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

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the Standard Mortgage Clause which protected the Applicants from any act of the occupants and expressly stated that it superseded any policy provisions in conflict with it.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.

The Plaintiff consigned her vehicle and the consignment representative (“the dealer”) sold the vehicle, and absconded with the proceeds of sale. The Plaintiff made a claim under the theft provisions of her insurance policy. She was denied coverage based on the application of an exclusion clause that provided that there would be no coverage for losses resulting from “theft or secretion by any person in lawful possession of the automobile under a mortgage, conditional sale, lease or other similar written agreement.”

The Plaintiff hired a solicitor to commence an action against the insurer, but the solicitor failed to file a claim prior to the expiry of the limitation period. The Plaintiff brought an action against the solicitor in negligence. In his defence, the solicitor argued that the exclusion clause did apply to exclude indemnity between the Plaintiff and her insurer.

With respect to the issue of whether the dealer was in lawful possession of the vehicle, the Court relied upon the decision in Quantel Leasing Corp. v. Co-operators General Insurance Co. (1993), 119 N.S.R. (2d) 292 (Co. Ct.). The circumstances pertaining to the dealer’s original acquisition of the vehicle should be considered. The Court held that the dealer came into lawful possession of the vehicle upon entering into the consignment agreement with the Plaintiff. It is clear that the Plaintiff did not regain possession of the vehicle, notwithstanding that she had a lawful right to do so at the expiry of the agreement.

The Plaintiff argued that the consignment agreement was not a "similar written agreement" to a mortgage, conditional sale, or a lease, and therefore the exclusion clause did not apply. The Court held that the transfer of lawful possession away from the lawful owner or holder of the title of the property, pursuant to a financial agreement, is the common element between all three of the terms in the exclusion clause. A consignment falls within the same genus as a mortgage, conditional sale or lease.

The Court determined that the Defendant met the onus of proving that the dealer was in lawful possession of the vehicle and that the words "other similar agreement" included a consignment agreement. Therefore, the exclusion clause applied and the Plaintiff was not entitled to seek indemnity from her solicitor.

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

Five individuals were injured when the vehicle driven by one of them was in collision with a vehicleowned by the City of Edmonton (“the City”), and operated by one of its employees. The employee was negligent. The costs of the health services provided to the five injured persons were paid by the Province of Alberta pursuant to the Alberta Health Care Insurance Plan.

Section 62(1) of the Hospitals Act, R.S.A. 2000, c. H-12, gives the Crown a right to recover health care costs from a wrongdoer whose wrong caused the injuries for which the health care was required. Section 62(3) of the Hospitals Act creates an exception that the Crown cannot recover where the wrongdoer caused the personal injury in the use or operation of an automobile, and if the wrongdoer was insured under a motor vehicle liability policy.

Pursuant to the recovery scheme set out in ss. 82-93 of the Hospitals Act, the Minister is to estimate the total cost of health services provided to persons in motor vehicle accidents in a year. It requires motor vehicle insurers to contribute proportionately to that cost according to the premiums that they received for third party liability insurance in a given year. This estimate is referred to as the “aggregate assessment”. The aggregate assessment represents the total cost of treating persons injured in motor vehicle accidents, including the cost of treating those injured by insured drivers. Motor vehicle insurers are obliged to report the amount of premiums they collect in a given year for third party liability insurance to the Minister of Finance.

The City argued that they fell within the exception in s. 62(3). It is partly self-insured and had excess liability insurance pursuant to a comprehensive liability policy issued by the Commonwealth Insurance Company. Commonwealth paid a majority of the amount contributed on behalf of the City of Edmonton to resolve the claims made by persons injured in the accident.

The City and Commonwealth Insurance admitted that they did not report any third party liability automobile insurance premiums to Alberta Finance in the year that the accident occurred, nor did they contribute to the aggregate assessment. The City submitted that they did not have to contribute to the aggregate assessment calculated in the Hospitals Act in order to rely on the exception in s. 62(3).

The Province cited Rizzo & Rizzo Shoes Ltd., [1998] 1 S.C.R. 27, and argued that the Hospitals Act should be given a "large and liberal" interpretation. They submitted that the provisions be construed as creating an exemption from claim-by-claim recovery only where the wrongdoer's insurer has contributed to the aggregate assessment.

 The Court determined that the Commonwealth policy was a "motor vehicle liability policy”. It fit the definition of the term in both the Hospitals Act and the Insurance Act. The Court held that the Crown did not have the right to recover the costs for health care services from the City. The principles of statutory interpretation do not require or justify reading s. 62(3) as creating an exemption only where the wrongdoer's insurer has contributed to the aggregate assessment.

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

The plaintiff was injured in a slip and fall and it was agreed that the plaintiff's injuries arose out of the negligence or breach of duty of the Property Manager.  The plaintiff's claim was settled and a summary trial was held to determine whether the Owner or the Property Manager was responsible for the plaintiff's damages under the PMA.

The Property Manager and the Owner entered into the PMA which contained mutual indemnification provisions and the following provision with respect to insurance:

6.01 (Property Insurance) Owner will obtain and keep in force adequate insurance against physical damage . . . and against liability for loss, damage or injury to property or persons which might arise out of the occupancy, management, operation or maintenance of the Property covered by this agreement.  Property Manager will be covered as an additional insured in all liability insurance maintained with respect to the property.  Owner shall save the Property Manager harmless from any liability on account of loss, damage or injury actually insured against by Owner.

The court reviewed the relevant case law and noted that the key question to be determined was whether the PMA placed upon the Owner the risk of loss.  The court noted that in the case at bar, article 6.01 of the PMA expressly provided that the Property Manager would be covered as an additional insured and that the Owner agreed to save the Property Manager harmless from "any liability on account of loss, damage or injury actually insured against by Owner".  The Article placed upon the Owner the risk of loss or damage arising from the Property Manager's negligence as it clearly defined the obligation of the Owner to carry insurance against liability for loss arising out of, in particular, the management or maintenance of the building.  The court rejected arguments by the Owner that it was only protecting its own interest without benefit to the Property Manager.  The court held that the Property Manager was not liable to the Owner for injury to third parties where the insurance which the Owner covenanted to carry provided coverage for those injuries.

In the result, the court held that the Owner was responsible for the plaintiff's damages.

This case was originally summarized by jmeadows@harpergrey.com and originally edited by dpilley@harpergrey.com

The plaintiff was a developer building a condominium project in Toronto.  The defendant insurance brokers, (Best) obtained insurance for the project.  A fire occurred and the insurer refused to pay more than 80% of the loss.  The plaintiff sued Best and the insurers for recovery of the "uninsured" loss.  Prior to trial, the plaintiff brought on a summary judgment application against Best.

Best had provided insurance to the plaintiff over the five years it was working on the project.  For the initial policy, Best was able to place the risk on a subscription basis with a number of insurers.  A group of insurers ("Encon") agreed to assume limits of 80%.  Best found two other insurers, CIC and Kingsway, who agreed to assume coverage for the remaining 20%.  It was Encon's practice to bill Best directly for premiums.  The invoice for the original policy indicated that Encon was billing for 100% of the premiums due all subscribing insurers who had assumed the total risk encompassed by the policy.  Best wrote to Encon indicating that the invoice was incorrect as Encon was only responsible for 80% of the risk.  The invoice was ultimately corrected by Encon.  Subsequently, Encon sent a letter attaching a policy endorsement which purported to set out the subscribers to the policy.  This endorsement had no reference to CIC or Kingsway and it appeared from the document that Encon subscribers were purporting to assume 100% of the risk associated with the project.  Encon was contacted and a representative advised that the endorsement was in error and that no further policy endorsements were necessary.

At the time of the policy renewal, a representative of Encon agreed to extend the policy and sent an email to Best confirming the policy extension and the amount of the additional premium.  The premium charged was commensurate with the assumption of 100% of the risk associated with the project.  As a result, Best assumed that Encon would be assuming 100% of the risk and that the participation of CIC and Kingsway was no longer necessary.  The policy continued to be renewed on this same basis until the date of the fire.

The Court held that Best owed a duty of care to the plaintiff which required Best to use a reasonable degree of skill and care in obtaining the requested insurance.  The Court noted that as far as the plaintiff knew, its contract continued with the subscribing insurers and the plaintiff had no knowledge that two of the subscribing insurers had been told by Best that their subscriptions were no longer necessary.  Best made assumptions based upon the premium charged by Encon that Encon was providing total coverage.  Best made this assumption without taking any steps to confirm its correctness with Encon.  The Court held that Best was negligent in the exercise of its duty by failing to ensure that the assumption concerning Encon assuming 100% of the risk was correct. 

Best argued that it was not appropriate to grant summary judgment in a case against an insurance agent prior to a determination that there was a deficiency or gap in the policy.  The Court rejected this argument noting that it was "plain and obvious" that Best had breached its duty to the plaintiff.  However, the Court did acknowledge that Encon, in its turn, may be liable to Best for the obligation to pay damages to the plaintiff and that this summary judgment decision in no way determined the issues between Encon and Best.

This case was originally summarized by jmeadows@harpergrey.com and originally edited by dpilley@harpergrey.com