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

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

Stomp Pork Farm Ltd. ("Stomp") operated a pork production operation which was damaged by a fire in 2005 which destroyed a barn under construction.  Stomp commenced an action against its insurers for failure to indemnify it in respect of this loss.  The insurers had denied coverage on the basis that the welding, cutting and open-flame warranty in the policy was breached.  Previously, FCC had advanced certain loans to Stomp and had required insurance to be placed on the facilities and also required FCC to be named as first loss payee under the policies and that there be a standard mortgage clause to the policy added to protect FCC.  Originally, FCC has been content to allow Stomp to proceed with the action against the insurers.  However, Stomp was subsequently placed under creditor protection under the Companies Creditors Arrangements Act, R.S.C. 1985 c.C-36 and no further actions were taken by Stomp against the insurers after December, 2007.  FCC then applied to add itself as a plaintiff to the action originally commenced by Stomp.  The defendant insurers resisted this application on the basis that FCC was barred from commencing an action as the two-year limitation had expired.

This Court noted that it was common ground that FCC's claim was in breach of contract.  This cause of action arose when the insurers denied the claim, not when the fire occurred.  The Court noted that although FCC was at risk because its security was impaired after the fire, it suffered no actual loss, injury or damage until such time as the indemnitor failed to honour its bargain respecting the concurrent security.  In this case, there was no formal denial of FCC's claim.  However, assuming FCC should have provided all the information needed to assess the claim on the filing of the Proof of Loss, the insurer's obligation to pay would have arisen 60 days after the filing of the Proof of Loss at the earliest.  Therefore, the failure to pay occurred on August 19, 2006.  This was the date that time began to run for the purposes of the limitation period.  Therefore, the claim of FCC was not out of time and an order was granted adding FCC as a plaintiff to the action originally commenced by Stomp.

The Court noted that in the alternative, even if FCC had been out of time, it would have nevertheless allowed the amendment under section 20 of the Limitations Act, S.S. 2004, c. l-16.1 as this was not a wholly new claim but merely the adding on of a new claim to an existing action, which was allowed by section 20 where there was no prejudice.  In this case, the insurers had not been affected in any negative way in their ability to respond to the claim.

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

This judgment involved two applications.  The first application was brought by the City of Saskatoon to strike out a portion of the Statement of Claim that alleged that the Defendant Saskatoon Transit was negligent while operating a Saskatoon transit bus when it was struck by a car on the driver's side.  The Plaintiff was a passenger on the bus and received injuries for which she claims damages.

The second application arose out of an allegation that the Defendant physiotherapists were negligent in respect of the care given to the Plaintiff after the accident and she suffered further injury which were caused by their actions.

In each application the Defendants alleged that the claims were barred pursuant to the provisions of the Automobile Accident Insurance Act, R.S.S. 1978, c.A-35.  Section 40.1 of the Automobile Accident Insurance Act provides that a person has no right of action "respecting, arising out of or stemming" from bodily injuries caused by a motor vehicle accident.  The Court observed that the intent of the legislation is not to determine what caused the bodily injuries, but rather whether an automobile was involved in the accident that resulted in the bodily injury.  As such, both applications were allowed.  The Court found that the Plaintiff's claim was statute barred based on the finding that the alleged injuries "arose out of or stemmed from" a motor vehicle accident.

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

The Plaintiff claimed for fire insurance coverage and consequential damages including damages for non-payment by the insurer.  The action pertained to a fire at a gas station owned by the Plaintiff.  The Defendant denied coverage on the basis that the station manager had deliberately set the fire.  In order to support its denial of coverage, the Defendant was required to prove the following elements of arson, each on a balance of probabilities:

“(1) that the fire was incendiary, that is deliberately set, not the result of natural or accidental causes;

(2) that whoever is alleged to have deliberately set the fire had the opportunity to do so; it is not essential that the opportunity of the alleged perpetrator be exclusive;

(3) that there was motive on the part of the insured, or someone on behalf of the insured, to cause the fire.”

The court held that the Defendant had established, through clear and cogent evidence, the three elements of arson on a balance of probabilities.  The court found that the fire did not occur naturally, that the station manager had the only opportunity to set the fire, and that the insured’s precarious financial position provided the appropriate motive to start the fire and make a fraudulent insurance claim.  Therefore, the claim was dismissed.