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

Rachel Noonan rented a Honda Civic from Choice Car and Truck Rental ("Choice").  At the time, she purchased optional insurance provided by Zurich Insurance ("Zurich") pursuant to a fleet insurance endorsement.  In November 2004, Ms. Noonan allegedly struck an individual with the Honda Civic.  That individual commenced an action against Ms. Noonan and Tracmount/Glojack Leasing ("Tracmount").  Zurich denied a duty to defend and indemnify Ms. Noonan or Tracmount on the basis that Choice did not have coverage for that particular car because Choice did not identify the Honda Civic in its monthly fleet report.  Choice leased the Honda Civic from Tracmount pursuant to a written lease.  The form of the lease obliged Choice to provide insurance.  As a precaution, Tracmount also maintained a contingent lessor's liability insurance policy with Lombard Canada Ltd. ("Lombard").  It was agreed as between Zurich and Lombard that if the Zurich insurance contract did not respond to the claim, the Lombard policy would respond to provide coverage.

Lombard applied to the court for a declaration that the Zurich policy covered the Honda Civic driven by Rachel Noonan.  The application was dismissed on a number of grounds including the fact that it did not appear that the vehicle was "described" and "specifically shown" on the certificate of insurance as required.  Lombard appealed this decision.

With respect to the standard of review, the court noted that to the extent that the interpretation of an insurance contract is purely a question of law, the appropriate standard is correctness, see Dunsmuir v. New Brunswick, [2008] 1 SCR 190.

In interpreting the insurance contract, the court noted that any insurance contract must be considered in the light of its purpose.  In the case at bar, the purpose of fleet insurance was not in dispute.  Fleet insurance provides coverage to the driver, a rental company and lessor for a fleet of cars.  The court recognized that rental cars in a fleet change frequently by reasons of addition and attrition.  The court further recognized that rather than reissuing a certificate of automobile insurance on a monthly basis to accommodate such a changeover, a fleet Endorsement substitutes a requirement for the filing of a monthly fleet report with the insurer.  In this case, the court held that the Endorsement adding fleet coverage to the policy did not use language of specificity and instead indicated coverage was based on the number of vehicles rather than the particulars of the specific cars in the fleet.  The court also found that Choice and Zurich had opted against two other choices for rate calculation printed on the form, receipts and mileage.  The parties clearly decided to assess the risk based on the number of cars in the fleet rather than the amount of rental income or rental mileage for the relevant month.  In the court's view, this choice also informed the interpretation of the words of the insurance contract.  The parties' deliberate decision on the plain language of the contract left no room for ambiguity.

In the result, the court allowed the appeal and granted a declaration that, as between Zurich and Lombard, the Zurich insurance contract provided coverage for the leased cars, the number of which Choice was obliged to report to Zurich in the monthly report described in the Endorsement.  The determination of whether Choice appropriately reported the number of leased cars was to be determined in further proceedings, if necessary.

This case was digested by Jonathan D. Meadows and edited by David W. Pilley of Harper Grey LLP.

This application related to proceedings that involved alleged wrongdoing that occurred in both 2000-2001 (the "2001 Misconduct") and 2002-2003 (the "2003 Misconduct") relating to actions of directors or officers of Nortel.  The Ontario Court of Appeal affirmed the Superior Court of Justice's determination that the 2001 Misconduct and the 2003 Misconduct did not involve the same or Interrelated Wrongful Acts and that the 2003 Misconduct occurred after the policy period of the 2001 Primary Directors' and Officers' insurance Policy (the "Policy").  This decision can be found at [2009] O.J. No. 2726 (Ont.C.A.).  The Court of Appeal also held that neither the allocation provision applicable to claims based on Securities Transactions nor the allocations provisions applicable to other types of claims applied to these proceedings.  In the absence of an applicable allocation provision, it was appropriate for Chubb to pay 50% of the defence costs incurred by Dunn and Beatty in these proceedings.  However, the Court of Appeal also found that the allocation provision in Endorsement 3 of the policy may be ambiguous and ordered a hearing to determine the proper interpretation of the Endorsement and indicated that extrinsic evidence related to the factual matrix and reasonable expectation of the parties should be gathered to assist in the interpretation of this Endorsement.

Chubb argued that Dunn and Beatty provided no extrinsic evidence that the parties intended any provision of the 2001 policy, including Endorsement 3, to extend coverage for claims based on the 2003 Misconduct that occurred after the expiration of the policy.  However, the court also noted that there was no evidence that the parties did not intend that coverage be so extended.  Therefore, the language of the policy had to be considered closely.  Endorsement 3 was intended to apply only "if Loss covered by this coverage section and loss not covered by the coverage section are incurred".  Chubb's position was that "Loss" is defined to mean those amounts that the insured becomes legally obligated to pay "on account of each Claim and for all Claims in each Policy Period…".  The court noted that the proceedings at issue did contain some allegations regarding the 2001 Misconduct which were interrelated to the allegations made in certain lawsuits brought while the Policy was in effect.  However, the within proceedings were not themselves Claims made in the Policy Period because the proceedings were brought after the Policy Period.  Accordingly, the within proceedings did not appear to involve both "Loss covered by this coverage section and loss not covered by this coverage section".

Dunn and Beatty were successful in their argument that the definition of Loss had to be considered in the context of the overall policy and the expansion of coverage caused by section 8 of the Policy which provided:

For the purposes of this coverage section, all Loss arising out of the same Wrongful Act and all Interrelated Wrongful Acts…shall be deemed one Loss, and such Loss shall be deemed to have originated in the earliest Policy Period in which a Claim is first made against any Insured Person alleging any such Wrongful Act or Interrelated Wrongful Acts.

Dunn and Beatty submitted that if you incorporated the narrow definition of Loss into the terms of the Policy and ignored the effect of section 8, there could never be coverage for Claims outside the Policy Period.  However, Chubb had previously acknowledged that section 8 did apply and did trigger some coverage for the within proceedings.  In doing so, the court held that Chubb acknowledged that the definition of Loss was modified by section 8 of the policy.  Given Chubb's admission pursuant to which it has been making payments on account of Loss, the court held that there was Loss in the within proceedings thereby triggering the allocation set out in Endorsement 3 (as there was also uncovered loss in the proceedings).  Endorsement 3 provided for 90% coverage of Defence Costs.

In the result, the court ordered that Chubb pay 90% of the defence costs of Dunn and Beatty to the policy limits.

This case was digested by Jonathan D. Meadows and edited by David W. Pilley of Harper Grey LLP.

This was an appeal of an application regarding the availability and priority of automobile insurance with respect to a tort claim against the owner and driver of a rented vehicle involved in a single vehicle accident.  The vehicle was owned by Enterprise Rent-a-Car Canada Ltd. and was insured under a policy issued by ACE INA.  The renter of the vehicle, who was not driving at the time of the accident, held a standard automobile policy with respect to his own vehicle, issued by Meloche Monnex.  The driver was driving with the consent of the renter.  He did not hold any insurance.  The renter and another passenger were both injured in the accident and brought an action against the driver and Enterprise, as the owner of the vehicle.

The provisions of the Insurance Act provided that insurance available to the lessee of a vehicle would respond first to a claim, insurance available to the driver of an automobile would respond second, and insurance available to the owner of an automobile would respond third to any claims with respect to liability arising from or occurring in connection with the ownership or, directly or indirectly, the use or operation of the automobile.  The renter’s automobile liability policy provided that available insurance would respond in the same order.

At issue was whether the renter’s automobile liability policy was “available” with respect to the claims, which would make it the first policy to respond to the claims.  The Court of Appeal found that the renter's insurance was not “available”.  With respect to rented or leased vehicles, his standard automobile policy provided that coverage was available to the policy holder with respect to rented vehicles but only with respect to the liability of the person renting the automobile arising from the negligence of the driver of that automobile.  The Court of Appeal interpreted this to mean that the policy provided coverage where a liability claim is asserted against the renter either as a driver or, where the vehicle was being driven by someone else with the renter’s consent, as the renter.  The policy would have provided coverage for the renter with respect to any claims brought against him directly with respect to the negligence of the driver of the rented vehicle but provided no coverage with respect to other claims.  In other words, although the policy would be “available” to the renter had a claim been brought against him, it was not available in this action as no claims were made against him and therefore, none of the allegations were capable of triggering an obligation on the part of his insurer to respond.

This case was originally summarized by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The insured, a manufacturer of plastic packaging, supplied defective packaging to one of its customers, a vendor of manure and soil products.  The packaging had been printed specifically for the customer’s use in packaging its products for sale to a certain purchaser.  The packaging was defective in that the ink used to print the labelling ran, making it illegible.  The product was not damaged, but had to be repackaged.  In the process of re-packaging, approximately 10% of the product was lost.

The insured’s customer claimed against it for losses related to the costs directly associated with packaging different product for sale to meet its contractual obligations, removing the raw materials from the defective packaging, disposing of the defective packaging, and for the loss of approximately 10% of the product during the salvaging process.  The insured reported the loss and the customer’s claim against it to the defendant insurer around the time the problem arose in early February 2008.  The insurer denied coverage under the insured’s commercial general liability policy in early May 2008.  In September of 2008, the insured settled the claim for the total amount being claimed.  The insured subsequently brought this action claiming indemnity pursuant to its commercial general liability policy.  The insurer defended the action on the basis that the damage did not constitute “property damage” within the meaning of the policy, that there was no accident or occurrence within the meaning of the policy, and if there was an occurrence resulting in property damage, coverage was nonetheless excluded under the policy.

The insured brought an application for summary judgment.  With respect to property damage, the insured argued that there was physical damage to its customer’s raw product in so far as 10% of that product could not be salvaged.  It further argued that its defective packaging had been incorporated into its customer’s end-product, the packaged soil and manure, and that there was physical damage to that product because it was rendered useless for its intended purpose.  It submitted that where the installation or incorporation of the insured’s defective component causes physical damage to a third party’s property, the cost of repairing the damage caused by the defective component is recoverable or, if property damage will only be incurred during the repair or replacement of the defective component, the cost of repair or replacement, other than the value of the defective component and the cost of the new component, will be recoverable.  The insurer submitted that the concept of incorporation applied to determine whether the property of a third party had suffered damage and that this was not a case where the use of the insured’s product changed the essential nature of the product said to be damaged.

The court concluded that though the finished product, the bagged manure and soil, was no longer suitable for its intended purpose once the defect in the packaging was discovered, the manure and soil contained in the packaging was nevertheless undamaged and could be separated from it.  The additional expense incurred by the insured’s customer to package replacement soil products in order to fulfill its contractual obligations were costs that resulted from the insured’s defective work product rather than any physical injury to the bagged soil products.  These costs constituted economic loss flowing from the insured’s supply of the defective packaging.  The cost of removing the product from the defective packaging, disposing of the defective packaging, and re-packaging the original product were also economic loss flowing from the insured’s supply of the defective packaging.  However, the permanent loss and disposal of 10% of the customer’s product during the salvaging process did amount to physical destruction of tangible property within the meaning of the policy and constituted property damage.

The judge further concluded that the property damage was due to an accident or occurrence.  The defect in the packaging was the failure of the ink used to print the packaging when it was exposed to moisture, causing it to run and rendering parts of the printed label illegible.  The judge concluded that the failure of the ink when exposed to moisture was neither expected nor intended by the insured and as this resulted in property damage to 10% of the customer’s product, it therefore constituted an “occurrence” within the meaning of the policy.  The insurer argued that there was no occurrence with respect to the product lost in the salvaging process because the customer made a deliberate decision to dispose of that product during salvage.  The judge rejected that submission on the basis that the occurrence was the failure of the ink, rather than the subsequent business decision of the customer to limit its salvaging process to the cost effective recovery of its raw material and accept that some product would be lost or discarded in the salvaging operation.

The insurer also submitted that two exclusions applied to limit coverage.  The judge found that while the own work/products exclusion and the work done by or on behalf of an insured exclusion would apply to exclude all of the insured’s claims flowing from its own defective work or work product, these exclusions did not apply to exclude coverage relating to physical injury, destruction, or loss of use of the insured’s customer’s product.  The insurer further attempted to argue that the exclusion for claims arising from loss of use of tangible property that had not been physically injured or destroyed resulting from the failure of the insured’s products applied to exclude coverage.  The judge held that this exclusion clause applied only in circumstances where the loss of use of property did not involve physical injury to tangible property and that in this case the 10% of the customer’s product had been physically removed and eliminated from the customer’s inventory as a result of the salvage process and amounted to physical destruction and therefore the exclusion did not apply.

In the result, it was found that the insured was entitled to indemnification but only with respect to the cost associated with the loss of 10% of its customer’s product as a result of the salvaging process.

This case was originally summarized by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The insureds had brought an action with respect to injuries they suffered in an motor vehicle accident.  Prior to beginning the lawsuit, the plaintiffs requested accident benefits through their own insurer and were denied.  The plaintiffs commenced the civil action claiming damages against the tortfeasor and entitlement and payment of various accident benefits against their insurer.  As the civil action progressed, the plaintiffs continued to request benefits and attend mediations with their insurer as required by the Insurance Act.  The insurer paid some benefits but continued to deny most of the plaintiffs’ claims.  On the first day of trial the plaintiffs brought a motion to amend their Statement of Claim to claim aggravated damages.

The insurer resisted the motion on the basis that the proposed amendment was a new cause of action and the two year limitation period set out in the Insurance Act had expired.  It argued that, as the limitation period had expired, there was a presumption of prejudice that would result from the amendment that could not be compensated for with costs or an adjournment.  The judge rejected the insurer’s argument and allowed the amendment.  He found that a claim for any type of damages, including aggravated damages, is not a cause of action but rather is a remedy and “does not stand alone”.

To determine if a pleading raises a new cause of action one must look at whether substantially all of the material facts giving rise to the cause of action have previously been pleaded or whether new facts are sought to be added that are relied upon to support a new cause of action.  A new cause of action is not asserted if the amendments simply plead an alternative claim for relief arising out of the same facts previously pleaded.  In this case, the factual situation that entitled the plaintiffs to assert their claim against the insurer was the existence of a policy of insurance issued by the insurer, the plaintiffs' entitlement to claim accident benefits under this policy, the insurer’s handling of the claims, and its decision to deny the benefits.  The proposed amendment to claim aggravated damages was founded upon the same factual situation.  The fact that the claim for aggravated damages would focus more on the insurer’s handling of the claims and the basis for the denial did not mean that the claim for aggravated damages should be treated as a new cause of action.

The insurer also relied on an earlier decision in which a plaintiff brought a claim for damages for “the insurer’s bad faith conduct in prematurely terminating her weekly benefits”.  However, the wording of the applicable limitation provision had changed since that time.  The earlier limitation provision read:

A proceeding in a court or an arbitration proceeding in respect of no-fault benefits must be commenced within two years after the insurer’s refusal to pay the benefit claimed or within such longer period as may be provided in the No-Fault Benefits Schedule.

In that case, the Court of Appeal upheld the motion judge’s finding that the plaintiff’s characterisation of the insurer’s refusal as bad faith conduct was merely an attempt to circumvent the mandatory requirements of the dispute resolution scheme in the Insurance Act through the guise of linguistic reformulation.  It found that her allegations, distilled, were that the refusal was inappropriate in the circumstances, which was the very issue contemplated for resolution under the No-Fault Benefits Scheme and that her claim was clearly subject to the two year limitation period.

In the instant case, the applicable limitation provision was:

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

The judge specifically noted that the phrase “in respect of”, present in the earlier limitation provision and also in the current provision regarding dispute resolution, was notably absent from the current limitation provision and provided good reason not to follow the earlier case.  In addition, he noted that no action had been started within the limitation period as it had been in this case.

Finally, the judge noted the practical implications of accepting the insurer’s argument that all claims must be commenced within two years of the denial of benefits.  Given that an insured is statutorily required to mediate before bringing an action, there could well be delay in moving a civil action forward.  An insured might not obtain sufficient disclosure about the insurer’s conduct until well after the expiration of the two year period.  Particulars necessary to justify a claim for punitive or aggravated damages might not be revealed until documentary or oral discovery in the civil action.  Alternatively, the conduct that might cause an insured to consider such an amendment might arise later in the relationship and again well after the limitation period had expired.

In the result, the judge allowed the amendment and granted the insurer a right of further examination for discovery dealing solely with the amendment.

This case was originally summarized by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The Applicant sought a declaration that it was covered under a policy of title insurance issued by the Respondent at the time of the Applicant’s purchase of a commercial strip mall.  At the time of purchase, the Applicant’s understanding was that the storage units in the lower part of the building were leased by Kennedy Storage.  When Kennedy defaulted on the lease, the Applicant changed the locks and took possession of the storage units.  A third party, Berardinetti, then indicated that she had leased two of the storage units and had paid the monthly rent to the prior owner after the Applicant's purchase of the property.  There was a written lease between the former owner and Berardinetti that had not been disclosed to the Applicant at the time of purchase.  The Applicant argued that the two competing leases for the two storage units were conflicting and constituted a defect in title at the time of the purchase that was covered under the policy.  The Applicant also argued that the alleged lease disclosed that the Kennedy lease was fraudulent, thereby making title unmarketable which was also a risk covered under the policy.

The Court dismissed the application.  With respect to the competing leases, the Court held that in order to succeed, a claimant must actually have a claim for loss or damage at the time that the claim is made.  In this case, there was no evidence of loss or damage.  Even if there were two leases for the same space in place at the time of closing, any conflict which might have existed between the legal rights of the tenants in relation to the two units covered by the Berardinetti lease had resolved by the time the Applicant discovered the second lease.  Kennedy had already defaulted and had been locked out of the premises and the Applicant entered into a new lease with Berardinetti.  Any losses related to the reduced rental stream fell under the exception in the policy relating to leases.

With respect to the argument that there was a fraudulent misrepresentation about the lease agreement, the Court held that Applicant’s potential claim on this basis did not constitute the covered risk of a “defect in title” or “unmarketable title”.

This case was originally summarized by Kim Yee and edited by David Pilley of Harper Grey LLP.

The Applicant was a Defendant in two actions that arose from property damage caused by asbestos contamination.  The Applicant sought a declaration that its Insurer was obliged to defend it.  The Applicant’s insurance policies contained an “Absolute Asbestos Exclusion Endorsement” which provided that the policy would not cover property damage, losses or expenses “caused by, resulting from or inconsequence of, or in any way involving asbestos, or materials containing asbestos in whatever for or quantity”.

In considering whether there was a duty to defend the Court looked beyond the labels contained in the Statements of Claim to determine the nature of the claim.  The Court noted that it must be determined whether the claims are entirely derivative in nature.  The duty to defend will not be engaged simply because the claim can be cast in terms of both negligence and an intentional tort.  It must be decided whether any of the properly pleaded non-derivative claims can potentially engage the indemnity provisions of the policy.

The Court ultimately concluded that the exclusion clause was clear and unambiguous.  Given that the exclusion clause applied, there was no duty to indemnify and therefore no duty to defend.  The Court distinguished the claims from the claim in Appin Realty Corp. v. Economical Mutual Insurance Co. (2008), 89 O.R. (3rd) 654 (Ont. C.A.) where it was found that there was a duty to defend.  In that case, the policy at issue had an exclusion clause relating to mould and the Plaintiff brought an action for damages arising from mould and bacteria.

This case was originally summarized by Kim Yee and edited by David Pilley of Harper Grey LLP.

The Plaintiff was involved in a motor vehicle accident in which he sustained catastrophic injuries.  As a result, the Plaintiff received benefits under the no fault provisions of the Automobile Accident Insurance Act, R.S.S., 1978, c. A-35 (the "Act”).  This included income replacement benefits, living assistance benefits and reimbursement for certain expenses.  The amount of the benefits the Plaintiff received under the no fault provisions were less than the maximum entitlement under the Act.  The Plaintiff commenced an action claiming for the difference between the amount he would have been awarded as damages at common law and the amount he had been paid and would continue to be paid under the Act.  It is in relation to that claim the Plaintiff sought a determination of law with respect to a number of issues.

Firstly, the Court was asked to assess whether a claim for “economic loss” could be pursued pursuant to s. 103(1)(a)(iii) of the Act where the benefits of Division 3 and Division 7 do not and will not exceed the maximum benefits prescribed in s. 112(3) of the Act.  The Court answered that question in the negative.  The aggregate limit for expenses must be exceeded before the right to claim for economic losses will arise.  The claims for those losses are limited to the scope of Part VIII of the Act.  The Court rejected the argument that the Plaintiff had a right to claim for economic losses if any portion of his claim was not paid for by the insurer.

The Plaintiff also sought to recover benefits from the Defendants which were not paid by the Insurer.  The Court held that the appropriate mechanism to seek reimbursement for such additional costs was within the appeal provisions in the legislation.

The Court found that the Plaintiff was not in a position to pursue a benefit to fund a substitute worker to carry out the work on his farm.  He had opted to receive an income replacement benefit based upon his employment earnings rather than pursuing a benefit to fund a substitute worker.

This case was originally summarized by Kim Yee and edited by David Pilley of Harper Grey LLP.

The Plaintiff brought an action against the Insurance Corporation of British Columbia ("ICBC") under s.24(1) of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 ("Act").  She claimed for damages for injuries she sustained when her purse was snatched by an unidentified passenger in a vehicle driving by.  Section 24(1) creates a statutory cause of action against ICBC for damage which arises out of the use or operation of a vehicle by an unidentified vehicle owner or driver.

ICBC unsuccessfully brought an 18A application to have the plaintiff’s claim dismissed.  ICBC appealed that decision and the Court of Appeal considered whether (i) the intentional acts of assault and conversion came within the ambit of s. 24(1) of the Act; (ii) the motor vehicle in question was being used as a motor vehicle, and not for some other purpose; and (iii) the use or operation of the motor vehicle caused the Plaintiff's injuries and loss.

The appeal was dismissed.  Section 24 of the Act is not restricted to cases in which the cause of action is based in negligence; intentional acts are not excluded from ambit of the section.  The vehicle was being used as a motor vehicle despite the fact that it was being used to effect a criminal purpose.  The Court agreed with the judge’s conclusion that there was a continuous chain of causation stretching between the use of the motor vehicle and the injuries sustained by the Plaintiff.

This case was originally summarized by Kim Yee and originally edited by David Pilley of Harper Grey LLP.

The Plaintiff Insured operated a recreational vehicle dealership and had its building and contents insured against loss by fire under a policy of insurance with the Defendant.  In the late hours of October 19 and early hours of October 20, 2000 a fire destroyed the property of the Insured.  The Insurer denied coverage alleging that the principal of the Insured, together with his father, deliberately started the fire with the intention of making a claim against the insurance provided by the Insurer.  The principal and his father were charged criminally with committing arson with the intent of defrauding the Insurer.  The Crown proceeded to trial against the father of the principal, who was acquitted and the Crown withdrew the charge against the principal.

The issue before the Court was whether the Insurer had established the defence of arson thereby depriving the Insured of recovery under the policy.  The Court found that the Insurer had established on a balance of probabilities that the principal of the Insured and his father had intentionally started the fire.  Circumstantial and conflicting evidence at trial did not offer another cause of the fire.  As a result the Insured's action was dismissed.

This case was originally summarized by Cameron B. Elder and originally edited by David Pilley.