintiff’s point of view, is reasonable in the circumstances.

D. Dangerous Activities

Where a person engages in an activity that is hazardous or inherently dangerous, that person may be absolutely liable for any resulting damage. All the plaintiff is required to demonstrate is that it has suffered loss at the hands of the defendant and, unlike in a case of bailment, the defendant cannot excuse itself on the basis that it took every possible precaution to prevent the damage from occurring.

A classic example used to illustrate absolute liability is that of the owner of a tiger rehabilitation center. Notwithstanding that the owner buys the strongest tiger cages available, erects ‘state of the art’ tiger-proof fencing and hires experienced tiger keepers to watch over the animals, if a tiger should accidentally escape, the owner is liable for any and all damages that result. Another example is that of a factory-owner who houses dangerous chemicals in his warehouse and carefully ensures that the storage of the chemicals accords with all industry guidelines. If the chemicals somehow escape from their containers, the owner is still liable for the damage. The absence of negligence is not a defense.

The law imposes this absolute liability in situations that are inherently dangerous in order to discourage reckless behavior and unnecessary loss by forcing potential defendants to take every possible precaution. It also has the effect of simplifying litigation and allowing a plaintiff to become whole more quickly.


In property damage claims where there is little or no evidence as to what has caused a loss, a subrogating insurance company may nevertheless have an excellent opportunity to recover against a potential defendant. A defendant who was in possession of the plaintiff’s property as a bailee or carrier at the time of loss may have to prove that it was not responsible for the plaintiff’s loss or that it satisfies an exception to liability. The common rationale for calling on a defendant to account for loss in these cases is that the defendant, as the party with control of the goods at the relevant time, will have the best knowledge of events leading up to the loss and the opportunity to have taken precautions to prevent the damage from occurring.

Alternatively, where a defendant’s actions or conduct have the effect of damaging the plaintiff’s property, a plaintiff may be able to hold a defendant liable even without proving negligence. If the defendant’s actions are inherently dangerous or interfere unreasonably with the plaintiff’s property, the defendant may be liable. In order to obtain optimal recovery in subrogated property claims, subrogation professionals and their legal counsel must be alert to potential theories of liability that arise on the facts of each case.