Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

The Insured, a roofing repair company, was covered by a commercial general liability insurance policy. A motorcyclist was struck by a ladder when it flew off one of the Insured's trucks while it was being driven along a country road. The motorcyclist brought a claim for damages against the Insured for injuries allegedly sustained as a result of being knocked off his motorcycle by the ladder.  The Insured requested that the Insurer defend the claim. The Insurer refused and took the position that the motorcyclist had suffered an automobile-related injury and that the policy excluded coverage for such risks. The Insurer was successful in obtaining a declaration to this effect in the Superior Court.

The original policy of insurance contained an automobile exclusion that provided that the insurance did not apply to "bodily injury or property damage arising out of the ownership, maintenance, use or operation by or on behalf of the Insured of any automobile". A rider was later added to the policy, which amended the automobile exclusion by adding wording that excluded claims for bodily injury with respect to which a motor vehicle liability policy was in effect or which was required by law to be in effect. The Applications Judge had relied on this additional wording in finding that the Insurer did not have a duty to defend given that the Insured was required by law to insure its trucks against liability arising from ownership, use, or operation thereof. The Applications Judge also noted that case law had established that loading and storage of the ladder on the truck comes within the scope of "use or operation" because it is one of the ordinary and well-known activities to which trucks are put.

The Insured argued on appeal that the rider could not apply because the Insurer's reliance upon it would defeat the reasonable expectations of the Insured given that it reduced the insurance coverage provided in the original policy.  The Court of Appeal refused to accept this argument, noting that it was within the Insured's reasonable expectations that the rider contained provisions that both extended some aspects of coverage and broadened exclusions in respect of others.

The Court of Appeal concluded that, even if the Insurer was required to rely on the exclusion in the original policy, the injuries sustained by the motorcyclist arose out of the loading or unloading of an automobile and therefore would come within the scope of "use or operation" in the exclusion. Lastly, the Court of Appeal found that the underlying action did not plead a concurrent cause of action regarding the negligent clean-up of the worksite, which would be covered, and that the substance and true nature of the claim involved the allegation of negligently loading and storing the ladder on the truck. 

Accordingly, the Court of Appeal dismissed the Insured's appeal and upheld the declaration that the Insurer had no duty to defend the Insured in the third party proceedings.