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

The Plaintiff was a passenger is a motor vehicle driven by Mr. Larkin. Mr. Larkin swerved to avoid a dog, owned by Mr. Hogeterp, and crashed into a telephone pole, causing the Plaintiff to suffer a severe brain injury. An action was commenced by the Plaintiffs against Mr. Larkin and Mr. Hogeterp. In August of 1997, Lombard Insurance entered an Appearance on behalf of Mr. Hogeterp and retained an independent adjuster to investigate the claim. The adjuster obtained two statements from the Defendant Mr. Larkin. Mr. Hogeterp's counsel provided the statements of Mr. Larkin to Mr. Larkin, and to the Plaintiff. The Plaintiff brought an Application seeking production of Lombard Insurance's entire adjuster's file. 

The Chambers Judge ruled that there would have been no waiver of privilege had Mr. Hogeterp's counsel released the statements to Mr. Larkin, as he was the maker of the statements, and was therefore entitled to the statement. The trial Judge relied upon Hanna v. Maritime Life Assurance (1995), 137 N.S.R. (2d) 339 (S.C.) for this proposition. However, the Chambers Judge found that the Plaintiff and Mr. Larkin were adverse in interest and as such, the disclosure of the statements waived privilege over the statements, and all other relevant documents dealing with the same subject matter. The Chambers Judge relied upon Walsh v. Smith (1999), 180 N.S.R. (2d) 173 for guidance with respect to the extent of the waiver of privilege. The Chambers Judge ordered that Mr. Hogeterp had to disclose documents that had any reference to the statements and the circumstances under which they were obtained. However, these references could be severed from the remaining filed documents. 

In determining what documents were privileged and what documents were not privileged, the Chambers Judge determined that the most appropriate method would be to examine the entire file over which privilege was claimed and make an individual assessment of each document.

The Testator willed his land and cottage to one of his children and her husband and the rest of his estate to another group of heirs.   He died in the fire that damaged the cottage.

The Fire Investigator had provided a report in which he concluded that the Testator died from smoke inhalation before the cottage was substantially damaged.   The Executrices of the will of the Testator applied for directions as to whether the heirs of the estate or the heir of the interest in the cottage  were entitled to the insurance proceeds for the damaged cottage.

The Court held that, based on the evidence of the Fire Investigator, it appeared the Testator died before there was any substantial damage to the cottage. Consequently, the cottage passed to the personal representative of the deceased, with the beneficial interest to the heirs of the estate at the time of his death.  As the "substantial damage" occurred after the "legal" and "beneficial title" had passed, the insurance proceeds were likewise payable to the heirs that had an interest in the cottage as opposed to the estate.

The insured owned a dairy farm that was extensively damaged during Hurricane Juan. A cement silo had collapsed, falling into the milking parlour and completely destroying that part of the building and all equipment contained therein. The insurer denied coverage with respect to the loss of the milking cooler, milking parlour and equipment therein, as the insured had not obtained coverage for wind damage or falling objects.

The Court reviewed evidence with respect to the discussions between the insured and the representatives of the insurer at the time the policy was taken and was satisfied that the insured had considered that there was little risk to the milking equipment from wind damage and had declined such coverage. The insured had obtained coverage for wind damage to the insured’s barns and structures. The Court held that some of the milking equipment, specifically those parts that were embedded in concrete, were sufficiently fixed so as to represent part of the structure of the barn and, therefore, fell within coverage.

 In the result, the Court directed the parties to separate pricing and installation costs for the embedded equipment and reach an agreement with respect to that portion of the claim, failing which the Court would hear detailed evidence on the costs of the embedded equipment.

Ms. Hartling was a young woman who suffered nervous shock after seeing her cousin, Mr. Hartling killed when he was struck by an uninsured motorist, Mr. Leblanc. Ms. Hartling claimed against Mr. Leblanc who, while obliged to, could not compensate her. Wawanesa, the auto insurer of Mr. Hartling’s stepfather, and the Uninsured Motorist Claims Fund (the “Fund”) agreed to be bound by the court’s decision as to which of them should compensate Ms. Hartling. When the Trial Court held that Wawanesa’s coverage did not extend to this type of loss and ordered the Fund to compensate Ms. Hartling, the Fund appealed.

The Insurance Act prescribed the language for mandatory coverage under the policy issued by Wawanesa. The key policy provision effectively stated that recovery would extend to Ms. Hartling if her claim for nervous shock represented damages “for” the death of Mr. Hartling, an insured person under the policy. The Fund argued that coverage by Wawanesa existed under this provision because the nervous shock was “caused by” the death of Mr. Hartling.

The Court of Appeal found there was no evidentiary basis in the facts from which to conclude that the nervous shock was caused by Mr. Hartling’s death. Rather, it could only be inferred that the nervous shock resulted from the global effects of the accident. Because the facts did not establish that Ms. Hartling’s nervous shock resulted from the fact of Mr. Hartling’s death, the appeal was dismissed.

In this case, the Plaintiff was run down in the parking lot of a local mall as he was pursuing a shoplifter. The van that struck him, driven by one of the Defendants, was being used as the get-away vehicle. The issue for the Court to decide was whether damages in the amount of approximately $163,000 were to be paid by Allstate, the liability insurer of the registered owner of the vehicle at the time of the incident, or by ING, the Plaintiff’s Section D (Uninsured Motorist) Insurer.

Based largely on findings of credibility, the Court found that the owner of the van failed to rebut the statutory presumption that it was being operated by the Defendant, Charles Burke, with the owner’s consent when the Plaintiff was injured. It therefore followed from s. 144(1) of the Insurance Act and s. 248(3) of the Motor Vehicle Act that Allstate was liable to pay the Plaintiff’s damages as the issuer of the owner’s liability policy. The action against ING, the Plaintiff’s uninsured motorist Insurer was dismissed.

The insured’s vessel lost its propeller and tail shaft while towing a barge. Under the Liner Negligence clause, coverage was excluded for loss or damage resulting from a want of due diligence by the insured and/or manager of the vessel. The insurer refused to indemnify the insured for the loss, claiming that a want of due diligence caused the tail shaft to break. The trial judge, in allowing the action, concluded that the insured had exercised due diligence. The insurer appealed.

The Nova Scotia Court of Appeal dismissed the appeal. The Liner Negligence clause is essentially an "all risks clause". The exclusion under the Liner Negligence clause is only for want of due diligence by the insured and/or the manager of the vessel. It is well established that once an insured makes out a prima facie case of coverage under an insurance policy, the burden then shifts to the insurer to prove that an exclusion is applicable. In order to rely upon the exclusion in the Liner Negligence clause, the insurer must bear the burden of proving a want of due diligence on the part of the owner, master or manager of the vessel. The trial judge did not err in concluding that the insured had exercised due diligence.

The plaintiff experienced corrosion of its facilities due to the alleged failure of a paint system. The plaintiff commenced an action against the suppliers and applicators of the paint system. The defendant, AML Painting Ltd. ("AML"), one of the applicators of the paint system, was insured under a CGL policy. The insurer sought an order that it did not owe a duty to defend or indemnify AML.

The Court was critical of the approach taken by the Ontario Court of Appeal in Alie, v. Bertrand & Frere Construction Co., [2002] O.J. No. 4697, in its analysis of what constitutes "property damage". The Court in Alie, supra had stated, in discussing the insuring provision and definition of property damage, that CGL policies are not performance bonds or intended to cover the cost of repairing or replacing the insured’s defective work product. The Court in the case at bar stated that such a general proposition could only flow from an analysis of the entire policy, and was still subject to the actual wording of the individual policy.

The Court found that the alleged continuing corrosion was property damage to someone other than the insured. Furthermore, the plaintiff’s claim clearly included a claim for compensatory damages, for physical injury to tangible property, and for loss of use of that tangible property. The court held that the insurer had a duty to defend AML.

The Insureds brought an application for an order requiring the Insurer to defend them under a homeowner’s insurance policy with respect to a personal injury claim. The Plaintiff in the underlying action had been run down and severely injured by an all-terrain vehicle ("ATV") owned by the Insureds and operated by the Insureds’ son.

The Plaintiffs alleged that the Insureds’ son was negligent in his use and operation of the ATV. The Plaintiffs alleged that the Insureds were negligent in supervising their son. The Statement of Claim also contained a subclause alleging "such other negligence as may appear at trial".

Where there are two concurrent causes of action in a Statement of Claim and there is a possibility that one of them falls within the coverage, the Insurer has a duty to defend.

The Court held that the rote wording in the subclause alleging "such other negligence as may appear at trial" added nothing of substance to the other allegations in the Statement of Claim.

The Court further held that, under the circumstances, the pleading of negligent supervision was not an independent and discrete cause of action that could potentially trigger the Insurer’s duty to defend. It was difficult to see how there was any realistic possibility that the Insureds could be found liable for negligent supervision while at the same time their son be absolved of any finding of negligence in his operation of the ATV. The Insurer did not have a duty to defend.

The deceased was struck from behind and killed while driving his bicycle. The Plaintiff was the deceased’s cousin. The Plaintiff was present at the site of the accident but did not suffer any physical injuries. She commenced an action to advance a claim for nervous shock. The defendant was an uninsured motorist. All issues in the proceeding had been settled except the determination of liability as between Wawanesa, the deceased’s step father’s Insurer, and the Uninsured Motorist Claims Fund (the "Fund").

The deceased was a "person insured under the contract" under 139(2) of the Nova Scotia Insurance Act, R.S.N.S. 1989, c. 231. The parties agreed that under s. 139(2), family members of a deceased may claim for damages as a result of their entitlement as provided in the Fatal Injuries Act, R.S.N.S., c. 163.

The Court noted, however, that a claim for damages under the Fatal Injuries Act did not include a claim for emotional distress or psychological injury which might result from the loss of a loved one. The Fund conceded that if the Plaintiff had been physically injured as a result of the defendant’s negligence, it would have had to pay. However, because the Plaintiff was emotionally damaged as a result of "bodily injury or death" of the "person insured", the Fund submitted that the Plaintiff was entitled to recover from Wawanesa.

The Court held that the emotional harm suffered by the Plaintiff was too remote from the original contract contemplated, and was not contemplated by the legislature when it passed the legislation. The Fund was liable for the loss suffered by the Plaintiff.

In September 1999, a motor vehicle accident occurred in which the Defendant’s motor vehicle rear-ended the Plaintiff’s motor vehicle, causing personal injuries to the Plaintiff. The Defendant commenced a Third Party claim against Graham Bowlby, alleging that while traffic was temporarily stopped, Bowlby intentionally left the vehicle in which he was a passenger, approached the Defendant’s vehicle and assaulted the Defendant causing the Defendant to lose control of his vehicle which then struck the Plaintiff’s vehicle. After being served with the Third Party action, Bowlby reported the claim to his auto insurer, Economical, and to his homeowner’s insurer ("Federation").

Economical denied coverage on the basis that the Third Party claim did not arise out of the "ownership, use or operation" of the Insured vehicle and therefore did not fall within coverage under the auto insurance policy. Federation elected to provide a defence under a reservation of rights but was not prepared to admit that the claim fell within the policy coverage. Bowlby was not satisfied with the situation and applied to the Court for an order that both Economical and Federation had an obligation to defend the Third Party action and also for an order permitting the appointment of defence counsel of his choice at the Insurer’s expense.

In reviewing the application as against Economical, the Court held that the test to be applied in determining whether a particular loss resulted from the "ownership, use or operation" of the motor vehicle was that laid down by the Supreme Court of Canada in Amos v. Insurance Corp. of British Columbia (1995), 127 D.L.R. (4th) 618. This two-part test was set out as follows:

1. Did the accident result from the ordinary and well-known activities to which automobiles are put?

2. Is there some nexus or causal relationship (not necessarily a direct or proximate causal relationship) between the appellant’s injuries and the ownership, use or operation of his vehicle, or is the connection between the injuries and the ownership, use or operation of the vehicle merely incidental or fortuitous?

In finding that the facts alleged in the Third Party action did not meet the Amos test, the Court reviewed the analysis outlined in Duval v. Alberta Motor Association Insurance Co., [2000] A.J. No. 184. Duval also involved a road rage situation and, in that case, the court held that one could not reasonably contend that an assault arose out of an ordinary and well-known activity to which automobiles are put. When an individual leaves his vehicle and accosts another driver, this is not an activity relating to the automobile. The Court in Duval also had held that there was not a sufficient nexus between the assault and the use or operation of the vehicle to satisfy the causal relationship requirement. The connection is merely incidental. In the case at bar, the Court agreed that the facts alleged in the Third Party action outlined similar circumstances and, therefore, it could not be said that there was a realistic possibility that a claim within the Economical policy coverage may succeed. The Court found that Economical had no legal obligation to defend Bowlby.

As Federation agreed to defend the claim under a reservation of rights, the application against Federation dealt solely with the issue of choice of counsel. Federation acknowledged that the counsel appointed to defend the case also advised Federation on issues of coverage. The Court noted that this raised the apprehension that the Insurer might tend to slant the defence so as to serve its interest rather than those of its Insured. Significantly, the reservation of rights arising out of the coverage issue depended on an aspect of the Insured’s own conduct, i.e., whether such conduct fell within the intentional act exclusion, and this conduct was very much in issue in the underlying litigation. In the circumstances, the court held that Federation must surrender the right to control the defence of the Third Party action because of the reasonable apprehension of a conflict of interest.

Hart was born with Aicardi Syndrome, an extremely rare constellation of congenital abnormalities involving problems with development of part of the brain. She was hospitalized for more than three months after her birth and frequently returned to the hospital after that time. When Hart was three years old, Combined Insurance issued a sickness hospital benefit policy to her. The premiums were paid by her parents. Beginning in 1992, following the one year waiting period, claims were filed with respect to Hart’s hospital stays and payments in the amount of $124,000 were made up to September 1999. Combined Insurance then denied liability for claims submitted after September 1999 and sought recovery for many of the payments made before that date, arguing that the hospital stays for Hart were for "respite care" which Combined Insurance said did not qualify for benefits because it was not a "covered sickness". Combined Insurance noted that many of the hospitalizations were arranged primarily to benefit Hart’s parents by giving them a break from looking after her at home and should not be covered by the Policy. Hart took the position that all hospital visits were necessary to monitor her condition and to prevent deterioration in her health.

The Court reviewed extensive medical records and found that all Hart’s hospitalizations occurred because of her Aicardi Syndrome. The Court found that Hart’s state of health was precarious at all times and that her severe physical and mental impairment made her completely dependent upon others, rendering her "totally disabled" within the meaning of the Policy. The fact that some of the hospital visits provided relief to Hart’s parents from the pressures related to constantly caring for their daughter did not change the dominant and underlying reason for hospitalization, which was monitoring and treating the severe effects of Hart’s disease.

In the result, Hart and her parents were entitled to approximately $75,000 claimed as benefits for hospitalizations. Hart’s claim for punitive damages was rejected as Hart was unable to prove that Combined Insurance committed an actual wrong in addition to breach of contract or was motivated by actual malice.

Hart was born with Aicardi Syndrome, an extremely rare constellation of congenital abnormalities involving problems with development of part of the brain. She was hospitalized for more than three months after her birth and frequently returned to the hospital after that time. When Hart was three years old, Combined Insurance issued a sickness hospital benefit policy to her. The premiums were paid by her parents. Beginning in 1992, following the one year waiting period, claims were filed with respect to Hart’s hospital stays and payments in the amount of $124,000 were made up to September 1999. Combined Insurance then denied liability for claims submitted after September 1999 and sought recovery for many of the payments made before that date, arguing that the hospital stays for Hart were for "respite care" which Combined Insurance said did not qualify for benefits because it was not a "covered sickness". Combined Insurance noted that many of the hospitalizations were arranged primarily to benefit Hart’s parents by giving them a break from looking after her at home and should not be covered by the Policy. Hart took the position that all hospital visits were necessary to monitor her condition and to prevent deterioration in her health.

The Court reviewed extensive medical records and found that all Hart’s hospitalizations occurred because of her Aicardi Syndrome. The Court found that Hart’s state of health was precarious at all times and that her severe physical and mental impairment made her completely dependent upon others, rendering her "totally disabled" within the meaning of the Policy. The fact that some of the hospital visits provided relief to Hart’s parents from the pressures related to constantly caring for their daughter did not change the dominant and underlying reason for hospitalization, which was monitoring and treating the severe effects of Hart’s disease.

In the result, Hart and her parents were entitled to approximately $75,000 claimed as benefits for hospitalizations. Hart’s claim for punitive damages was rejected as Hart was unable to prove that Combined Insurance committed an actual wrong in addition to breach of contract or was motivated by actual malice.

The Insured made a contract with the Bedford Waterfront Corporation in which the Insured agreed to deliver concrete caissons from a dismantled wharf to Bedford by floating them with sufficient stability that they could be moved across a waterway. Bedford retained a third party to do the towing. One of the caissons was defective and sank. The third party reclaimed the sunken caisson but only after expending a considerable sum of money. The third party sued the Insured on the grounds that the Insured represented that the caisson was safely afloat. The Insured claimed coverage under its policy with the Insurer, who maintained that the loss fell squarely within the policy’s business risk exclusion. In its Statement of Defence, the Insured maintained that Bedford had instructed the third party to refloat the caisson on the insistence of municipal and federal authorities who considered it a threat to navigation in the area. The chambers judge allowed the application and held that the Insurer had a duty to defend. This decision was based on the Statement of Defence which indicated that the claim was based on actual physical damage to tangible third party property, the Port Authority’s waterway. The damage was the caisson’s obstruction of the waterway. The Insurer appealed this decision.

On appeal, the Court found that the chambers judge erred in having regards to the Insured’s Statement of Defence in determining the nature of the claim made against the Insured. In determining the duty to defend, "pleadings" referred to pleadings directed against the Insured. However, the duty to defend could be triggered by the Statement of Claim in this case. The third party’s claim was not for the cost of replacing the caisson as a result of its sinking but for the cost of raising the caisson. The true nature of the claim was that the caisson was an obstruction to navigation and could not remain where it was. The Court held that it was able to take judicial notice of the Navigable Waters Protection Act and Canada Ports Corporation Operating By-law and, as a result, it was possible to infer that Bedford and the third party were not permitted to leave the caisson lying where it sank and were subject to being ordered to remove it. The Court held that there were sufficient facts alleged which, if proved, established a claim against the Insured arising out of property damage.

In the result, the Insurer was obligated to defend the Insured.

Ken Murphy Enterprises Ltd. ("Murphy") was the owner of a number of rental properties. Ken Murphy was the company’s principal owner. Murphy used the brokerage services of Vaughne Assurance Limited ("Vaughne") and obtained fire insurance through the Commercial Union Assurance Co. of Canada ("Commercial Union") for a five-unit apartment building known as Rock Cottage.

On December 4, 1996, Ken Murphy advised Vaughne that he wished to remove insurance coverage from three of his properties because they were vacant; however, he wished to obtain fire insurance for Rock Cottage. He advised Vaughne that Rock Cottage was under renovations, but that it would be rented on February 1, 1997. In fact, Rock Cottage had been vacant since August of 1996, and remained unoccupied until a fire on October 31, 1997. Ken Murphy made no formal report about the vacating of Rock Cottage to Commercial Union or to Vaughne. However, Ken Murphy had had several informal chit-chats with Vaughne in June or September of 1997 in which Vaughne was advised that Rock Cottage was vacant and was being vandalized. Commercial Union, through Vaughne, issued a renewal policy covering Rock Cottage in August 1997. After the fire on October 31, 1997, Commercial Union refused to cover the fire loss, refunded Murphy its insurance premiums on the basis that Murphy’s vacating of Rock Cottage constituted a material change in the policy, and that the material change voided the insurance. Murphy commenced an action against Commercial Union for payment of the fire loss, and against Vaughne Insurance, for failing to advise that the material change in risk caused by the vacating of Rock Cottage would void the insurance policy.

The trial judge found that the vacating of Rock Cottage constituted a material change in risk, that the insurance policy was void, and that Murphy was not owed any compensation by Commercial Union for the fire loss under the policy of insurance. With respect to Vaughne, the trial judge noted that the insurance policy was voided in the fall of 1996. At that time Murphy did not advise either Vaughne or Commercial Union of the material change of risk to Rock Cottage. He further found that any failure on the part of Vaughne later in 1997 did not cause the loss of coverage because the policy had already been voided by February 1, 1997. The claim against both Commercial Union and Vaughne was dismissed.

Murphy appealed on the basis that the trial judge did not consider whether Vaughne was negligent in failing to advise Murphy that the insurance policy would not cover Rock Cottage in the event of a fire loss after the insurance policy on Rock Cottage was renewed in August of 1997. The Court of Appeal noted that the trial judge did not appear to turn his mind to the question of Vaughne’s alleged negligent failure to advise Murphy that he had no insurance on Rock Cottage when he renewed the policy. In analysing the nature of the relationship between an insured and an insurance broker the Court noted that it was Murphy’s duty to provide accurate information respecting the risk to Vaughne and pay the premiums of the policy. It was Murphy’s duty to report material changes in risk to Vaughne.

The Court of Appeal determined that although Vaughne, as an insurance broker, was not legally responsible for actively monitoring the nature of the risk during the term of the policy, Murphy provided Vaughne with sufficient information such that Vaughne should have enquired about a material change of risk in Rock Cottage in June or September of 1997. One cannot infer that Murphy would or could have arranged insurance in response to notification from Vaughne. Ken Murphy was an experienced insured, and knew without Vaughne’s advice that conditions existed which made it unlikely that Rock Cottage was still insured after February of 1997. Murphy did nothing to protect his interests, apart from a rather ambiguous conversations with Vaughne. The Court of Appeal determined that Murphy was aware that vacating Rock Cottage would void the insurance, and that he took no steps to obtain valid insurance after Rock Cottage had been vacated. The court determined that although Vaughne had failed in his obligation to advise Murphy of the risks of vacating Rock Cottage, no damages flowed from Vaughne’s failure to notify Murphy because it was not his intention to keep the property insured. The appeal was dismissed.

This was an appeal of a decision of MacDonald A.C.J.S.C. requiring that the insurer, Royal & Sun Alliance Insurance Company ("Royal & Sun Alliance") pay the costs of remediating contaminated soil on an insured’s property. The insured was an elderly widow who lived alone in the family home following her husband’s death. A smell of oil became apparent in the basement of her house in 1984. In 1998, when the widow moved out of the house and the house was prepared for sale, a massive amount of oil contamination was discovered in the basement. The insured denied that it was liable for payment of benefits under the homeowners policy on the basis that the claim was statute-barred since the insured first noticed the smell of oil in 1984 and did not commence a claim until 1998. MacDonald A.C.J.S.C. determined that the discoverability principle could be read into a contract of indemnity insurance, and that the limitation period did not commence until 1998 because the true extent of the loss arising from the incident could not be quantified until 1998.

For purposes of the appeal, Royal & Sun Alliance accepted that the discoverability rule applied to the contract of indemnity insurance. However, Royal & Sun Alliance argued that the trial judge erred by requiring the insured to know the extent of the oil contamination before the time limit would commence. The Court of Appeal noted that it is accepted law that once a claimant knows that some damage has occurred, the exact extent of the damage may not be known for an action to accrue (Peixeiro v. Haberman, [1997] 3 S.C.R. 549). The court noted that the amount of knowledge necessary to trigger the running of time must be determined by the trial judge applying the contractual wording in the insurance contract and the discoverability principle to the facts found. In the insurance policy, a "situation", a "loss", and "damage" must mean soil contamination giving rise to a claim. If it were otherwise, knowledge that a drop or two of oil had dripped on the ground would require notice of loss to be given to the insurer. Suspicion in and of itself is not sufficient to constitute discovery of a material fact; however, this is an issue that should be considered by the trial judge along with the other facts.

As the insured did not actually know that she had a soil contamination problem until 1998, the question for the judge was whether, with reasonable diligence, the insured ought to have known that the soil was contaminated. The judge’s conclusion that the claimant was reasonably diligent in her handling of the matter involved the application of a legal standard of the discoverability principle to the facts. The Court of Appeal could not find a palpable and overriding error on this finding and upheld the decision of the trial judge.

This was the appeal of a trial decision arising out of a motor vehicle accident in 1995. Liability for the accident was admitted by the Defendant driver’s insurer, and the insurer paid the Plaintiff up to the limits of the policy. However the Plaintiff, Dr. Campbell-MacIsaac, was a dentist, and because of injury sustained in the accident she was forced to give up her career and sell her dental practice. The Defendant’s paid-in limits were not enough to compensate for her extensive losses, and she claimed indemnity under her own motor vehicle liability insurance policy issued by the Appellant, Lombard Insurance, which included additional underinsured motorist coverage up to a limit of $6,000,000.

Dr. Campbell-MacIsaac also had her own disability insurance with another insurer which entitled her to long-term disability benefits for as long as she remained unable to practice dentistry. At trial, Lombard argued that pursuant to the terms of the underinsured motorist coverage, it was entitled to deduct from the amount of damages awarded by the trial judge any amount she recovered for LTD benefits up to the date of trial, and the present value of future LTD benefits. Those arguments were rejected at trial, and the trial judge applied the collateral benefits rule.

The Appeal court analyzed the application of the collateral benefits rule, that is, the rule that a tortfeasor is not entitled to claim to its credit the value of private insurance benefits obtained by the insured Plaintiff through its own insurer. The court held that the rule has no application in a case involving a first party dispute in contract between an insured and an insurer. The tortfeasor is not a party to the dispute.

The Lombard policy included a right of subrogation, and specifically allowed that the amount payable under the policy was in excess to any amount recovered pursuant to any policy of insurance providing disability benefits. It also included a clause allowing Lombard an assignment of any right of action.

The Appeal court considered recent judgments, particularly Somersall v. Friedman, [2002] 3 S.C.R. 109, where the Supreme Court of Canada held that underinsured motorist coverage was a policy of indemnity such that an insured was to receive no more than full indemnity, and thus limiting the insurer’s liability to the actual loss proven. The court denied an insured the right to "profit" or be overcompensated under such a policy.

The Appeal court also considered Myers v. Zurich Insurance Co., [1992] 118 N.S.R. (2d) 379, where the court held that the underinsured motorist protection pays only "excess" amounts to any amounts actually recovered, and thus a claimant is not entitled to receive amounts for expenses which have been paid in full by others.

The Appeal court applied these principles strictly, and held that Dr. Campbell-MacIsaac was entitled to indemnity under the underinsured motorist policy only up to the extent of her loss, and thus cannot profit from the insurance.

The court went on to hold that interpretation of excess coverage protection intended by the underinsured motorist protection would not reflect the true intent of the parties, which was to provide excess coverage protection only, not to allow a windfall at the insurer’s expense.

The court also held that there was no basis upon which to distinguish between benefits paid up to the date of trial and benefits to be paid in future. Future benefits could be calculated based on weekly future contingencies.

An elderly widow lived alone in the family home following her husband’s death. A smell of oil became apparent in the basement of the house in 1984. In 1998, when the widow moved out of the house, and the house was prepared for sale, a massive amount of oil contamination was discovered in the basement. A remediation Order for over $100,000 was issued to the widow by the Province. The insured petitioned the court for a declaration of entitlement to benefits under her policy of insurance for the cost of the remediation order. The insurer denied that it was liable for payment of benefits on the basis that the claim was statute barred since the insured first noticed the smell of oil in 1984, and did not commence a claim until 1998. The court determined that there were two issues to consider: whether the discoverability principle could be read into a contract of insurance; and whether the discoverability principle would extend the limitation period to 1998.

MacDonald A.C.J.S.C. relied upon Callaghan Contracting Limited v. Royal Insurance Co. of Canada (1989), 97 N.B.R. (2d) 381 for the proposition that in determining whether the discoverability principle applies to a contract, one must distinguish between service contracts and contracts of indemnity. In a contract of indemnity, the insurer owes an obligation to compensate an insured for damages that have actually been suffered. Therefore, no cause of action arises until the extent of the loss is quantifiable, because the reimbursement obligations of the insurer have not "crystallised". Crystallisation of damages occurs when the material facts on which the claim is based have been discovered, or ought to have been discovered through the exercise of reasonable diligence.

In determining whether the insured had acted reasonably, MacDonald A.C.J.S.C. noted that the insured was not seeking to be compensated for am oily smell, but was seeking to be indemnified for a major remediation project resulting from contaminated soil. On this basis, he determined that the material fact was that there was an environmental catastrophe in the basement, and that the material fact was not discoverable until 1998 when the remediation Order was made. The court noted that reasonable diligence in the 1980’s and even in the 1990’s was not the same as today. Although the mere smell of oil is a scary spectre in today’s world, everyone is much more conscious of and alert to this type of problem than they were in the 1980’s and early 1990’s. The trial judge therefore determined that the claim for insurance proceeds was not barred by contract or statute.

The Insured had a CGL policy with the Defendant Insurer. It was not in dispute that the policy was in effect at all relevant times. The Insured was sued by W, which alleged that the Insured had misrepresented the fact that certain caissons would not sink in the course of being towed from one location to another. One caisson did sink, however, and W was ordered by various government entities to retrieve the caisson as it constituted a hazard to navigation in its sunken state.

The Court held that the business loss exception to the CGL policy, which excluded coverage for the Insured’s own negligent or defective work, was applicable as the Insured, with knowledge of the proposed towing and installation process, represented to W that the caissons would stay afloat. However, the Court held that there might be coverage to the Insured under the "physical injury to tangible property" section of the policy in that the sunken caisson resulted a hazardous obstruction of the waterway and therefore an injury to tangible third party property, i.e. the waterway owned by the government entities which ordered the retrieval of the sunken caisson.

The Court therefore found that there was potential coverage under the policy and the Insurer was required to defend the Insured.