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

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

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

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

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

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

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

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

Arruda was fatally stabbed after a collision involving his vehicle and one or two other vehicles. His vehicle had been brushed by the others and shot at by the occupants before the other vehicles left the scene. Arruda called 911. While waiting for the police arrive, Arruda stood behind his vehicle armed with a baseball bat. The other vehicle returned, its occupants armed with knives. Arruda was unable to defend himself and died at the scene before the police arrived. The occupants of the other vehicle were convicted of manslaughter in Arruda's death.

Arruda's insurance policy provided for the payment of benefits if his death arose directly, and independently from all other causes, from the use or operation of an automobile. At trial, the Court had found that Arruda's death was not caused by an accident arising from the use or operation of an automobile. The Court agreed that Arruda would not have died had he not been driving his vehicle on the night of the incident. However, the Court considered the temporal distance between the end of Arruda's driving and his death. The Court found that the attack was a clear intervening event between Arruda's use of his vehicle and his death, outside the ordinary use or operation of a vehicle, breaking the chain of causation. The Court further found that the use of the vehicle was not the dominant feature of Arruda's injuries, but was merely ancillary. The family of Arruda appealed this decision.

The Court of Appeal dismissed the appeal, finding that the Trial Judge was correct in finding that the case turned on causation. The phrase "directly and independently of all other causes" in the policy narrowed the broad scope of coverage. The chain of causation could not be broken for the policy provision to apply. In this case, no injury resulted or arose directly from Arruda's use of the vehicle. Arruda's injuries and death were caused by the assault, an independent and intervening cause, which precluded recovery under the policy.

The issue that arose on this motion was whether the loss suffered by the Plaintiff was covered by a comprehensive business policy such that there was a right of subrogation by the Plaintiff as against the Defendants; or, alternatively, was the loss covered by a builder's risk policy held by the Defendants, such that there would be no right of subrogation by the Plaintiff against the Defendants.

The issue arose because the main Defendant's contract with the Plaintiff related to an expansion of the Plaintiff's existing facilities. All other authorities cited to the Court dealing with the issue of coverage under a builder's risk policy involved a new construction project and not a situation involving an expansion and/or addition to an existing structure. Nevertheless, the Court found these situations to be analogous. It found that in a situation where there is an addition to an existing structure (as opposed to when a new stand-alone building is being constructed on the same property), the negligence of a trade or sub-trade employed to do the work could cause damage to all, or at least a portion of the existing structure. In this case, there was no question that the new construction caused damage to the existing building.

The Supreme Court of Canada in Commonwealth Construction Co. v. Imperial Oil Ltd., [1978] 1 S.C.R. 317 recognised that each trade and sub-trade on a project has an insurable interest in the entire project. In this case, the Court expanded that principle to the situation where there is an expansion or addition to an existing structure and as such, found that trades and sub-trades involved in the expansion work have an insurable interest in the entire interconnected structure and not merely the new addition that they are working on.

In the result, the Court found that all parties involved in the construction of this project had an insurable interest not only in the addition to the existing structure, but the existing structure itself. To hold otherwise would defeat the reasonable expectations of the parties and would require a clear language of exclusion, which was absent in this case. As such, the loss in question was covered by the builder's risk policy.

The Insureds obtained home insurance coverage through the Defendant Broker in 1982. Between 1982 and 1991, the Insureds' policy contained a sweage backup endorsement ("SBU"), which insured their home against water damage sustained as a result of sewage backup. The Insureds experienced a sewage backup in 1992 under a subsequent policy that had not been placed by the Defendant Broker. This loss was covered under their policy, however, the Insurer refused to renew the Insureds' policy when it expired later that year. The Insureds then contacted the Defendant Broker to secure a new home insurance policy. A policy was subsequently secured and took effect in November 1992. The Insureds' home sustained significant water damage in July 2001 as a result of a sewage backup. They were told by the Insurer that this loss was not covered since their policy did not contain a SBU endorsement.

The Court was asked to determine whether the Defendant Broker had either breached its contract with the Insureds or was negligent by failing to obtain the SBU endorsement that was bargained for. The Insureds conceded that they were aware that the endorsement was not initially included in the policy, but argued that the Broker had informed them that this would be incorporated after 2-3 years without them having to do anything further. The Broker argued that it did not inform the Insureds that the endorsement would be incorporated into their policy, and would not have made this representation as it is not possible for any clause to be automatically incorporated into an insurance policy.

The Court noted that if the Broker had failed to obtain the type of insurance coverage that it agreed to obtain, it would be liable for breach of contract on the basis of the Ontario Court of Appeal’s decision in Fine’s Flowers Ltd. et al vs. General Accident Assurance Co. of Canada et al (1977) 81 D.L.R. (3d) 139 para. 13 (Ontario Court of Appeal). The factual issue for the Court was whether the parties had bargained for future inclusion of the SBU endorsement. The disagreement concerning what transpired at a 1992 meeting between the Insureds and the Broker boiled down to a contest of credibility and the evidence concerning this meeting was diametrically opposed.

On the evidence, the Court found that the parties had likely exited the 1992 meeting with an imperfect understanding of the importance of the SBU endorsement and what was to be done about this clause in the future. The evidence failed to establish that the Broker and the Insureds had come to any mutual understanding as to what steps were going to be taken. As a result, the Court could not find that the endorsement was a term “bargained for” as discussed in Fine’s Flowers and the Insureds' claim for breach of contract could therefore not succeed. However, the Court found that the Insureds had relied upon the Broker to obtain insurance for their home, including the SBU endorsement. In the particular circumstances of the case, the Broker owed a duty of care regarding the future treatment of the endorsement. 

The Court noted that the scope of the duty owed to the Insureds was governed by Fine’s Flowers and the subsequent decision of the Supreme Court of Canada in Fletcher vs. Manitoba Public Insurance Co. [1990] 3 S.C.R. 191. In particular, the Court found that the Broker had a duty to provide sufficient coverage and that any failure on the part of the Insureds to specifically articulate their needs did not absolve the Broker of liability. The evidence was that the parties were aware of the possibility that future losses might result from a sewage backup and despite this, the Broker did absolutely nothing to inform the Insureds about the sewage backup gap. 

The Town was insured under a commercial general liability policy issued by one Insurer with a second Insurer providing excess commercial liability insurance. Both of these policies were in effect at the material time and the wording with respect to coverage in both policies was the same. 

The Third Party brought an Action against the Town alleging damages associated with the loss of possession of a parcel of land owned by the Town. The Insurers denied that they had any duty to defend the Town on the basis that the true nature of the alleged claims were for breach of contract and therefore excluded from coverage. In deciding the issue of whether the Insurers had a duty to defend, the Court was required to consider several sub issues including, whether the Third Party claim had been properly pleaded, whether the insuring agreement and the policies covered contractual liability, whether any of the properly plead claims were derivative in nature, and whether any of the properly plead non derivative claims were covered by the policies. 

The Court considered the general principles of contractual interpretation and the principles specific to insurance contracts. In particular, the Court reiteretated the principle that when interpreting any written contract the object is to give effect to the intention of the parties and the specific purpose of insurance, that it is a mechanism for transfer of fortuitous risks so that usually the only losses which are covered are unforeseen or accidental. The Court then considered the cases, including the Supreme Court of Canada's decision in Monenco Ltd. vs. Commonwealth Insurance Co., 2001 SCC 49, which provide that an insurer’s duty to defend is triggered by the pleadings. The Court noted that “if there is a mere possibility that the facts alleged in the Statement of Claim would require the Insurer to indemnify the Insured for the claim, the duty to defend is triggered.” 

The Court followed the three step process set out by the Supreme Court of Canada in Non-Marine Underwriters, Lloyd's of London vs. Scalera, 2000 SCC 24 to determine whether or not the Third Party’s claim could trigger indemnity. In doing so, the Court found that the requisite elements for a claim in breach of contract were made out in the Amended Statement of Claim, as were the requisite elements for the claim in negligent misrepresentation and for proprietary estoppel. On the other hand, the Court found that the Third Party’s allegations fell short of being capable of establishing a claim in trespass and/or wrongful eviction, which the Court noted was not a claim in and of itself as much as it was a fact establishing damage arising from other claims.

The Court then considered whether the viable claims for breach of contract, negligent misrepresentation and propriety estoppel were expressly excluded from coverage under the policies. In doing so, the Court referred to case authority which had established that the common phrase in liability insurance policies “liability imposed by law” was not intended to include contractual liability. Next, the Court engaged in an extensive review of the jurisprudence interpreting the exclusion for liability assumed by an insured under contract or agreement and found that this included the assumption by an insured of tort liability on behalf of another.

The Defendant, Peace Hills General Insurance Co. (“Peace Hills”), brought an Application for Summary Judgment dismissing the Plaintiff’s action for recovery under the terms of a Home Owner’s Insurance Policy (the “Policy”). 

The Plaintiff, Mrs. Charles, was married to Mr. Charles. They owned a home which they purchased as joint tenants and which they insured under the Policy with Peace Hills. The Policy provided coverage for the home and its contents. Both Mr. and Mrs. Charles were named Insureds under the Policy. The Policy contained a clause excluding loss or damage resulting from any intentional and criminal act by all persons insured by the Policy, even though the act was by only one of the persons insured by the Policy. 

On September 29, 2003, Mrs. Charles inquired of her insurance agent the means by which Mr. Charles could be removed from the Policy. The couple were having difficulties and had signed a separation agreement which purported to transfer possession and ownership of the home to Mrs. Charles. Mrs. Charles advised the insurance agent that she would be keeping the home as part of the division of matrimonial property. The agent advised that Mr. Charles’ name could not be removed from the Policy until there was evidence that he was no longer a joint owner on title. Mr. Charles then threatened to drive his tractor trailer through the home. He phoned Mrs. Charles and uttered words to the effect of “have you ever heard the expression burning down the house”. The home was subsequently destroyed by fire. Mr. Charles was charged with arson in relation to the fire. However, the criminal charges were stayed. 

The Insurer argued that the evidence supported the conclusion that Mr. Charles, a co-Insured, set the fire which destroyed the home and therefore Mrs. Charles was not entitled to indemnification. The Court found that on a balance of probabilities, Mr. Charles deliberately set fire to the house. The Court also found that Mrs. Charles was not entitled to relief against forfeiture. The Court held that there was no genuine issue for trial with respect to the claim and that it was plain and obvious that the action could not succeed. 

Accordingly, the Application for Summary Judgment was granted and the Plaintiff’s action was dismissed.

A condominium development was being built in four stages: A, B, C, and D. The Insured was the developer, controller, manager, and interim board of Stage C. The Insured also owned one residential unit and one parking space of that stage.

The condominium development was damaged in a fire allegedly started by a subcontractor, for whom the Insurer argued the Insured was vicariously liable. The Insurer paid out the full fire loss, and then sued the Insured to recover over $25,000,000 of that payment.

The Court noted that the type of insurance at issue was fire or all risk. This type of insurance is no-fault. The Court also noted that the law is well settled that the Insurer has no subrogation rights against an Insured no matter how negligent the Insured was. The Court found that departure from the usual rule against subrogation was unwarranted and would open a floodgate to excess litigation.

A vehicle for sale by consignment was involved in an accident during a test drive. The Insurer for the vehicle dealership and the Insurer for the vehicle wholesaler disagreed as to which was to provide first loss coverage. The wholesaler was the owner of the vehicle. A chambers judge found that the Insurer for the wholesaler was to provide first loss coverage, on the basis that s. 650 of the Insurance Act, R.S.A. 2000, c.I-3, states that the owner’s policy is to provide first loss insurance.

The Insurer for the wholesaler argued that s. 610 of the Insurance Act operated, so as to make a provision in the dealership’s policy, which provided that the Insurer for the dealership would be the first loss insurer for vehicles in the dealership’s care or control, prevail over s. 650.

The Court of Appeal rejected this argument, and upheld the chamber judge’s ruling.

Duke was an engineering technician who entered into a critical illness insurance policy with Clarica. At the time he entered into the policy, Duke had no particular health concern and was farming, flying regularly and running 6 km a day, three times a week. He passed his pilot’s physicals on a regular basis. Duke further passed a physical by a physician retained by Clarica. Subsequently, the plaintiff was diagnosed with Parkinson’s disease.

 During the investigation into his condition, Duke told one of his physicians that, in hindsight, "I’d been carrying my arm on an angle and dragging my heel" over the last five years. Once diagnosed with Parkinson’s disease, Duke made a claim for critical illness benefits under the policy. Clarica denied coverage based upon an exclusion in the policy excluding coverage where "the insured person had a covered critical illness or any symptoms associated with a covered critical illness before the date the policy came into effect".

 The Court held that the requisite timing of the association of the symptoms with the covered critical illness was unclear from this exclusion clause. The Court noted that it could not determine from a plain reading of the exclusion clause that having symptoms of Parkinson’s disease before the policy was issued would exclude coverage whether or not anyone made an association between the symptoms and Parkinson’s disease as of that date. In this case, the Court interpreted the ambiguity in the exclusion clause against Clarica and in favour of Duke such that, under the exclusion clause, the association of the symptoms with Parkinson’s disease had to occur before the policy was issued to exclude coverage. The Court found that neither Duke nor any of the physicians who had treated or assessed him had "associated" his symptoms with Parkinson’s disease prior to the issuance of the policy.

Therefore, the Court held that the exclusion clause did not apply and Clarica had improperly denied the critical illness benefits under the policy.