Following a fire at his house, AXA denied coverage for a fire loss because it alleged Johnson failed to disclose the presence of a massage parlor in his basement suite and, further, that Johnson himself had started the fire.

The court held that Johnson had made a material misrepresentation in the application for insurance and had committed arson with respect to the fire loss at issue, and upheld the denial of coverage.

In doing so, the court reaffirmed that morally blameworthy civil conduct, such as arson, need only be proved on a balance of probabilities.

Johnson v. AXA Pacific Insurance Co., [2011] B.C.J. No. 414, March 14, 2011, British Columbia Supreme Court, T.C. Armstrong J.

In June 2007, Johnson purchased fire insurance for the house through Gold Key Insurance. In the application for insurance, Johnson was asked questions about the house and indicated "no" to the question as to whether there were going to be any business operations at the location. Mr. Johnson also answered "no" to the question as to whether there were any other income producing opportunities at the house. Johnson acknowledged signing the application but stated that he did not read the small print.

Julie McNamara testified for AXA. She rented the suite but used it only for her aromatherapy and massage business. She and her daughter resided in a townhouse in a different location in Surrey. Ms. McNamara testified that she had advised Johnson of her use for the suite. Ms. McNamara did not have a business licence to operate her massage practice at the house. The Court accepted Ms. McNamara's evidence noting that it would not make sense for her to pay rent on two residential units unless one was used for a purpose other than a home. As well, Ms. McNamara had no apparent motive to be untruthful in her evidence and was not successfully challenged during cross examination.

AXA argued that the failure to disclose this business operation at the house was a material misrepresentation on the application for insurance. AXA called evidence from an expert in insurance underwriting, Ms. Patricia Stirling, an Underwriting Manager with BCAA Insurance Corporation, who noted that additional information would have been required if the business use had been disclosed. If the business use had been acceptable, it could have been approved but with increases in premiums and higher deductibles. A second witness on the issue, a personal lines underwriting manager with AXA, also gave evidence that the information with respect to business use would have been material to the consideration of the application. In this case, the personal lines manager noted that it was unlikely that the risk would have written as aromatherapy was not an approved business.

The Court noted that Johnson was obliged to make an honest and full disclosure of the use of property to AXA. The Court found that Johnson intentionally failed to disclose to the insurance agent the use or intended use of the suite by Ms. McNamara for her aromatherapy/massage business. The Court noted that it was irrelevant whether the insured's failure to disclose was deliberate, inadvertent, overlooked, or unintended: Lafarge Canada Inc. v. Little Mountain Excavating Ltd., 2001 BCSC 218. The Court held that the failure to disclose material information was fatal to the insured's claim under the policy. AXA met the burden to show that it was acting as a reasonable or a prudent insurer in treating the non-disclosure by Johnson as material to the risk and was entitled to void the policy for this reason: see Kehoe v. British Columbia Insurance Co (1993), 28 B.C.A.C. 68. The Court specifically held that Johnson had signed the application and could not avoid the consequences of the deficiencies in his disclosure even if he had not read the application and documents, citing Lee v. Canadian Northern Shield Co., 2005 BCSC 866.

The Court went on to review the elements of arson noting that AXA needed to prove, on the balance of probabilities, that it was more likely than not that Johnson intentionally caused the fire. The elements to be considered in this analysis were:

- the fire was of an incendiary origin;
- Johnson had sufficient motive that the fire be set; and
- Johnson had the appropriate opportunity to do so.

The Court reviewed these elements and the law with respect to the burden of proof as set out by the Supreme Court of Canada in F.H. v. McDougall, 2008 SCC 53, where the Court had confirmed that there was no higher burden of proof for allegations of arson than the civil standard.

In this case, the fire causation experts gave persuasive evidence that the fire was caused by an incendiary act due to well defined multiple origins and the absence of any viable accidental cause. As well, positive test results for gasoline were found at the points of origin and a gasoline jerry can lid was located in one of the bedrooms. Johnson did not challenge the opinion of the fire causation expert with respect to the cause of the fire.

The Court rejected Johnson's evidence with respect to the possibility that another individual may have set the fire. The Court noted that Johnson agreed that he had left his doors open but stated that he had left his dog in the house to guard against burglars. However, he went on to admit that the house had been broken into over 40 times prior to the fire including many times when the dog was present. Johnson did not provide any compelling evidence that any other individual entered the house. The Court noted that there was no evidence of anyone else being at the property at the time and no suggestion that Johnson had any enemies or other persons who might have wanted to burn his house. Johnson did not argue that the fire was caused by an intruder. The Court held that there was no rational alternative to Johnson being the probable fire-setter. Though not impossible, it was too speculative to contemplate that an unknown third party would have sufficient motive and opportunity to plan this fire and go through the convoluted process of lighting gasoline in multiple suites in the circumstances of the case. Based on all the evidence, the Court concluded that Johnson had an almost exclusive opportunity to light the fire.

The Court reviewed the evidence with respect to Johnson's financial difficulties. He had failed to pay his utility bills and his ex-wife was advancing a support claim of over $200,000. He had been off work for some time as a result of an injury and was in arrears on his mortgage payment. The Court noted that financial problems were the most common motives alleged and accepted for people to commit arson of their own property, citing Abmrus v. Prudential Assurance Co. Ltd. (1989), 41 C.C.L.I. 115 (B.C.S.C.). A degree of financial strain making the acquisition of money important at the time of the fire provides evidence of motive for arson: Lally v. Safeco Insurance Co. of America (1990), 49 C.C.L.I. 83 (B.C.S.C.). On the basis of the evidence, the Court was satisfied that Johnson was in sufficient financial difficulty that he needed money at the time.

The Court concluded that it was more likely than not that Johnson had started the fire. In the result, the Court held that Johnson had started the fire and breached his insurance policy and dismissed the action.

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

Following a theft, Lloyd's Underwriters ("Lloyd's") argued that this loss was not covered, because the policy in place only applied to trucks subject to such trucks "having all their openings closed, securely locked and all keys removed…."

The Plaintiff’s action against Lloyd's with respect to the disappearance of cargo on one of its truck trailer units was allowed.  The court held that "all keys removed" created ambiguity as to whether the keys were intended to be removed from the locks or from anywhere in the truck.  The Court found the wording of the Unattended Truck Endorsement was ambiguous, and interpreted the policy wording against Lloyd's.

421205 Alberta Ltd. (c.o.b. Schroeder Transport) v. Lloyd's Underwriters, [2011] A.J. No. 311, March 17, 2011, Alberta Court of Queen's Bench, J.M. Ross J.

On March 1, 2006, a truck and two flatbed trailers owned by the Plaintiff and insured under the Lloyd's policy were stolen from the parking lot of a truck stop. A cargo of electrical cable reels was stolen from the trailers. The two trailers had remained attached to the power unit and the driver had locked the doors of the power unit, leaving the keys under the floor mat or on the floor of the cab. The driver had gone into the truck stop leaving the truck unattended as defined in the Lloyd's policy. The Plaintiff made a claim on the insurance contract as Lloyd's had denied coverage on the basis that the keys had not been removed from the truck.

The Plaintiff argued that it was entitled to the protection of the Unattended Truck Endorsement and the fact that the keys were left inside the locked truck was immaterial. The Endorsement extended coverage to include losses directly resulting from forcible and/or violent entry. In this case, all of the openings were closed and securely locked and, therefore, access to the power unit must have occurred due to forcible and/or violent entry. Lloyd's disagreed with this interpretation noting that the coverage provided was specifically made subject to the trucks having "all their openings closed, securely locked and all keys removed". Lloyd's argued that the phrase "all keys removed" was unambiguous and means that all keys must be removed from the truck. The Court disagreed noting that it was possible that the phrase "all their openings closed, securely locked and all keys removed" created ambiguity as to whether the keys were intended to be removed from the locks or from anywhere in the truck. The Court could not resort to the common practice in the industry as no evidence was placed before it with respect to whether or not it was common practice to leave unattended trucks running where the weather was extremely cold, as suggested by the Plaintiff. However, given the ambiguity in the wording, the Court held that this was one of the appropriate cases to resort to the contra proferentem doctrine with the result that the policy must be interpreted against the insurer.

The Court rejected the submission put forward by Lloyd's that the claim was statute-barred. Section 3(1)(a) of the Limitations Act provided for a two year limitation after the date on which the claimant first knew, or in the circumstances ought to have known, "that the injury was attributable to the conduct of the defendant…". The Court agreed with the position set out in Johnson v. Wunderlich (1986), 57 O.R. (2d) 600, that in an action for breach of contract, the cause of action arises from the date of the breach and that such a breach occurs when the insurer denies liability or the insured knows or ought to know that his claim will not be honored. In the case at bar, the action was commenced within two years of the receipt of the denial from Lloyd's. Therefore, the action was not statute barred.

In the result, the Court found that the Plaintiff's claim for the disappearance of cargo from one of its truck trailer units was covered under the Unattended Truck Endorsement of the Lloyd's policy.

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

At issue was whether a car loaned to the customer of a car dealership while his vehicle was being repaired was a "loaner" or a rental car.  If it was a rental car, the customer's insurer would be the primary insurer responsible for the loss.

The insurer of the car dealership was found to be the primary insurer with respect to collision damages. There was no written agreement between the car dealership and its customer pertaining to the use of the vehicle and no real terms of use for the vehicle.

Coachman Insurance Co. v. Lombard General Insurance Co. of Canada, [2011] O.J. No. 1236, March 23, 2011, Ontario Superior Court of Justice, M.J. Quigley J.

The Court noted that s. 277 of the Insurance Act provided that an owner's policy which insured a vehicle involved in an accident was primary. However, amendments to s. 277 of the Act provided that where a vehicle is leased and coverage is otherwise available to the lessee, the lessee's policy is primary. Section 277(4) of the Act defined a lessee as "a person who is leasing or renting the automobile for any period of time". The Act did not provide any definition of the words "rent" or "renting".

The issue of whether a loaner vehicle constitutes a "rental" was canvassed in the 2002 case of ING Halifax v. Guardian Insurance Co. of Canada (no cite provided). In that case, the Court held that a loaner vehicle provided by a commercial garage in the course of its business constituted a rental. In the ING case, there was a written agreement setting out the terms including: the length of the rental; the customer was responsible for fuel; $500 insurance deductible in the case of an accident; the customer was responsible for any physical damage to the vehicle; permission to drive was limited to the city limits and to the person who signed the agreement; and that the person was also responsible for any parking and speeding violations. However, in the case at bar, the Court found that there was no written agreement and that both parties understood that the repairs to Jenkins' vehicle were to be completed on the same day that the collision occurred. Given the informal basis of the provision of the loaner vehicle, the Court found that it would be "a stretch" to describe Jenkins' possession of the vehicle as anything other than an discretionary loaner by Edwards Mazda. All the factual indices of the arrangement between the parties suggested to the Court that it was the loan of the vehicle rather than a rental. In the result, Lombard was found to be the primary insurer.

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

SGI had attempted to characterize these payments as "ex gratia", and argued that it had no obligation to continue them.

The Automobile Injury Appeal Commission (the "Commission") disagreed, holding that the payments must have been authorized under the relevant legislation, as "you can't spend money you are not authorized to spend."

The appeal by SGI from a decision of the Commission ordering SGI to pay income replacement benefits to the mother of an injured child was dismissed where the Commission properly concluded that benefits paid to the mother were covered by Personal Injury Benefits Regulations and were not merely ex gratia payments.

Saskatchewan Government Insurance v. Becker, [2011] S.J. No. 154, February 23, 2011, Saskatchewan Court of Appeal, R.G. Richards, G.A. Smith and R.K. Ottenbreit JJ.A.

On October 17, 2006, Emilia Becker, then 11 years old, was a passenger in a school bus involved in an accident. Emilia suffered a moderate brain injury and experienced dizziness, severe headaches, and difficulty with concentration and memory. Prior to the accident, she had been an excellent student. In 2007, a neuropsychologist recommended that Emilia attend school for half days because her symptoms were made worse by fatigue. The neuropsychologist recommended that she be at home in the afternoon with parental supervision to nap and rest for the rest of the day.

The SGI injury representative responsible for Emilia's claim during the initial period felt that it would be a benefit for Emilia to have a parent involved in her care and SGI compensated Emilia's mother, Heather Becker, for time that she was away from her employment to look after Emilia. SGI considered the payments to Heather Becker to be ex gratia as there was no express provision in the Act authorizing reimbursement of the parent of an injured insured minor who takes time off work to care for the injured child. After almost a year had expired, SGI notified Heather Becker that it would discontinue payments at the beginning of the school year and would no longer be making the ex gratia payments. An appeal to the Commission was brought in Emilia's name seeking an order that SGI pay the difference between Heather's salary prior to the collision and what she earned at her reduced hours while looking after Emilia. SGI took the position that the Commission had no jurisdiction to adjudicate the issue since the payments had been ex gratia. SGI also requested that the Commission put any questions it had in writing concerning potential issues in the appeal. The Commission complied and asked the parties to make submissions as to whether Emilia was entitled to benefits, such as custodial care from her mother, under s. 112(2) of the Act and, as to whether, on the assumption that SGI thought compensating Heather Becker for lost income while caring for her daughter was either "necessary or advisable", it had reasonably terminated that benefit. Section 112(2) of the Automobile Accident Insurance Act, R.S.S. 1978, c. A-35, provided as follows:

(2)     Subject to the regulations, the insurer may take any measure it considers necessary or advisable to contribute to the rehabilitation of an insured, to lessen a disability resulting from bodily injury and to facilitate the insured's recovery from the accident.

After receiving questions from the Commission, SGI elected to not make further submissions and, instead, made a formal offer to settle the matter by paying the lost wages claimed, provided that Emilia withdraw her appeal and that Heather and Mark Becker execute a final release in relation to any economic loss arising from the circumstances. When the hearing before the Commission reconvened, SGI took the position that the requested payment had been made and, therefore, the right of appeal no longer existed. Emilia and her parents took the position that they had not accepted SGI's settlement and wanted to continue with the appeal.

At the hearing, the Commission ruled that it was seized with the matter and concluded that Heather's care was necessary or advisable to lessen Emilia's disability and facilitate her recovery. The Commission further concluded that funding for Emilia's mother's net wage loss for the time period at issue was not reasonably terminated and ordered SGI to make that payment together with prejudgment interest. SGI appealed this decision.

The Court of Appeal reviewed the correspondence concerning the settlement offer and held that this offer had clearly not been accepted by Emilia or her parents who wanted the issue determined. The Court reviewed s. 112(2) of the Act and found that, by its clear wording, it gave SGI an extremely broad discretion to make payments considered necessary or advisable to contribute to the rehabilitation of an insured.  In the Court's view, the Commission did not err in concluding that, where a parent's presence is considered necessary or advisable to the proper recovery or rehabilitation of a child who suffered an acquired brain injury, this provision was broad enough to authorize funding necessary to make that presence possible. The Court further concluded that the Commission had jurisdiction to order the payment of the benefit to the insured rather than referring the matter back to SGI under s. 112(2) as s. 193(7)(b) of the Act expressly authorized the Commission to "make any decision that the insurer is authorized to make pursuant to this Part".

In the result, SGI's appeal was dismissed.

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