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

The insured owned a home with a sealed fiberglass deck and a 12 seat hot-tub on the second level. The hot tub extended down into an enclosed room located on the first level of the home (the “hot tub room”). In or about the week of March 23, 2009, the insured shut off the hot tub motor and drained the water from the hot tub, as he noticed the tub was leaking. His evidence at trial was that he did not think he disconnected the hot water pipe. On March 29, 2009, the insured discovered that the pipes in the hot tub room had frozen and burst. The insured therefore made a claim to his insurer for the water damage. The claim was denied on the basis of the exclusion for “loss or damage…caused by freezing during the usual heating season…within an unheated portion of your dwelling…”

The insured gave evidence that the hot tub room itself was insulated with fiberglass insulation and Styrofoam. The hot tub water was heated by a heat exchanger and a pump heater, and was kept at 39-40 degrees Celsius at all times. The insured argued that the hot tub room was heated by the water in the hot tub room itself, the heat exchanger, pump heater and hot water pipes. When the hot tub pump and heater exchanger were operating, the air temperature in the hot tub room was about 20 degrees Celsius.

The insurer argued that, once the insured disconnected the power to the hot tub and drained it, the only source of heat in the “hot tub room” would have been eliminated. Therefore, they argued, at the time of the pipes freezing, the hot tub room was an “unheated room”.

The court first rejected the insured’s argument that the incident did not take place during the “usual heating season”. It took judicial notice of the fact that March 29, 2009 in Regina, Saskatchewan, was during the :usual heating season”. Next, the court addressed whether the damage took place in an “unheated portion of the dwelling. The court that found that, even after the hot tub was drained, the hot water line was still connected. Although there was clearly no, or inadequate, heat at the time the pipes froze, the court found this did not mean the room was an “unheated room”. The court compared it to the situation where a furnace fails. The court stated as follows: “In considering the intention of the parties, it is a reasonable interpretation that if the room in question, i.e. the hot tub room, were ordinarily heated, the fact that it was unheated at the time of the mishap would not be reason for the insurance coverage to be denied.” The court also rejected the insurer’s argument that the hot tub room was in an “unheated portion” of the dwelling because it was not connected to the home’s heating system and had no dedicated heating appliance of its own. The court found that the evidence was that the room was generally heated to 20 degrees Celsius and that there was nothing in the contract to indicate what the source of heat should be for it to be described as being “heated” or conversely “ unheated”.

This case was digested by Natasha D. Morley and edited by David W. Pilley of Harper Grey LLP.

The Plaintiff was involved in a motor vehicle accident in which he sustained catastrophic injuries.  As a result, the Plaintiff received benefits under the no fault provisions of the Automobile Accident Insurance Act, R.S.S., 1978, c. A-35 (the "Act”).  This included income replacement benefits, living assistance benefits and reimbursement for certain expenses.  The amount of the benefits the Plaintiff received under the no fault provisions were less than the maximum entitlement under the Act.  The Plaintiff commenced an action claiming for the difference between the amount he would have been awarded as damages at common law and the amount he had been paid and would continue to be paid under the Act.  It is in relation to that claim the Plaintiff sought a determination of law with respect to a number of issues.

Firstly, the Court was asked to assess whether a claim for “economic loss” could be pursued pursuant to s. 103(1)(a)(iii) of the Act where the benefits of Division 3 and Division 7 do not and will not exceed the maximum benefits prescribed in s. 112(3) of the Act.  The Court answered that question in the negative.  The aggregate limit for expenses must be exceeded before the right to claim for economic losses will arise.  The claims for those losses are limited to the scope of Part VIII of the Act.  The Court rejected the argument that the Plaintiff had a right to claim for economic losses if any portion of his claim was not paid for by the insurer.

The Plaintiff also sought to recover benefits from the Defendants which were not paid by the Insurer.  The Court held that the appropriate mechanism to seek reimbursement for such additional costs was within the appeal provisions in the legislation.

The Court found that the Plaintiff was not in a position to pursue a benefit to fund a substitute worker to carry out the work on his farm.  He had opted to receive an income replacement benefit based upon his employment earnings rather than pursuing a benefit to fund a substitute worker.

This case was originally summarized by Kim Yee and edited by David Pilley of Harper Grey LLP.

Mr. debalinhard had an insurance policy with Butler Buyers Hail Insurance Ltd ("Butler Buyers"). Three quarter sections of his land were rented out to another farmer. In July 2007 the canola crops grown on the rented land were damaged by hail.  A representative appointed by the defendant attended the property in September 2007 but failed to reach an agreement on the percentage of loss suffered.  The defendant valued the loss at 45% for each of the three quarters of land, while the plaintiff felt the loss was 55% on each quarter.

By virtue of Section 286(1) of the Saskatchewan Insurance Act, Statutory Conditions 8 and 15 were deemed part of the hail insurance contract in this case.  Conditions 8 and 15 set out a series of steps designed to reach a valuation on hail damage where there is a disagreement as to the percentage of loss suffered.

Since an agreement could not be reached between the plaintiff's and the defendant's representatives, an umpire was appointed  who determined that the value of the loss was 10% on each quarter of land.

The plaintiff was not satisfied with the award and submitted that Statutory Condition 15 was not binding on him on the basis of biased interest or lack of impartiality on the part of the umpire, that he did not comply with Statutory Condition 15(i) because he did not deliver notice in writing requiring appraisal within three days of the disagreement, and that he did not comply with Statutory Condition 15(iii) as he was not prepared to accommodate the plaintiff's representative in estimating the percentage of damage.

The plaintiff also submitted that the umpire was without jurisdiction to make a final valuation because he did not comply with Statutory Condition 8 in that he did not meet within 30 days of the plaintiff's notice of loss.  The plaintiff had the onus of proving all elements of the claim on the balance of probabilities.  The judge found that the plaintiff's lack of recall about dates and who attended to his land was not sufficient on the balance of probabilities to find that the defendant violated Statutory Condition 8.  The judge found that it was as likely as not that the notice requiring an appraisal be delivered in three days pursuant to Statutory Condition 15 was met and held on the balance of probabilities that the defendant did not violate Statutory Condition 15(i).

With respect to the claim that the defendant violated Statutory Condition 15(iii) as the defendant's representative was not prepared to accommodate the plaintiff's representative the judge found that very likely that was not the case.  The judge was also not satisfied that the plaintiff at any time during the process raised any concerns about the three issues considered above.

In addition, the plaintiff debalinhard agreed in writing that he would cover an equal share of the umpire's expenses and by inference that he would be bound by the umpire process set out in that document.  The process included a condition that the umpire's award was final.

As to whether the decision under Statutory Condition 15 was binding on the plaintiff with respect to bias, interest or lack of impartiality, the judge found that the method employed by the umpire did not show any evidence of bias to the parties and that the umpire did a careful job of appraising the percentage of hail loss on the quarter sections.

The judge was not satisfied the valuation should be set aside and found that the umpire's award was binding on the plaintiff.

This case was originally summarized by Neil J. MacDonald and originally edited by David W. Pilley.

The Saskatchewan Mutual Insurance Co. ("SMI") provided Homegrown Advertising Inc. ("Homegrown") with a commercial general liability policy. Homegrown was retained to assist in marketing a company in Illinois and was sued in an Illinois class action for sending unwanted faxes. Homegrown settled the action for $5 million but it was agreed the judgment would only be satisfied to the extent of available insurance proceeds. Homegrown took steps to register the judgment against SMI in both Illinois and Saskatchewan. SMI commenced an action against Homegrown seeking a declaration that it had no duty to defend Homegrown in the Illinois class action as Homegrown did not have coverage for the claim. Homegrown took the position that the Saskatchewan courts did not have jurisdiction.

The Court held that Saskatchewan was the more appropriate forum in which the action should be tried. Factors supporting this determination included the fact that the action involved the interpretation of a contract made in Saskatchewan between Saskatchewan parties, and that the interpretation would be conducted under Sasakatchewan law. The Illinois Court had been alerted to SMI's application in Saskatchewan and, therefore, it was likely that the Illinois Court would await the Saskatchewan Court's decision before proceeding. In the result, the Court dismissed Homegrown's application and found that the Saskatchewan courts had jurisdiction to hear SMI's action.

This case was originally summarized by Jonathan D. Meadows and originally edited by David W. Pilley.

The plaintiff incurred potential liability to the victims of a helicopter crash in 1995. The families of the victims filed actions in Saskatchewan and British Columbia. One of the plaintiff’s insurers, Associated Aviation Underwriters Inc., now Global aerospace Inc. (“Global”) assumed the plaintiff’s defence in those actions. The plaintiff then filed an action against its other insurers in 1999, claiming that they “had neglected or refused to pay legal, defence, investigation, negotiation and settlement costs as required by their respective policies of insurance” (the “Underlying Action”). Global was a third party to the Underlying Action. in 2005, Global settled all the claims against the plaintiff arising from the helicopter crash and in 2007, Global filed a notice of motion in the Underlying Action to vary the plaintiff’s pleadings. The variations sought would effectively substitute Global as a plaintiff by substituting its claim for contribution in place of the plaintiff’s claim for indemnification. The application asked for “radical changes to [the plaintiff’s] statement of claim”.

The chambers judge held that although Global’s proposed amendments were outside the limitation period, they should nonetheless be allowed pursuant to section 20 of Saskatchewan’s Limitation Act, which provides an exception to the normal limitation periods, holding:

Notwithstanding the expiry of a limitation period after the commencement of a proceeding, a judge may allow an amendment to the pleadings that asserts a new claim or adds or substitutes parties if:

(a) the claim asserted by the amendment, or by or against the new party, arises out of the same transaction or occurrence as the original claim; and

(b) the judge is satisfied that no party will suffer actual prejudice as a result of the amendment.

The defendants appealed the decision of the chambers judge. The Court of Appeal held that the chambers judge erred in allowing the proposed amendments. The Court held that provisions like s. 20 “provide for exceptions to limitation periods but should not be allowed to become a means for their wholesale avoidance”, and that the sought amendments were too dramatic to fall within the scope of s. 20.

This case was originally summarized by W. Jay Havelaar and originally edited by David D. Pilley.

The Plaintiff Insured suffered an insurable loss when his house was broken into on June 19, 2006. At the time of the loss, the Insured had a policy with the Defendant Insurer which was in good standing. The Insured issued a Statement of Claim on June 4, 2007. The Insurer alleged that the claim was vitiated by the Insured's willfully false statements. In the alternative, the Insurer relied on Statutory Condition 11 of the The Saskatchewan Insurance Act which provides for an appraisal in the event of disagreement as to value of insured property. When the Insurer filed a Dispute Note, the Insured was still within the limitation period and was in the legal position to cure any irregularities. At the time of the Application, he was outside the limitation period. The Insurer asked the Court to dismiss his Statement of Claim which would have meant that the Insured would not be able to start another Action.

The issues before the Court were as follows:

1.   Had the Insurer waived the requirement of Statutory Condition 11 until after the trial?

2. If "yes", could the parties waive the requirements of s. 3(3) of The Small Claims Act?

3. If the answer to Issue No. 1 or 2 was "no", could this Court apply the remedial provisions of s. 109 of The Saskatchewan Insurance Act to the requirements of s. 3(3) of The Small Claims Act?

The Court answered No. 1 in the affirmative, found that submissions on No. 2 were insufficient for it to reach a conclusion, and since the Court found that it could apply the remedial provisions of s. 109 of the Saskatchewan Insurance Act, it did not decide the issue. Therefore, the Court found that it had jurisdiction to proceed with the trial.

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

The Insureds owned a collection of Swarovski Silver Crystal figurines (the “Collection”) which was valued at approximately $9,950 and which they displayed in a glass display case in their home.  In 1992 they purchased a home insurance policy from the Insurer through a broker who negotiated additional special coverage for loss or damage due to accidental breakage of the Collection.  In 1993 the Insureds submitted a new application for insurance for their home and the Collection through the defendant broker (the “Broker”) and executed a form, at his direction, which cancelled the prior home insurance policy.  In response to the new application the Insurer issued a new standard “comprehensive perils” policy to the Insureds which contained an exclusion for accidental damage to and breakage of fragile items.  In 2004 the display case holding the Collection fell off the wall and many of the figurines were damaged or destroyed.  The Insureds made a claim under their policy but the Insurer denied the claim based on the exclusion.

The Insureds sued the Broker alleging negligence or breach of contract for failing to obtain the coverage for insurance as instructed by them.  The Broker issued a third party claim against the Insurer claiming it was negligent or in breach of contract or contributorily negligent for failing to issue a policy of insurance in accordance with the application submitted by the Broker on behalf of the Insureds.  At trial, the Court found the Broker liable in negligence for the loss suffered by the Insureds and that the Insurer had a duty of care to the Broker to properly underwrite and deal with the application for insurance.  The Insurer was found to have been negligent and to have contributed equally to the loss.

On appeal, the Broker’s liability was not disputed.  With regard to the Insurer’s liability, the Court held that when an insurer receives an application for insurance, absent a specific request by a broker, the insurer has no general duty to conduct its own review of the needs, wishes, or desires of the applicant.  Furthermore, even when there are references to a previous policy on the application, coupled with numerous changes in coverage, there is no basis for a new duty to be imposed on the insurer.  The insurer relies on the broker to apply for coverage in accordance with an insured’s needs.  References to a previous policy number do not request the insurer to provide the same coverage as existed under the previous policy.  When the coverage requested differs from the previous coverage the insurer has no duty to inquire into whether the coverage applied for is adequate and in accordance with the insured’s needs.  None of the circumstances warranted changing the longstanding commercial relationships or expectations of insurers, intermediaries, or insureds.  The Court further noted that the established duties of intermediaries to their clients is adequate to protect insureds.

In the result, the portion of the judgment finding the Insurer equally liable was set aside and the third party claim was dismissed.

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

Epp, a farmer, was injured in an automobile accident.  He claimed and received Income Replacement Benefits ("IRB") under the "no-fault" provisions of the Automobile Accident Insurance Act, RSS 1978, c.A-35, on the basis that he was completely disabled from working.  These benefits were to be based on the income lost as a result of the injuries sustained in the accident.  Following the accident, family and friends did much of the work Epp was unable to do and did not charge for this work.  As a result, in the years following the accident, Epp's income tax returns showed very little loss of farming income with the result that SGI decided to reduce his IRB.  Epp appealed that decision to the Commission.  The Commission held that SGI was not allowed to include any income not "earned" by Epp through his actual labour in computing Epp's gross yearly income for the purposes of considering a reduction in IRB.  The Commission allowed Epp's appeal and directed SGI to recalculate the IRB accordingly.  SGI appealed the decision of the Commission.

The Saskatchewan Court of Appeal allowed SGI's appeal noting that the Commission defined the word "earn" too narrowly.  The Court found that in adopting this overly narrow definition, the Commission appeared to have overlooked or ignored the provisions of the Act and Regulations which spelled out exactly how business income from a self employment or partnership interest was to be calculated.  After reviewing the relevant provisions of the Act and Regulations, the Court held that nothing suggested or supported the restricted meaning of "earn" or "income" used by the Commission in coming to its decision. In the result, the Court allowed the appeal.  In obiter, the Court noted that if Epp had either paid or agreed to pay the persons who provided the work and services without compensation, the decision may have been otherwise.

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

Following a loss the Plaintiff brought an action against its insurers who had denied coverage. Subsequently, one of the Defendant insurers, Global, indemnified the Plaintiff. Global then sought contribution from the remaining defendant insurers. The Plaintiff sought to amend the Statement of Claim to assert that Global was advancing the Plaintiff’s claim on a subrogated basis. The Defendants sought a summary dismissal and took the position that because the Plaintiff had been fully indemnified, the action was spent.  In their view, to permit the amendments would be to allow the Plaintiffs to reinvent the Statement of Claim.  The Defendants were also of the view that the dispute was now solely between the insurers and could not be continued on a subrogated basis. It was argued that a previous application brought by the Plaintiff to amend the pleadings foreclosed them from pursuing a subrogated claim because of the doctrine of issue estoppel.

The application to amend the Statement of Claim was granted and the application for summary dismissal was denied. The Court held that the previous application to amend the pleadings centred around whether such amendments were appropriate because of a limitations issue. The Court’s discussion about the subrogated nature of the claim in that application was collateral to its decision. The circumstances of this application did not meet the elements of res judicata enunciated by the Supreme Court of Canada in R. v. Mahalingan, 2008 SCC 63.

The Court also held that the common law does not necessarily preclude a subrogated claim when the insured has been fully indemnified. The amendments requested are necessary to determine the issues in dispute and can be permitted without injustice to the other side. In obiter the Court held that a Plaintiff cannot be over-compensated; anything that is realized over and above what the Plaintiff is entitled to must be held in trust for global.

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

The Applicants, 601260 Saskatchewan Ltd and Mr. Ireland who was the director, officer and employee of the numbered company, were in the house moving business. They had a Commercial General Liability policy of insurance (“the CGL policy”) with the Respondent. The Applicants were hired to move a home for the Fitzsimonds who alleged that while the house was being placed on the new foundation it was damaged along with the basement and foundation. The Fitzsimonds subsequently commenced an action against the Applicants for breach of contract and negligent misrepresentation. The Respondent initially defended the Applicants in relation to the claim, but later advised they had no obligation to do so, citing the exclusions in the CGL policy.

The Court held that the duty to defend was broader than the duty to indemnify; it is not necessary to prove that an obligation to indemnify will in fact arise in order to trigger the duty to defend. The onus rests on the insured to establish that the claims in issue fall within the insurance coverage. Once this is established, the onus shifts to the insurer to show that an exclusion clause applies. The threshold for the insured is low and the threshold for the insurer is high because general coverage provisions are interpreted broadly while exclusion clauses are interpreted narrowly against the insurer.

The Court cited the three-step process to be followed in assessing whether a claim triggers the obligation to defend which was outlined by the Supreme Court of Canada in Non-Marine Underwriters, Lloyds of London v. Scalera, [2000] 1 S.C.R. 551. First, the Court must determine the "true nature" of the claims alleged against the insured. Second, the Court must determine if any of the claims are "derivative" in nature.  That is, whether the underlying elements of what is claimed are identical to other claims which are not covered by the policy. Third, the Court must determine whether any of the properly pleaded non-derivative claims may be covered by the insurance policy. If they are, then the insurer's obligation to defend is triggered.

When embarking on the three-step process the Court should give effect to the reasonable expectations of the parties to the insurance contract and it should be kept in mind that insurance usually makes economic sense only where the losses covered are unforeseen or accidental. Any ambiguity in the wording of the insurance policy should be construed against the insurer.

One of the exclusion clauses relied upon by the Respondent was the “own work” clause in the CGL policy. In short, this clause exempts from coverage any work done by the insured. The Court held that the damage to the foundation and the basement were not covered by the exclusion and the Respondent had a duty to defend those claims. However, the claim in relation to the house itself fell under the exclusion.

The Respondent also relied upon a clause that excluded from coverage any “personal property in the care, custody, or control of the named insured.” The Court held that if there was damage to the personal property located outside of the home the Respondent’s obligation to defend would be triggered in relation to that damage.

Lastly, the Respondent relied upon a clause that excluded coverage from damage that arises from the “removal or weakening of support of any property…”. The Court held that this exclusion clause would only apply to the house as no supports were removed from the foundation or the basement.

The Court also held that Mr. Ireland's liability was not synonymous with that of the company. As such, the claims against Mr. Ireland are derivative in nature. The Respondent did not argue that the exclusions applied to Mr. Ireland directly and so it was determined that the Respondent had a duty to defend him.

This case was originally summarized by kyee@harpergrey.com and originally eduted by dpilley@harpergrey.com