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

The plaintiff, a dentist, was diagnosed with cataracts in both eyes, a condition which substantially undermined his ability to carry on with his practice.  In July of 1998, the plaintiff’s claim for disability benefits from the defendant, Sun Life, was approved. The defendant subsequently informed the plaintiff that his policy required him to undergo corrective eye surgery.  The plaintiff petitioned the Supreme Court for a declaration to the contrary.  On June 29, 2001, while the Supreme Court judgment was under reserve, the defendant wrote to the plaintiff reaffirming that he was required to have corrective surgery, indicating that it intended to cease benefits if he did not, and setting out a date for final payment. The Supreme Court and the Court of Appeal held for the defendant.  The Court of Appeal issued its ruling on January 29, 2003, and the plaintiff commenced corrective surgery shortly thereafter. Despite the surgeries, the plaintiff was unable to practice dentistry, and commenced an action against the defendant for disability benefits.  The defendant brought an application under Rule 18A claiming the action was statute barred as it was commenced outside the limitation period set out in s. 22 of the Insurance Act, R.S.B.C. 1996, c. 266.  The plaintiff argued that correspondence and discussions passing between the parties during the litigation meant that “clear and unequivocal notice” of the defendant’s intention to deny benefits was never given.  This submission was premised mainly on the fact that the defendant had indicated that it would not consider the plaintiff in fundamental breach of his policy if he postponed surgery during the litigation.  No formal standstill agreement was reached.

The plaintiff’s action was dismissed.  The Supreme Court ruled that the June 29, 2001 letter constituted “clear and unequivocal notice”.  In determining what constitutes “clear and unequivocal notice”, the Supreme Court referred to the Court of Appeal’s decision in Balzer v. Sun Life Assurance Company of Canada, 2003 BCCA 306, and the line of cases emerging from that judgment.  The Court interpreted Balzer to mean that when an insurer expresses its intention to cut off benefits and close its file, the s. 22 limitation period is triggered.  The correspondence and discussions passing between the parties did not undermine the notice contained in the June 29, 2001 letter as the communication was related to the appeal, and to the consideration of additional information concerning the plaintiff’s medical status.

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

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.

The Defendant Insurer applied for a dismissal of the Plaintiff Insured's claim.  The Insured was employed by the Royal Bank of Canada as a customer service representative.  The Insurer provided insurance coverage, including long term disability coverage for the bank's employees, including the Insured.

The Insured developed laryngitis and, as a result, was told to rest her voice.  She attempted to return to work but was unable to do so.  On the advice of her employer, she accepted short-term disability benefits for eight weeks.  After the Insured's short-term disability benefits were exhausted, she applied to the Insurer for long-term benefits based on her doctor's then diagnosis of "muscular tension dysphonia".  The Insurer approved her application for long-term disability benefits.  The Insured was advised that if her medical condition prevented her from performing the duties of her own occupation, she would, in approximately 18 months, be eligible for disability payments only if she was unable to work at any occupation for which she was qualified, or might reasonably become qualified by training, education or experience.

The Insured was eventually advised that her claim would be closed at the expiration of the 18 month period as she was no longer entitled to disability benefits.  Approximately six months after the Insured's benefits were cut off, she received a new diagnosis of conversion disorder and advised the Insurer. The Insurer rejected the Insured's claim for benefits based on the new diagnosis and the Insurer issued a Writ of Summons.

The Insurer brought this application to have the Insured's claim dismissed on the basis that section 22(1) of the Insurance Act of British Columbia requires that "every action on a contract must be commenced within one year after the furnishing of reasonably sufficient proof of a loss or claim under the contract and not after".

In this case, the policy provisions that applied to the Insured's claim, on a literal rating, permitted the Insured to commence legal action two years after the last day on which a proof of claim would be accepted under the terms of the policy.  Thus, the issue before the Court was which limitation period applied.  If section 22(1) of the Insurance Act applied, the Insured had not brought her claim within time whereas, if the limitation period in the policy applied, the Insured had brought her claim within time.

The Court found that while section 3 of the Insurance Act prevents an Insurer from contracting for a limitation period shorter than that provided for in the Insurance Act, there is nothing in section 3 that prevents an insurer from contracting for a period greater than that in the Act.  The Court also granted the Insured relief from forfeiture as she had failed to formally file a proof of loss, which the Court viewed as imperfect compliance given the circumstances of the case.  In the result, the Insurer's application was dismissed.

This case was digested by Cameron B. Elder and 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.

In 1977 the Plaintiff, Minox, constructed a complex of condominiums which were rented out to tenants. Within two years of completing construction the building experienced humidity problems and mould began to occur in some of the units. In 2001 it was determined that some of the mould was toxigenic.

In 1993 Sovereign General Insurance Company issued a policy of insurance which was maintained by Minox up to and including 2003. In 2002 Minox filed two proofs of loss relating to damage caused by toxigenic and other mould in the complex. Sovereign denied the policy on the basis that mould was not a risk covered by the policy, as it was not fortuitous. It also claimed that the loss was excluded under the policy and that the loss did not occur during the policy period.

The court found that the damage caused by mould is a risk covered under the policy. It rejected Sovereign's argument that mould is a condition resulting from the normal use and occupation of the property, and therefore not a risk or peril. It found that although it is highly likely that mould will develop due to moisture problems, it is not certain or inevitable. The court pointed to the fact that less than half of the units in the complex had occurrences of mould. Therefore, it found that the growth of mould, either toxigenic or non-toxigenic, was a fortuitous event and therefore a risk covered under the policy.

The court then went on to consider whether mould was excluded under the policy. It found that the exclusions relating to "seepage, leaking or influx of water etc.", "entrance of rain, sleet snow through windows, skylights or other similar wall or roof openings etc.", "dampness, dryness or atmosphere, changes of temperature etc." and "wear and tear, gradual deterioration, latent defect, inherent vice, faulty or improper workmanship etc." all did not apply to exclude coverage. It pointed out that the policy contained no exclusion specifically relating to loss or damage caused directly or indirectly by mould and that such exclusion clauses are not uncommon in the industry. Therefore, coverage for mould damage was found not to be excluded under the policy.

The court also looked at whether the loss or damage occurred within the policy period. Sovereign argued that the date of occurrence of the alleged loss was the date on which moisture first resulted in mould. Therefore, damage was present long before Sovereign became the insurer on risk. Minox argued that damage arose with the discovery and identification of the toxigenic mould which, they state, was in 2001. The court agreed that there was no evidence of serious health complaints relating to mould prior to 2001. Therefore, a reasonable inference to be drawn was that, absent any serious health complaints which are generally associated with the presence of toxigenic mould, mould did not exist prior to 2001. The court therefore found that the damage occurred during the policy period.

The court also dealt with the issue of whether Sovereign had waived its right to rely on the exclusions by its failure to make inquiries as to the condition of the building. It stated that the principle enunciated in Canadian Indemnity Co. v. Johns-Manville Co., [1990] 2 S.C.R. 549, does not go so far as to create a duty on the insurer to require an application or do conduct an inspection. Therefore, the most that could be said is that Sovereign deprived itself of the opportunity to deny coverage initially or to include a mould exclusion by its failure to conduct a visual inspection either prior to extending insurance to Minox or during any of the renewal years.

The court therefore held that the damages suffered by Minox were recoverable under the policy.

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

The Insureds were Ontario residents who were injured in a motor vehicle accident in Florida. They sued the at-fault driver in Florida and recovered damages at his policy limit, $100,000 USD each. After legal expenses the net amount recovered by the Insureds was approximately $120,000 USD total. The Insureds then pursued damages from their own insurer under the underinsured motorist endorsement of their own automobile insurance policy. The matter went to trial and a jury assessed the Insureds damages at $177,500 and $682,000 respectively. The policy clearly indicated that the Insurer was entitled to deduct from the jury award the amount received by the Insureds from the American insurer. At issue was whether the amount “received” by the Insureds was the gross amount of the award or the net amount after legal expenses.

The judge held that there was no ambiguity in the insurance contract and that a plain reading showed that the Insurer was entitled to deduct all funds already obtained by the Insureds in compensation for their injuries with no allowance made for any costs incurred by them in pursuing recovery. The Insureds’ attorneys in the Florida litigation received the full $200,000 USD in trust as agents for the Insureds and these funds were presumably disbursed in accordance with the Insureds’ instructions. The Insurer had no control over the disbursement of the funds and no method for determining what expenses were reasonably incurred in recovering the funds. Given the unambiguous terms of the insurance contract there could be no reason to read in a term that limited the Insurer to deducting the net amount when this would leave the Insurer in the uncertain position of not knowing what expenses might properly be deducted from the gross receipts to arrive at a net sum. When making their claim against the Insurer under the underinsured motorist endorsement, it was open to the Insureds to claim special damages for the costs incurred to recover the funds already received.

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

The issue on this appeal concerned the scope of the uninsured automobile insurance coverage under O.A.P. 1, the standard automobile insurance policy in use between 2001 and 2003 in Ontario.

The Insured was injured in a car accident in 2001.  While stopped at a red light, her car was struck by a car driven by the Defendant who was the owner and operator of an uninsured automobile.  After being chased by the police, the Defendant entered the intersection at high rate of speed, lost control of his vehicle, and collided with the Insured's car.  The Insured sued the Defendant and her own Insurer under the uninsured coverage of her insurance policy.  Her Insurer brought Third Party proceedings against the police chief, the Police Services Board, and the Municipality but these parties were not sued by the Insured directly.

The Insurer appealed from an Order that it was obligated to compensate the Insured even though she had failed to sue the Third Parties.  The motion judge concluded that the Insurer was obligated to compensate the Insured even though she failed to sue the Third Parties.

The Court of Appeal held that the Insurer was liable to pay the Insured under the uninsured coverage provisions of her policy unless the Third Parties admitted that they were obliged to pay her or she obtained judgment against them.  The Insurer had attempted to rely on section 2(1) of the Uninsured Automobile Coverage Schedule which essentially provided that the Insurer was not liable to make any payment under the uninsured coverage provisions where a person insured under the contract was entitled to recover money under any valid policy of insurance other than money payable on death or where the person insured under the contract was entitled to recover money under the Third Party liability section of a motor vehicle liability policy.  The Court focused on the meaning of the phrase "entitled to recover money".  The Court found that within the meaning of section 2 of the Schedule, the phrase means entitled to recover in fact.  Thus, the Court concluded that an insured would be disentitled from recovery under the uninsured coverage in O.A.P. 1 based on the negligence of an insured joint tortfeasor only where the joint tortfeasor's insurer admits liability to pay or where the insured obtained a judgment against the joint tortfeasor.

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

This action arose as result of a car accident which occurred in front of the Park Hyatt Hotel in Toronto. The Plaintiff was injured when his vehicle was struck from the rear by the Defendant, Abdenuce Mohammed. The Plaintiff alleged that he sustained a number of injuries and subsequently began to obtain long-term disability benefits through his employer. At the time, Mr. Mohammed was employed as a parking valet with the Park Hyatt Hotel.    The vehicle that he was operating was insured by the Coachman Insurance Company, and had excess coverage with Gerling Canada Insurance Company. The Court, on a previous occasion, ordered that the Coachman and Gerling policies were to be the first loss insurance and the Hyatt’s policy was to be excess insurance only.

The issue before the Court in this instance was whether the Hyatt was entitled to the benefit of the deduction, trust, and assignment provisions set out in the Ontario Insurance Act (“the Act”), even though it was only an excess insurer. Section 267.8(1) of the Act provides that damages for pecuniary loss, such as loss of income and loss of earning incapacity, are to be reduced by any payments that the Plaintiff has received or that he was entitled to receive prior to trial. Sections 267.8(9), (10) and (12) of the Act provide that if the Plaintiff recovers damages for future loss of income or earning capacity he shall hold any and all of those benefits in trust to the credit of the Defendants. The Act does not speak to whether the sections applicable to excess insurers.

The Court held that the Hyatt was entitled to a deduction under s.267.8(1) and was also entitled to benefit of the trust and assignment benefits contained in ss.267.8(9), (10) and (12).

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

The applicant insurance company sought a declaration that an automobile insurance policy sold to the respondent had been effectively cancelled prior to an accident involving the defendant. The policy had been sold to the respondent’s father as part of the applicant’s marketing strategy to insure all of a family’s vehicles under one policy. The premiums for all the family vehicles, including the respondent’s, were automatically deducted from the father’s bank account.

The respondent failed to deliver a copy of a mechanical inspection report to the applicant, as was required by the policy. As a result, the applicant issued a letter to the respondent that his policy would be cancelled within thirty days. The applicant did not notify the respondent’s father of the cancellation, and in fact provided a renewal notice to the father, for all three family policies, without mention of the imminent cancellation of the respondent’s policy.

The applicant took the position that the termination was effective, because the respondent’s father had no insurable interest in the respondent’s vehicle, and was therefore not entitled to termination of coverage on it. The respondent took the view that “where one policy number is issued with respect to a number of family vehicles, it is reasonable for the average person applying for insurance to understand that” the overall policy holder is entitled to notice of cancellation. The court agreed with the respondent’s position, holding at para. 40 that:

[the respondent’s father] would have had an expectation that matters related to coverage under his Policy (including that related to the [respondent]) would be brought to his attention, consistent with his past dealings with his insurance company.

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

Dunn and Beatty, were executives at Nortel during the period of 1999 through 2003. They were charged with falsification of books and records and publishing false prospectus contrary to the Criminal Code in 2008. The allegations of fraud and misconduct were made in respect of activities that took place in the period of 2000 - 2001, as well as misconduct allegations in respect of activities that took place in the period of 2002 - 2003. Indemnity for defence costs incurred in the defence of claims is included in the coverage for Wrongful Acts, as well as Inter-related Wrongful Acts which originate in the policy. The policy states that where there is a loss that is covered by the policy and a loss that is not covered, 90% of defence costs are to be allocated to the covered costs.

In adopting the ruling made in the case of Hanis v. Tevan [2008] ONCA 678, the Judge held that defence costs covered by the 2001 policy are related exclusively to the defence of covered claims, therefore allocation of costs is required. The Judge found that the language of this policy did not contain express language providing for the payment of defence costs relating to uncovered claims. Therefore in order to give rational meaning to the terms of Wrongful Act and Inter-related Wrongful Act, the Judge held they must be in respect of a claim made during the policy period in 2001. A claim made with respect to 2003 financial statements was not a claim that was made during the 2001 policy.

Chubb allocated 50% of the defence costs to the 2001 policy, and 50% to the 2003 policy. Chubb had rescinded and denied coverage under the 2003 policy period with respect to Dunn and Beatty. The Judge found that since defence costs under the 2001 policy can only relate to claims under that policy, allocation was appropriate and dismissed Dunn’s claim.

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