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

The Claimant Strata Corporation brought an action against the owners of an individual strata unit (the "Owners") for damage caused by a burst water pipe. The failure was due to high acid levels in the local water and not to any negligent act or omission by the Owners.

The cost of the repairs was approximately $3,700, which was less than the $10,000 deductible in the insurance policy held by the Strata Corporation. The Strata Corporation accordingly looked to the Owners for the cost of repairs. The owners had a household insurance policy with the Insurer, which provided a limit of $2,500 in respect of liability of a strata owner for an assessment in respect of any insurance deductible of the Strata Corporation. This amount was paid by the Insurer to the Strata Corporation in partial settlement of the claim. The Strata Corporation then sought to recover the balance of the claim ($1,287.80 plus costs) from the Owners.

The same household policy held by the Owners provided that, upon payment of a $500 deductible by the Insureds (i.e. the Owners), the Insurer would pay for the remaining property damage for which the Insureds were found to be "responsible". The trial judge considered whether it could be said that the Owners were "responsible for the loss or damage" and answered this question positively. In particular, her honour held that because the Owners had a duty to repair and maintain the premises, they were "responsible" for the loss.

She therefore ordered the Insurer to pay the Strata Corporation $787.80 on behalf of the Owners, after taking into account the $500 deductible. The Supreme Court judge upheld this decision, finding that "being responsible for the loss or damage" was not the same as being negligent.

ICBC sought an order enjoining itself from paying $200,000 in settlement funds to the Insured in accordance with a settlement agreement reached on January 15, 2007. This settlement was in respect of a motor vehicle accident that had occurred in August 1986. ICBC claimed that the Insured had committed fraud with respect to a subsequent single-car accident that occurred on January 5, 2005 and brought an action against the Insured in this regard.

 In the fraud action ICBC alleged that the Insured and his uncle had made false statements concerning who was driving the vehicle at the time of the 2005 accident. A little more than a year after that accident, it became clear that the Insured had lied when he stated that his uncle had been driving the vehicle. Prior to learning of the Insured’s alleged "fraud", ICBC had paid out approximately $55,800.00 and therefore sought indemnity from the Insured for this amount, and punitive damages of up to $100,000.

The issue before the Court was whether a Mareva injunction should be issued to prevent the Insured from receiving all or part of the settlement funds in respect of the earlier accident. The primary questions were whether the nature of the alleged fraud was sufficiently serious to place it within the fraud exception to the general rule prohibiting pre-judgment execution and whether the evidence supported an inference that the Insured would likely dissipate the funds. The Court considered its general jurisdiction to grant an injunction under s. 39(1) of the Law in Equity Act and noted that in order to obtain a Mareva injunction the plaintiff must demonstrate that it has a strong prima facie case [of fraud], and also that there is a real risk of assets being dissipated before judgment is obtained.

While the Court noted that the alleged fraud by the Insured was serious and could not be countenanced, it was distinguishable from the fraudulent conveyances cases on which ICBC relied as it did not involve the complex taking of property. The Court found that the Insured’s lies and misleading statements only suggested that the Insured was a dishonest person who could not be trusted. This was not sufficient to support an inference of a real risk that the asset would be dissipated such that ICBC’s attempts to realise on any judgment it might obtain would be frustrated.

The Court ultimately concluded that there was no factual basis for it to grant a Mareva injunction in the nature of pre-judgment execution and, further, that it would not be just and equitable in the circumstances to do so.

The Insured operated a sandblasting business on property it had leased from the Owner. It was a term of the lease agreement between the Insured and the Owner that the Insured would leave the property in good repair at the end of the lease term. At the end of the lease term environmental testing confirmed that the soil at the property contained concentrations of pollutants, which exceeded the allowable limits. The Owner was required to spend approximately $160,000 to remediate the property, and subsequently commenced an action against the Insured to recover these costs.

The allegations against the Insured in the Owner’s Statement of Claim were essentially that the Insured was in breach of contract and liable in tort by failing to remove the sandblasting residue from the property and by releasing contaminants in excess of regulatory standards. Further, the Owner alleged that the Insured was negligent in contaminating the lands with various pollutants or, alternatively, the Insured’s sandblasting operations contaminated the soil to levels that exceeded regulatory standards.

The Insurer refused to defend the Insured in the underlying action, citing the pollution exclusion in the policy as the basis for this refusal. This exclusion provides that the insurance does not apply to property damage "arising out of the actual, alleged, potential or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of pollutants" from any premises, site or location which at any time is owned or occupied by the Insured. After reviewing the history of the pollution exclusion, the Court concluded that the allegations against the Insured fell squarely within the exclusion. In particular, the Court noted the allegation by the Owner that the Insured, during the course of its business activities, had spread mounds of used sandblasting residue containing pollutants over the property.

In the result, the Court denied the Insured’s petition, finding that the claims of the Owner were not within the coverage provided by the policy and that the Insurer did not have a duty to defend.

The petitioning general contractor, Progressive Homes Ltd. ("Progressive"), sought a declaration that the Respondent liability insurance company, Lombard General Insurance Co. of Canada ("Lombard"), was required to defend it in four actions. The four underlying actions were brought against Progressive by the BC Housing Management Commission ("BC Housing"), which alleged "leaky condo" type defects in the construction of four condominium developments. Lombard argued it had no duty to defend because the claims made in the underlying actions did not fall within the initial coverage grant under the insurance contract, as they did not relate to a claim for personal injury or damage to third party property outside the building.

The sole issue for determination was whether Lombard, under the terms of the policies, was obligated to defend Progressive with respect to the underlying actions. The Court relied on Swagger Construction Ltd. v. ING Insurance Company of Canada which held that any damage to other parts of the building resulting from the contractor’sdefective workmanship was not covered by the policy based on the principle that a CGL policy is not intended to be a performance bond. Furthermore, any defect in the structure is a defect in the quality of the whole and it is artificial to treat a defect in an integral structure as a dangerous defect liable to cause damage to "other property".

 In the result, the Court found that the allegations in the underlying actions did not allege "property damage" because the alleged damage was to the very building Progressive was contracted to build. Accordingly, coverage under the insurance contracts could not be triggered, Lombard was under no duty to defend Progressive and the application was dismissed.

The Insurer, GCAN Insurance Company ("GCAN"), applied for a declaration that it had no duty to defend the Respondents. Two strata companies had brought an action against the Respondents alleging that, inter alia, the Respondents built a defective building envelope which allowed water ingress, which in turn caused damage to the interior and exterior of the building.

GCAN argued that the decision of the British Columbia Supreme Court in Swagger Construction Ltd. v. ING Insurance Co. of Canada, 2005 BCSC 1269, was determinative of the issue, and was binding. The Respondents argued that Swagger was (1) distinguishable; (2) a judicial aberration that ought not to be followed, or (3) applicable only to general contractors, but not to owners, developers, or general partners. The Court accepted the third argument of the Respondents, and found that the "own work" type coverage or exclusion from coverage did not apply to owners or developers, but was limited to general contractors. The Court stated: stands for the principle that in the context of an insurance policy covering physical injury to tangible property, defective construction is not an "accident" (and therefore coverage is excluded) unless there is damage to the person or property of a third party. To deny coverage to the owner/developer when they took no part in the construction of the project is essentially akin to saying that the general contractor and the owner/developer are the same parties. While the precise roles of all the parties involved must be determined on the facts at trial, at this point it can at least be said that the "Named Insureds" contained within the Policies are not all the same party.

Swagger

 […]

 It would be unfair to allow the insurer to avoid defending an owner/developer for work performed by the general contractor in which the owner/developer took no part (paras. 95-97).

The Court therefore granted the declaration in respect of the general contractor, but found that GCAN was obligated to defend the other Respondents.

The Insured was a 52 year-old woman who had a long-standing problem with alcohol, but had never been diagnosed as being an alcoholic. She purchased a policy of travel insurance from the Insurer prior to travelling from her home in Vancouver to Denver, USA. At the time she purchased the policy, the Insured made a declaration that she was "in good health" and knew of "no reason to seek medical attention …".

The evidence adduced by the Insurer at trial showed that the Insured had been hospitalised the night prior to making the declaration after she had taken a prescription narcotic while in a state of a gross intoxication. The Insurer denied the Insured’s claim on the basis that she had failed to properly disclose the state of her health at the time the policy was purchased.

 The trial judge found that a reasonable person would interpret the declaration made by the Insured as meaning that the Insurer was only interested in health conditions serious enough to warrant medical attention that was more than routine or non-emergency medical treatment. She therefore found that the Insured was entitled to make the declaration that she was in good health and knew of no reason to seek medical attention.

The Court of Appeal disagreed with the trial judge’s construction of the words "medical attention" and found that, on the evidence, the Insured could not properly have made the declaration of good health that she had made in order to obtain the policy. The Court of Appeal therefore concluded that the Insurer was entitled to deny the claim by the Insured’s estate. The Insurer’s appeal was allowed and the claim dismissed.

The Insured firm of consulting engineers had obtained a professional liability insurance policy from the Insurer in respect of the design and construction of a power plant project which commenced in early 1999.

In April 2004, a major part of the power plant failed. This failure caused the plant to shut down for some time with a resulting loss that was estimated to be in the range of $50 million. The Insured’s solicitors gave notice of the failure to the Insurer by letter of June 10, 2004 and requested that the Insurer pay solicitors’ fees incurred by the Insured in respect of steps taken to protect the Insured’s interests in the event of a claim. The Insurer declined to pay the solicitors’ accounts, taking the position that there was no obligation to defend under the policy unless and until a claim against the Insured was actually made.

The summary trial judge had granted the Insured’s application for declaratory judgment, holding that the Insurer’s duty to defend was triggered in respect of claims or potential claims arising from the April 2004 failure of the power plant.

The issue for the Court of Appeal was whether or not an insurer’s obligation to defend an insured under the terms of a professional liability policy was triggered by the insured giving notice of an event from which it expected a claim could be made.

The Court of Appeal considered the coverage afforded under the policy and specifically the Insurer’s obligation to defend under section VII. This section provided that the company (Insurer) "shall defend any claim against the Insured seeking damages to which this insurance applies". The Court noted that "claim" was a defined term in the policy and meant "a demand received by the Insured for money or services, including the service of suit or institution of arbitration proceedings against the Insured".

In the result, the Court of Appeal agreed with the Insurer, who had argued that the duty to defend could only be triggered once a claim was made. The wording of the policy was not broad enough to encompass all circumstances or events reported during the policy from which the Insured might expect a claim to be made. Moreover, there was no claim in existence in June 2004 since neither the owner of the power plant nor the general contractor was seeking anything from the Insured and were certainly not seeking damages in the form of "a money judgment, award or settlement" to which the policy applied. There was no authority provided by the Insured for the proposition that an insurer will be held liable for defence costs incurred prior to any claim for money actually being made.

 The appeal by the Insurer was allowed and the Insured’s claim for declaratory relief dismissed.

This was a motion for summary judgment brought by a Plaintiff condominium corporation ("York") and others against, inter alia, the Defendant Lombard Canada Ltd. ("Lombard"). In a previous action, the Plaintiffs sued the general contractor Bradsil Leaseholds Limited ("Bradsil") alleging that soil had been pumped away under York’s condominium complex due to a faulty dewatering system installed by Bradsil. Lombard insured Bradsil under a CGL policy. The Plaintiffs obtained summary judgment in the previous action against Bradsil in excess of the policy limits of $2 million. As Bradsil was not able to satisfy that judgment, the Plaintiffs brought the current action against Lombard pursuant to section 132 of the Insurance Act, R.S.O. 1990, c.I-8. Throughout the previous action and the current action, Lombard denied coverage.

The first issue was whether the Plaintiffs proved that their claim was covered under the policy as compensatory property damage caused by an occurrence. Lombard asserted that the damage resulted in a "pure economic loss" and therefore the policy did not engage. The Court concluded that Bradsil supplied a defective dewatering system which caused damage to property owned by third parties. Accordingly, the damage was compensatory within the meaning of the policy.

The second issue was whether the property damage was caused by an "occurrence," meaning an accident. Lombard asserted that negligence on the part of the Insured causing damage to third parties could not support the finding that the occurrence was an accident. The Court concluded that a CGL policy is intended to provide compensatory damages to third parties for an accident which includes any "unlooked for, mishap, or occurrence".

Finally, the Court found that the Plaintiffs were entitled to enforce the policy against Lombard even though the judgment was obtained pursuant to a motion for summary judgment, not "an actual trial" as required under the policy. As Lombard had reputed the policy by refusing to defend either action, it no longer had the right to raise defences which might have ordinarily been available to it. In addition, the Court found that it would be contrary to public policy to enforce the term in the policy requiring "an actual trial" as it was in conflict with the requirements of section 132 of the Insurance Act.

Accordingly, the Court found that the policy applied and that the Plaintiffs were entitled to judgment against Lombard in the amount of $2 million plus costs.

The Insured operated a convenience store which sustained a loss as a result of a burglary. Less than a week before the burglary, the Insured obtained insurance from the Aviva Insurance Company of Canada ("Aviva"). An Interim Binder of coverage had been provided but the full policy of insurance had not yet been issued. Aviva denied coverage under the insurance policy because the Insured’s alarm system was not operating and Aviva claimed that this was a breach of the alarm warranty in the policy.

The Court noted that the case involved a claim arising from an event that took place after the insurance was bound but before the policy was issued. In these circumstances, the claim must be adjudicated by reference to the contract as expressed in the Interim Binder only. When the Insured signed the application for insurance, this operated as a formal offer to enter into an insurance contract on the terms set out. When Aviva accepted the proposal and bound the insurance, the Interim Binder required Aviva to issue a policy in accordance with the proposal. The Court noted that where the Insurer agrees to the proposal but requires the Insured to agree to a warranty that was not contained in the Interim Binder, the unsigned warranty constitutes a counter-offer which is capable of acceptance by the Insured, citing Scottish & York Insurance Co. Limited v. Metrix Professional Insurance Brokers Inc., [2006] B.C.J. No. 1431. In this case, the Interim Binder included an alarm warranty as a condition. However, the terms of the warranty were not defined and there was no specific reference to the Alarm System Warranty Endorsement in the policy that was to be issued or to any standard terms relating to an Alarm Warranty in the Aviva policy.

The Court rejected Aviva’s argument that the Warranty should be effective because an explanation of its inclusion was provided to the Insured at the time of the application for insurance. The Court applied s. 12 of the Insurance Act, R.S.B.C. 1996, c. 226 which required that a term or condition of the contract of insurance, when issued, must be set out in full in the policy or in the document attached to it unless an alteration of the contract has been agreed on in writing between the Insurer and the Insured after the policy is issued. The Court concluded that the Alarm Warranty was not accepted in accordance with s. 12 of the Insurance Act and was not enforceable.

The Insured was sued by his passenger after a motor vehicle accident in which he drove his vehicle off of the road. ICBC hired an investigator who concluded that the preponderance of the evidence suggested that the Insured was intoxicated at the time of the accident. ICBC therefore issued a Third Party Notice putting the Insured on notice that he was in breach of his policy for being "incapable of proper control of his vehicle by reason of consumption of alcohol". The Insured hired independent legal counsel to defend him in the third party claim.

ICBC later withdrew the Third Party Notice and retained counsel to defend the Insured. As the litigation matured, ICBC put the Insured on notice that the third party claim might exceed his policy limit and the Insured again retained independent legal counsel.

After the third party claim was settled for the policy limit, the Insured brought this claim against ICBC for damages to cover the cost of his independent legal counsel.

In rejecting the Insured’s claim, Mr. Justice Rogers held that it was not necessary for ICBC to have an "iron clad case" against the Insured before putting him on notice that it believed he was in breach of the policy. Justice Rogers concluded that there was nothing unreasonable in ICBC issuing the Third Party Notice to its Insured, which necessitated him retaining independent legal counsel.

The Court also rejected the Insured’s claim that ICBC breached its duty to instruct and retain independent counsel to advise the Insured on the possibility of liability in excess of his policy limit. The Court found that there was no actual conflict between ICBC and the Insured as ICBC and appointed defence counsel had, at all times, conducted themselves entirely in keeping with the Insurer’s obligation to give equal consideration to its own interests and to those of the Insured. In reaching this conclusion, Justice Rogers referred to the case of Fredrickson v. ICBC (1990), 44 B.C.L.R. (2d) 303, which he said was indistinguishable from the present case. Fredrickson stands for the proposition that an exposure in excess of policy limits sets up a potential conflict between the Insurer and Insured, but that potential does not in and of itself give rise to a requirement that the Insurer retain independent counsel for its Insured.

In September and October 2000, the Insured, Agresso Corporation ("Agresso"), entered into a series of agreements with the Sault College of Applied Arts and Technology ("Sault College") to provide software.

On January 14, 2002, Agresso applied for Information Technology Errors and Omissions insurance from Temple Insurance Company ("Temple"). A policy was issued from February 28, 2002 to February 28, 2003. The policy insured Agresso for "wrongful acts" that occurred within the policy.

There were problems with the software, and by January 20, 2003, Agresso was aware that Sault College was not satisfied with its progress on solving a major problem. On February 21, 2003, Agresso applied for a second policy. Temple issued a new policy on the same terms as the first one from March 28, 2003 to March 28, 2004, and a retroactive date of February 28, 2002. The Insured did not disclose to the Insurer that there was a potential claim from Sault College.

The Court found that on the basis of the pleadings, the Statement of Claim alleged a statement of facts that properly construed, would support an action that could potentially fall within coverage. However, the Court found that there was no duty to defend because Agresso had failed to disclose information material to the contract. The application form for the policy required the Insurer to answer a number of questions regarding knowledge of prior errors or claims. Agresso’s own evidence confirmed that it first became aware of a potential claim on January 20, 2003, a month before the application for the second policy was completed. The Court found that the true question was whether a reasonable person would have concluded that the circumstances constituted a dispute, allegations of non-performance, or facts, circumstances, or situations which may reasonably give rise to a claim. The Court found that Agresso was aware of Sault College’s view that a key problem could not be solved, that the College abandoned the entire system only a few months later, and that it notified Agresso of its intention to start legal proceedings a few months after that. The Court was satisfied that a reasonable person in Agresso’s position would have been of the opinion that the circumstances indicated that there was a reasonable likelihood a claim would be made against it. The Court was also satisfied that if the Defendants had been informed of the situation, they would have acted differently by refusing to accept the risk or imposing special conditions. The insurance contract was therefore void pursuant to section 13 of the Insurance Act.

The Plaintiff was injured in a 2000 accident caused by an unidentified driver. At trial, the jury awarded $150,000 in damages, including a component for past wage loss. The Plaintiff had received social welfare payments regularly prior to the accident. The Plaintiff received disability benefits between the time of the accident and the time of trial. ICBC sought to deduct from the jury award the amounts paid to the Plaintiff by the government as disability benefits.

The Court agreed with ICBC’s position that the Disability Level Two payments which the Plaintiff received were, in substance, social assistance payments and must therefore be deducted pursuant to M.B. v. British Columbia, [2003] 2 S.C.R. 477. The Court reviewed the applicable legislation and held that the fact that the Plaintiff was disabled did not change the nature of payments made to her, which were a form of income replacement. In the result, the Court ordered that the deductions claimed by ICBC be deducted from the jury assessments.

Under the Plaintiffs’ contract of insurance, they were to use their vehicle for farm use only. The Court found that in breach of the policy, Mr. Bolen often drove the truck to work. The Court also found that the Plaintiffs had made a misrepresentation when they declared Mrs. Bolen to be the principal operator of the vehicle. Mrs. Bolen received a Road Start discount, for which Mr. Bolen would not have been eligible. The Court found that on the basis of s. 19(1)(b) and (c), the Plaintiffs’ claims were forfeited. The Court then went on to consider whether relief from forfeiture should be granted. The Court acknowledged that there was a particular issue in that previous jurisprudence has held that s. 24 of the Law and Equity Act does not permit a court to grant relief from forfeiture arising from s. 19 of the Insurance (Motor Vehicle) Act. The Court found that it did not need to determine this issue, because the Plaintiff’s conduct, and their breaches, showed a disregard for the duty of good faith and for the interest of ICBC as an insurer, and it would therefore not be appropriate to grant equitable relief in any event.

At trial, a police officer and an unidentified driver of another vehicle were found to be equally responsible for an accident that killed an auxiliary police officer and injured the Plaintiffs. The police officer and the Attorney General of Canada (the "RCMP Defendants") and ICBC were each held to be 50% jointly and severally liable. ICBC had been named as a nominal defendant in the tort action by virtue of s. 24 of the Insurance (Motor Vehicle) Act, which applies to hit and run situations when a driver or vehicle is unidentified.

In this proceeding, the RCMP Defendants brought an application for contribution and indemnity from ICBC based on s. 4(2)(b) of Negligence Act, after they had paid the entire amount of the Plaintiffs’ damages. ICBC took the position that, as a matter of social welfare policy, s. 24 provides limited and specific statutory relief to injured victims of hit and run drivers. ICBC submitted that participating in the action as a nominal defendant and the subsequent finding that it was jointly and severally responsible for the Plaintiffs’ damages, did not render ICBC "at fault" within the meaning of s. 4(2)(b) of the Negligence Act.

The Court concluded that the phrase "nominal" defendant meant that ICBC was named in place of the real or actual party in order for the fault of that person to be determined. Further, ICBC’s involvement under this section was said to stand in "entire contrast to something real or substantial" and was simply to provide an injured victim of an unidentified driver the means to statutory compensation. As such, the RCMP Defendants were not entitled to contribution and indemnity from ICBC under the Negligence Act.

Aviva Canada Inc. ("Aviva") issued a comprehensive owner’s policy (the "Policy") to the Dewhirsts (the "Insureds"). On March 1, 2003, the Insureds’ daughter held a party on the Insureds’ deck. Unfortunately the deck collapsed. Approximately 45 people were on the deck. As a result of the collapse, seven parties have commenced actions against the Insureds. Many of the people injured in the collapse were minors at the time and consequently, the limitation dates for commencing actions may not commence until they reach the age of majority. Aviva wished to enter into settlement negotiations with the existing claimants. However, Aviva wished to be credited for funds paid under the policy such that it would not be liable for future claims in excess of its policy limits.

Aviva took a variety of steps to locate additional potential claimants, including obtaining a list of the individuals at the social event, phoning each individual on the list and leaving messages for them, writing letters to the individuals, placing ads in newspapers, and asking individuals who had been contacted to pass on Aviva’s adjuster’s name and number on to people whom they knew or suspected having had been at the social event. Despite these efforts, a number of people who attended at the social event have not been contacted.

Aviva sought a declaration that it is entitled to pay settlements and judgments on behalf of the Insureds in chronological order in which defendants’ costs, settlements and judgments incur, that the amounts paid will reduce the limits of liability specified in the policy, and that no additional relief for the incident will be available once the policy limits have been exhausted.

Wong J. noted that Aviva sought a declaration that British Columbia courts adopt the "first past the post" approach in regards to the allocation of insurance policy limits in the non-automobile context. The "first past the post" approach means that insurers pay insurance proceeds to judgment creditors in the order in which the creditors obtain judgment. It also applies to settlements negotiated on behalf of the insured. As such, insurers are free to pay judgment creditors as soon as judgment is obtained and to settle with claimants with the knowledge that the insurer’s aggregate policy limits will be reduced accordingly. Once the policy limit has been realised, the insurer’s liability would be extinguished.

In British Columbia, the Courts have interpreted the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 and Part 6 of the Insurance Act, R.S.B.C. 1996, c. 226 to mean that insurance proceeds, in the automobile context, are to be distributed to successful third party claimants on a pro rata basis. Wong J. noted that Bartkow and Walker v. Merit Insurance Co., [1962] I.L.R. 336 (B.C.C.A.), Henry v. Zurich Insurance Co. (1998), 50 C.C.L.I. (2d) 35 (B.C.S.C.) and Regency Plymouth Chrysler Inc. v. ICBC (1999), 11 C.C.L.I. (3d) 94 (B.C.S.C.) support this proposition. However, Wong J. stated that in contrast to the automobile context, third party claims in the non-automobile context are governed solely by s. 24 of the Insurance Act. Wong J. determined that s. 24 of the Insurance Act does not use the same limiting language present in s. 21 of the Insurance (Motor Vehicle) Act and s. 159 of the Insurance Act.

Wong J. noted that in Ontario, the Ontario Superior Court of Justice in Solway v. Lloyd’s Underwriters (2005), 22 C.C.L.I. (4th) 138 (Ont. S.C.J.) and the Alberta Queen’s Bench in Commerce & Industry Insurance Co. of Canada Inc. v. Singleton Associated Engineering Ltd., 2005 ABQB 500, have applied the "first past the post" approach in the property insurance context. Applying a pro rata obligation in this context would require claimants who have diligently brought their claims forward to wait until all potential claimants have come forward and had their cases heard. In addition, Aviva took steps to ensure that all potential claimants were identified and provided with an opportunity to initiate their claims.

Wong J. determined that public policy suggest that British Columbia should adopt the "first past the post" approach, as it encourages early settlement that lessens the burden on the Courts, rewards claimants who diligently move their claims forward, and affords judgment creditors the opportunity to realise the fruits of their judgments as soon as possible.

In 1995, Connor McIlvenna (the "Infant Plaintiff") was hit by a car. He was six years old. He suffered a head injury. Initially he appeared to make a full recovery. In the months immediately following the accident, the Insurance Corporation of British Columbia ("ICBC") paid a small amount of benefits under its First Party Insurance provision. In 2001, intellectual and learning impairments became apparent in the Infant Plaintiff and his mother requested rehabilitation assistance from ICBC. ICBC refused to provide any benefits because the two-year limitation period set out in the Regulations had expired. The limitation period applies even if a child is involved.

The Infant Plaintiff commenced an action against ICBC for failing to advise the Infant Plaintiff’s mother about his entitlements to first party benefits, including advice about the kind of therapy and treatment that could have been funded and the existence of a limitation period; and for failing to recognise the possible future implications of a brain injury in a child, including a failure to make further inquiries and, if necessary, specifically recommend or initiate appropriate therapy or treatment. ICBC brought a summary application to have the Statement of Claim struck on the basis that the pleadings did not disclose a reasonable cause of action.

In determining whether a viable cause of action existed, Smith J. relied upon Cooper v. Hobart et al, [2001] 3 S.C.R. 537, for the proposition that the Court must apply a two-part test set out in Anns v. Merton London Borough Council, [1978] A.C. 728. The two part test requires the Court to first decide whether there was sufficient proximity between the parties to create a prima facie duty of care, and if so, whether there were any factors negating such a duty.

Smith J. concluded that the first pleading, the duty to advise the Infant Plaintiff’s mother about his entitlement to benefits, fit within a well established category of negligent misstatement in circumstances where one party is reasonably relying on another parties superior knowledge or expertise. Smith J. noted that Fletcher v. Manitoba Public Insurance Corp., [1990] 3 S.C.R. 191, is an example of such a case. In Fletcher, the Supreme Court of Canada held that a public insurer had a duty to advise purchasers of liability insurance that underinsured motorist coverage was also available. The Court held that the relationship between the insurance customer was of sufficient proximity to impose liability for negligent misstatement. Smith J. distinguished this situation from Esau v. Co-operators Life Insurance Co., 2006 BCCA 249 and Pekarek v. Manufacturer’s Life, 2006 BCCA 250 on the basis that the Plaintiffs in those cases knew or ought to have known that the insurer was taking a position adverse to their interest. The adversity changed the relationships between the parties and negated any suggestion of reasonable reliance on advice from the insurance companies.

Smith J. determined that the second duty alleged by the Plaintiff, that in addition to his duty to advise about what benefits are available, the insurer owes a duty to independently recognise treatment and therapy needs and take the initiative in recommending or providing them, does not fall within the same established category. Smith J. noted that the Claimant’s own treating doctors and therapists did not recognise any care that was needed at the time that the benefits were denied. He determined that an independent duty on ICBC to ensure treatment could create an intolerable situation for a claimant if ICBC, in furtherance of its duties, recommended or initiated a course of treatment that the Claimant’s own doctor did not agree with. Smith J. struck the second cause of action on the basis that it did not disclose a reasonable cause of action, but allowed the first cause of action.

This was a summary trial application in which the Plaintiff, B.C. Master Blasters Inc. ("Master Blasters") claimed against its insurer, Aviva Insurance Co. of Canada ("Aviva") for a defence and indemnification in respect of a claim brought against it by Weyerhaeuser for damages sustained while Master Blasters was working on its boiler. The issue was whether Master Blasters was entitled to be defended and indemnified in respect of the claim under a CGL policy issued to it by Aviva.

Master Blasters was hired by Weyerhaeuser to clean smelt off the pipes on the floor of its boiler. Employees of Master Blasters used a jackhammer-like tool to remove the smelt thereby damaging some pipes. When Weyerhaeuser made a claim against Master Blasters for damage to the boiler, Aviva denied coverage on two grounds. First, it said that the damage was not the result of an "accident". Second, it said that the "work performed/business risk" exclusion clauses in the insurance contract excluded coverage for this sort of damage.

On the first issue, the Court noted that property damage is generally found to be "accidental" where the person causing the damage does not intend to cause it. There is a presumption that a person intends the natural and probable consequences of his or her acts. Accordingly, the Court found that the damage to the boiler was accidental. The workers had no intention of doing damage to the pipes and they would not have proceeded to use the jackhammer-like device if they had thought that they would do any damage in the process.

On the second issue, the Court stated that the critical question was what particular part of property Master Blasters was working on at the time. The Court found that the damage was a direct result of the work being performed, which was the removal of smelt from pipes. While it may be that the damage to other parts of the boiler might fall outside the "own work" exclusion, it could not be said that the work product in this case did not involve the pipes on the floor of the boiler. The Court found that the property damage in issue in this case was to that particular part of property on which Master Blasters was performing operations. It was also to property that "must be restored, repaired or replaced because Master Blasters’ work was incorrectly performed on it."

Accordingly, the Court found that the insurance policy excluded the damage claimed to have been suffered by Weyerhaeuser as a result of Master Blasters’ work and the Plaintiff’s action was dismissed.

In a Small Claims action, the Insured sued Mr. Gillespie and ICBC for damage caused to his truck. The damage occurred when Mr. Gillespie drove the truck despite a "water and fuel" warning light which came on briefly. The Small Claims judge held that the engine damage caused by this negligence fell within the claimant’s comprehensive coverage in the ICBC policy.

Section 132(1) of the Insurance (Motor Vehicle) Act Regulations excluded liability under comprehensive coverage if the damage was "consisting of" or "caused by" mechanical fracture, failure or breakdown of any part of the motor vehicle unless that loss or damage was coincidental with damage which was covered under comprehensive or collision coverage. The Insurer accepted that it had the onus to show that the exclusion clause applied. It argued that the trial judge erred in confining the inquiry to causation of the damage and failing to consider whether the engine damage "consisted of" mechanical fracture, failure or breakdown. The Court found that "consisted of" had a separate and distinct meaning from "caused by". The Court agreed with the Insurer that "consists of" referred to the actual composition of the loss or damage, as opposed to what caused the damage. The Court agreed that the loss or damage to the motor vehicle did consist of mechanical failure or breakdown of the engine. The Court therefore held that section 132(1) excluded ICBC’s liability to indemnify Mr. Pflegr for the cost of repairing the engine damage.

The Claimant, Mr. Garnier, sought damages from the Defendant, Mr. Kilkenny, alleging that he damaged Mr. Garnier’s vehicle during an assault with a baseball bat. ICBC was also named as a nominal Defendant pursuant to s. 24 of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c.231 (the"Act").

The Claimant’s vehicle was damaged while stopped at an intersection by an assailant wielding a baseball bat. Following the attack, the assailant returned to his truck and left. The truck the assailant had been driving was that owned by the Defendant; however, the identity of the assailant was unknown. The Court found that there was no evidence identifying the Defendant Mr. Kilkenny as the perpetrator of the assault or the person responsible for the damage and dismissed the claim against him. The Court then considered whether ICBC should be liable pursuant to s. 24 of the Act.

The relevant portions of s. 24 of the Act state that if damage to property arises out of the use or operation of a motor vehicle and the name of the driver is not ascertainable and the owner is not liable, any person who has a cause of action against the owner or the driver, may bring an action against ICBC as nominal Defendant.

ICBC argued that, under s. 24, the Claimant must prove that someone is liable to the Claimant for negligent use or operation of a motor vehicle before compensation is available. Accordingly, the actions of the unidentified motorist in the case at bar would be intentional torts or criminal acts, but would not fall within the ambit of automobile liability coverage.

The Court relied on Chan v. Insurance Corporation of British Columbia, 16 B.C.L.R. (3d) 96 and found that the facts underlying the case at bar satisfied the "purpose test". It was not possible to isolate the assault with a bat from the use or operation of the assailant’s vehicle. With respect to the "causation test", the question is whether there is a sufficient nexus between the assailant’s use or operation of his vehicle and the damage to the Claimant’s vehicle. The Court found that the fact that the unknown assailant exited his vehicle, inflicted the damage and then returned to his vehicle, did not distinguish the nexus between the use or operation of his vehicle and the damage he caused to the Claimant’s vehicle.

In the result, the Court found ICBC liable as a nominal Defendant pursuant to s. 24 of the Act.

The Insured made three claims on an all risks policy of marine cargo insurance for damage to three shipments of laminated truck flooring manufactured in Malaysia and shipped first to Singapore and then to California in 1999. All three shipments were discharged in California damaged by moisture, as the flooring was cracked, delaminated and water-stained. The purchaser rejected the shipments and the Insured made claims on the policy seeking indemnity for the full sale value of the flooring. The Insurer denied all three claims. At trial, the trial judge found that, while the source of the moisture that damaged the flooring was internal to the flooring, the external environmental conditions in the holds of the three vessels caused the damage. The trial judge considered that it was fortuitous that the flooring was exposed to the conditions in the holds of the vessels and awarded damages. The Insurer appealed.

The primary issue on the appeal was whether or not the cause of the loss was fortuitous and not attributable to the inherent nature of the flooring. The Court of Appeal noted that an all risks policy of marine insurance afforded the Insured an indemnity against loss caused by a broad range of events, but it was fundamental to the coverage that the cause of the loss be a true accident or a casualty. There was nothing in the evidence that would support an inference that the conditions in the holds of the three vessels were in any way clearly exceptional, such as to constitute fortuitous occurrences that caused the damage to the flooring. The conditions in the hold might have differed from the environmental conditions outside, but that did not mean that they were in any way exceptional in the sense of being other than what was ordinary for the carriage. There was no evidence to suggest that they were out of the ordinary. The cause of the loss was, in that sense, internal to the flooring. The Court of Appeal held that the loss had not been shown to have been caused by a fortuitous occurrence external to the flooring; rather, on the evidence adduced, it was attributable to the nature of the subject matter of the insurance.

In the result, the Insurer’s appeal was allowed and the action was dismissed.

On January 23, 2000, four armed gunmen robbed the Haworth Jewellery Store in Kelowna, British Columbia shortly after the closing of the store. The owner was present and had not locked the backdoor. At the time, the jewellery had been removed from the display cases and was collected in trays ready for nighttime storage in the vault. Shortly before the robbery, the owner purchased, through her local insurance agent, Capri Insurance Services Ltd. ("Capri"), a Scottish & York jeweller’s block policy of insurance. The Scottish & York jeweller’s block insurance policy contained warranties that stipulated certain store closing procedures. One of those warranties required that the insured lock the exterior store doors before the jewellery was moved from the locked display cases to the vault. By the date of the robbery, the owner had not been provided with a copy of the warranties and consequently, having never previously purchased a jeweller’s block insurance policy, was unaware that some of her business practices breached the warranties. Scottish & York paid the loss and sued to recover the amounts paid out from Metrix for failing to advise the agent, Capri, of the content of the warranties and failing to obtain the insured’s acceptance of the warranties by the time the insurance was bound.

It was common ground that the store opening and closing warranty was not contained, nor referred to, in the application for insurance. Metrix argued that its obligations to Scottish & York were governed by contract, written and oral, and that it was never an express or implied term of the contract that Metrix was obliged to send warranties to the insured in the quotation or with the interim binder. Metrix’s standard practice was to send the policy and warranties to the agent, in this case, Capri, asking for the return of the signed warranties "as soon as possible". The Court also found that Scottish & York did not have a standard practice of requiring the return of the signed warranties at the time of the placing of the policy and that its usual practice was to obtain the warranty signed by the insured within four months of the placing of the policy. It was Scottish & York’s standard practice to stay on risk without the warranty in the period between the date of the binding and the signing of the warranties by the insured. Scottish & York did not expect the warranties to be accepted by the insured prior to the date of their delivery with the policy. The Court held that unless an insured had an ability to read and accept the full warranties before the loss, the warranties were unenforceable citing McKay v. Norwich Union Ins. Co. (1895) 27 O.R. 251 (Ont. C.A.). In this case, the owner of the Haworth Jewellery Store had not agreed to the warranties and Scottish & York was unable to enforce them and was liable to pay the loss under the policy.

The Court agreed with Scottish & York that Metrix did owe a duty of care to Scottish & York to communicate the content of the standard warranties of the policy to Capri, at least at the binding stage of the transaction, and that Metrix breached this duty of care in this instance. The issue then became whether Scottish & York was able to prove, on a balance of probabilities, that Metrix’s failure to inform Capri about the warranties caused or contributed to the loss. The Court noted that to succeed, Scottish & York would have to prove that if Metrix had informed Capri about the warranties, Capri would in turn have informed the owner of Haworth and that the owner would have altered her opening and closing procedures to comply with the policy, and further that the robbery probably would not have occurred if the door had been locked as required by the warranty. After reviewing evidence relating to the owner’s recklessness concerning her surveillance system and financial matters, the Court held that to find that the owner would have complied with the warranties would be largely speculative and, therefore, Scottish & York had failed to discharge its burden of proof.

In the result, Scottish & York’s claim against Metrix was dismissed, with costs.

Pacific held a forest license near Bella Coola, British Columbia. Pacific’s logging contractor ("GBA") was cutting logs on the site and subsequently a fire broke out at the area. Pacific’s manager received notice of the fire and directed the logging contractors to fight the fire. Pacific also brought in other helicopters and professional firefighters and requested water bombers to attend and fight the fire. The bill for the water bombers was approximately $800,000.

Pacific had a policy of insurance with LUA, which insured Pacific against "all risks of direct physical loss or damage from any cause other than as hereinafter excluded". An extension to the policy provided coverage for expenses incurred by the Insured, or on their behalf, for fighting fire on lands being occupied by them, or their contractors.

GBA, the logging contractor, had obtained a commercial insurance policy from AXA. This policy provided coverage to GBA for, amongst other things, "all sums … which the Insured shall become obligated to pay by reason of the liability imposed by law".

At trial, LUA took the position that Pacific was an unnamed Insured under the AXA policy and was, therefore, entitled to claim under it as primary insurance, or at least to cause it to contribute equally with LUA. LUA argued that, having paid the expenses associated with fighting the fire, it was entitled to contribution from AXA according to the principles enunciated in Family Insurance Corp. v. Lombard Canada Ltd., [2002] 2 S.C.R. 695. AXA maintained that the AXA policy was not engaged on the facts before the Court. The LUA policy was property insurance, whereas the AXA policy was general liability insurance. The AXA policy insured GBA only for sums that GBA became obligated to pay by reason of liability imposed by law. AXA argued that the AXA policy was not engaged, as GBA (or another insured, which arguably included Pacific) had not become legally obligated to pay a sum of money because of liability imposed by law or statute.

The Court rejected LUA’s argument that it was not necessary to have a judgment or an agreed settlement in order to give rise to "liability imposed by law". LUA argued that the obligation to incur costs to fight the fire is clear under the Forest Practices Code and that an insured should not have to pursue litigation in order to obtain a determination of liability in order to engage the AXA policy. The Court found that there was no indication that the government ever attempted to recover any of its costs from Pacific. The expenses at issue in the lawsuit only related to costs paid out by Pacific itself to fight the fire. The Court held that the LUA policy covered Pacific’s own expenses in fighting the fire, whereas the AXA policy expressly excluded such coverage. The Court held that this was not a case of double insurance held by the same insured for the same risk or peril. The policies at issue covered different perils and did not insure the same risk. They operated in different circumstances to provide complementary coverage. In the result, the Court dismissed LUA’s claim for equitable contribution.

Ms. Esau had a policy of disability insurance with Co-operators Life Insurance Co. ("Co-operators"). In November of 1998, Ms. Esau ceased her employment, claiming that she was disabled and unable to work. Her policy with Co-operators provided for disability benefits commencing May 17, 1999. Ms. Esau completed a written proof of loss and application for disability benefits on June 23, 1999. On October 21, 1999, Co-operators advised Ms. Esau that her application for disability benefits was refused; however, she was advised that she could appeal the decision to deny her benefits and submit additional medical evidence. There was a 31-day time limit for the submission of additional medical evidence. On March 12, 2001, after a variety of correspondence between Ms. Esau and Co-operators, Co-operators informed Ms. Esau that it had completed a review of her claim and its decision to decline her LTD claim remained unchanged.

Ms. Esau commenced a Writ of Summons on March 19, 2002 for payment of LTD benefits. Co-operators sought a Summary Judgment on the basis that Ms. Esau had failed to commence her action within the limitation period created under the policy of insurance. Under the terms of the policy, the Plaintiff was required to commence an action to enforce payment of disability benefits within one year of the date that the proof of loss was provided to Co-operators. The motions judge determined that the fact that the denial of Ms. Esau’s benefits had been appealed was irrelevant. The motion’s judge noted that he could not accept Ms. Esau’s suggestion that the contact of Co-operators in continuing to consider her appeal after the expiration of the limitation period could create an estoppel as there was no detrimental reliance by Ms. Esau on Co-operators’ actions after the expiration of the limitation period.

On appeal, Ms. Esau argued that an Insurer was required to provide a clear and unequivocal denial of the claim prior to the commencement of the limitation period. Thackray J.A., for the Court, noted that the clear and unequivocal test only comes into play when it is the conduct of the Insurer that invokes the commencement of the limitation period. In this case, since it was the conduct of the Insured, in applying for benefits, that invoked the limitation period, no clear and unequivocal notice from the Insurer was required.

In concurring Reasons, Madam Justice Levine noted that the commencement of the limitation period in conjunction with the appeal process created uncertainty for both lawyers and claimants. A judicial plea to the legislature was made to relieve consumers, insurers and the courts from the current, "untenable", situation in which disabled persons experience the stress of technical legal battles rather than the peace of mind that their disability insurance was intended to provide. Despite these comments, a unanimous court dismissed the appeal.