There is likely no duty to defend an insured who is sued for a civil assault

An appeal from a judgment declaring that an insurance company had a duty to defend its insured for civil assault and battery. The appeal was allowed. The Court of Appeal concluded that there was no duty to defend the respondent.

Meadows v. Meloche Monnex Insurance Brokers Inc., June 2, 2010, Ontario Court of Appeal, E.E. Gillese, S.E. Lang and P.S. Rouleau JJ.A.

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.

A girlfriend is not a spouse or dependent under an automobile policy.

A Girlfriend of insured is not spouse or dependent for purposes of unidentified driver provisions of an insurance policy.

Pepe v. State Farm Mutual Automobile Insurance Co., [2010] O.J. No. 2138, May 20, 2010, Ontario Superior Court of Justice, D.A. Wilson J.

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.

An insurance company must follow up on evidence after the initial decision to deny a claim is made. If they do not punitive damages may be assessed against them.

Appeal by the insurer from a jury’s award of punitive damages dismissed. By not following up on all the evidence relevant to the claim, withholding critical information from the adjuster engaged to investigate the claim and allowing the adjuster to present the results of the investigation in a partisan, biased and un-objective manner, the insurer’s actions were exceptional. A reasonable jury could have concluded that an award of punitive damages was rationally required to punish the insurer’s conduct.

Kings Mutual Insurance Co. v. Ackermann, [2010] N.S.J. No. 255, May 4, 2010, Nova Scotia Court of Appeal, J.W.S. Saunders, M.J. Hamilton and J.E. Fichaurd JJ.A.

The insureds were insured for damage to their dairy barn for the peril of a “windstorm", among other perils. On October 3, 2003, the insureds notified the insurer that their barn had been damaged by hurricane Juan. Upon receiving notice of the loss, the insurer hired an independent adjuster, who in turn hired a professional structural engineer to give his opinion on the damage to the barn and its cause. The insurer’s engineer concluded that “the structural condition of the building had not been affected by the passing of hurricane Juan”. The insureds also hired a structural engineer who found that the barn had, in fact, been damaged by hurricane Juan.

On April 6, 2004, The insureds provided the adjuster with three letters dealing with damage to the barn; one from each of the insured, Leaonard MacPhee, a carpenter, and Brian Chapman, also a carpenter. Both Mr. MacPhee and Mr. Chapman noted that they had witnessed the barn both prior to and after the hurricane and that there was no structural damage to the barn, that they noticed, prior to the hurricane. The insurer did not follow up with, or interview, any of these witnesses.

Prior to hurricane Juan, a safety survey report was conducted, indicating that the barn was in “good” repair and suitable for insurance coverage. This report was forwarded to the adjuster  by the insurer shortly after the claim was made. However, the insurer never forwarded the “post-Juan” survey report, which was conducted on June 1, 2004, to the adjuster. Further, the author of these reports, an investigator employed by the insurer, was never interviewed in connection to the claim.

On July 19, 2004, the insureds submitted their proof of loss and their claim was denied by the insurer. The insureds brought an action, which was heard before a civil jury. The jury awarded the insureds the full amount of their insurance coverage, together with punitive damages, in the amount of $55,000. The jury specifically made a finding of bad faith in relation to the coverage denial and found that the insurer’s conduct offended its sense of decency.

On appeal, the court found that on the facts of the case, the insurer’s failure to instruct its adjuster to follow up with the various witnesses, each of whom had first hand knowledge of the pre hurricane state of the barn, was tantamount to ignoring relevant evidence. The court also noted that several comments made in the adjusters report, showing disdain for the insureds’ counsel and expert, and making comments about the mounting costs to the insureds, indicated that the investigation was not undertaken in an unbiased and objective manner. Therefore, the court found that the evidence before the jury supported its finding of bad faith. A reasonable jury could have concluded that an award of punitive damages was rationally required to punish the insurer’s misconduct.

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

 

 

Claims for breach of contract and negligence against an insurer require proof of the standard of care required by the insurer and it's adjusters.

Claims against Insurer in negligence and breach of contract dismissed on a non-suit motion on the basis of the Insureds' failure to adduce evidence of the standard of care.

Tingley v. Wellington Insurance, [2009] N.S.J. No. 375, August 18, 2009, Nova Scotia Supreme Court, D. MacAdam J.

This case involved a motion by the Defendant Insurer for a declaration of a non-suit.  The Plaintiff Insureds were a mother and her children whose home was insured by the Insurer.  After a break-in, the Insured and her children began to have health problems including skin irritations, breathing problems, and other symptoms.  The Insurer arranged for a cleaning of the home and advised the family to return home because it was safe.  The Insureds continued to have health problems and the Insurer arranged additional cleaning.  Ultimately, the Insureds moved from their home.

The Insureds brought a claim against the Insurer for breach of contract for the Insurer's failure to compensate them for items contaminated following the break-in.  The Insureds also advanced claims of equitable fraud, negligent misrepresentation, and negligence by the Insurer and its adjuster.

The Court dismissed the Insureds' claims for breach of contract and negligence on the basis that the Insureds had failed to present any evidence of the standard of care required of an insurer or its adjuster with respect to assessing a claim for chemical contamination of a home.  The Court did not dismiss the claim with respect to negligent misrepresentation and equitable fraud as there was evidence that the Insurer's adjuster advised the Insureds that their home was safe to inhabit after the initial cleaning.  There was evidence that, at that time, the cleaning had not eradicated the problems with the home.

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

In order to deduct future insurance benefits from a tort award, the defendant must lead evidence proving the future benefits.

In deducting no-fault accident benefits from a tort award in a motor vehicle case, a trial judge must estimate the future value of the benefits based on evidence, and not on representations by trial counsel.

McCreight v. Currie, [2008] B.C.J. No. 740, April 3, 2008, British Columbia Court of Appeal, C.M. Huddart, P.D. Lowry and S.D. Frankel JJ.A.

The Court of Appeal was asked to consider whether the trial judge had estimated the deduction for Part 7 benefits appropriately under the regulations to British Columbia’s Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231. Part 7 benefits apply in respect of injury or death caused by an accident arising out of the use or operation of a vehicle regardless of who is at fault in the accident. The benefits cover medical and rehabilitation costs, disability benefits, and death benefits. Part 7 benefits are deducted from any tort award.

At trial the judge had allowed a deduction for future benefits based upon trial counsel’s statement in written submissions that the Insurance Company of British Columbia (“ICBC”) would pay the full amount of the proposed deduction to the plaintiff. In allowing the appeal, the Court of Appeal held that it was impermissible for the trial judge to take into consideration counsel’s opinion of what position ICBC would take as to future claims under Part 7. The Court was clear that this was not to be taken as “suggesting evidence as to ICBC policy is not acceptable on a [Part 7 benefits] application.” Rather, it is unacceptable for the court to consider ICBC counsel’s representation as to what ICBC would cover.

This case was digested by W. Jay Havelaar and edited by David W. Pilley of Harper Grey LLP.

 

On a summary trial a judge should not decide issues of fact based on evidence capable of supporting more than one inference.

Appeal by Fidelity Insurer from summary judgment in favor of the Insured was allowed. The motion judge should not have decided issues of fact based on evidence that was capable of supporting more than one inference. Genuine issues remained for trial. However, since the interpretation of the bond was a contentious issue and the trial judge's interpretation would no doubt end up being appealed, the Court of Appeal interpreted the fidelity bond in order to assist the trial judge with the task of applying the bond to the evidence before him or her.

Iroquais Falls Community Credit Union Ltd. (Liquidator of) v. Co-operators General Insurance Co., [2009] O.J. No. 1783, May 4, 2009, Ontario Court of Appeal, D.H. Doherty, E.A. Cronk and R.G. Juriansz JJ.A.

The Insured, a Credit Union, made a claim under its fidelity bond for the actions of one of its employees. The branch manager had removed $432,000 from a vault and granted herself and others unauthorized lines of credit and overdrafts totalling $1,445,512 and credit extensions of $223, 969. The Insurer denied the entire claim, asserting that the requirements under the dishonesty provision of the bond were not met and that the loss was excluded under the unfaithful performance exclusion of the bond because the manager claimed that she had had applied the money that she took to loans that were going into default, in order to protect the Insured from attracting the scrutiny of the authorities.

The Insured moved against the Insurer for summary judgment. The motion judge granted the motion, finding that the manager and other employees participated in a single collusive scheme that resulted in losses to the Insured, and ordered the Insurer to indemnify the Insured in the amount of 1.8 million.

On Appeal, the decision was overturned. The judge should not have decided issues of fact based on evidence that was capable of supporting more than one inference. The judge should not have made a factual finding that a single, collusive scheme had been undertaken, as this was a genuine issue for trial. The quantification of damages was also a genuine issue for trial. Lastly, the application of several exclusions and conditions in the fidelity bond, including the "Termination" exclusion and the "Notice of Loss" condition, were not considered by the judge and could form the basis for genuine issues at trial.

 The interpretation of the bond was rightly undertaken by the motion judge because it was necessary to apply the bond to determine whether there was a genuine issue for trial. However, the Court of Appeal was not persuaded that the interpretation of the bond should, after deciding that the matter should proceed to trial, be left for the trial judge to interpret on a full record. The bond's interpretation was hotly contested and the trial judge's conclusions would likely be appealed to the Court of Appeal. Deciding the contentious issue of the bond's interpretation would assist the trial judge in applying the bond's application to the evidence at trial. The "dishonesty" provision, relied on by the Insurer to deny coverage, is a coverage clause and thus should be construed broadly. It requires that, in order for coverage to apply, the loss result directly from  dishonest or fraudulent acts of an employee. Furthermore, the dishonest acts must have been committed with "manifest intent" to cause the insured to sustain the loss and with "manifest intent" to obtain a financial benefit for any person or entity or oneself. The Insurer sustains a direct loss when cash is improperly removed from its vault. This is also true when an employee presents false loan applications to the loan committee for approval because the Insured parted with money it otherwise would have kept. It is of no consequence that the Insured could later collect the money. This argument confuses the issue of whether there is a "direct loss", which is but one requirement to trigger coverage, with whether the loss, once established, can be recovered, which is a question of damages. The meaning of "manifest intent" has been considered by many American courts. It is clear that the text of the bond, by including the modifier "manifest", requires that the employee's intent to cause loss be clear or obvious or show itself plainly. It is not necessary that the employee posess knowledge that certain consequences of an act are certain to occur in order to infer "manifest intent". The employee's "manifest intent" may be established by the employee's admission as to his or her intent, or by evidence which establishes that he or she knew or was substantially certain that the loss would be the consequence of the dishonest act. Knowledge may be proved by admissions, circumstantial evidence, or a combination of the two. No matter what evidence is used, the focus of the analysis should be placed on the employee's intent in performing the very act that caused the loss, and not on some act the employee performs or plans to perform later.

 In the result, the summary judgment granted by the motion judge was set aside.

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

Waivers declining additional insurance coverage may be valid.

This was an application for summary judgement by the Plaintiff rental car company. The Defendant refused to compensate the Plaintiff after he had damaged a rental car belonging to it.  The Court held that the waiver declining additional insurance coverage signed by the Defendant was valid.  Damages were awarded to the Plaintiff.

Enterprise Rent-A-Car Canada Ltd. v. Penton, [2009] N.J. No. 73, Newfoundland and Labrador Supreme Court - Trial Division, April 2, 2009, R.A. Fowler J.

The Defendant rented a vehicle from the Plaintiff rental car company. When he picked the vehicle up he signed a rental agreement. The Plaintiff signed the areas which indicated that he wished to decline additional insurance coverage and that he had read the entire agreement. He subsequently got into an accident and demolished the car.

The Defendant refused to pay for the damage to the vehicle and asserted that he did not understand the waiver because the rental agent hurried him through the process and did not give him an adequate explanation.

The Plaintiff commenced an action against the Defendant to recover the cost of the vehicle and then brought an application to have the matter proceed by way of summary trial. The Defendant argued that because there was conflicting evidence about the circumstances under which the agreement was signed, the matter could not be decided by way of summary trial.  The Court held that the matter could proceed by summary trial even though it would be necessary to assess the credibility of the Defendant and the rental agent to determine what the parties had understood the bargain to be at the time the contract was signed.

The Court awarded the Plaintiff the value of the damaged vehicle as well as costs. The rental agreement was standard and enforceable. The Defendant’s assertions about what occurred lacked credibility. The fact he had rented vehicles from the Plaintiff on two prior occasions and opted for the additional insurance at a cost of more than $160 each time was taken into account. The Court concluded that he would not have paid this additional amount in the past if he did not understand what it was for. The rental agent’s statements that it was her usual practice to go over the agreement with customers and that there were incentives from the company for employees who sold a lot of insurance coverage were accepted.

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

Misrepresenting the indentity of the prinicipal operator of a vehicle can invalidate the insurace

Mr. Teap had been involved in six at-fault motor vehicle accidents. When renewing the insurance on his 2000 BMW under his company name, he stated that there was no principal operator assigned to the BMW. After an investigation following subsequent damage to his car, ICBC denied coverage. The Judge found that Teap knowingly misrepresented that there would be no principal operator when in fact he was the only operator of the vehicle.

Lexus Holdings Int.’s Ltd. v. The Insurance Corp. of British Columbia, [2009] B.C.J. No. 495, March 13, 2009, British Columbia Supreme Court, E.A. Arnold, Bailey, J.

Mr. Teap is the only director and shareholder of Lexus Holdings in Canada. Lexus Holdings has owned three vehicles and purchased five new policies of insurance. Teap was the principal operator named on the first three policies, then a Mr. Osagie was named on the fourth, then no principal operator was designated on the fifth. This claim arose under the fifth policy. Teap had been involved in six at-fault accidents between 1995 and 2003, which resulted in him having a +130 Claim Rated Scale, which attached a 1300% surcharge to his name.

In 2005, the BMW was vandalized and ICBC concluded that it was a total loss. The actual cash value of the BMW was assessed at $32,640.00.

ICBC advised Teap that they were denying his claim as he was in breach of s.19 (1)(b) of the Insurance Act, which states that if an applicant knowingly misrepresents or fails to disclose a fact required to be stated in it, then all claims are rendered invalid and insurance money is forfeited. ICBC’s position at trial was that Teap recognized that he would pay significantly more as the declared principal operator than if none was designated. Teap’s position at trial was that he did not generally know who the principal operator was going to be and that he did not engage knowingly in a misrepresentation. Teap argued in the alternative that if it was found that he did knowingly misrepresent the information, the Court should grant relief from the forfeiture of the insurance benefits pursuant to s.24 of the Law and Equity Act.

Knowingly making a misrepresentation is a form of fraud. The standard of proof is on the balance of probabilities, and clear and quotient evidence is required. The judge referred to a number of cases that showed that speculation, suspicion or potentially unreliable evidence from a Plaintiff who sustains a loss, constitute an insufficient basis upon which an insurer may deny a claim based on fraud or a type of fraudulent misrepresentation. The Judge found that the circumstances of this case could be distinguished from those cases as Teap was not involved in the theft of this vehicle or any other physical act in relation to it. A finding that Teap knowingly misrepresented the matter of the principal operator rests entirely on an assessment of the inherent reliability and credibility of his testimony, contrasted against the facts likely known to him at the time.

The Judge found Teap to be a highly unreliable witness whose evidence shifted frequently when he considered it in his own best interest. He was evasive, cagey and outright contradictory in many of his answers, and the Court could have no confidence in any his assertions.

Teap had no other vehicles registered in his name during the insured period. Had he been declared the principal operator, he would have been required to pay $45,902.00 for insurance for the year as opposed to the $5,869.00 he paid.

The Judge was satisfied on a balance of probabilities that Teap knew he was a principal operator when he declared in his contract with ICBC that there was no principal operator and thus knowingly misrepresented the information. The burden was on ICBC to prove that Teap did not have an honest believe that there was no principal operator for the BMW and the burden was met.

In turning to consider s. 24 of the Law and Equity Act the Judge held that as it is purely discretionary, and Teap has shown a blatant disregard for his obligation to be truthful, the Judge declined to grant relief.

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

Allegations of bad faith will be dismissed on a summary basis if there is no factual basis to the allegations.

The Insured ("Pearlman") brought a claim against the Insurer ("ACI") alleging that, amongst other things, ACI had acted in bad faith, deceitfully and fraudulently in handling Pearlman's claim for medical expenses related to a motor vehicle accident which occurred in British Columbia. ACI brought a Summary Trial Application to dismiss Pearlman's Action. The Summary Trial Judge dismissed the Application indicating that there were "valid questions" concerning ACI's conduct which he was unable to answer on the material before him. ACI appealed from this decision.

Pearlman v. American Commerce Insurance Co., [2009] B.C.J. No. 299, February 24, 2009, British Columbia Court of Appeal, L.S.G. Finch C.J.B.C., K.J. Smith and S.D. Frankel JJ.A.

The Insured ("Pearlman") brought a claim against the Insurer ("ACI") alleging that, amongst other things, ACI had acted in bad faith, deceitfully and fraudulently in handling Pearlman's claim for medical expenses related to a motor vehicle accident which occurred in British Columbia. ACI brought a Summary Trial Application to dismiss Pearlman's Action. The Summary Trial Judge dismissed the Application indicating that there were "valid questions" concerning ACI's conduct which he was unable to answer on the material before him. ACI appealed from this decision.

The Court found that there was no evidence tendered by Pearlman in support of the argument that ACI failed to act in good faith throughout or that it acted with anything less than the requisite degree of care for Pearlman's interest in processing his claim. Similarly, there was no evidence to support the allegations of deceit, fraud, abuse of process or misrepresentation. The Court found that there was sufficient evidence to find all the facts necessary to support ACI's Application for the dismissal of the Plaintiff's Action and that it would not be unjust for the Court to dismiss the Action.

In the result, the Court allowed ACI's appeal and dismissed Pearlman's Action.

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

A criminal conviction is prima facie evidence of an intentional act which would exclude coverage under most insurance contracts.

Appellant insured's  criminal conviction for intentionally setting fire on his property establishes a successful prima facie case by insurer at trial and shifts the burden to the insured to show a genuine issue for trial.

Ecclesiastical Insurance Office plc v. Michaud [2008] M.B.J. No. 387 Manitoba Court of Appeal M.A. Monnin, R.J.F. Chartier and A.D. MacInnes JJ.A. November 13, 2008

 

The appellant was convicted criminally of arson and arson related offences in respect of an explosion and fire that destroyed his property.  He sued his insurer, the respondent, for indemnity under his insurance policy and the respondent sued the appellant for the amount it had been required to pay a mortgagee pursuant to a standard mortgage clause in the insurance contract.  Both actions were heard by chambers motion and in both case the respondent insurer was granted summary judgment on the basis that the appellant had not demonstrated that there was a genuine issue for trial and that the certificate of the appellant’s criminal conviction established a prima facie case for success by the respondent in each trial.

The appellant argued that his denial that he had anything to do with the explosion and fire established a genuine issue for trial.  The Court of Appeal disagreed, holding that while the appellant’s denial may raise a credibility issue, more was required to raise a genuine issue for trial.  The appellant’s bare denial did not raise sufficient evidence to overcome the prima facie case established by the certificate of his criminal conviction.

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