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

The Plaintiff commenced an action against the Defendant insurer for disability benefits under a group benefits policy issued by the Plaintiff's employer. The Defendant argued that the Plaintiff's claim was barred by a time limit imposed by British Columbia's Insurance Act. Under the Act, "every action on a contract must be commenced within one year after the furnishing of reasonable sufficient proof of loss or claim under the contract and not after."

The parties agreed that there must be a clear and unequivocal denial of further benefits in order to trigger the limitation period. However, they disagreed on whether such a denial had occurred. The Defendant submitted that a letter to the Plaintiff advising his benefits would terminate on December 4, 2004 constituted a clear and unequivocal denial of further benefits. The letter read:

"There is insufficient medical evidence to support the reported restrictions and limitations and to support a continued absence from work. Therefore your file has now been closed.

If you disagree with this decision, you have a right to appeal. You will need to send us a letter explaining the reasons you feel a review is necessary. This will need to be supported by further medical information not already on file."

The plaintiff relied on the continued communication between himself and the Defendant's representatives pursuing the various levels of appeals of the Defendant's decision to argue that there had not been a clear and unequivocal denial of further benefits.

The Court reviewed the case law in this area and concluded that the legal test for the commencement of the limitation period was clear: the clear and unequivocal denial of benefits test agreed to by the parties. The Court also determined that whether there had been such a denial was a question of fact. The Court found that on the facts of the case, the Defendant's letter advising the Plaintiff of the closure of the Plaintiff's file constituted a clear and unequivocal denial of benefits and that a mere willingness to entertain an appeal if the Plaintiff were to obtain new evidence did not render the denial equivocal.

The Defendants were involved in building an addition to the church building owned by the Plaintiff society. The Defendants were alleged to have caused a fire during the course of the building project which burned the church down. The Plaintiff society settled with its insurer for indemnity for the damage caused by the fire, and the insurer commenced a subrogated action in the name of the Plaintiff society against the Defendants. The Defendants then applied for a declaration that they were insureds under the contract of insurance between the Plaintiff society and its insurers, pursuant to the Commercial Policy and Builders Rider, and thus entitled to indemnification against subrogation.

The Court held that there were three stages to the Defendants' application: the first was the determination of whether the insurers bore a duty to defend the Defendant; the second and third were the indemnification and subrogation issues, the determination of which the Court held would require a trial. The duty to defend, however, could be determined on the application. The Court found that the duty to defend and to indemnify against the costs of an action does not depend upon the judgment obtained in the action. Accordingly, the duty to defend is much broader than the duty to indemnify against a judgment. The Court held that there was a reasonable probability that the Defendants would be found to be insureds under the Plaintiff society's insurance policy, and therefore the insurer was compelled to provide the Defendants with a defence.

This was an appeal by a Third Party from a motion judge's decision. The Plaintiff operated a Pharmacy in premises leased from the Defendants. The lease agreement provided that all of the lessee's policies of insurance were to contain a waiver of subrogation for the benefit of the lessor. The Plaintiff sustained water damage to its inventory and office equipment when water escaped from one of the pipes in the leased premises' sprinkler system.

The Plaintiff filed with its insurer, which paid out in full settlement of the claims. The insurer then commenced a subrogated action in the name of the Plaintiff against the Defendants. The Defendants raised the lease provision as a complete defence to the claim and issued a third party notice to the law firm that had prepared the lease agreement, claiming indemnity in the event that the lease failed to protect the Defendants from the claims advanced in the underlying action. The Defendants then applied, under Rule 23 of the New Brunswick Rules of Court for a judicial determination as to whether, by virtue of the lease agreement, the Plaintiff could pursue its claims. The motion judge held that the lease agreement did not preclude the subrogated action. The Third Party law firm appealed.

In interpreting the lease clause purportedly barring the subrogated action, the Court was mindful of the fact that the clause was taken verbatim from a New Brunswick statute, which is enacted in both English and French. As a result, the Court had to take a nuanced approach in interpreting the contract, as some of the traditional principles of contractual interpretation, such as the contra preferentum rule, could not apply. The Court found that the motion judge had erred in finding that the lease agreement did not preclude the subrogated action. Rather, the Court held that the lease operated to “effectuate a loss-bearing scheme that bars the underlying subrogated action in nuisance and negligence.”

This was an application by the Applicant for a declaration that the Respondent had a duty to defend him under a commercial liability policy in an action commenced against the Applicant by the Plaintiff. The Applicant and Plaintiff were employees of a grocery store. The Plaintiff alleged that the Applicant placed him in a headlock and caused him to slip and fall, causing permanent injuries and damages.

The Applicant asserted that he was an insured under the grocery store’s commercial liability policy. The Respondent argued that the Applicant’s acts were captured by an exclusion under the policy which purported to exclude bodily injury or property damage caused intentionally by or at the direction of the insured.

The Respondent further argued that it was not necessary for the court to find intent to cause injury in order to engage the exclusion clause. Rather, it was enough if the insured’s acts were intentional.

The Applicant countered by citing a related case - ING Insurance Co. of Canada v. Mitsios, [2007] O.J. No. 338, - with the same fact pattern where the court found that the exclusion clause has been interpreted by the courts to require that the injuries be intentionally caused.

In that case the exclusion clause was under a homeowner’s policy and excluded “bodily injury or property damage by an intentional or criminal act or failure to act by any person insured by this policy.” The Court held that although the exclusion clause under the homeowner’s policy was different than the exclusion clause in the commercial liability policy in the case at bar, the reasoning was equally applicable. The Court found that a finding that the insured intended to cause the injuries was necessary to trigger the exclusion clause.

This was an appeal involving two issues. The first related to the scope of an exclusion clause and the motion judge's determination that it did not absolve the insurer from its duty to defend the insured against the insured's claim for bodily injury arising from his exposure to mold and/or bacteria. The second related to the motion judge's determination that the insured could require the insurer to retain counsel of the insured's choice.

On the first issue the insurer relied on the clause in the policy under the heading "Common Exclusions". That provision provided as follows:

"This insurance does not apply to:

7. FUNGI AND FUNGAL DERIVATIVES

(a) "bodily injury", "property damage", "personal injury", or Medical Payments or any other costs, loss or expense incurred by others, arising directly or indirectly, from the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, presence of, spread of, reproduction, discharge or other growth of any "fungi" or "spores" however caused, including any costs or expenses incurred to prevent, respond to, test for, monitor, abate, mitigate, remove, cleanup, contain, remediate, treat, detoxify, neutralize, assess or otherwise deal with or dispose of "fungi" or "spores"…

This exclusion applies regardless of the cause of the loss or damage, other causes of the injury, damage, expense or costs or whether other causes acted concurrently or in any sequence to produce the injury, damage, expenses or costs."

The motion judge found that this exclusion, including the "concurrent exclusion" clause, did not absolve the insurer of its duty to defend because the plaintiff had pleaded that his injuries arose from mould and bacteria and if it were found that the injuries were due solely to bacteria (a non-excluded peril), the exclusion clause would not apply.

On appeal, the insurer argued that the motion judge failed to consider the effect of the word "alleged" within s. 7(a) of the exclusion. According to the insurer, the effect of that language was to absolve the insurer of a duty to defend in any case where bodily injury from mould is alleged, even if combined with other causes of bodily injury, such as bacteria. The insurer submitted that the effect of the clause was that the duty to defend was narrower than the duty to indemnify.

The court disagreed with the insurer's position finding that the language in clause 7(a) is both unclear and ambiguous in its effect. The court found that a plain reading of the provision did not support the insurer's position. The court further found that the insurer's position "stands on its head" the general proposition that the duty to defend is broader than the duty to indemnify. The court found that if the clause was meant to convey that the insurer's duty to defend is narrower than its duty to indemnify then clear and unambiguous language would be required. 

Because of the issues with respect to coverage both the insured and insurer sought to appoint the counsel of their choice. The motion judge had referred to the principle that an insurer's right to control the defence is not absolute citing Brockton (Municipality) v. Frank Cowan Co. (2002), 57 O.R. (3d) 447 (C.A.). The motion judge found that the insured's counsel was competent and experienced and should be retained by the insured to defend the action at the insurer's expense. On appeal the insurer suggested that in order to meet the mutual concerns expressed by both sides, a third approach would be to agree on independent counsel. The Court of Appeal was not prepared to interfere with the trial judge's exercise of his discretion.

The Manitoba Public Insurance Corporation (MPIC) sought leave to appeal from a decision of the Automobile Injury Compensation Appeal Commission. Pursuant to s. 187(2) of The Manitoba Public Insurance Corporation Act, C.C.S.M., c. P215 leave may only be granted on a question of jurisdiction or of law. 

The insured had been transporting a new propane stove to a friend. She placed it on the back seat of her vehicle and drove to her friend's place. When she arrived, he was absent. She then drove to a park, some five miles outside of town, to walk her dogs. Upon returning to the vehicle, she sat in the driver's seat. Since the stove had been making a lot of noise on the trip to the park, the insured decided to reposition it. From the front seat, and with a lit cigarette in her mouth, she turned around to move the stove. While doing so, she was suddenly enveloped by fire and thrown from her vehicle. She sustained serious burns and other bodily injuries. She sought coverage under Part 2 of the Act for these injuries.

The claim for Part 2 benefits was denied by the MPIC case manager on the basis that an investigation had revealed that the proximate cause of her injuries was smoking in the presence of propane gas and not by an automobile or the use of an automobile. The Commission overturned the internal review officer's decision, finding that the insured's injuries were caused by the use of an automobile or a load. 

In its notice of motion seeking leave to appeal, MPIC identified the issue as follows: "Did the Commission err in law in its interpretation of Sections 70(a) and 71(1) of the Act by finding that [the insured] sustained a bodily injury caused by an automobile, by the use of an automobile or by a load?" MPIC submitted that this was a question of statutory interpretation and question of law. The relevant sections of the Act are as follows:

"70(1) In this Part,

"accident" means any event in which bodily injury is caused by an automobile;

…

"bodily injury caused by an automobile" means any bodily injury caused by an automobile, by the use of an automobile, or by a load, including bodily injury caused by a trailer used with an automobile…

Application of Part 2

71(1) This Part applies to any bodily injury suffered by a victim in an accident that occurs on or after March 1, 1994."

MPIC asked the court to consider how the decisions of Lumbermens Mutual Casualty Co. v. Herbison, 2007 SCC 47, and Citadel General Assurance Co. v. Vytlingham, 2007 SCC 46, might have impacted the Commission's decision.

The insured argued that the Commission, in reaching its decision, was simply applying the established legal principles developed in McMillan v. Thompson (Rural Municipality) (1997), 115 Man.R. (2d) 2, which applied Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405.

The court held that the two recent Supreme Court of Canada cases do not deal with no-fault insurance schemes. This the court said was confirmed by the Supreme Court of Canada in Citadel General. As such, the court found that the Commission had been right to apply the test formulated in McMillan which was as follows: "Were the respondent's injuries caused by (in the sense of being related to) the use of an automobile?" As such there was no issue of law to be appealed and the application for leave to appeal was denied.

The insured operated an abattoir and meat processing plant which was completely lost in a fire. The insured filed a proof of loss with its insurer claiming replacement value. The insurer argued that the insured was not entitled to replacement value; rather it was only entitled to net-asset value or actual-cash value, an amount which the insured paid. The difference was substantial. 

The insurer asked the court to grant it leave to file an Amended Statement of Defence allowing it to advance the plea of "rectification of contract" on the basis that at all material times the parties understood entitlement to indemnification was on a replacement-cost basis but required the insureds to first replace the lost property. The insured had not rebuilt the processing plant because the City would not permit it to do so since a residential area had closed in around the site and from the City's perspective the area was no longer suitable for a meat processing plant and abattoir. The insured submitted that the application to amend should be denied because the argument of rectification was hopeless in the face of s. 513 of the Insurance Act, R.S.A. 2000, c. I-3 which provides:

"513(1) All the terms and conditions of a contract of insurance must be set out in full in the policy whereby securely attached to it when issued, and unless so set out no term of the contract or condition, stipulation, warranty or proviso modifying or impairing its effect is valid or admissible in evidence to the prejudice of the insured or any beneficiary."

The insurer argued that s. 513(1) does not displace the doctrine of rectification.

The court found that the policy was clear and unambiguous. It found that the insurer was not relying on some uncertainty arising out of the interpretation of the policy itself. Instead, the insurer contended that a very significant condition, that the insured was required to actually rebuild in order to be entitled to replacement cost, was simply left out. The court found that to allow the insurer to rectify the insurance policy in a manner that would add a condition imposing this limitation on the insured would be to fall wholly afoul of s. 513(1) of the Act.

A fire loss occurred at the UPEI Student Centre. The Centre was in the midst of a renovation and expansion whereby the old UPEI Alumni Gym would be selectively demolished and integrated within the new facility. The insurer had provided the "all risks" insurance coverage to the general contractor for the construction project. The insurer denied coverage on the basis that the fire loss involved the Gym, which according to the insurer was excluded from coverage under the "all risks" policy pursuant to a contractual exclusion for existing structures. UPEI then filed its proof of loss with its own property insurer which paid the claim and brought a subrogated action in negligence against all contractors and sub-contractors on the site who may have been tortfeasors.

Two sub-contractors brought third-party proceedings against the insurer for a declaration that the "all risks" policy that the insurer issued to the general contractor was the primary property insurance in respect of the loss and that the sub-contractors were unnamed insureds under that policy.

After the close of pleadings and completion of oral discovery on the third-party claims, the sub-contractors brought a motion for summary judgment against the insurer for judgment on the third-party claim.

The main issue on the motion was whether the fire loss occurred to a structure that was included or excluded from coverage. The policy provided as follows:

"1. This Policy, except as herein provided, insures

(a) property in the course of construction, installation, reconstruction, or repair."

The insurer issued an endorsement on the "all risks" policy which stated:

"It is hereby agreed that permission is granted for the continuing use and occupancy of the premises for the purposes necessary or incidental to such premises.

It is further agreed that coverage under this policy attaches only to section under renovation and not to existing structure."

The issue therefore was whether coverage under the "all risks" policy covered the damage caused by the fire that occurred in the Gym.

The court concluded that the Gym structure was dedicated to the construction project. The Centre was to be a new building.  The design of the Centre incorporated specific components of the Gym including three brick walls, foundation, steel roofing, and steel girders. During performance of the work, problems were discovered with the structural integrity of the Gym, and reinforcements were commissioned. That undertaking was assigned to one of the sub-contractors which brought the third-party proceedings.

The court also found that insurer's understanding of the construction project was materially at odds with that description.  The insurer understood that the new construction was an addition that would be attached to an existing structure. The Certificate of Insurance described the project as "renovation/additions student union building…". At the time of the fire the Gym was within the construction envelope and under renovation. It was part of the construction site. The contractor had control of the building. It was not then a building for use and enjoyment as a Gym. The court concluded as follows:

"(1) that the property damaged by the fire was property within the construction site and subject to the construction project;

(2) that the fire loss occurred during the operation of the construction project; and

(3) that the "all risks" insurer was operating under a misapprehension that the project was an addition to an existing student-union building and that the Alumni Gym was an existing and occupied building."

Despite these findings, the court found that the insurer's defence survived the "good hard look that is to be applied at the summary judgment stage." The court held that there were questions of fact that would or could involve full evidence at trial. When the fire occurred, the construction project was at a very early stage. There was also a question of fact regarding the nature of the property that was damaged by the fire. On this basis the Court found that the matter should proceed to trial and the motion for summary judgment was dismissed.

Appeal by two minor children of the deceased Insured from a decision of the Divisional Court finding that they were not entitled to a portion of the proceeds from a life insurance policy owned jointly by the Insured and his wife. 

The Insured and his wife jointly owned a life insurance policy which provided that on the death of one, the other was entitled to a lump sum payment of $109,000. The Insured was the sole owner of another life insurance policy which named his wife as the beneficiary. The Insured had made inadequate provision for his dependents, three of whom were minors at the time of his death. The three minors and the Insured's wife fell within the definitiion of "dependents" under the Ontario Succession Law Reform Act ("SLRA").

Two of the minor children brought applications against the Insured's estate claiming entitlement to a share of the proceeds under the policies. The Insured's wife brought a cross-application seeking an order directing the insurance company to pay her the proceeds of both policies. The applications judge held that both policies were caught by the wording of the provisions in the SLRA, namely s. 72(1)(f), and were therefore deemed to be part of the Insured's estate for the purpose of funding the dependents' support order. The net proceeds were ordered divided into three equal shares for the support of the three minor children. The wife's appeal to the Divisional Court was allowed in part and the jointly owned policy was excluded from the Insured's estate. An appeal and cross appeal were brought from this decision.

The Ontario Court of Appeal held that, on a proper interpretation of s. 72(1)(f) of the SLRA, the jointly owned policy was not caught because it was not "owned" by the Insured. At the instant of his death, the wife's joint ownership interest became an absolute entitlement to the proceeds of the policy. The Court of Appeal stated that an interpretation of s. 72(1)(f) which would encompass the jointly-owned policy was not consistent with the overall scheme of s. 72 of the SLRA, which was to capture property owned by the deceased. The Court of Appeal did not interfere with the exercise of discretion by the applications judge in ordering support for the three dependent children given that the policy soley owned by the deceased fell squarely within s. 72(1)(f) and was, therefore, available for the purpose of an order for dependent support.

The former agent had been employed under a contract with the Insurer from 1999 to March 2006. The contract prohibited disclosure of any confidential information obtained in the course of the employment relationship and stated that, upon termination of the contract, the agent would return the original and all copies of any "confidential information" received during the course of his employment. The contract further provided that the agent would not make use of or disclose the confidential information or cause or permit it to be used by any person. Clause 12 of the contract restricted the agent's ability for two years following his termination to either directly or indirectly induce any existing policyholder to switch insurers.

The Insurer claimed that, after the agent's termination on March 15, 2006, he had started soliciting the Insurer's policyholders, pursuading a number of them to switch carriers. The evidence showed that as of March 15, 2006, the agent had been responsible for 330 of Insurer's policies of insurance. As of November 30, 2007, 93 of those policies had been cancelled, lapsed, terminated or replaced. The Court found that while there was no direct evidence that the agent had solicited or induced policyholders to switch insurers, it was a reasonable inference from the evidence filed that he had engaged in solicitation or inducement of at least some of the policyholders who had switched insurers or cancelled their policies.

The Insurer sought an injunction to restrain the agent from inducing existing policyholders to cancel or switch policies and to require the agent to deliver up any confidential information and to restrain him from using or disclosing such information. The agent argued that his contracts with the Insurer were invalid, but assuming that the contracts were valid, there was insufficient information to show that he violated the terms of the contract.

Justice D.K. Gray reviewed the criteria for granting interlocutory injunctions as set out in the Supreme Court of Canada's decision in R.J.R. MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, noting also that an injunction is an extraordinary remedy and is not to be granted lightly. He took into account the fact that there had been an element of delay on the part of the Insurer in requesting the return of all confidential information and that the Insurer had made no effort to pursue this issue until bringing its claim in December 2007 and applying for an injunction shortly thereafter. The Court also found that the Insurer could, by due diligence, have discovered the agent's activities in soliciting policyholders and inducing them to switch insurance carriers well before August 2007.

Despite these facts, the Court found that the Insurer had made out its case for an injunction and ordered that the agent be restrained from soliciting and inducing the Insurer's policyholders, but only for the balance of the two-year period prescribed by the terms in the contract. The Court limited the injunctive relief concerning return of confidential information to the return of the physical manifestations of the confidential information in the agent's possession. The injunction did not prohibit the agent from utilizing his own knowledge of who the policyholders were and when their policies might expire.