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

The insured owned a housing complex, for which it purchased a broad-form, all-risk policy of insurance from Sovereign-General Insuance Co. between 1993 and 2003. The Complex was built in 1977 and within two years there were reports of water leaking into some apartments via vents and light fixtures. These problems continued and a persistent mould problem developed. The mould problem was addressed on an ongoing basis with bleach treatments and by replacing damaged drywall and carpeting as necessary. No insurance claims were made with respect to this damage.

In 2001, it was discovered that some of the mould was toxigenic and further investigation revealed that the toxigenic mould originated from a “mould amplification site” within the building. Mould remediation and elimination of conditions leading to mould propagation, such as replacement of doors and windows, was recommended. Following further investigation, the insured submitted two proofs of loss in late 2002, for $8,585 and $646,000 respectively. The insurer denied coverage of both proofs of loss, on the basis that the build-up of humidity causing the mould growth was not the result of a risk or peril; and exclusions against latent defect or improper design and seepage of water or dampness of atmosphere applied. The insurer also stated that the insured had failed to report the loss on a timely basis. The insured subsequently started this action. 

At trial, the judge determined that the evidence established that there was seepage of water through doors or windows, that there was the entrance of rain, snow or sleet through doors or windows, and that there was dampness of atmosphere in the Complex, all of which contributed to excess humidity and moisture within the units of the Complex. He also determined that moisture was an essential ingredient for the development of mould. However, because the evidence established that mould would not inevitably result from moisture or humidity problems, the trial judge was unable to conclude that the excessive moisture was a direct or indirect cause triggering the appearance of the mould. On that basis he concluded that the loss was not excluded under the policy.

On appeal, the Court found that the trial judge had erred in his interpretation and application of the exclusion clause. The Court noted that the use of the phrase "directly or indirectly" generally connotes that both the direct and consequential losses of an event are captured. Thus, as long as the evidence indicated that mould was a direct or consequential result of the seepage, rain, and humidity, then the exclusion clauses would apply, absent other issues. In this case, the evidence, as found by the trial judge, was clear that the seepage, rain, and humidity present in the Complex led to the moisture and humidity conditions which were so conducive to mould growth. Even if the mould was the result of concurrent causes, the use of the phrase "directly or indirectly caused" in the exclusion clauses, allowed the exclusion clauses to apply. Therefore, even though the evidence indicated that the right temperature, adequate food, and mould spores needed to be present, the evidence also established that moisture was a prerequisite for mould growth.

It was clear that the seepage, rain and humidity problems within the Complex contributed at least indirectly to the growth of mould within the Complex and consequently, the exclusion clauses applied. In the result, the Court allowed the appeal, holding that the insurer was not liable to the insured to cover the costs of mould remediation and prevention.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The Claimant was the owner of an apartment building and leased the apartments to individual lessees pursuant to 99 year leases. A water leak from the Defendant’s apartment caused damage to several apartments. At issue was whether the Defendant was liable to pay the cost of repairs, as this amount was less than the deductible under the insurance which the Claimant was required to obtain pursuant to the terms of the lease and which otherwise would have covered the loss had the cost of repair exceeded the deductible.

Under the terms of the lease, the Defendant was obligated to repair and maintain her suite, except with respect to damage insured against by the Claimant. The Claimant was required to keep the building insured against loss or damage caused by certain risks and, in compliance with that obligation, had purchased an “all risk” policy, which included the risk of flood. The Claimant argued that since the cost of repairs could not be recovered under the insurance policy, the loss was not an insured loss and therefore, the Defendant was liable for the cost of repairs.

The Court relied on Lincoln Canada Services LP v. First Gulf Design Build Inc., [2007] O.J. No. 4167, in which it was held that:

34.       …Once a party has agreed to obtain insurance, the amount of that deductible is a matter between the party and its insurer and should not change the allocation of risk as between the parties to the lease. Many factors affect the amount of the deductible and the other party should not be in a position of having its exposure fluctuate depending on the size of the deductible.

35.       To hold otherwise would create great uncertainty for a landlord or tenant. It would never really know what its exposure for a negligent act might be. It would always need to know what the deductible was in the other party's insurance policy. That would not accord with commercial reality. Once the parties have agreed on insurance for a specified loss, the matter should end there.

The Court concluded that the covenant to insure in a lease is determinative unless some other provision modifies the covenant. If the risk of a loss falling within the deductible is to be passed to a lessee who causes the loss, this must be set out in express wording in the lease. The lease in this case did not include a term requiring the tenant to insure nor was there a term setting out the circumstances under which the risk of a deductible amount would pass substantially or wholly to a particular lessee.

In the result, the Court held that even if the damage was caused by the negligence of the Defendant, the damage was caused by a risk that the Claimant had covenanted to insure against under the terms of lease. Absent express provisions of the lease, the Defendant could not be held liable to indemnify the Claimant for the cost of repairs falling within the insurance deductible.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The appellant, Meloche Monnex, appealed from a judgment declaring that it had a duty to defend the respondent for civil assault and battery. The respondent was sued by Skidmore for injuries allegedly sustained in a physical altercation. The respondent took the position that the claim against him by Skidmore fell under the coverage of his home owner’s policy. Meloche Monnex relied upon the exclusion in the policy for damages arising from intentional acts. The respondent argued that he was acting in self defence when he hit Skidmore and therefore it was not an intentional act.

The Court of Appeal considered whether extrinsic evidence, beyond the statement of claim such as the statement of defence and affidavits, could be considered in determining if there was a duty to defend. However, the Court of Appeal concluded that whether or not additional materials were considered, the result was the same.  If the plaintiff in the action succeeded, he would have to prove that there was an assault which is an intentional act which is excluded from coverage. If the plaintiff did not succeed in the action, then there was nothing to indemnify and therefore no insured claim.

Although the claim referred to negligence, the gravamen of the claim was assault and battery. The Court of Appeal rejected the possibility of the claim succeeding in negligence in the absence of an assault. The Court of Appeal allowed the appeal and set aside the application judge’s decision and replaced it with a dismissal of the application.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

Economical Mutual Insurance Company ("Economical") applied for a declaration that Aviva Insurance Company of Canada ("Aviva") was obliged to participate in the defence of claims made by three infant plaintiffs against Surinder Singh Rattan who was alleged to be liable for negligence as a social host.  Aviva was the insurer of the strata corporation where Rattan resided.  Rattan had a homeowner’s policy of insurance with Economical.  At issue was whether Rattan was an insured under the strata corporation’s policy with Aviva.

Economical took the position that Rattan was an insured by virtue of s. 150 and s. 155 of the Strata Property Act, S.B.C. 1998, c. 43 (“SPA”).  The SPA requires the strata corporation to obtain and maintain liability insurance to insure the strata corporation against liability for property damage and bodily injury.

The Court held that the strata corporation’s policy did not afford Rattan coverage except in respect of any business conducted by him and in respect of any liability he may have in his capacity as a stockholder in the strata corporation.  As neither constituted the basis for the claims against Rattan, Aviva had no duty to defend or to participate in the defence of any of the three actions brought against him.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

The Insured sought indemnity under a property insurance policy.  The Insured and the Insurer disagreed on whether various provisions of the policy and a Statement of Values signed by the Insured, but not expressly incorporated into the policy, limited the recovery of the Insured.  The Insured sought a declaration that it was owed the unpaid balance of its claim.

The Insured filled out the Statement of Values after it had already applied for insurance.  Effectively, the Statement of Values assigned value to the property insured by the policy.  The Insurer sought to limit its liability to the Insured based on this Statement of Values.  Ultimately, the Court found that the Statement of Values was not part of the contract and therefore, the Insurer's liability to the Insured would be determined by reference to the policy.  In the result, the Insured was successful.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

This case concerned a property insurance policy.  The action was brought by the Estate of the Insured, who was murdered by her estranged husband.  He then set fire to the house the Insured owned, which had been their family home where he had been residing since she moved out, and then killed himself.

The insurance policy contained an exclusion of coverage for intentional acts of an insured.  The Insured's husband was an Insured under the policy and the intentional act exclusion meant that the Insured's Estate was denied coverage.  A claim against the Insurer by the Insured's Estate was eventually settled for approximately 50% of the value of the home.  The Insured's Estate then brought an action in negligence against the Insured's broker seeking damages for the loss in insurance coverage represented by the insured value of the home less the settlement proceeds.

The theory of the Estate of the Insured was that the Defendant broker should have identified to the Insured that she might have a change in her insurance needs because she was the owner of a home that she was no longer living in due to her separation from her husband.  The Insured's Estate argued that the defendant should have explained to the Insured that the Intentional Act exclusion in her policy would exclude coverage for her if the loss was due to an intentional act by her husband.  It argued that if this gap in coverage had been explained to the Insured, and alternative coverage pointed out, she likely would have changed her insurance coverage.

It was not disputed that the defendant owed the Insurer a duty of care.  The Court found that the defendant had breached the duty of care it owed the Insured.  The Court held that once the defendant learned that the Insured had moved out of the family home, and given that the Insured had directly contacted the defendant to obtain her own tenant's insurance, the defendant had a duty to canvass with the Insured whether or not she had a change in her insurance needs.  At that time, and on subsequent occasions when the defendant dealt with the Insured, the defendant should have made inquiries about her separation from her husband, advised her that her homeowner's policy did not cover her if her husband or another tenant intentionally damaged the property, and advised her that she could instead obtain rental dwelling insurance that would not exclude damage caused by intentional acts of tenants.  The Court found that had the defendant fulfilled its duty of care, the Insured would likely have replaced her homeowner's policy with a rental dwelling policy.  The defendant's breach of its duty of care caused the Insured's Estate to suffer an uninsured loss.  It was reasonably foreseeable that if the defendant failed to advise the Insured of the gap in coverage under her homeowner's policy and of the availability of substitute coverage that any loss falling within the gap of coverage would not be covered and the Insured (or her Estate) would suffer damages.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

The two Plaintiffs were injured when they were shot at while driving their vehicle.  They retuned home in their vehicle after a weekend away and were confronted by the two Defendants, who had broken into their home.  The Defendants ran from the home, brandishing shotguns, and shouted at the Plaintiffs to get out of the car.  The male Plaintiff instead tried to back the car away and the Defendants fired their shotguns multiple times, seriously injuring both Plaintiffs.  The Plaintiffs brought this action against the Defendants and obtained default judgment.  The Plaintiffs then sought to recover the judgment from a fund set up under the Motor Vehicle Accident Claims Act, which permits a person to recover an unsatisfied judgment if the tortfeasor is uninsured or unknown.  The Plaintiffs brought this motion for a special case to determine if they were entitled to recover the judgment under the fund.

The relevant provision of the Motor Vehicle Accident Claims Act, R.S.A. 2000, c. M-22 (the "Act") provides:

5(1) When a person recovers in a court in Alberta a judgment for damages for bodily injury to or the death of a person arising out of the use or operation within Alberta of a motor vehicle, the person may, on the determination of all proceedings, including appeals, apply to the Administrator in the prescribed form for payment under this section of the amount of the judgment or of the amount of the unsatisfied portion of it.

At issue was whether s. 5(1) requires the use or operation of a motor vehicle by a tortfeasor or whether it simply requires the use or operation of a motor vehicle by either the plaintiffs or a tortfeasor.

Based on earlier Supreme Court of Canada jurisprudence, the Court concluded that where indemnity is sought under a motor vehicle liability policy or an underinsured motorist endorsement to that policy, barring wording in the policy to the contrary, the determination of coverage is focused on whether the tortious acts arose from the tortfeasor's use or operation of a motor vehicle. Where no-fault benefits are sought pursuant to an insured's own policy, the focus is on the use and operation of a vehicle by the insured who is seeking those benefits. 

The Court held that the wording of s. 5(1) was clear and requires the judgment against the tortfeasor to arise out of the tortfeasor's use or operation of a motor vehicle.  That is, the judgment for damages must arise out of the use or operation of a motor vehicle, which necessarily means that the tortfeasor's liability must arise out of the tortfeasor's use or operation of a motor vehicle.  It was irrelevant whether the Plaintiff was engaged in the use or operation of a motor vehicle at the time the injuries were sustained.  Where the tortfeasor's liability does not arise out of the use or operation of a motor vehicle, any judgment against the tortfeasor will not be for damages arising out of the use or operation of a motor vehicle.  The Court also examined the meaning of s. 5(1) within the context of other provisions of the Act and noted that provisions relating to an unknown owner or operator required that person to be the tortfeasor.  Those provisions in combination demonstrated the legislative intent that the fund apply only where the judgment is for damages arising out of the tortfeasor's use or operation of a motor vehicle.

In this case, the parties had agreed that the tortfeasors were liable to the Plaintiffs in tort for the losses and damages sustained by the Plaintiffs as a result of an assault and battery and the injuries "did not arise out of the use or operation of the motor vehicle owned or operated by either or both of the Defendants".  As there was no chain of causation linking the use or operation of a motor vehicle by the Defendants to the injuries suffered by the Plaintiffs, they were not entitled to be indemnified by the fund under the Act.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The Insured brought a motion for a determination of a question of law.  The insured had been driving his car when he was involved in a single car accident whereby his vehicle left the roadway, became airborne, and eventually came to rest in a ditch after impacting with a tree.  His girlfriend at the time was a passenger.  He had purchased the optional protection for losses caused by unidentified motorists up to his own liability limit.  The Insured therefore issued a statement of claim claiming damages from his Insurer pursuant to the unidentified provisions of his policy.

The endorsement the Insured purchased included a section which limited the ability of individuals to make claims against their policy for claims involving unidentified vehicles if there was no independent evidence to corroborate the involvement of a vehicle whose driver or owner could not be ascertained.  The individual who corroborated the evidence of the claimant could not be the spouse or dependent of a claimant.  The narrow issue before the Court was whether the Insured's girlfriend at the time was a spouse or dependent of the Insured.  The Court found that she was not.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

The issue before the Court was whether one of two parties had a duty to defend the Insured.  The Insured was in the business of providing motorcycle lessons to students.  It had a commercial insurance policy with Lloyd's Underwriters and third-party liability policies with ICBC covering its motorcycles and other vehicles.

The issue arose out of a claim advanced by a Ms. Robertson against the Insured.  In the statement of claim filed by Ms. Robertson, she alleged that while participating in a motorcycle course that was offered by the Insured, she fell and sustained injury while pushing the motorcycle of another student at the instruction and behest of the Insured.  She alleged that the accident was caused or contributed to by the negligence of the Insured.

ICBC argued that the injury claims did not arise out of the use or operation of a vehicle by the Insured and as a result, it had no duty to defend.  Lloyd's conceded for the purposes of the petition that the underlying action alleged that bodily injury was caused by an occurrence which would come within the policy's coverage, but argued that the policy's automobile exclusions operated to exclude coverage.

The Court found that the essence of Ms. Robertson’s claim against the Insured was that she fell and was injured when pushing a motorcycle as part of a motorcycle training course which was offered by the Insured for remuneration.  The Court concluded that it was an ordinary and well-known use of a motor vehicle to use it for instruction in the operation of a vehicle. In addition, the judge noted that it was not unusual to see a motocyclist pushing a motorcycle and training students on how to push a motorcycle was therefore part of the training provided by the school.  Thus, the Court held that ICBC had a duty to defend and Lloyd's did not.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

The insured had an automobile insurance "storage policy" with Insurance Corporation of British Columiba ("ICBC"), insuring the vehicle against a number of risks, including theft, but only if the vehicle was stored. The vehicle was stolen from a privately owned lot where it was parked. The lot was available for use by customers of Kal Tire and TCJ Auto Group. The lot had 200 spaces marked on an asphalt surface. The insured vehicle was parked in one of the spaces. The lot was not gated and there were no signs posted indicating any parking restrictions. There were four public entranceways to the lot from adjoining streets and a laneway.

The insurance policy did not apply to vehicles parked on a "highway". The question before the court was therefore whether the insured vehicle was parked on a "highway" when it was stolen. The term "highway" is not specifically defined in the Insurance (Vehicle) Act or Regulations. But Part 1 defines "highway" to mean "a highway as defiend in the Motor Vehicle Act". The insured argued that the definition in Part 1 only applied to the three types of compulsory insurance coverages and not optional coverages such as a storage policy. It further argued that as the term was not otherwise defined, it should be given its plain ordinary meaning. The insurer argued, and the court agreed, that the certificate of insurance stated on its face that "except as otherwise provided…all terms, including definitions, of the Insurance (Motor Vehicle) Act and Regulations apply to this policy." Further, paragraph 2.2. of Division 2 of the Policy stated: "Unless otherwise defined in this policy, words and phrases used in this policy have the meanings given to them by sections 1 and 1.1 of the Insurance (Vehicle) Act…and apply to this policy even if in the context of the Act or Regulation they apply only to universal compulsory insurance." The court found the section to be dispositive of the insured's argument.

Having found that the definition of "highway" in the Motor Vehicle Act applied to the storage policy, the court went on to examine whether the area where the insured vehicle was parked at the time of the loss fell within the definition.The definition of "highway" in the Motor Vehicle Act includes: (a) every highway within the meaning of the Transportation Act; (b) every road, street, lane or right of way designed or intended for or used by the general public for the passage of vehicles, and (c) every private place or passageway to which the public, for the purposes of the parking or servicing of vehicles, has access or is invited. The court found that the parking lot was a "highway". Although it was a private place, in that it was privately owned, it was not used exclusively for parking for customers. There were no signs restricting parking to customers of the business. The area was not gated. The court found that the owner of the lot where the vehicle was kept clearly intended the public to have access to any of the marked parking stalls. The fact that the public had unresticted access to the area where the vehicle was parked changed the nature of the risk that the insurer was insuring. The court found that there was therefore no coverage under the policy.

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