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

The Plaintiff Insured appealed the dismissal of his action against the Defendant Insurer. The Insured held a long term disability policy with the Insurer. The Insured subsequently became disabled as a result of meningitis. He applied for long term disability benefits but his application was rejected by the Insurer who took the position that the Insured had materially misrepresented his medical history on the initial questionnaire.

The trial judge found that the policy was void ab initio because the Insured had not disclosed material facts. In particular, the Insured had not disclosed the identity of his attending physician or his consultation with that physician four or five months prior to the date of the insurance application regarding lumbar pain. The trial judge found that had the Insured not misrepresented his medical history, the coverage offered would have been subject to full exclusions for back and hip related ailments. The Insured's appeal, which was on the basis that the trial judge had committed errors of facts, was dismissed.

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

Feaver was struck by a car driven by Briggs after leaving a party held at the third party's restaurant. The Defendant, Unifund Assurance Company, joined the restaurant alleging they were liable to the deceased in that they allowed him to consume alcohol, and become intoxicated to the extent that he was unable to ensure his own safety.

The Feavers attended a staff party at the restaurant where, in her affidavit, Mrs. Feaver said her husband consumed approximately six beers during the evening, and was feeling good but was not drunk. Blood samples taken from Mr. Feaver suggested he had consumed closer to 18 to 20 bottles of beer during the evening.

The restaurant owner's affidavit also stated that Mr. Feaver appeared fine and did not display any visible signs of intoxication when he left. Mr. Feaver left in the company of his wife and another couple, who were responsible for him. The restaurant owners knew the group were going to walk to a nearby restaurant along a sidewalk, and that they were going to be driven home by a group called Operation Red Nose after leaving the second restaurant.

The judge held that Unifund could argue the third party restaurant owners should have known Mr. Feaver had consumed up to 18 beers despite the assertion of Feaver's wife that he had four to five and lacked signs of intoxication. However, even if Feaver was visibly intoxicated, the third party owners knew he was in the hands of three other people, including his wife, that he was going to be walking along a sidewalk adjacent to their establishment, and that he was to be driven home at the end of the evening. On the strength of that evidence the judge felt that there was no foreseeable risk to Mr. Feaver when the third party owners allowed the group to walk to the other restaurant, and as a result the claim against the third party would be dismissed at trial. The judge granted the summary judgment against the Defendant Unifund Insurance under Rule 22.

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

The insureds purchased a policy of insurance for their trailer through their insurance broker, AA Munro Insurance, . In the spring of 2009 the river where their trailer was parked flooded and destroyed their trailer. When they attempted to claim against their policy for the full replacement value of the trailer, they discovered that their policy only entitled them to the depreciated value of the trailer.

The insureds claimed that when they spoke to AA Munro Insurance they were clear in their desire for replacement value insurance. The court found that there was more than one way for the broker to insure the trailer. The more expensive option would have been through a so-called trailer policy, which would have provided for full replacement value. The less expensive option was to use a standard automobile policy which provides for a depreciated amount only, in the event of theft or damage. The broker insured the trailer under the latter.

Before agreeing to the coverage the insureds received a fax from the broker quoting the premium on the policy. The fax read, in part, "$30,000 value Replacement Cost." The insureds concluded from this that they had replacement value insurance. The broker claimed that it needed to know the replacement cost to know how much insurance to arrange, but that this did not mean that the coverage would be for replacement value.

The court found that most people reading those words would conclude that they had replacement value insurance, It held, citing the Supreme Court of Canada's decisions in Fine's Flowers Ltd. v. General Accident Assurance Co, (1977), 17 O.R. (2d) 529, and Fletcher v. Manitoba Public Insurance Co, [1990] 3. S.C.R. 191, that it is the duty of an insurance broker to explain the coverage being offered, and in particular match it up with the customer's needs. In this case the broker did not fully explain to the insureds the limitations of the policy they would be getting. In doing so, the broker was in breach of its duty of care.

The insureds were awarded the difference between the replacement value of their trailer ($33,900.00) and the amount their insurance company actually paid them for the trailer ($28,465.00), amounting to $5,435.00.

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

The insured was the owner of a truck-mounted concrete boom truck that collapsed on a construction site. The accident was reported to the insurer, but the insured advised it was seeking recovery from the truck manufacturer and distributor. It started an action against those parties on June 29, 2005. However, it advised the insurer that, should it be unsuccessful in the claim, it would be seeking recovery under the policy.

On September 9, 2005 the insurer wrote to the insured confirming that the loss was covered by the policy and that the insurer was prepared to pay the cost of repairing the truck minus the deductible. The letter confirmed that the insurer was aware that the insured was seeking to recover the loss without recourse to the insurer. The letter also confirmed that the claim could be "re-opened for processing" anytime before the one year limitation period expired on January 5, 2006.

The insured never filed a proof of loss form, but it did start an action against the insurer on December 25, 2005. The main action against the manufacturer and distributor is scheduled for February 2010. Should the insured be unsuccessful in that action then it sought, in the action at bar, to recover from the insurer under the policy.

The insurer argued that the insured could not succeed in the action against it because it did not submit a proof of loss to initiate the claim and specifically elected to pursue remedies against the other parties in the main action. As there was never a claim advanced under the policy, there was never a denial of the claim and therefore no breach of contract on which to sue.

The insured argued that it issued a formal claim within the limitation period, by serving the Statement of Claim. Further, it argued that the insurer had, in fact, denied the claim when it issued its Statement of Defence.  The Insured argued that it would be open to the court to conclude that a breach of contract occurred when the claim was defended. Lastly, it argued that the insurer's position concerning a failure to complete a formal proof of loss is merely a question of form over substance and that the court has liberal powers under s. 129 of the Insurance Act to relieve from forfeiture.

The court held that, although the insured was not in technical compliance with the proof of loss procedures under the policy, it was difficult to see how the insurer had been prejudiced by the insured's actions. While the formal proof of loss might not have been filed, the insurer was immediately on notice of the loss, had all the information that would be contained in a proof of loss, and had been kept fully aware of the status of the main action. The court was not persuaded that the insured could not succeed in its arguments and, therefore, there were triable issued raised by the facts and the law. Accordingly, the summary judgment motion was dismissed.

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.

MedCentra Inc. (“MedCentra”) was a third party service provider which provided MRI examinations to persons who were involved in motor vehicle accidents and who were insured persons under standard automobile policies of insurance Economical Mutual Insurance Company (“Economical”). MedCentra directly billed Economical for the MRI services provided to persons insured through Economical pursuant to the direct billing provisions set out in section 44 of the Statutory Accident Benefits Schedule (SABS). Economical paid for some but not all of the services performed by MedCentra. MedCentra sought to compel payment from Economical directly for the MRI examination services that it rendered to individuals insured by Economical. The issue for determination on this motion for summary judgment was whether MedCentra was entitled to bring an action directly against Economical to compel payment of any amounts that might be owing to MedCentra for MRI services rendered to persons insured by Economical.

To be entitled to recover payment directly from Economical for services rendered to insured persons, MedCentra would have to establish that it met the test of the principled exception to the doctrine of privity of contract. The “critical and cumulative” factors necessary to satisfy the test were set out by the Supreme Court of Canada in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd, [1999] 3 S.C.R. 108:

(a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? and,

(b) Are the activities performed by the third party the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties?

The Court found no evidence that Economical or any of the insured persons to whom MedCentra provided services intended to confer any benefit on MedCentra, let alone the benefit of direct billing. The Court further found that any attempt by an insured person to confer the benefit of direct billing on MedCentra would be invalid because of the prohibition contained in section 65 of the SABS against an insured person making any assignment of benefits under the SABS. The option of allowing a service provider to bill an insurer directly was within the insurer’s discretion alone. The Court agreed with Economical’s submission that MedCentra could not be in a better position than an insured person under the SABS and thus could not be in a position to compel Economical to extend the benefit of direct billing to it.

The Court also found that to allow MedCentra to compel payment directly from Economical would undermine the statutory benefit regime provided under the Insurance Act and would be contrary to the explicit statutory provisions that kept the claims dispute process between insurers and insured persons. The provision allowing for direct billing at the option of the insurer did not change the basic nature of the claims process, namely, that claims are made by the insured person and any resulting dispute is between the insured person and the insurer, and not between the service provider and the insurer.

In the result, MedCentra had no right to bring an action directly against Economical for payment for the examinations provided to insured persons. There was no contractual relationship between Economical and MedCentra and no basis on which to relax the doctrine of privity of contract.

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

The plaintiff insured Janey McQueen (“McQueen”) was injured in a rollover motor vehicle accident in January 2004. At the time of the accident, McQueen was not employed and had been receiving disability benefits for 10 years, primarily due to manic depression. She was 35 years old and resided with her husband and 14 year old daughter. Following the accident, the defendant insurer, Echelon General (“Echelon”), paid some benefits but eventually terminated housekeeping benefits, refused to pay transportation benefits, and refused to fund a psychological assessment. McQueen experienced 21 denials of 16 separate benefits over a period of three years and after two failed mediations, brought a suit seeking certain statutory benefits pursuant to the Statutory Accident Benefits Schedule and alleging that Echelon had breached its obligation to act in good faith in handling her claims.

McQueen’s evidence was that prior to the accident, she did the cooking, cleaning, shopping, etc. but that after the accident, she was bedridden for two months and her husband was obliged to leave his job to take care of her and take on the household responsibilities. McQueen obtained a certificate from her family doctor and an occupational therapy assessment which both supported her entitlement to housekeeping benefits. Echelon paid housekeeping benefits until the end of July 2004 and then ceased payments based on a medical report completed by Dr. Kwok, following a half-hour examination of McQueen and without the benefit of seeing the occupational therapy assessment. Echelon also denied McQueen funding for an in-home assessment for housekeeping benefits that was recommended by the occupational therapist, saying it was not “reasonable and necessary.”

The Court found that the onus was on Echelon to provide reasons for the assessment being unreasonable and unnecessary, which it did not do. It further found that McQueen had a substantial inability to carry out housekeeping activities without assistance during the relevant time and that she had established her entitlement to housekeeping benefits on a balance of probabilities. She was awarded benefits of $100 per week for the relevant period.

With regard to McQueen’s claim for transportation benefits, the Court found that these benefits had been denied in spite of the occupational assessment indicating that she required taxi transportation. Dr. Kwok’s report stated that McQueen was not disabled from operating a motor vehicle and Echelon incorrectly assumed that McQueen had a vehicle, though hers had been destroyed in the motor vehicle accident, and denied the benefit. The Court awarded McQueen a transportation allowance of $7,500.

The Court also awarded McQueen the cost of a number of psychological, neurological and occupational therapy assessments that had been recommended but not carried out.

The Court reviewed the law regarding awarding damages for mental distress, citing the BC Court of Appeal and the Supreme Court of Canada decisions in Fidler v. Sun Life Assurance, 2004 Carswell BC 1086 and [2006] 2 SCR 3. The Court held that for an award of damages for mental distress to be appropriate, it must be satisfied that:

a) An object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and,

b) The degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation.

The Court found that Echelon’s file notes were evidence of an adversarial approach to McQueen ab initio and that in behaving in that manner, Echelon had breached its contract of insurance with McQueen. Echelon adopted this adversarial approach early on, in spite of file notes indicating that McQueen had serious injuries that required treatment and notwithstanding the duty of good faith it owed to McQueen throughout. The Court held that the object of the contract of insurance was to secure psychological benefits to McQueen in the form of peace of mind and that the nature of the contract was such that its breach would bring about mental distress and that this was within reasonable contemplation of the parties. McQueen had endured mental suffering as a result of the breach, which was of a sufficient character to warrant compensation. McQueen was accordingly awarded $25,000 in damages for mental distress.

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

The appellant leased a single unit in a commercial mall owned by the respondent.  A fire occurred in the appellant’s unit, causing damage to the building and its contents, and interrupting the appellant’s business.  The parties brought a motion seeking a determination regarding whether the respondent or its insurer was entitled to claim damages against the appellant.  This question was itself dependant on whether the terms of the Offer to Lease had passed risk of loss caused by the fire on to the appellant or the respondent.  For the purposes of the motion, it was assumed that the appellant’s negligence occasioned the loss.  The Superior Court ruled that the appellant had assumed the risk of loss, and that the respondent was therefore entitled to pursue its claim.

The Court of Appeal disagreed, holding that the respondent had assumed risk of loss.  In so ruling, the Court of Appeal turned to the terms of the Offer to Lease and the Supreme Court of Canada’s decision in Ross Southward Tire Ltd. v. Pyrotech Products Ltd., [1976] 2 S.C.R. 35.  In Ross, the lease contained a condition requiring the tenant to pay for insurance, but did not contain a covenant requiring the landlord to obtain such insurance. The lease did not specifically mention insurance for losses occasioned by fire.  The Supreme Court of Canada ruled that given the terms of the lease, the risk of losses caused by fire passed to the landlord and precluded a subrogated claim against the tenant for damages.  The Court of Appeal found that the Offer to Lease in the case at bar was in substance identical to the lease in Ross, insofar as it required the appellant to contribute to the cost of insurance, but imposed no reciprocal obligation on the respondent.  The Court of Appeal held that if a tenant is required to pay for insurance, it is entitled to the benefit of that insurance.  As a result, in order for the appellant to be deprived of such a benefit, the Offer to Lease must contain a specific term to that effect.

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

Wingtat was in the business of slaughtering poultry and processing, packaging and selling poultry and meat. Wingtat had cold-storage facilities in its own premises but also used off-site cold-storage facilities owned by third parties. A fire at an off-site storage location destroyed Wingtat's stock valued at $800,000. Aviva took the position that coverage for this loss was limited to $25,000 as a result of the wording of paragraph 10 of a Multi Peril Extension Endorsement regarding temporary locations. Aviva pursued summary judgment with respect to its position.  The Chambers Judge dismissed Aviva's application and Aviva appealed from that decision.

The Court of Appeal found that coverage was provided for stock at a temporary location under Clause 2.B of the insuring agreement. Clause 2.B did not require that the address of the temporary location be specified on the Declarations Page as a precondition to coverage.  The Court noted that a requirement to specify the address of the temporary location on the Declarations Page could not be implied in Clause 2.B because such a requirement would make the clause superfluous with respect to the category of Temporary Locations. The Court rejected Aviva's argument that the Endorsement providing $25,000 in additional coverage for temporary locations limited such coverage noting that the Endorsement clearly stated that the extensions of coverage were in addition to the limits provided elsewhere in the policy. If the coverage in paragraph 10 of the endorsement was in addition to the limits provided elsewhere in the policy, then the wording in that paragraph could not possibly be construed to be a reduction or cap of those limits. The $25,000 limit in paragraph 10 of the Endorsement for temporary locations was simply a limit of the additional insurance provided by the Endorsement.

In the result, Aviva's appeal was dismissed.

This case was originally summarized by Jonathan D. Meadows and orginally 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.