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

The two Plaintiffs were injured when they were shot at while driving their vehicle.  They retuned home in their vehicle after a weekend away and were confronted by the two Defendants, who had broken into their home.  The Defendants ran from the home, brandishing shotguns, and shouted at the Plaintiffs to get out of the car.  The male Plaintiff instead tried to back the car away and the Defendants fired their shotguns multiple times, seriously injuring both Plaintiffs.  The Plaintiffs brought this action against the Defendants and obtained default judgment.  The Plaintiffs then sought to recover the judgment from a fund set up under the Motor Vehicle Accident Claims Act, which permits a person to recover an unsatisfied judgment if the tortfeasor is uninsured or unknown.  The Plaintiffs brought this motion for a special case to determine if they were entitled to recover the judgment under the fund.

The relevant provision of the Motor Vehicle Accident Claims Act, R.S.A. 2000, c. M-22 (the "Act") provides:

5(1) When a person recovers in a court in Alberta a judgment for damages for bodily injury to or the death of a person arising out of the use or operation within Alberta of a motor vehicle, the person may, on the determination of all proceedings, including appeals, apply to the Administrator in the prescribed form for payment under this section of the amount of the judgment or of the amount of the unsatisfied portion of it.

At issue was whether s. 5(1) requires the use or operation of a motor vehicle by a tortfeasor or whether it simply requires the use or operation of a motor vehicle by either the plaintiffs or a tortfeasor.

Based on earlier Supreme Court of Canada jurisprudence, the Court concluded that where indemnity is sought under a motor vehicle liability policy or an underinsured motorist endorsement to that policy, barring wording in the policy to the contrary, the determination of coverage is focused on whether the tortious acts arose from the tortfeasor's use or operation of a motor vehicle. Where no-fault benefits are sought pursuant to an insured's own policy, the focus is on the use and operation of a vehicle by the insured who is seeking those benefits. 

The Court held that the wording of s. 5(1) was clear and requires the judgment against the tortfeasor to arise out of the tortfeasor's use or operation of a motor vehicle.  That is, the judgment for damages must arise out of the use or operation of a motor vehicle, which necessarily means that the tortfeasor's liability must arise out of the tortfeasor's use or operation of a motor vehicle.  It was irrelevant whether the Plaintiff was engaged in the use or operation of a motor vehicle at the time the injuries were sustained.  Where the tortfeasor's liability does not arise out of the use or operation of a motor vehicle, any judgment against the tortfeasor will not be for damages arising out of the use or operation of a motor vehicle.  The Court also examined the meaning of s. 5(1) within the context of other provisions of the Act and noted that provisions relating to an unknown owner or operator required that person to be the tortfeasor.  Those provisions in combination demonstrated the legislative intent that the fund apply only where the judgment is for damages arising out of the tortfeasor's use or operation of a motor vehicle.

In this case, the parties had agreed that the tortfeasors were liable to the Plaintiffs in tort for the losses and damages sustained by the Plaintiffs as a result of an assault and battery and the injuries "did not arise out of the use or operation of the motor vehicle owned or operated by either or both of the Defendants".  As there was no chain of causation linking the use or operation of a motor vehicle by the Defendants to the injuries suffered by the Plaintiffs, they were not entitled to be indemnified by the fund under the Act.

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

Appeal by insurer from an order to defend its insured in a third party proceeding. The plaintiff was injured in a motor vehicle accident. He was riding as a passenger  in a motor vehicle which was struck by another vehicle operated by defendant Tarrabain and owned by defendant Erikson Nissan. Negligence was alleged in the Statement of Claim against both defendants. Erikson filed a Statement of Defence admitting it was the owner of the vehicle but denying that the vehicle was operated with its consent. Erikson then issued a third party notice against the insured, the father of  Tarrabain. Erikson alleged that the insured brought the vehicle to Erikson for servicing and signed a service loan agreement

The insurer admitted that the loaned vehicle qualified as a temporary substitute vehicle under the policy, entitling the insured to indemnification from its use. However, it argued that the third party notice claimed indemnity on the basis of contract, the service loan agreement, and did not involve liability arising from the ownership, use or operation of a motor vehicle. The chambers judge rejected this submission, finding that the Third Party notice had to be considered in conjunction with the Statement of Claim, which alleged negligence. The chambers judge found a duty to defend. The insurer appealed.

On appeal, the court found that the chambers judge had correctly considered the Statement of Claim alongside the Third Party Notice. Although the Court of Appeal acknowledged that it had previously found that a Statement of Defence should not be considered when deciding whether a duty to defend exists, it noted that the concern that existed there, of the insured drafting the pleadings in a way to extend coverage, did not exist in the case at bar. Further, pursuant to Rule 65(2) of the Alberta Rules of Court, the Statement of Claim is appended to the Third Party Notice, and the Third Party Notice makes express reference to it. The Court of Appeal further found that the Statement of Claim alleged that the plaintiff’s injuries arose out of the ownership, use, or operation of a motor vehicle, and therefore a duty to defend existed. The appeal was dismissed.

This case was originally summarized by Natasha Morley and originally edited by David Pilley of Harper Grey LLP.

Insurance broker brought an application for an order declaring that the insurance company he worked for was liable to indemnify him for a settlement reached with insureds who alleged that the broker negligently handled their policy application.

The broker had an Agency Agreement (the “Agreement”) with the insurer which allowed him to solicit applications and issue binders and policies according with the Agreement and the insurer’s instructions. The agreement also provided that the insurer would indemnify and hold the broker harmless against liability to policy holders caused solely by the insurer’s error in processing the broker’s business. The broker argued that the insurer was vicariously liable for his negligence and, therefore, a joint tort-feasor. The broker further argued that, as a joint tortfeasor, the insurer owed him a right of contribution and indemnity pursuant to s. 3(1)(c) of the Tortfeasors Act.

The court agreed that the insurer was vicariously liable for the actions of the broker, regardless of the fact that the broker acted negligently. However, whether or not the insurer was considered a joint tortfeasor was not material, as s. 3(1)(c) provides that a party may be liable as a joint tortfeasor or otherwise. However, section s. 3(1)(c) also states that “no person is entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability regarding which the contribution is sought.” The court therefore stated that the question was whether the “damage” referred to in the section falls within the meaning of the phrase “the liability regarding which the contribution is sought” The court went on to answer that question in the affirmative. It stated that an insurer, as principal, has a right of indemnity against its agent. Therefore, the situation between the broker and insured fell within the exclusion in s. 3(1)(c). Further, the court stated that each party cannot have a right of indemnity against the other, and here it was the insurer that had a right of indemnity against its negligent agent, the broker. Therefore, the application was dismissed.

This case was originally summarized by Natasha Morley and originally edited by David Pilley of Harper Grey LLP.

Engle owned a commercial building in Calgary.  It leased the premises to a number of commercial tenants and secured an all risk policy from Aviva.  In July 2006 construction began on a high-rise condominium project located on a site adjacent to Engle's building.  After the lot was excavated several stories deep, tenants in the building began to notice cracks developing in the floors, walls and ceilings.  Engle's proof of loss claim to Aviva was denied on the basis that the policy excluded loss or damage caused by earth movement and settlement.

Engle retained a structural engineer who concluded that the damage to the building was caused by the excavation activity on the adjacent lot, specifically by inadequate underpinnings and shoring, together with vibrations, shaking and the destabilizing effects of the deep excavation.  The estimated cost of repair was in the range of $1 million.

At first instance, the chambers judge ruled that the exclusion clause for damages caused to buildings by "settling, expansion, contraction, moving, shifting, or cracking…" did not apply.  The chambers judge found that the loss was fortuitous and not "inevitable".  The chambers judge interpreted the exclusion clause to apply only to settlement-type damages caused by natural forces.  Aviva appealed this decision.

The Court of Appeal reviewed the general principles applicable to the interpretation of insurance contracts.  The Court's primary analysis was with respect to the principle which holds that the reasonable expectations of the parties must be taken into account where the policy wording is ambiguous.  In this case, the clause excluded "loss or damage caused directly or indirectly" to buildings by settling.  The clause did not specify whether it was intended to apply to both natural and fortuitous types of settlement or simply to naturally occurring settlement.  The Court noted that the chambers judge had determined that the word "settling" was commonly understood to mean that which is expected and occurs naturally.  The Court held that the reasonable intention of the parties to a policy such as the one at issue was that the settlement exclusion applied only to naturally occurring settlement but not to settlement that occurs otherwise.  This interpretation was consistent with the underlying purpose of an "all risk" insurance policy to protect against fortuitous events.  The Court noted that given the almost inevitable nature of settlement, it would be understandable that an insurer would intend to exclude it and that an insured would not expect such naturally occurring settlement to be covered.  However, the same cannot be said about settlement resulting from an unexpected, fortuitous event.  There would be no reason why the parties would intend that damage resulting from an unnatural or fortuitous event be excluded under an "all risk" policy.

In the result, the appeal by Aviva was dismissed.

This case was originally summarized by Jonathan D. Meadows  of Harper Grey LLP.

The Applicants sought a Declaration of Coverage, as mortgagees, under the Standard Mortgage Clause in a fire insurance policy. The policy was issued by the Respondent Insurer to an Insured who was not a party to the proceedings. The Insurer had denied coverage on the basis of a Tenant Exclusion Endorsement which provided that loss and damage caused directly or indirectly by vandalism or criminal or malicious acts was excluded. The fire had been deliberately set by the property's tenant. The Applicants argued that the Standard Mortgage Clause was all encompassing and should prevail over the Tenant Exclusion Endorsement. The Court agreed finding that while the Tenants Exclusion Endorsement expressly excluded coverage for loss or damage resulting from malicious or criminal acts, it was inconsistent with the Standard Mortgage Clause which protected the Applicants from any act of the occupants and expressly stated that it superseded any policy provisions in conflict with it. The Tenant Exclusion Endorsement was therefore unenforceable.

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

A seven and half month old infant (the “Infant”) was cared for at a day nursery operated by the insured caregiver (the “Caregiver”) in her home. The Caregiver dropped the Infant, who suffered serious injuries which resulted directly in her death. The Caregiver was charged and convicted of the offence of criminal negligence causing death. The Infant’s parents (the “Parents”) subsequently brought an action against the Caregiver and obtained a consent judgment against her. The Caregiver filed a proposal in bankruptcy. At the relevant time, the Caregiver was insured by the Defendant insurers under a Homeowners Insurance Policy which included coverage for the day nursery. The Defendants denied coverage to the Caregiver on the basis of an exclusion in the policy which excluded coverage for claims arising from bodily injury caused by any criminal act or wilful negligence by an insured. The judgment remained unsatisfied and the Parents brought this action to recover the judgment from the Defendants. The sole issue was whether the Defendants could rely on the exclusion clause.

The Parents argued that the term “criminal act” was not defined in the policy and was ambiguous as written and in the face of s. 529(2) of the Insurance Act, R.S.A. 2000, c.I-3 which allows an insurer to specifically exclude coverage for unintentional criminal acts and otherwise provides that coverage may only be denied in relation to criminal acts committed with the intent to bring about loss or damage.

The Court reviewed a number of decisions from other provinces interpreting similar exclusion clauses and cited with approval the judgment of the Ontario Court of Appeal in R.E. v. Wawanesa Mutual Insurance Co., 2007 ONCA 92, citing Buttar v. Safeco Insurance Co. of America 1986 CanLII 1260 (B.C. S.C.), wherein the Court stated:

In any event there is no authority for the proposition that the exclusionary clause in the policy is to be read as if “criminal act” applies only to criminal offences carried out with the intent of causing the loss. The exclusionary clause is not so worded. It does exclude criminal acts causing the loss. There is no ambiguity or uncertainty in the language used. Criminal acts causing the loss are excluded. In addition wilful acts causing the loss are excluded.

In the result, the Court found that the words “any criminal act” in the policy exclusion were clear and unambiguous and did not require a modifier for clarity. Section 529(2) of the Insurance Act did not apply because the “any criminal act” exclusion “otherwise provided”. Therefore, the “criminal act” exclusion applied and the Parents could not recover their judgment against the Defendants.

The Court further found that the Defendants were not entitled to rely on the “wilful act” exclusion as the incident had been characterized as an “unintentional act committed with no degree deliberation” in the reasons for judgment convicting the Caregiver.

This case was originally summarized by Emily M. Williamson and originally edited by David W. Pilley.

The Applicants, the Insureds, sought a Declaration that the Insurer had a duty to defend them in relation to a Third Party Notice.

The Statement of Claim alleged that the Plaintiff was a passenger in a BMW which was involved in a road race. The driver of the BMW lost control of the car leading to a collision with a light pole and serious injury to the Plaintiff. The Plaintiff sued the owner and driver of the BMW as well as Ericksen Nissan Ltd. ("Ericksen") which owned the other car involved in the road race, a Nissan, and also the driver of the Nissan. Ericksen defended the claim on the basis that the driver did not have Ericksen's consent to drive the Nissan. Ericksen issued a Third Party Notice to the Insureds, the father and brother of the driver of the Nissan.

It was alleged in the Third Party Notice that the brother of the driver of the Nissan owned an Infinity which was brought into Ericksen for service. A Service Loaner Agreement was signed by the owner of the Infinity. The Service Loaner Agreement provided that any loss or damage to the loaner vehicle was the responsibility of the Insureds.

The Insureds sought coverage from their Insurer, who insured the Infinity.

The issue before the Court was which documents ought to be considered in determining whether the Insurer had a duty to defend the Insureds. The Insureds argued that the Court should consider the pleadings as a whole including the Insureds' policy and the Service Loaner Agreement. The Insurer argued that the Court ought only to consider the Third Party Notice since the Third Party Notice sounded in contract and provided no basis for indemnity other than in contract and made no allegations regarding the involvement of an at-fault motorist.

The Court concluded that the relevant pleadings should be considered as a whole together with the terms of the policy and the Service Loan Agreement. In the result, the Court found that the Insurer had a duty to defend the Insureds in relation to the Third Party Notice. The key issue was whether the Insurer had a duty to defend the Insureds if their obligation to pay arose in contract. The Court held that while the Service Loaner Agreement was the basis on which the Insureds might be required to pay, that Agreement effectively transferred a potential tort liability from Ericksen to the driver of the Nissan and therefore the Insureds, which would trigger the policy. It was only upon examining the Statement of Claim, the policy and the Service Loaner Agreement together that this became apparent.

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

The insureds' residence was located near Elbow River, Calgary, which flooded in June 2005. The insureds evacuated their residence at approximately 11:30 p.m. on June 18, 2005. At that time they were also advised that the city would be removing service from a nearby lift station, as it had become overwhelmed, and that, as a result, sewer would back up into their basement. When the insureds returned the next day, river water surrounded their house. They testified that the inside of their home was full of foul smelling water and refuse to a depth of about 10 inches.

The insureds had an “all risks” insurance policy that excluded water damage caused by sewer back-up. However, they had purchased an additional endorsement that covered such damage. The endorsement contained an exclusion for loss or damage that “occurs before, during or after flood damage to the premises.” The insurer denied coverage based on the exclusionary clause.

The insureds argued that all the damage to the interior of the house was due to sewer back-up and that the house was not otherwise damaged by the flood, therefore the exclusion should not apply. The insurer took the position that the sewer-water damage was not the only water damage to the interior of the house and that, even if it was, there was additional damage to the exterior of the premises caused by the flood.

The court accepted the insureds' expert evidence, that the damage to the residence was caused by sewer back-up and that if any river water did enter the house in addition to the sewer back-up, it did not contribute in any material way to the damage already caused by the sewage back-up. Therefore, the court found that the insurer did not satisfy its onus of establishing that there was any damage caused by flooding to the interior or exterior of the dwelling and thus the damage caused by sewer-back-up did not occur “before, during or after flood damage to the premises.” Further, the court found that evidence such as silt covering the lawn, driveway and deck did not constitute “damage” within the ordinary meaning of the word.

The court agreed that the insurer’s investigation of the claim was perfunctory and inadequate. However, it found that the insureds did not suffer injuries that would be compensable even if the conduct of the insurer was in bad faith. Furthermore, the disappointment, frustration and anger that the insureds suffered was not sufficient to found a claim for damages for mental distress.

This case was digested by Natasha D. Morley and edited by David W. Pilley

The Respondents were injured in two separate motor vehicle accidents. At trial they challenged the constitutionality of the $4,000 cap on minor injuries sustained in motor vehicle accidents under the Minor Injury Regulation, AR 123/2004 (“the MIR”). They argued that it infringed their rights under ss.7 and 15 of the Charter of Rights and Freedoms (“the Charter”). They were successful and the trial judge held that the MIR infringes s. 15(1) and is not saved by s. 1 of the Charter. The Applicants appealed that decision. If the Applicants were successful the Respondents sought to appeal the trial judge’s decision that the MIR does not infringe s. 7 of the Charter.

The Court of Appeal held that the MIR is not unconstitutional and dismissed the cross appeal. The trial judge erred in failing to assess the entire legislative scheme, including the Diagnostic Treatment and Protocols Regulation (the “DTPR”), rather than just the MIR. This resulted in a flawed s. 15 analysis.

The decision in Law v. Canada (Minister of Employment and Immigration), [1999] 1 S.C.R. 497 sets out the correct analytical framework for a s. 15 analysis. The first step was to choose an appropriate comparator group. The trial judge did not err in choosing motor vehicle accident victims who suffer injuries other than those set out in the MIR as the comparator group. Second, it must be established that there was discrimination on the basis of an enumerated ground, such as a disability. The Court of Appeal accepted the trial judge’s decision to classify minor injury claimants as “disabled” persons, in so far as that term is defined in Granovsky v. Canada (Minister of Employment and Immigration), 2000 SCC 28.

Third, it must be considered whether there was differential treatment of the claimants in a substantive sense. This includes a consideration of whether there is (1) a pre-existing disadvantage or stereotype,  (2) a perpetuation of the stereotype, (3) correspondence between the ground claimed and the needs, capacities and circumstances of the claimants (4) ameliorative purposes and effects, and (5) interests effected.

The Court of Appeal held that the trial judge erred in finding that the legislation as a whole perpetuates a stereotype about minor injury claimants being less entitled to damages. He also erred in overemphasizing that the purpose of the legislation was to reduce insurance premiums because the legislation also sets out a regime to respond to the needs of the claimants. The trial judge failed to recognize that the scheme provides medical benefits to the claimants in exchange for their pain and suffering. The interests effected by the cap are “not of fundamental societal or constitutional importance. The trial judge erred in determining that a reasonable claimant would conclude that the distinction is discriminatory.

The MIR does not coerce soft tissue injury victims into following the protocols set out in the DTPR nor does it remove a health care practitioner’s discretion. Therefore, the legislation does not infringe a person’s right to security of the person under s. 7.

Given that there was no infringement of the Charter there was no need for the Court to make a determination under s. 1.

This case was originally summarized by Kim Yee and originally edited by David W. Pilley.

The applicant insurance company sought a declaration that an automobile insurance policy sold to the respondent had been effectively cancelled prior to an accident involving the defendant. The policy had been sold to the respondent’s father as part of the applicant’s marketing strategy to insure all of a family’s vehicles under one policy. The premiums for all the family vehicles, including the respondent’s, were automatically deducted from the father’s bank account.

The respondent failed to deliver a copy of a mechanical inspection report to the applicant, as was required by the policy. As a result, the applicant issued a letter to the respondent that his policy would be cancelled within thirty days. The applicant did not notify the respondent’s father of the cancellation, and in fact provided a renewal notice to the father, for all three family policies, without mention of the imminent cancellation of the respondent’s policy.

The applicant took the position that the termination was effective, because the respondent’s father had no insurable interest in the respondent’s vehicle, and was therefore not entitled to termination of coverage on it. The respondent took the view that “where one policy number is issued with respect to a number of family vehicles, it is reasonable for the average person applying for insurance to understand that” the overall policy holder is entitled to notice of cancellation. The court agreed with the respondent’s position, holding at para. 40 that:

[the respondent’s father] would have had an expectation that matters related to coverage under his Policy (including that related to the [respondent]) would be brought to his attention, consistent with his past dealings with his insurance company.

This case was digested by W. Jay Havelaar and edited by David W. Pilley of Harper Grey LLP.