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

The Insured obtained home insurance for both her real and personal property through the defendant Broker between March 2000 to November 2004. A fire occurred on November 4, 2004, which resulted in destruction of the Insured's home and contents. The policy contained a clause which provided for replacement costs of the home in excess of the limit of coverage, which was only $186,000. Accordinlgly, the Insurer agreed to pay the actual cost of $357,000 to replace the Insured's house despite the lower limit of coverage. There was no similar term in the policy that applied to the contents, which were subject to the same limit. As a result there was a shortfall in insurance coverage for the contents of the house, which were valued at roughly $338,000.

The Insured claimed that the Broker was negligent or in breach of contract by underestimating the cost to replace her house. If the value had been estimated correctly this would have resulted in the higher limit of coverage being applicable to the contents of the house as well The parties agreed that incorrect information had been used in calculating the replacement cost of the house.

The Court found that the Broker had breached his duty of care to exercise reasonable skill in estimating the replacement cost of the house and to obtain insurance coverage that would meet this estimate. However, there was no finding of liability since the breach was not found to have caused the Insured's loss. Mr. Justice Halfyard held that the Broker's conduct in underestimating the house replacement cost did not create the risk that the Insured would suffer harm by way of inadequate coverage for her personal property. His Lordship found that the risk of inadequte coverage for the house contents was not known nor reasonably foreseeable by the Broker and that there was no evidence of carelessness on his part in respect of obtaining coverage for the contents. In the result, the Court dismissed the Insured's claim.

Had Justice Halfyard found liability, he would have assessed 50% contributory negligence against the Insured due to her failure to exercise reasonable care in reviewing the insurance coverage renewal materials, which contained erroneous information regarding the characteristics of her house.

The Insurer brought an application for a declaration that it had no duty to defend or indemnify the Respondents. The Respondents were insured pursuant to a home owner's policy of insurance. That policy excluded claims arising from the ownership, use, or operation of any motorized vehicle. A 12-year old girl, the sibling of the Insureds, was injured while operating an ATV owned by one of the Respondents. The Court found that the Insurer had waived any right to deny a duty to defend and could not now repudiate that position. The waiver occurred in a letter which was sent to the Respondents one month after the Statement of Claim was issued. The letter advised that the Insurer would defend the action. The Court found that a subsequent letter delivered approximately five months later in which the Insurer advised that they would not defend the action did not have the effect of removing the waiver.

The Insureds collected rare and expensive bottles of wine, which they kept in a temperature-controlled, architecturally designed wine cellar in their home.  The value of the collection was estimated at between $5,000,000 and $10,000,000. In October 2003, a municipal sewer backup caused a flood in their home that ruined much of the wine. The Insureds attempted to recover some of the loss on their homeowner's insurance policy, which was underwritten 50% by Canadian Northern Shield and 50% by Sovereign. The Insurers refused to cover the loss. Sovereign said it was not liable to indemnify the Insureds because the Insureds failed to disclose material facts relating to the value of the wine on the application. The Insureds brought a summary trial application seeking a declaration that Sovereign was not entitled to deny liability to the Insureds on the basis that the policy was properly voided for non-disclosure by the Insureds of material facts.

The Insureds' application was allowed. The onus of proof was on an insurer to prove that there was a misrepresentation or non-disclosure by the Insured of facts within his or her knowledge; that the misrepresentation was objectively material; and that the Insurer was induced by the misrepresentation to accept the risk at the stipulated premium. In this case, Sovereign failed to meet the onus of proving the alleged non-disclosure on a balance of probabilities. The Court found that Sovereign was told that there was a wine collection before entering into the contract. While Sovereign was not required to ask questions about every possible circumstance that could be material to the risk, the fact that it demanded an appraisal for the residence itself, but asked no questions about the value of the contents, was some evidence that it considered the value of the building to be far more relevant in determining the risk than the value of the contents. The fact that the Insureds asked for $1.5 million in contents coverage was only evidence that that was the amount of insurance they wished to purchase. It provided no reasonable basis for inferring that the Insureds believed the contents to be worth no more than $1.5 million.

In the result, the Court held that Sovereign was not entitled to void its participation in the policy on the basis of material misrepresentation or non-disclosure and was not entitled to refuse to indemnify the Insureds for the loss or damage they suffered from the October 16, 2003 flood on that basis.

In December 1997, the home of an insured ("Sagl") was destroyed by fire. The Insurer refused to pay the losses, claiming the fire was deliberately set by someone acting on Sagl's behalf. The Insurer further claimed the policy was void because Sagl intentionally concealed or misrepresented the material facts before and after the loss. The Insurer submitted that the fire was staged, as Sagl's son was staying elsewhere for the night, Sagl was out for dinner, Sagl's dog was outside and the maid had the night off. The Insurer claimed that Sagl was in bad financial straits and would benefit from having insurance proceeds from the fire. Sagl had claimed that she had significant assets, including jewellery and art, and that her financial position was not dire. It was clear that significant personal assets were lost in the fire.

The Fire Marshall investigated the fire and concluded arson was the likely cause because of the absence of residents, windows were left open and there were no signs of forced entry. The Inspector did not consider statements by firefighters on the scene, who confirmed that the fire started in the basement, in concluding that fires were set in three places in the home. The Investigator did not discuss with Sagl what items in the basement could have started the fire and Sagl's evidence was that there were lamps in the basement which were known to have started fires in other circumstances.

Sagl had purchased insurance by inadequately completing an application form, but neither the brokers nor the Insurer had requested that she complete the form prior to issuing the insurance policy or collecting premiums. Sagl claimed that she lost personal property valued at over $2,200,000 in the fire, including jewellery valued at approximately $925,000. The Insurer offered no evidence to rebut this claim. Sagl provided an appraisal of her art collection, which valued it of over $9,000,000. The Insurer did not prepare a rebuttal report, but challenged many items as fraudulent where no purchase receipts were retained and no pictures of the work provided.

The Court awarded Sagl damages for full replacement cost of the home and the policy limits for contents, jewellery and art. The Court further awarded punitive damages of $500,000 against the Insurer.

The Court found that the Insurer had not established that there was a staging of arson, as all absences from the house on the night of the fire were reasonable. The Insurer did not establish that Sagl had a motive or opportunity to have someone set the fire to her house. The Court found that the Fire Marshall's investigation of the fire was flawed as the investigation proceeded on the assumption that the fire was incendiary. The Investigator did not keep an open mind until the investigation was complete. The Insurer had failed to prove on a balance of probabilities that Sagl was involved in the fire in any way.

The Court found that the Insurer was wrong to suggest that Sagl's claim for personal property losses was fraudulent where evidence showed value of the contents of the home greatly exceeded the policy coverage. The Insurer was faulted for poor business practices in failing to examine the art collection prior to providing coverage. The Insurer failed to show Sagl intentionally concealed or misrepresented material facts relating to the policy after the fire. The Court concluded that the Insurer breached its duty of good faith in failing to determine appropriate coverage for Sagl, then asserting her claims were fraudulent. The Insurer also breached its duty of good faith by failing to properly scrutinise the Fire Marshall's evidence. The Insurer's allegation that Sagl committed the criminal offence of arson without evidence to support the allegation was reprehensible. In denying coverage for ten years after the fire, the Insurer's conduct was malicious, oppressive and high-handed, meriting condemnation of the Court.

The Insureds obtained home insurance coverage through the Defendant Broker in 1982. Between 1982 and 1991, the Insureds' policy contained a sweage backup endorsement ("SBU"), which insured their home against water damage sustained as a result of sewage backup. The Insureds experienced a sewage backup in 1992 under a subsequent policy that had not been placed by the Defendant Broker. This loss was covered under their policy, however, the Insurer refused to renew the Insureds' policy when it expired later that year. The Insureds then contacted the Defendant Broker to secure a new home insurance policy. A policy was subsequently secured and took effect in November 1992. The Insureds' home sustained significant water damage in July 2001 as a result of a sewage backup. They were told by the Insurer that this loss was not covered since their policy did not contain a SBU endorsement.

The Court was asked to determine whether the Defendant Broker had either breached its contract with the Insureds or was negligent by failing to obtain the SBU endorsement that was bargained for. The Insureds conceded that they were aware that the endorsement was not initially included in the policy, but argued that the Broker had informed them that this would be incorporated after 2-3 years without them having to do anything further. The Broker argued that it did not inform the Insureds that the endorsement would be incorporated into their policy, and would not have made this representation as it is not possible for any clause to be automatically incorporated into an insurance policy.

The Court noted that if the Broker had failed to obtain the type of insurance coverage that it agreed to obtain, it would be liable for breach of contract on the basis of the Ontario Court of Appeal’s decision in Fine’s Flowers Ltd. et al vs. General Accident Assurance Co. of Canada et al (1977) 81 D.L.R. (3d) 139 para. 13 (Ontario Court of Appeal). The factual issue for the Court was whether the parties had bargained for future inclusion of the SBU endorsement. The disagreement concerning what transpired at a 1992 meeting between the Insureds and the Broker boiled down to a contest of credibility and the evidence concerning this meeting was diametrically opposed.

On the evidence, the Court found that the parties had likely exited the 1992 meeting with an imperfect understanding of the importance of the SBU endorsement and what was to be done about this clause in the future. The evidence failed to establish that the Broker and the Insureds had come to any mutual understanding as to what steps were going to be taken. As a result, the Court could not find that the endorsement was a term “bargained for” as discussed in Fine’s Flowers and the Insureds' claim for breach of contract could therefore not succeed. However, the Court found that the Insureds had relied upon the Broker to obtain insurance for their home, including the SBU endorsement. In the particular circumstances of the case, the Broker owed a duty of care regarding the future treatment of the endorsement. 

The Court noted that the scope of the duty owed to the Insureds was governed by Fine’s Flowers and the subsequent decision of the Supreme Court of Canada in Fletcher vs. Manitoba Public Insurance Co. [1990] 3 S.C.R. 191. In particular, the Court found that the Broker had a duty to provide sufficient coverage and that any failure on the part of the Insureds to specifically articulate their needs did not absolve the Broker of liability. The evidence was that the parties were aware of the possibility that future losses might result from a sewage backup and despite this, the Broker did absolutely nothing to inform the Insureds about the sewage backup gap. 

The Defendant, Peace Hills General Insurance Co. (“Peace Hills”), brought an Application for Summary Judgment dismissing the Plaintiff’s action for recovery under the terms of a Home Owner’s Insurance Policy (the “Policy”). 

The Plaintiff, Mrs. Charles, was married to Mr. Charles. They owned a home which they purchased as joint tenants and which they insured under the Policy with Peace Hills. The Policy provided coverage for the home and its contents. Both Mr. and Mrs. Charles were named Insureds under the Policy. The Policy contained a clause excluding loss or damage resulting from any intentional and criminal act by all persons insured by the Policy, even though the act was by only one of the persons insured by the Policy. 

On September 29, 2003, Mrs. Charles inquired of her insurance agent the means by which Mr. Charles could be removed from the Policy. The couple were having difficulties and had signed a separation agreement which purported to transfer possession and ownership of the home to Mrs. Charles. Mrs. Charles advised the insurance agent that she would be keeping the home as part of the division of matrimonial property. The agent advised that Mr. Charles’ name could not be removed from the Policy until there was evidence that he was no longer a joint owner on title. Mr. Charles then threatened to drive his tractor trailer through the home. He phoned Mrs. Charles and uttered words to the effect of “have you ever heard the expression burning down the house”. The home was subsequently destroyed by fire. Mr. Charles was charged with arson in relation to the fire. However, the criminal charges were stayed. 

The Insurer argued that the evidence supported the conclusion that Mr. Charles, a co-Insured, set the fire which destroyed the home and therefore Mrs. Charles was not entitled to indemnification. The Court found that on a balance of probabilities, Mr. Charles deliberately set fire to the house. The Court also found that Mrs. Charles was not entitled to relief against forfeiture. The Court held that there was no genuine issue for trial with respect to the claim and that it was plain and obvious that the action could not succeed. 

Accordingly, the Application for Summary Judgment was granted and the Plaintiff’s action was dismissed.

This was an Application by the Insured, Mr. Graham, who sought a Declaration of Coverage under the terms of his comprehensive Homeowner’s Insurance Policy (the “Policy”) with Canadian Direct Insurance Inc. (“Canadian”).

 The Insured went on a vacation and left his outdoor sprinkler system operating, assuming it was on automatic and would shut off. Earlier in the day, he had turned it to manual. By failing to reinstate the system to automatic, the sprinkler continued to operate in his absence. When the Insured returned home after the vacation, he found significant damage to the foundation of his house caused by the resulting flooding. Canadian Direct denied his request for coverage under the Policy. 

The central issue in this Application involved the interpretation of the Policy’s relevant coverage and exclusion provisions. The Policy did not provide coverage for loss or damage caused by water unless the loss or damage resulted from the sudden and accidental escape of water. The Policy contained an exclusion for loss or damage caused by continuous or repeated seepage or leakage of water. The Insured submitted that the manual escape of water was sudden and accidental. The Insurer submitted that there was no escape of water based on the Little Oxford English Dictionary which defines “escape” as to “break free from captivity or control” because the sprinkler and the control box did not malfunction so as to cause the water to “break free”. 

The Court found that the loss caused by the Insured’s mistake in failing to turn his sprinkler system to automatic before leaving on vacation did not fall within the coverage provisions of the Policy. There was no “sudden and accidental escape of water”. The water did not “escape”. Any negligence for the mishap had nothing to do with the operation of the sprinkler but with the Insured’s mistake in failing to switch the system back to automatic.  

In the result, the Court found that the Insured’s loss was not covered by the Policy. In the alternative, the Court found the loss was excluded by the Policy.

The plaintiff in the main action claimed against the Insured and others for personal injury resulting from an alleged assault. The particular allegations against the Insured were for inciting the other defendants to assault the plaintiff and/or continue the assault, and inciting the other defendants and expressing his own intention not to assist or obtain medical attention for the plaintiff following the assault.

The Insurer took the position that the allegations against the Insured in the Statement of Claim fell within two exclusion clauses in the policy of insurance. The first exclusion clause was for "physical abuse or assault", which is done "at the direction of, or with the knowledge of any person insured by this policy, or failure of any person insured by this policy to take steps to prevent" such physical abuse or assault. The second exclusion clause was for "bodily injury or property damage caused intentionally by" the insured or at the insured’s direction or "resulting from your [the insured’s] criminal acts or omissions".

The Court concluded that the impugned paragraphs in the Statement of Claim containing the particular allegations against the Insured clearly fell within the exclusion clauses. The Court dismissed the third party claim against the Insurer and ordered the Insured to pay to the Insurer the costs of the application, which were fixed at $3,500, as well as the Insurer’s costs in the action, which were fixed at $2,500.

This was an appeal by the Plaintiff Insured, Mr. McKenzie from an order that the Defendant Insurers, Dominion of Canada General Insurance Company ("Dominion") and State Farm Fire and Casualty Company ("State Farm"), as primary insurers, were required to contribute equally in respect of claims made against Mr. McKenzie, Mr. Tischler and a third party following a boating accident. The trial judge ordered that a boat owner’s liability policy issued to Mr. Tischler by State Farm provided primary coverage. The judgement further declared that after coverage under the boat owner’s policy had been exhausted, Dominion, pursuant to a home owner’s policy issued to Mr. McKenzie’s father, and State Farm, pursuant to a personal liability umbrella policy ("PLUP") issued to Mr. Tischler, were required to contribute equally in respect of claims made against Mr. McKenzie. Mr. McKenzie was insured in respect of the claims against him under all three policies.

The issue on appeal was the order in which the State Farm PLUP and the Dominion home owner’s policy were required to contribute to the claims against Mr. McKenzie. Mr. McKenzie argued that once the limits of the boat owner’s policy were spent or exhausted, it fell to the homeowner’s policy issued by Dominion to pick up any losses and that the State Farm PLUP was required to contribute only if amounts remained to be paid after the Dominion policy limits were spent or exhausted. The Respondent, Dominion, argued that Mr. McKenzie’s approach in characterising the policies at issue as either being primary, excess and/or umbrella was flawed and contrary to the reasoning of the Supreme Court of Canada in Family Insurance Corp. v. Lombard Canada, [2002] 2 S.C.R. 695. Rather, the proper approach was to first determine whether the "other insurance" clauses in the Dominion homeowner’s policy and the State Farm PLUP could be reconciled. If they could not, then according to Family Insurance, the policy should rateably contribute to the claims against Mr. McKenzie.

The Court of Appeal found that the application Judge erred in accepting Dominion’s arguments as to the contribution obligations of the State Farm PLUP and the Dominion homeowner’s policy. The coverage provided by State Farm’s PLUP was as a true excess or umbrella policy while Dominion’s homeowner’s policy was required to provide primary coverage. The Court also found that the application Judge and Dominion misinterpreted Family Insurance, supra and that if the Supreme Court of Canada had intended to do away with any distinction among primary, excess and/or umbrella policies of insurance, it would have done so in a clear and expressed language to that effect.

The Court allowed the appeal holding that the Dominion policy and the State Farm PLUP were not, by their language, required to contribute equally to the claims against Mr. McKenzie. Rather, the State Farm PLUP was a true excess or umbrella policy and was not called upon to respond to the claims until the limits of the Dominion homeowner’s policy were exhausted.

The Insurer sought a Declaration that it was not required to defend or indemnify the Murrays in respect to an action brought against them by the Wilsons who were injured in a single motor vehicle accident in which the Murrays’ son, Ronald, was the driver. The allegations against the Murrays in the action were that they failed to discipline or supervise Ronald and failed to act as reasonable or prudent parents. The Insurer sought to deny coverage on the basis that the homeowners policy contained an exclusion for damage arising from ownership, use or operation of any motorized vehicle.

 The Court reviewed the decision in Non-Marine Underwriters, Lloyds of London v. Scalera (2000), 1 S.C.R. 551 where the Supreme Court of Canada had held that a Court construing the Insurer's duty to defend must look beyond the labels used by the Plaintiff to determine the substance and true nature of the pleaded claim. Where the claim contains allegations of both negligence and an intentional tort, the Court must decide whether the harm alleged inflicted by the negligent conduct is derivative of that caused by the intentional conduct.

The claim will only be treated as "derivative" for the purpose of this analysis if it is an ostensibly separate claim which nonetheless is clearly inseparable from a claim of intentional tort. In this case, the Court held that the general allegations of failure to discipline and to exercise reasonable supervision over Ronald Murray were all referable to the use and operation by him of the vehicle. The allegations against the Murrays were not discreet causes of action such that they could stand alone. If the Wilsons established their claims against the Murrays but were unable to establish that the vehicle was used or operated in a negligent manner by Ronald at the time of the accident, they would not succeed in the action. Therefore, the supervision, discipline and parental responsibility claims were clearly derivative of the negligent driving claims.

 In the result, the Court issued a Declaration that the Insurer was not required to defend nor indemnify the Murrays.