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

The Insured sought indemnity under a property insurance policy.  The Insured and the Insurer disagreed on whether various provisions of the policy and a Statement of Values signed by the Insured, but not expressly incorporated into the policy, limited the recovery of the Insured.  The Insured sought a declaration that it was owed the unpaid balance of its claim.

The Insured filled out the Statement of Values after it had already applied for insurance.  Effectively, the Statement of Values assigned value to the property insured by the policy.  The Insurer sought to limit its liability to the Insured based on this Statement of Values.  Ultimately, the Court found that the Statement of Values was not part of the contract and therefore, the Insurer's liability to the Insured would be determined by reference to the policy.  In the result, the Insured was successful.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

The Insured's wharf was damaged when struck by a vessel which was blown into it during high winds.  As attempts were made to move the vessel away from the wharf, a section of the wharf was torn off.  The Insured had an insurance policy which contained a "Windstorm or Hail" clause which excluded coverage for damage "directly or indirectly caused by…any of the following, whether driven by wind or due to windstorm or not:  snow-load, tidal wave, high water, overflow, flood, waterborne objects, waves, ice, land subsidence, landslip".

The Insured sought an order determining whether the damage to the wharf was excluded from insurance coverage.  The Court found that "waterborne object" for the purposes of the exclusion clause included a vessel.  As such, coverage under the policy was excluded.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

Plaintiff landlord brought claim against the defendant tenant in relation to a sewer back up on the leased premises. The claim alleged various acts of non-compliance with the lease on the premises occupied by the tenant. The main allegations consisted of a claim that the tenant neglected or refused to repair damage to the tenant's work and improvements in accordance with the terms of the lease, that the tenant failed to maintain insurance in the name of the landlord, and that the tenant unilaterally and without notice reduced the insurance coverage to less than the full replacement value .

The tenant issued a third party claim against its insurer seeking an order that the insurer defend and indemnify it in respect of the main action.  The insurer brought a motion for summary judgment for the claim to be struck out on the basis that the policy does not cover allegations in respect of a failure to adequately insure the property of other persons. That is, the policy specifically excludes from coverage liability assumed in a contract for property that is owned, rented, or occupied by the insured. The tenant argued that the allegations, if looked at broadly, fell within coverage. The tenant relied on the well known principle that it is the "substance" of the claim and not the "legal labels" used that determies whether coverage is triggered. Therefore, the tenant argued that although the allegations against the tenant sounded in breach of the lease, if broadly interpreted, they supported a claim in negligence for property damage that triggered the insurer's obligation to defend.

The court first dismissed the tenant's claim for indemnity, finding that it had been brought prematurely. The duty to idemnify can only be determined after the facts in the underlying case have been proven at trial.

Next, the court addressed the duty to defend. It commented that the policy consisted of coverage for four types of liability: A. Bodily Injury and Property Damage Liability; B. Personal Injury Liability; C. Medical Payments; and  D. Tenant's Legal Liability. It went on to say that the tenant's argument appeared to mix up the various coverages and exclusions and omitted to refer to various exclusions. For instance, under coverage A, there were exclusions "a" to "t". The tenant only referred to exclusion "b" which excluded from coverage liability assumed under a contract or agreement. An exception under exclusion "b" is "an insured contract". The tenant omitted to cite exclusion "h" which excluded coverage for "property you own or rent". Exclusion "h" was critical since it excluded leased premises from coverage.  The tenant also referred to the Tenant's Legal Liability Broad Form which modified coverage D by expanding coverage from applying only to damage caused by fire to covering "property damgage". The tenant did not cite exclusions "a" to "i" under coverage D. However, under coverage D, exclusion "B" excluded assumption of liability in contract, and contained no exception for "an insured contract" (or a lease) as is the case with Coveage A. The court therefore held that the tenant "did not succeed in showing that a tenant's liability for breach of the terms of a lease agreement is covered" under the policy.

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

The Applicant sought a declaration that it was covered under a policy of title insurance issued by the Respondent at the time of the Applicant’s purchase of a commercial strip mall.  At the time of purchase, the Applicant’s understanding was that the storage units in the lower part of the building were leased by Kennedy Storage.  When Kennedy defaulted on the lease, the Applicant changed the locks and took possession of the storage units.  A third party, Berardinetti, then indicated that she had leased two of the storage units and had paid the monthly rent to the prior owner after the Applicant's purchase of the property.  There was a written lease between the former owner and Berardinetti that had not been disclosed to the Applicant at the time of purchase.  The Applicant argued that the two competing leases for the two storage units were conflicting and constituted a defect in title at the time of the purchase that was covered under the policy.  The Applicant also argued that the alleged lease disclosed that the Kennedy lease was fraudulent, thereby making title unmarketable which was also a risk covered under the policy.

The Court dismissed the application.  With respect to the competing leases, the Court held that in order to succeed, a claimant must actually have a claim for loss or damage at the time that the claim is made.  In this case, there was no evidence of loss or damage.  Even if there were two leases for the same space in place at the time of closing, any conflict which might have existed between the legal rights of the tenants in relation to the two units covered by the Berardinetti lease had resolved by the time the Applicant discovered the second lease.  Kennedy had already defaulted and had been locked out of the premises and the Applicant entered into a new lease with Berardinetti.  Any losses related to the reduced rental stream fell under the exception in the policy relating to leases.

With respect to the argument that there was a fraudulent misrepresentation about the lease agreement, the Court held that Applicant’s potential claim on this basis did not constitute the covered risk of a “defect in title” or “unmarketable title”.

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

The Plaintiff Insured operated a recreational vehicle dealership and had its building and contents insured against loss by fire under a policy of insurance with the Defendant.  In the late hours of October 19 and early hours of October 20, 2000 a fire destroyed the property of the Insured.  The Insurer denied coverage alleging that the principal of the Insured, together with his father, deliberately started the fire with the intention of making a claim against the insurance provided by the Insurer.  The principal and his father were charged criminally with committing arson with the intent of defrauding the Insurer.  The Crown proceeded to trial against the father of the principal, who was acquitted and the Crown withdrew the charge against the principal.

The issue before the Court was whether the Insurer had established the defence of arson thereby depriving the Insured of recovery under the policy.  The Court found that the Insurer had established on a balance of probabilities that the principal of the Insured and his father had intentionally started the fire.  Circumstantial and conflicting evidence at trial did not offer another cause of the fire.  As a result the Insured's action was dismissed.

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

Mr. debalinhard had an insurance policy with Butler Buyers Hail Insurance Ltd ("Butler Buyers"). Three quarter sections of his land were rented out to another farmer. In July 2007 the canola crops grown on the rented land were damaged by hail.  A representative appointed by the defendant attended the property in September 2007 but failed to reach an agreement on the percentage of loss suffered.  The defendant valued the loss at 45% for each of the three quarters of land, while the plaintiff felt the loss was 55% on each quarter.

By virtue of Section 286(1) of the Saskatchewan Insurance Act, Statutory Conditions 8 and 15 were deemed part of the hail insurance contract in this case.  Conditions 8 and 15 set out a series of steps designed to reach a valuation on hail damage where there is a disagreement as to the percentage of loss suffered.

Since an agreement could not be reached between the plaintiff's and the defendant's representatives, an umpire was appointed  who determined that the value of the loss was 10% on each quarter of land.

The plaintiff was not satisfied with the award and submitted that Statutory Condition 15 was not binding on him on the basis of biased interest or lack of impartiality on the part of the umpire, that he did not comply with Statutory Condition 15(i) because he did not deliver notice in writing requiring appraisal within three days of the disagreement, and that he did not comply with Statutory Condition 15(iii) as he was not prepared to accommodate the plaintiff's representative in estimating the percentage of damage.

The plaintiff also submitted that the umpire was without jurisdiction to make a final valuation because he did not comply with Statutory Condition 8 in that he did not meet within 30 days of the plaintiff's notice of loss.  The plaintiff had the onus of proving all elements of the claim on the balance of probabilities.  The judge found that the plaintiff's lack of recall about dates and who attended to his land was not sufficient on the balance of probabilities to find that the defendant violated Statutory Condition 8.  The judge found that it was as likely as not that the notice requiring an appraisal be delivered in three days pursuant to Statutory Condition 15 was met and held on the balance of probabilities that the defendant did not violate Statutory Condition 15(i).

With respect to the claim that the defendant violated Statutory Condition 15(iii) as the defendant's representative was not prepared to accommodate the plaintiff's representative the judge found that very likely that was not the case.  The judge was also not satisfied that the plaintiff at any time during the process raised any concerns about the three issues considered above.

In addition, the plaintiff debalinhard agreed in writing that he would cover an equal share of the umpire's expenses and by inference that he would be bound by the umpire process set out in that document.  The process included a condition that the umpire's award was final.

As to whether the decision under Statutory Condition 15 was binding on the plaintiff with respect to bias, interest or lack of impartiality, the judge found that the method employed by the umpire did not show any evidence of bias to the parties and that the umpire did a careful job of appraising the percentage of hail loss on the quarter sections.

The judge was not satisfied the valuation should be set aside and found that the umpire's award was binding on the plaintiff.

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

More Marine had carried insurance with the Defendant Insurers for over five years under a number of different policies.  Over that time, More Marine had accumulated a loss ratio of approximately 245% indicating that it had an extremely poor loss history.  As a result, the Insurers considered not renewing More Marine's policy in 2006.  After some negotiation, the Insurers agreed to renew the policies if the deductible for each loss was increased and the annual aggregate deductible was increased to $250,000.  Previous versions of the policies obtained by More Marine did not include constructive total losses under the annual aggregate deductible and, consequently, such losses did not trigger that deductible.  Significant negotiation occurred between the Insurers and the broker for More Marine in securing the policy for the 2006-2007 term and these negotiations specifically referred to the inclusion of the annual aggregate deductible in the policy.  In June 2007, More Marine suffered a constructive total loss claim arising out of the sinking of the vessel "Glenshiel".  The Insurers contended that the applicable policy included the annual aggregate deductible amount of $250,000.  More Marine contested this interpretation and sought rectification of the insurance contract to remove the deductible clause.  More Marine also advanced a claim against its broker alleging that the broker ought to have explained the annual aggregate deductible clause to More Marine and ought to have obtained insurance that did not include this deductible clause.  The Defendants sought summary judgment as against More Marine.

The Court was satisfied that the Insurers intended to include the annual aggregate deductible clause in the policy.  It noted that the Insurers had seriously considered not renewing in 2006 and only renewed the policy when More Marine, through its broker, agreed to an increase in deductibles and premium due to the poor loss history of More Marine.  The cover note to the 2006-2007 policy clearly indicated that the policy was subject to the terms, conditions, exclusions and provisions contained in the policy including all endorsements.  The additional premium was 20% higher than the previous premium.  After reviewing the communications between the parties, the Court noted that More Marine was concerned about premium amounts and would certainly been involved in any negotiation which saw its premium increase by 20%.  Therefore, the Court rejected evidence from More Marine that it was unaware of the negotiations which led to the endorsement which included the annual aggregate deductible for constructive total loss claims.  The Court held that More Marine knew the specific terms of the policy prior to suffering the loss of the Glenshiel and that it had accepted and agreed to the terms that were negotiated on its behalf by its broker.  Therefore, the action as against the Insurers was dismissed.

In reviewing the claim against the broker, the Court found that the law relating to the standard of care of an insurance agent was clear: the agent owed a stringent duty to provide both information and advice to its client.  In this case, the Court rejected More Marine's contention that the wording of the annual aggregate deductible clause in the endorsements was unclear and should have been explained more fully by its broker.  The Court found that the wording of the endorsements was clear and that the deductible applied to all claims unless specifically excluded.  The broker was not obligated to explain the meaning of the clause in that regard.  The Court found that it was apparent from the evidence that the parties negotiated the express terms of the annual aggregate deductible clauses so that the Insurers could continue to provide insurance at an affordable cost even when there was a poor claims history.  In the circumstances, the Court concluded that More Marine must have known and agreed to the inclusion of the annual aggregate deductible clauses in the policy.  The Court rejected More Marine's argument that its broker should have obtained alternate coverage that did not include these deductibles as there was no evidence put forward by More Marine that its agent had ever agreed to obtain coverage that excluded constructive total losses from the deductibles.  In fact, the Court concluded that based on the evidence, even if the broker had pursued other coverage, it would have failed to obtain such coverage based on the poor loss history of More Marine.  In the result, More Marine's claim against its broker was dismissed.

This case was originally summarized by Jonathan D. Meadows  of Harper Grey LLP and originally edited by David Pilley.

Versacold operated a warehousing and distribution business including a refrigerated warehouse business in Winnipeg, Manitoba.  On May 24, 2003 anhydrous ammonia, a refrigerant used at the warehouse, escaped from a pressure regulator valve and dripped onto meat products belonging to Maple Leaf Foods Inc. ("Maple Leaf") that were being stored at the facility.  All of the insurers to the subscription policy paid their proportionate shares of the damages to the stock claimed by Versacold except Commonwealth which declined to pay the claim.  Commonwealth denied the claim on the basis that the losses fell within the exclusion clause for leakage or discharge of refrigerant and that this leakage was not caused by an insured peril.

The Court reviewed the exclusion clauses at issue and found the language to be ambiguous.  Therefore, it examined the pre-contractual negotiations between Versacold and the Insurers to determine the intention of the parties with respect to this type of loss.  The Court found that the parties had turned their minds to this specific point when drafting the policy and that it had been agreed that the Insurers would not provide coverage for the stock of customers damaged through ammonia contamination from the refrigeration system that resulted from wear and tear.  If the leak of refrigerant had been caused by an insured peril, such as fire, then the damage caused by the ammonia contamination would be covered.  However, when the leakage of refrigerant was caused by an uninsured peril, such as wear and tear, the resulting loss would not be covered.  Therefore, the Court concluded that Versacold was not entitled to recover against Commonwealth for any payments it made to Maple Leaf under the "Property" section of the policy.  The Court then went on to examine whether or not Versacold was entitled to recover under the Warehouseman's Legal Liability provisions of the policy for the amount that it paid to Maple Leaf.

The Warehouseman's Legal Liability section of the policy expressly indicated that it would not apply to any liability for losses for which the Insured had assumed liability under contract in excess of liability imposed upon him by law as a warehouseman or bailee.  In this case, the Court noted that there was no evidence that Versacold's inspection or maintenance/replacement routines fell below the standard prevailing in the industry.  Therefore, there was no evidence that Versacold breached the appropriate standard prevailing in the industry and, consequently would not have been liable in negligence or as a bailee.  In the result, the Court concluded that Commonwealth was not obliged to indemnify Versacold for the amounts paid to Maple Leaf.  Versacold failed to demonstrate that it would have been liable to pay Maple Leaf by reason of liability imposed by law upon the Insured arising from the law of negligence or bailment.

This case was originally summarized by Jonathan D. Meadows  of Harper Grey LLP, and originally edited by David Pilley.

Engle owned a commercial building in Calgary.  It leased the premises to a number of commercial tenants and secured an all risk policy from Aviva.  In July 2006 construction began on a high-rise condominium project located on a site adjacent to Engle's building.  After the lot was excavated several stories deep, tenants in the building began to notice cracks developing in the floors, walls and ceilings.  Engle's proof of loss claim to Aviva was denied on the basis that the policy excluded loss or damage caused by earth movement and settlement.

Engle retained a structural engineer who concluded that the damage to the building was caused by the excavation activity on the adjacent lot, specifically by inadequate underpinnings and shoring, together with vibrations, shaking and the destabilizing effects of the deep excavation.  The estimated cost of repair was in the range of $1 million.

At first instance, the chambers judge ruled that the exclusion clause for damages caused to buildings by "settling, expansion, contraction, moving, shifting, or cracking…" did not apply.  The chambers judge found that the loss was fortuitous and not "inevitable".  The chambers judge interpreted the exclusion clause to apply only to settlement-type damages caused by natural forces.  Aviva appealed this decision.

The Court of Appeal reviewed the general principles applicable to the interpretation of insurance contracts.  The Court's primary analysis was with respect to the principle which holds that the reasonable expectations of the parties must be taken into account where the policy wording is ambiguous.  In this case, the clause excluded "loss or damage caused directly or indirectly" to buildings by settling.  The clause did not specify whether it was intended to apply to both natural and fortuitous types of settlement or simply to naturally occurring settlement.  The Court noted that the chambers judge had determined that the word "settling" was commonly understood to mean that which is expected and occurs naturally.  The Court held that the reasonable intention of the parties to a policy such as the one at issue was that the settlement exclusion applied only to naturally occurring settlement but not to settlement that occurs otherwise.  This interpretation was consistent with the underlying purpose of an "all risk" insurance policy to protect against fortuitous events.  The Court noted that given the almost inevitable nature of settlement, it would be understandable that an insurer would intend to exclude it and that an insured would not expect such naturally occurring settlement to be covered.  However, the same cannot be said about settlement resulting from an unexpected, fortuitous event.  There would be no reason why the parties would intend that damage resulting from an unnatural or fortuitous event be excluded under an "all risk" policy.

In the result, the appeal by Aviva was dismissed.

This case was originally summarized by Jonathan D. Meadows  of Harper Grey LLP.

The insured apparently arranged for her house to be burnt down, so she could collect the insurance monies. The accused, along with two others, set fire to some furniture in the basement. The fire department arrived and although the house was not burnt to the ground, it suffered considerable damage.  The policy was in the name of the insured and so all monies were paid to her and the companies that performed the cleaning, but all the insurer’s dealings were with the daughter of the insured and her husband and the majority of the money was paid for their benefit.

The accused was charged with and convicted of arson. At sentencing, the judge made a restitution order for him to pay $40, 537.50 in favour of the insurance company.

The accused appealed on the basis that he did not receive any of the funds paid out by the insurance company or otherwise profit from the offence.  He argued that although the court has the power to order restitution  in favour of an insurance company under s. 152(1) of the Insurance Act, the power is based on subrogation. A restitution order can be made only if the recipient of the insurance monies would him or herself have a valid claim for restitution. In this case the insurance claims were submitted by the same persons who asked Popert to burn down the home. As they were ultimately responsible for the arson, they would not have a right to claim restitution. Accordingly there was no valid claim to pass to the insurance company.

The Court of Appeal agreed with that reasoning, but found that the restitution order could also be justified on the basis of s. 738(1)(a) of the Criminal Code.  The Court of Appeal noted that on a plain reading of s. 738(1)(a), its scope is not restricted to persons whose property has been directly damaged as the result of an offence. Section 738(1) empowers the court to order restitution to “another person” in the case of damage, loss or destruction of the property of “any person.” This is to be contrasted with earlier versions of the section which limited the court’s power to making compensation orders in favour of the person whose property had been lost or damaged. Further, the Court noted, this interpretation accords with a purposive reading of the section. The purpose of the section is to provide a “convenient, rapid and inexpensive means of recovery” for victims. The Court of Appeal stated that the insurance company was, in a very real sense, a victim of the arson.

Ultimately, the restitution order was set aside based on Popert’s lack of ability to pay. The appeal was allowed.

This case was originally summarized by Natasha Morley and originally edited by David Pilley of Harper Grey LLP.