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

The insured owned a pick-up truck insured by the insurer. His son was an 'excluded driver' under the policy. His son used the truck, accompanied by another driver, and was involved in a motor-vehicle accident. Both the insured and his son were sued by the occupants of the other vehicle.

The insurer brought an application for a declaration that it had no duty to defend or indemnify either the insured or his son. The insurer argued that there was no coverage on three grounds: (1) The son was an 'excluded driver'; (2) The son drove the truck on public roads without the insured's consent; and (3) The insured allowed the son to drive while in breach of the conditions on his G-1 driver's license.

On the first ground, the court agreed that the insurer had no duty to defend or indemnify the son, as he was clearly listed as an 'excluded driver'. However, the insured argued that he understood this to mean that his son had no coverage, not that he was not himself protected from third party liability. The court questioned whether the insurer had taken adequate steps to bring the coverage implications to the insured's attention. The form that was originally sent to the insured, clearly explaining the implications of having an excluded driver on the policy, only listed another vehicle owned by the insured, not the truck in question. Although the insurer sent a revised form, listing the truck, the insured had left the country and claimed he did not receive it prior to the accident. Since the evidence was unclear, the court was not prepared to make a finding on the evidence that the insurer had taken all the appropriate steps to ensure the insured fully understood the coverage implications of having his son listed as an 'excluded driver'. The court directed the trial of an issue on the 'excluded driver' endorsement.

On the second ground, the court found that although both the insured and his son had sworn affidavits that the son did not have express consent to drive the vehicle, he did have implied consent. Email evidence suggested that when the insured found out that his son was using the truck on some public roads, he simply told his son to "be careful."  The court found that, at the very least, the insured had acqueised and had impliedly consented to his son using the truck on public roads.

On the third ground, the court found that the insured did not allow his son to drive while unauthorized to do so. The son had his G-1 license, which required him to have another driver in the vehicle with more than four years driving experience. At the time of the indicent there was another driver with the son, but he had less than the requisite experience. The court found that it could not be stated that the insured allowed his son to drive his truck in breach of the liscensing requirements since he could not have known that his son's passenger lacked the requisite experience.

The court directed a trial of an issue under Rule 38.10(1)(b) with regard to the coverage implications of the 'excluded driver' endorsement in relation to the insured. It also declared that the son was not covered and that the insurer had no duty to defend or indemnify him in the upcoming actions.

This case was originally summarized by Natasha D. Morley and originally edited by David W. Pilley.

A MVA occurred at an intersection under construction by Peters Bros. Construction Ltd. (the "Contractor"), an independent contractor hired by the City to undertake repairs to certain roadways in the city. The Contractor was required to purchase a policy of liability insurance naming the City as an additional insured. AXA was the insurer for the policy in issue. The pleadings in the MVA Claims alleged that the MVA occurred as a result of the Contractor's negligence in removing a stop sign at the intersection and replacing it in the wrong location. Ultimately, the MVA Claims were settled and the City was not required to contribute to the settlement. However, the City sought a declaration that AXA was liable to pay the defence costs incurred by the City.

The Court noted that AXA would only have the duty to defend the City if the Statements of Claim in the underlying actions alleged a state of facts that, properly construed, would support an action that could potentially fall within coverage: Non-Marine Underwriters, Lloyds of London v. Scalera, 2000 SCC 24. The policy issued by AXA provided coverage to the City as an additional insured "but only with respect to liability which arises out of the operations of the Insured". The Court noted that each and every claim in the underlying actions flowed back to the movement of the stop sign and the conduct of the Contractor in removing and improperly relocating the sign and therefore was attributable to matters that "arise out of the operation of the insured". The Court concluded that had the Contractor not been working on the construction contract at the particular intersection in issue and had it not removed and relocated the stop sign, there would not have been any claims. Thus, the liability at issue in each of the MVA claims arose "out of the operations of the Contractor". As a result, the Court concluded that all of the claims alleged a state of facts which, if proven, arose out of the operations of the Contractor and, therefore, fell within the coverage afforded by AXA's policy.

The Court rejected AXA's argument that defence costs should be apportioned between covered and non-covered claims. The Court cited from RioCan Real Estate Investment Trust v. Lombard Insurance Co., [2008] O.J. No. 1449 (S.C.J.), where the Court concluded that where there is a duty on an Insurer to defend some, or only one, of the claims against an insured and that claim embodies the true nature of the claim, a duty to defend the entire claim arises. The Court further noted that where the covered and non-covered claims are so intertwined that there is no rational or practical basis for distinguishing costs related to the covered and arguably non-covered claims, an Insurer is obliged to fund the defence of the whole claim relying on the decision in SREIT (Park West Centre) Ltd. v. ING Insurance Co. of Canada, 2008 NSSC 183.

In the result, Penticton was successful in obtaining an Order that AXA indemnify it for all defence costs incurred in defending the MVA Claims.

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

The Applicants, the Insureds, sought a Declaration that the Insurer had a duty to defend them in relation to a Third Party Notice.

The Statement of Claim alleged that the Plaintiff was a passenger in a BMW which was involved in a road race. The driver of the BMW lost control of the car leading to a collision with a light pole and serious injury to the Plaintiff. The Plaintiff sued the owner and driver of the BMW as well as Ericksen Nissan Ltd. ("Ericksen") which owned the other car involved in the road race, a Nissan, and also the driver of the Nissan. Ericksen defended the claim on the basis that the driver did not have Ericksen's consent to drive the Nissan. Ericksen issued a Third Party Notice to the Insureds, the father and brother of the driver of the Nissan.

It was alleged in the Third Party Notice that the brother of the driver of the Nissan owned an Infinity which was brought into Ericksen for service. A Service Loaner Agreement was signed by the owner of the Infinity. The Service Loaner Agreement provided that any loss or damage to the loaner vehicle was the responsibility of the Insureds.

The Insureds sought coverage from their Insurer, who insured the Infinity.

The issue before the Court was which documents ought to be considered in determining whether the Insurer had a duty to defend the Insureds. The Insureds argued that the Court should consider the pleadings as a whole including the Insureds' policy and the Service Loaner Agreement. The Insurer argued that the Court ought only to consider the Third Party Notice since the Third Party Notice sounded in contract and provided no basis for indemnity other than in contract and made no allegations regarding the involvement of an at-fault motorist.

The Court concluded that the relevant pleadings should be considered as a whole together with the terms of the policy and the Service Loan Agreement. In the result, the Court found that the Insurer had a duty to defend the Insureds in relation to the Third Party Notice. The key issue was whether the Insurer had a duty to defend the Insureds if their obligation to pay arose in contract. The Court held that while the Service Loaner Agreement was the basis on which the Insureds might be required to pay, that Agreement effectively transferred a potential tort liability from Ericksen to the driver of the Nissan and therefore the Insureds, which would trigger the policy. It was only upon examining the Statement of Claim, the policy and the Service Loaner Agreement together that this became apparent.

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

PCL Constructors Canada, the Insured, was the construction manager and built the first phase of a hospital renovation project. The roof began to leak approximately one year after the project was substantially completed and the hospital sued the Insured for property damage arising out of alleged construction mistakes, defects, and deficiencies. The Insured was insured by the Insurer pursuant to a comprehensive general liability insurance policy relating to the expansion and renovation of the hospital. The Insured requested the Insurer to defend the action on its behalf but the Insurer denied its duty to defend and any duty to indemnify the Insured for the claims made by the hospital.

The judge noted that though case law establishes the general principle that comprehensive general liability insurance policies are not intended to be a means for a contractor to cover expenses incurred to repair its own defective workmanship, this is a general principle that only serves as an interpretive aid and determination of coverage must be made by examining the wording of the policy. He found that the exclusions in the policy effectively excluded all of the claims being made, subject to the interpretation of an exception to one of those exclusions. The effect of the exclusion in question was to exclude coverage for damage to property caused by the Insured’s incorrect performance of work on that property but the effect of the exception was to include all property damage arising out the Insured’s work except for work that had not been completed; i.e. it restricted the exclusion so as only to exclude property damage that arose out the Insured’s own work before all of that work had been completed based only on covered allegations. The judge concluded that there may be coverage for the claims depending on whether the property damage arose before or after the contract was complete. Because there was a possibility that a portion of the claim might be covered, the Insurer had a duty to defend the action against the Insured.

With regard to the Insured’s request to be allowed to appoint counsel of its own choosing, the judge held that though there was a possibility that some portions of the claim might be covered and other portions not covered, both the Insurer and the Insured had an interest in proving that the insured was not liable for the damage or that the damages claimed were excessive. In that regard there was no conflict of interest between the Insurer and the Insured. There was also no air of reality to the speculation that the Insurer would instruct counsel to present a defence. The judge refused the Insured’s request to appoint counsel but agreed with the alternative request that defence counsel be mutually agreeable to the Insured and Insurer and a number of other conditions including that defence counsel be different from counsel who argued coverage.

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

The Deerhurst resort hired a local contractor to remove snow. Under the terms of the snow removal contract, Deerhurst was named as an additional insured but only with respect to liability arising out of the contractor's operations. A resort guest was injured after slipping on an icy pathway leading back to her hotel room. Her claims can be grouped under three headings:

1. Negligence on the part of all defendants relating to the removal of snow and ice;

2. Negligence on the part of Deerhurst in the operation and management of the hotel, including inadequate lighting and lack of non-slip matting on the walkways, the failure by management to cancel evening's program at the conference centre so that the guests could have stayed in their rooms, the failure to cut the program short, so that the participants could have returned to their lodging sooner and more safely, and the failure to offer the Plaintiff temporary overnight accomodations in the main lodge until the walkways were clear of snow and ice and made safe for use; and

3. Occupier's Liability

Aviva agreed to defend the snow removal contractor but refused to provide separate or additional defence for Deerhurst. Deerhurst brought an application for declaration that Aviva was obliged to defend the entire action - not just the snow and ice removal claims that are covered by the policy, but the two other categories of claims as well.

An Insurer is not obliged to defend a claim that clearly falls outside the coverage provided by the policy. With respect to mixed claims, Ontario Courts have held that an Insurer is obliged to defend only those claims that potentially fall within coverage.

Deerhurst relied on a recent decision of RioCan Real Estate Investment Trust v. Lombard Insurance (2008) 91 O.R. (3d) 63 that appeared to support the position that where there is a duty on an Insurer to defend even one of the claims made by an Insured, and that claim embodies the true nature of the claim, a duty to defend the entire claim arises.

In this case the Court did not find that one of the claims captured the true essence of the action as the claim of negligence in hotel operations and management could stand on its own.

In the result, Aviva was not obliged to defend the entire action, only the snow and ice claims but it is contractually obliged to provide a defence not only to the snow removal contractor but to Deerhurst as well.

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

Manulife owns Metrotown Centre in Burnaby, B.C. and the Defendant Maxime's Bakery was a tenant there. Maxime's insurance policy through Sovereign named Manulife as an additional insured under the policy.

One of Maxime's employees was delivering goods in a cart, and struck the Plaintiff Liu, causing a number of injuries. The Plaintiff commenced an action against the employee, Maxime's and Manulife. The issue  in this application was whether the claims as alleged in the pleadings fell within the scope of Manulife's coverage outlined in the policy. Did the event arise from legal operations performed by or on behalf of the named Insured, requiring Sovereign to defend Manulife, or did the event occur due to the statutory breaches of Manulife as an occupier under the Act?

Liu alleged that the Defendants did not take all reasonable steps to ensure the premises were reasonably safe for the operation of the cart. The delivery of goods undertaken by the employee fell within the scope of the policy. That act comprised part of the legal operations of Maxime's and any claims arising from these actions permit Manulife to rely on the additional Insured clause in the policy. The Plaintiff's injuries arose out of the delivery of goods, and not through an independant obligation of Manulife as an occupier. The collision was clearly connected to the operation that Sovereign agreed to insure.

In the result, the Court determined that Sovereign owed Manulife a duty to defend the action.

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

The respondents SREIT (Park West Centre) Ltd. (“SREIT”) owned and managed a commercial property in Halifax and contracted with D. & J. Excavating (“D. & J.”) to provide snow and ice removal services.  D. & J. was required to maintain liability insurance and did so with the appellant ING Insurance Co. (“ING”).  SREIT was identified as an additional insured under that policy.

The underlying action was started when a pedestrian sued for injuries sustained after he slipped on ice and fell outside SREIT’s premises.  ING was prepared to provide a complete defence to SREIT until the pedestrian amended his statement of claim to include an allegation that SREIT was negligent in failing to properly maintain the rain gutters and manage the roof water runoff near the sidewalk thereby causing or contributing to the ice buildup on which he fell.  ING refused to defend SREIT against the rain gutter allegations.  SREIT brought an application for a declaration obliging ING to assume and pay for the entire defence in the underlying action.  The application was allowed and ING was ordered to assume a complete defence of SREIT’s interests in the action.

On appeal, the Court held that whether the amended claim triggered a duty by ING to defend the entire claim must be determined based on the facts as pleaded and the insurance coverage provided, after taking into account any exclusions from that coverage found in the policy.  The Court noted that the duty to defend, unlike the duty to indemnify, is triggered not by actual acts or omissions of an insured, but rather by allegations against the insured.  The mere possibility that a claim within the policy may succeed is enough.  An insurer cannot resist a duty to provide a defence simply by raising other possible scenarios in which there would be no coverage.

The Court held that the chambers judge was correct in ordering ING to mount a complete defence on behalf of SREIT and noted his three principal reasons for that decision.  First, the substance and true nature of the claim was that the premises were not reasonably safe because of an icy sidewalk which had not been salted, a pleading which could give rise to liability within the policy coverage, regardless of whether the icy conditions were caused or exacerbated by  a leaky gutter.  Second, and in the alternative, if the amended statement of claim contained allegations that fell both within and outside the coverage, then the claims were so intertwined as to permit no rational or practical basis for bifurcating the respondents' defence.  Third, any apparent or actual conflict of interest would not, in the circumstances of this case, trump ING's duty to defend.

In the result, the appeal was dismissed.

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

The Plaintiff is a general contractor and had a number of successive commercial general liability policies of insurance with the Defendant insurance company. Four actions were commenced against the Plaintiff when part of a condominium project it had built caused water damage to other parts of the building.  During the building of the condominium project the Plaintiff had made use of sub-contractors for most of the work.  It was alleged that the Plaintiff was negligent and in breach of contract with respect to the construction.  The Plaintiff sought an Order that the Defendant had an obligation to defend it with respect to the claims.

The policies provided that the Plaintiff would be covered for damages due to property damage caused by an “accident” or an “occurrence”.  “Accident was defined as  “continuous or repeated exposure to conditions which result in property damage neither expected nor intended from the standpoint of the insured.”  The term “occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  Some of the policies contained exclusion clauses which provided that damage done by “work performed by or on behalf of the named insured” was not covered.  The other policies contained exclusion clauses that stated that the damages arising from work “performed by the named insured” would not be covered.

The Defendant took the position that the policies did not cover poor workmanship or a failure to fulfill contractual obligations.  The Plaintiff’s argued that the claims fell squarely within the language of the policies which insured them for “property damage” caused by “accident”. 

The Trial Judge held that the policies were not triggered and therefore the Defendant had no obligation to defend the Plaintiff.  The Plaintiff’s application was dismissed and it appealed that decision.  The Trial Judge found it unnecessary to consider whether the exclusion clauses relating to work performed by subcontractors would apply since the policies were not triggered in the first place.

The Court of Appeal began its analysis of the issue with reference to the general principles of insurance contract interpretation. Words used must be given their plain and ordinary meaning, the contract must be interpreted contextually, and the Courts must give effect to the parties reasonable expectations.  Additionally, ambiguities must be resolved in favour of the insured.

The Court went on to state that in considering this issue a Court should begin with the presumption that all sections of an agreement have meaning.  The contract should be read as a whole rather than coverage clauses and exclusion clauses being read in isolation.

The Court of Appeal dismissed the appeal and held that the policy did not cover the loss which is framed in the pleadings as poor workmanship.  The policies in question did not contain clear enough language necessary to establish that the insurance is intended to transfer fortuitous contingent risks, such as poor workmanship or faulty design.

This case was originally summarized by Kim Yee and originally edited by David Pilley.

Becamon was insured with Wawanesa and possessed a G1 driver’s licence which required her to be accompanied by a fully licensed driver at all times when driving her vehicle. Becamon struck the Plaintiff with her car in a strip mall where the Plaintiff was walking. At the time, Becamon was alone in the vehicle and therefore in contravention of her licence. She was charged under the Highway Traffic Act (“HTA”) for contravention of conditions on her licence (for failing to wear her glasses) and for driving without being accompanied by a qualified driver. She subsequently pleaded guilty and paid a fine of $105 for each offence.

Wawanesa refused to indemnify Becamon on the basis that she had violated a statutory condition in the policy by driving when she was not “authorized by law” to do so. Wawanesa took the position that the limit of its policy coverage was $200,000, rather than the $1,000,000 of coverage that would have been applicable if Becamon had not been driving alone. Becamon brought a third party notice against Wawanesa and sought a declaration that Wawanesa had a duty to indemnify her with respect to the Plaintiff’s action for damages. The trial judge granted Becamon’s declaration.

On appeal, the Court considered whether Becamon’s guilty pleas to the offences precluded her from arguing that she was driving lawfully in the civil action, and whether the trial judge erred in concluding that the accident did not take place on a highway as defined by the HTA.

The Court reviewed two decisions regarding the presumption of guilt in a civil proceeding following a conviction in a criminal proceeding: Re Del Core and Ontario College of Pharmacists (1985), 51 O.R. (2d) 1 (C.A.) and Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77. The Court also considered the vastly different consequences of Becamon's guilty pleas in the criminal and civil proceedings, and held that fairness dictated that the result in the criminal case should not be binding in the civil case. It was noted that the trial judge was correct to consider Becamon's lack of counsel and her difficulties with the English language in coming to that result. The Court also held that the parking lot was private property, not a public highway, and therefore the HTA did not apply.

This case was originally summarized by Kim Yee and originally edited by David Pilley.

In American Home Assurance Co. v. Temple Insurance Co., [2009] O.J. No. 249 (Sup.Ct. of Justice), American Home Assurance Co. ("American Home"), an Ontario based insurer, applied for a declaration that Temple Insurance Co. ("Temple"), another Ontario based insurer, was required to contribute equitably to costs incurred by American Home to defend a Florida action brought against their mutual insured Tidan Inc. 

The American Home commercial general liability policy provided for coverage of $1 million for bodily injury or death.  The Temple umbrella policy provided a further $9 million in coverage for claims exceeding the limit of the primary policy. 

Tidan was sued in 2002 by the family of a man who drowned while swimming in the ocean adjacent to Tidan's Florida oceanfront hotel.  American Home received notice of the Florida action in November 2003 and accepted its duty to defend Tidan, retaining a Florida firm to represent Tidan.  Notice of a $15 million settlement demand was provided to Temple in May 2006.  In March 2007, American Home tendered its policy limit of $1 million but Temple was not prepared to settle, so the firm retained by American Home continued to represent Tidan at American Home's expense.  American Home no longer took part in the settlement discussions, which took place between the plaintiffs and Temple's counsel.  The case was eventually settled for $2,273,000.  Temple paid the remainder owing after American Home's $1 million was paid.  Temple refused to contribute to Tidan's defence costs.

The Court found that Temple's duty to defend Tidan was triggered when it received notice that the claim against Tidan was expected to exceed the limits of the primary American Home policy.  The Court found that American Home's first in line status was counterbalanced by the significantly greater interest Temple had in continuing the litigation after its duty to defend was triggered.  Equity required Temple to pay its share of the defence costs.  The Court held that Temple was required to pay American Home 50% of the costs billed to American Home by counsel for Tidan from May 2006 onward to be reduced by 25% of the costs billed to Temple by the American firm it had retained.

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