Wawanesa Mutual Insurance Co. v. Hewson,  S.J. No. 534, Saskatchewan Court of Appeal
The insured father, Larry Hewson, carried on a cattle operation. The insured son, Dayton Hewson, worked with his father throughout his lifetime. He was paid no wages, though every year he was given a heifer and when the animals were sold, the son retained the money. The father did not declare wages to the son on his income tax returns. The son was also attending high school on a full-time basis.
The son was injured while hauling hay and was paralyzed from the waist down. The son brought an action against the father for injuries suffered in the accident, and the appellant insurer brought this action for a declaratory judgment stating that the son was an “insured” within the definition in the policy, and that an exclusion clause in the policy applied to the claim such as to relieve the insurer of any liability to indemnify the father. Also the insurer applied for a declaration that it was under no duty to defend the claim brought against the father.
The contract of insurance was a farm policy providing farm liability coverage. The exclusion at issue reads as follows:
You are not insured for claims made or actions brought against you for:
(3) bodily injury to you or to any person residing in your household other than an employee;
At trial, the judge held that the word “you” referred to the insured against whom a claim was made, i.e. the father. He declined to interpret the clause as precluding liability for claims made by one insured against another insured. He also found ambiguity in the exclusion clause, and refused to interpret the words “an employee” as applying only to residents of the Hewson household and not to insureds. Due to the perceived uncertainty and ambiguity in the wording of the policy and the exclusion clause, he determined that the employee exception applied to both insureds and residents in the household.
The Court of Appeal applied the general principles of interpretation of insurance contracts, including contra proferentem, and the principle that coverage provisions should be construed broadly and exclusion clauses narrowly. The Court of Appeal agreed that the difficulty in interpreting the exclusion clause is that the word “you” as used therein is inherently ambiguous. The court found that while the interpretation of “you” as relied upon by the trial judge was reasonable, there were also two other possible interpretations of the term “you”, including “any insured” and the possibility that the term “you” could have different meanings in different parts of the policy. Because there were multiple possibilities respecting the interpretation, and each interpretation raised possible contradictions within the policy, the Court of Appeal held that it could not be said that the coverage was clearly excluded or that the exclusion clause was unambiguous.
With respect to the interpretation of the word “employee”, the Court of Appeal held that it was a factual issue, and on the facts, the definition applied by the trial judge was a reasonable one.
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