Ordering an insurer to fund directors' defence costs in a CCAA?

Fiera Private Debt Fund III LP v. 3306133 Nova Scotia Limited, 2026 NSSC 35
Can a court order insurers to fund directors' defence costs in a CCAA?

Summary: The Nova Scotia Supreme Court has held that insurers can be required, within CCAA proceedings, to advance defence costs to directors and officers facing claims tied to alleged pension breaches, even where a non-insured party seeks to rely on the policy. The Court concluded that claims brought by the pension plan’s interim administrator against the directors for unpaid pension contributions and fiduciary breaches were covered under both a fiduciary liability policy and a D&O liability policy, rejecting the insurers’ arguments based on privity of contract. Emphasizing the remedial purpose of the CCAA and the close factual and commercial connection between the coverage issues and the restructuring, the Court ordered the insurers to defend and fund the directors’ defence costs.

The Halifax Herald Ltd. (“The Herald”) was a prominent media and publishing company in Atlantic Canada and a wholly-owned subsidiary of Brace Holdings Limited. At all material times, Mark Lever, Ian Scott and Sarah Dennis were The Herald’s directors and officers and effectively its operating minds (the “D&Os”).

In 2018 and 2019, The Herald failed to make $2.6 million of pension contributions into its employee pension plan as required under Nova Scotia’s Pension Benefits Act. The funds, which would otherwise be held in the pension plan, were used for other purposes, including to transition the traditional print operation into a digital model. A dispute arose between the Superintendent of Pensions and The Herald as to the propriety of The Herald’s actions, beginning with a demand for payment sent by the Superintendent and escalating to a Notice of Intended Order on January 17, 2022 seeking to compel payment. The D&Os served as both the sponsor of the pension plan and its administrator.

The Labour Board and then, on appeal, the Nova Scotia Supreme Court held that The Herald remained obligated to pay the unpaid special payments. Shortly thereafter, The Herald sought protection under the Companies’ Creditors’ Arrangement Act, and the Applicant, Eckler Admin Corp Ltd., (“Eckler”), was appointed interim administrator for the Pension Plan.

In November 2024, Eckler commenced an action against the D&Os, alleging that by failing to make required pension contributions, the D&Os (acting through The Herald) breached Nova Scotia’s Pension Benefits Act, the Pension Benefits Regulations, and corresponding private contractual obligations under the Pension Plan. Eckler also alleged that the D&Os breached their fiduciary duties by using the contributions payable to the Pension Plan to, among other things, improperly fund The Herald’s planned transition to a digital media company.

Eckler moved for declaratory relief in connection with coverage available under two insurance policies by AIG Insurance Company of Canada and Newline Canada Insurance Limited. The named insureds to the D&O’s Liability Policy were The Herald’s parent company and the D&Os. Neither Eckler nor the employee-members of the Pension Plan were named insureds on the policy. The insurers opposed the relief sought and stated that there was no available coverage under either insurance policy.

Newline argued that allowing a non-insured stranger standing to invoke the D&O’s Policy would improperly circumvent both the doctrine of privity and the contractual preconditions to suit against the insurer. However, the Court noted that the context of CCAA proceedings substantially weakened Newline’s argument. The overall purpose and object of the CCAA includes avoiding or mitigating against the severe social and economic consequences of bankruptcy through the facilitation of compromises or arrangements. Addressing Eckler’s claims through these CCAA proceedings conformed with the underlying statutory intent and purpose. This process under the CCAA incorporated all of the named insureds as parties and was intended to address the assets and undertakings (including claims for and against) of those parties. The Court found that there was a clear commercial and factual connection between the liabilities that gave rise to the alleged insured claims and the CCAA proceedings.

AIG did not dispute that Eckler’s claims were “Claims” for “Loss” arising from “Wrongful Acts” – as those terms are defined under the Fiduciary Liability Policy. AIG’s central arguments for denying coverage was that the Fiduciary Liability Policy was a “claims-made-and-reported” policy; meaning that coverage is conditional upon the underlying claim being both made and reported to the insurer during the term of the policy. In this case, AIG argued that insurable “Claims” included related disputes like the Superintendent of Pension’s demand letter dated May 17, 2021 and subsequent escalation via NOID of January 17, 2022. Having received notice of these claims made in 2021 and 2022, Eckler was obliged to report them to AIG during that same policy term. However, The Herald failed to report these “related” claims until 2024 thus disentitling it to coverage. Eckler countered that the Fiduciary Liability Policy was not “claims-made-and-reported” or that, in any event, the Eckler Claims were new and not “related” to the dispute with the Superintendent of Pensions in 2021 and 2022.

The Court found that the Fiduciary Liability Policy functioned as a claims-made with notice as a condition to invoke coverage during that period—not a strict “made-and-reported-in-same-period-or-forfeit-forever” model. While breaching the statutory and regulatory obligations to make contributions to the Pension Plan formed part of the relevant factual backdrop, Eckler’s “Claims” alleged actionable wrongs that did not involve the Superintendent and were different in kind, timing, and the nature of the loss and corresponding remedies. Accordingly, the Court was satisfied that the communications in 2024 were sufficient to satisfy the notice requirements under the Fiduciary Liability Policy.

The Court confirmed that under the Fiduciary Liability Policy, AIG had a duty to defend The Herald and its D&Os against the covered Eckler Claims raised in the Herald Action and the D&O Action. Similarly, the Court held that under the D&O’s Liability Policy, Newline had a duty to advance defence costs to the D&Os so that they might defend the covered Eckler Claims in the same actions. The Court found that the alleged fiduciary breach and related conflict of interest complaint primarily involved board-level decisions and the D&Os were appropriately entitled to indemnification.

.Judge: The Honourable Justice John Keith

Professionals involved:

• Mary Paterson of Osler and Michael Murphy of Pink Larkin for Eckler Admin Corp. Ltd.

• Eric Dolden, Paul Dawson and Mark Whyte of Dolden Wallace Folick for AIG Insurance Company of Canada

• Grace MacCormick of Patterson Law, Roderic McLauchlan of Clyde & Co and Mark Mandelker of Trisura (previously with Clyde & Co) for Newline Canada Insurance Limited