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

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

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

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

The Insured, a Prince Edward Island resident, was involved in a motor vehicle accident involving the Defendant, a New Brunswick resident. The accident took place in New Brunswick.

At issue in this appeal was whether the Defendant’s Insurer was entitled to deduct from the Plaintiff’s award of damages, those amounts that the Plaintiff’s own Insurer had paid for weekly no-fault benefits in the amount of $38,940.

The trial judge found that the Defendant (i.e. the Defendant’s insurer) was entitled to an offset from the award made to the Plaintiff of the $38,940. The Court of Appeal considered the provisions of the New Brunswick Insurance Act and the provisions of the New Brunswick Motor Vehicle Act and found that, taken together these provisions required a deduction from the Plaintiff’s award for those amounts he had already received from his Insurer as income loss benefits.

The Court of Appeal rejected the Plaintiff’s argument that the provisions in the New Brunswick Insurance Act did not apply to him because the benefits he received were not paid under a contract of automobile insurance made in New Brunswick. The provisions of the New Brunswick Insurance Act regarding no-fault benefits were clearly not limited to situations where the source of the payments for loss of income is a policy of automobile insurance issued in New Brunswick.

Bremner Farms was in the business of selling and repairing farm equipment. On occasion, its customers brought equipment onto the premises of Bremner Farms where it remained for some time while being repaired. On September 20, 2004 a fire damaged the premises, including equipment of customers on the premises. Bremner Farms was insured by Economical Mutual Insurance Co. (“Economical”) who denied coverage for the claims relating to the property of customers on the premises on the basis of an exclusion in the policy. The parties agreed to have the matter decided by stated case before the Court.

At issue was the interpretation and interaction of the following two exclusion clauses:

2    This exclusion does not apply to:

(b) …”property damage” for which the insured is obligated to pay compensatory damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability or compensatory damages:

1)   Assumed in a contract or agreement that is an “insured contract”; or

2)   That the insured would have in the absence of the contract or agreement.

…

h)   “Property Damage” to:

4)   Personal property in your care, custody or control.

Bremner Farms conceded that section 2(h)(4) would normally preclude coverage but argued that the concluding portion of section 2(b) provided coverage which superseded the general exclusion of the 2(h)(4). The Court disagreed noting that no support was presented for the submission that an exception to an exclusion could not be trumped by another general exclusion clause. The Court held that the wording of 2(h)(4) clearly applied to the fact situation involved in the loss. The Court indicated that it was possible that in some situations an exception to an exclusion would permit coverage. However, where there is a clear and unambiguous exclusion which precludes coverage, this clause must be given its plain and simple meaning. In the result, recovery of damage for the loss of property of Bremner Farms’ customers was excluded pursuant to 2(h)(4) of the policy.

The claim by the third party against the Insured was for serious damage caused to a large poultry-processing plant as a result of fire. The particular allegations of negligence against the Insured related to its approval of plans and specifications, issuing of permits for the construction of the third party’s property and for failing to carry out appropriate building inspections.

Both Insurers claimed to have no duty to defend the Insured on the basis of specific exclusion clauses in the policies. In reference to the seminal decision in Nichols v. American Home Assurance Company, [1990] 1 S.C.R. 801, the Court noted that the duty to defend arises where the pleadings allege claims that could possibly be covered under the policy. The Court confirmed that the duty to defend and obligation to provide indemnification are separate issues; with the duty to defend being broader.

After citing these principles, the Court concluded that the Insured had established there was a possibility that the claim advanced by the third party was covered by both policies and the Insurers had not demonstrated that the allegations in the Statement of Claim clearly fell outside of coverage.

A defamation action was commenced against the Insured. The Insured brought an application for an order compelling the Insurer to defend it in accordance with the policy. The application judge found that the Insurer had a duty to defend. The Court of Appeal dismissed the appeal.

The Court of Appeal noted that apart from the alleged "publication" of defamatory material on the Insured’s website, the Plaintiff was, in effect, suing the Insured for defamatory comments which had been made to newspaper reports in the hope that the comments would be published in the newspapers.

Under the policy, the Insurer agreed to indemnify the Insured for third party claims for injury arising out of the conduct of the Insured’s business and arising from "oral or written publication of material that libels or slanders a person…." The clause defining coverage had a built-in exception under which damages caused by defamation as a result of "publishing" done by or for the Insured were not covered. Furthermore, an exclusionary clause excluded indemnification if the Insured published a defamatory statement "with knowledge of its falsity…."

The Court of Appeal noted that the use of the expression "publication" in the coverage clause could not be attributed the same meaning as the word "publishing" in the built-in exception in the coverage defining clause. However, many arguments were possible with respect to how the built-in exception should be interpreted. The Court found that it was not clear that the allegations in the Statement of Claim fell outside the insuring agreement. There was a possibility that the claim against the Insured was covered under the policy. The appeal was dismissed.

Thibodeau rented a 2005 Yukon four wheel drive truck from National. She also purchased National’s insurance coverage. When the truck was returned, there were scratches on the vehicle, and a branch was dangling beneath. The tow hook had also been pulled off. Damages to the vehicle were in excess of $3,000 and National filed a claim in Small Claims Court against Thibodeau.

National argued that Thibodeau could not rely on the insurance coverage she purchased as the insurance policy contained a prohibition from driving on unpaved roads. Thibodeau acknowledged that she drove on an unpaved road then stated that she did not know how the damages to the vehicle occurred. Thibodeau indicated that she was not aware of the prohibition from driving on an unpaved road. Counsel for National took the position that because Thibodeau signed her name on the bottom of the rental agreement, the exclusions in the insurance coverage were necessarily brought to Thibodeau’s attention. The Court did not agree with this proposition, citing from the Ontario Court of Appeal decision in Tilden Rent a Car Co. v. Clendenning, (1978) 83 D.L.R. (3d) 400, where the Court made the following statement:

In modern commercial practice, many standard form printed documents are signed without being read or understood. In many cases, the parties seeking to rely on the terms of the contract, know or ought to know that the signature of a party to the contract does not represent the true intention of the signer, and that the party signing is unaware of the stringent and onerous provisions which the standard form contains. Under such circumstances, I am of the opinion that the party seeking to rely on such terms, should not be able to do so in the absence of first having taken reasonable measures to draw such terms to the attention of the other party, and, in the absence of such reasonable measures, it is not necessary for the party denying knowledge of such terms to prove either fraud, misrepresentation or non est factum.

The Court found that a prohibition from driving a rental vehicle on an unpaved road was an onerous and unusual condition which should have been brought to the attention of Thibodeau in order for National to rely upon it. The Court noted that it would not occur to an individual renting a vehicle, as a matter of course, that should he or she operate the vehicle on an unpaved road, this could nullify the coverage purchased by this individual. The Court refused to apply the prohibition in the contract and held that Thibodeau was not liable for any damage to the vehicle as she had purchased coverage to protect herself against this risk.

The insured was a company which carried on the business of surveillance and private investigations. The insured had a standard automobile insurance policy with the insurer which contained the following terms: "The insurer agrees to indemnify the insured against direct and accidental loss or damage to the automobile, including its equipment". The sole issue to be resolved was whether the surveillance equipment contained in the van for the insured’s business was covered under the policy.

The Court noted that "its equipment" was a composite term which must be considered in its immediate context. The Court held that "its equipment" and/or "an automobile’s equipment" includes only equipment that is integral to the automobile’s use as a mode of transportation or which is permanently affixed, designed and manufactured specifically for the automobile which enables it to perform a function in addition to the automobile’s use as a mode of transportation. In the result, the insured was awarded damages only for the loss of the van and not for the loss of the surveillance equipment.

An insured vehicle owner gave her consent to two individuals to use her car. The two men were involved in a single-car accident in which one was severely injured and the other was killed. The injured man said that the deceased was driving at the time of the accident, and commenced an action for damages against the alleged driver and the vehicle owner. The solicitor for the owner’s insurer filed a Statement of Defence denying that the deceased was driving and alleging that the injured man was driving while impaired. The deceased’s parents commenced proceedings against the injured man and the vehicle owner, also alleging that the injured man was driving. The insurer filed a Statement of Defence on behalf of the owner, but denied liability under the policy and refused to defend the injured man on the grounds that he falsely denied being the driver.

The insurer was added as a third party in its own name, under the provisions of the Insurance Act that allow an insurer to appear as a third party and carry on a defence on behalf of the defendant insured, without being estopped from later denying liability under its policy if it is found that there is no coverage. The injured man brought an application claiming that despite the coverage dispute the insurer had a duty to defend him and, because it had taken a position clearly incompatible with his interests, he should be permitted to appoint his own solicitors at the expense of the insurer. The application was granted and the motions court held that, while the insurer could continue to defend the action as a third party, it could not advance a defence contrary to the interests of the injured man.

The Court of Appeal upheld the decision in its entirety. Deschênes J.A. held that the Act was clear: while a Third Party insurer may participate to the same extent as if it were a defendant in a main action despite the fact that it is denying liability under the policy, the Act is intended to limit the issues to those between the plaintiff and the defendant. Any dispute between the insured and the insurer cannot be an issue. Counsel appointed by the insurer where such issues of coverage are raised cannot represent the insured defendant without "an obvious appearance of impropriety", and outside counsel must be appointed.

The Plaintiff brought an action to recover damages for injuries and losses allegedly sustained as a result of a motor vehicle accident that occurred in January 2000. The Plaintiff was involved in a subsequent motor vehicle accident in December 2000. The Plaintiff claimed that, as a result of the January 2000 accident, he suffered from chronic pain syndrome rendering him totally disabled since December 2000. The Court found that the Plaintiff had not met the burden of proving on a balance of probabilities that, as a result of January 2000 accident, he suffered from a chronic pain condition which disabled him from working.

The court also considered the effect of weekly indemnity payments which the Plaintiff had received from his Section B insurer. The court followed a previous decision of the New Brunswick Court of Appeal which confirmed that in a case where an injured party has been overcompensated for past loss of income as a result of receiving section B Loss of Income Benefits, the trial judge is obligated to reduce the amount payable for non-pecuniary damages to account for the over-compensation in applying the release provisions of section 263(2) of the New Brunswick Insurance Act.

The Insured was a Defendant in the underlying defamation action. The Insured applied for a declaration that its Insurers (Cooperators and Encon) owed it a duty to defend in the circumstances.

The Co-Operators Policy, the primary policy, excluded coverage for injury arising out of advertising, publishing, broadcasting or telecasting done by or for the Insured. It expressly excluded coverage for injury arising out of oral or written publication of material, if done by or at the direction of the Insured with knowledge of its falsity.

The court referred to the so-called "pleadings rule" and found that it was evident from the pleadings that a large proportion of the allegations made against the Insured appeared to be covered by the Co-Operators Policy. The Court noted that only one allegation, which dealt with material disseminated on a website maintained and controlled by the Insured, appeared to fall within the exclusions. Co-Operators had a duty to defend. Because the claim was seamless as pleaded, it was not possible to distinguish between the Defence costs that might be attributable to the allegations that might be covered by the policy and those that were excluded. As such, the court held that Co-Operators would bear the cost of defending the action.

The court held that even though Co-Operators had appointed separate coverage counsel and defence counsel, the Insured was entitled to appoint its own counsel at the expense of Co-Operators. The court noted that the issue of whether or not there was publication or broadcasting by or on behalf of the Insured may well become an important evidentiary component of the trial. Thus, even though the trial counsel appointed by the Insurer would not be retained to canvass coverage issues, it would be too substantial a conflict to ignore.