Coverage for theft when keys left in the vehicle

In a case concerning coverage under a motor truck cargo insurance policy, a truck driver locked a truck and secured the two flatbed trailers, but left the keys under the floor mat inside the cab of the truck.

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.

Lloyd's issued a motor truck cargo insurance policy to the Plaintiff which included an exclusion for "any losses from unattended trucks while in the ordinary course of transit". The Lloyd's policy also contained an Unattended Truck Endorsement which provided that, in consideration of an additional premium charged, the policy was extended to included losses to cargo "directly resulting from forcible and/or violent entry to unattended trucks, subject to such trucks having all their openings closed, securely locked and all keys removed…."

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.

Realtors are not insured for damages caused to customer's homes

A Realtor burned down a house that he was showing.  He was sued by the owner of the house.  The Realtor was insured by a standard homeowners policy.  He brought an application to compel his insurer to defend the lawsuit that was brought against him by the owner of the house.  The Court allowed his application and compelled the insurer to defend the lawsuit.  The insurer appealed.  The appeal was allowed.   The Court of Appeal determined that the realtor's claim was not covered by his insurance policy as he had care, custody, and control of the home at the time of the damage.

The case reference is: Fiaklow v. the Personal Insurance Co. [2006] A.J. No. 1530, the Alberta Court of Appeal.  December 8, 2006.

Here is a link to the decision.


A fire broke out in the home while a real estate agent, was holding an open house. The homeowners had provided the Realtor with a key to the house in a lock box in order to facilitate the showing of the home to potential buyers. The Realtor started a fire in the fireplace to make the home seem more attractive. The fire caused significant smoke damage to the home and the homeowners sued the Realtor for damage. The Realtor was insured through a standard homeowners policy. 

The Realtor's insurer denied coverage to the Realtor on the basis of an exclusion for claims arising from damage to property in the Insured’s care, custody, or control.  The realtor sought a declaration of entitlement to a defence to the lawsuit commenced against him by the homeowners.  At first instance, the judge found that the Insured was entitled to a defence under the policy as he did not have care, custody, or control of the house at the time of the damage. The Insurer appealed this decision.

The Court of Appeal allowed the Insurer’s appeal. The question of whether the Realtor was in the care, custody, or control of the premises was a mixed question of fact and law which depended partly upon the correct interpretation of the contractual terms, as well as the complete factual context. In this case, the Realtor had access, although not exclusive access, at the time of the damage. The Realtor was the one in the house and it was he who started the fire in the fireplace. He clearly had the authority of the owners to admit third parties to the house and, while the owners were away, had a greater level of dominion over the house than any other person. In the circumstances, the only proper conclusion was that he was in the care, custody, or control of the house at the time of the fire. As a result, the claims against the Realtor were excluded from coverage under the policy under the exclusion clause for “damage to property in your care, custody or control”.


A Landlord's insurer is not entitled to bring a subrogated claim against a tenant whose rent financed the insurance

A Landlord’s Insurer was not entitled to bring a subrogated claim against a Tenant to recover the amounts paid out on the Landlord’s claim following a fire caused by the Tenant’s negligence where the Tenant paid the Landlord’s insurance premium as additional rent under the lease.

The case reference is: Alberta Importers and Distributers (1993) Inc. v. Phoenix Marble Ltd. [2006] A.J. No. 1514, the Alberta Court of Queen's Bench, Clark J.  November 30, 2006.

Here is a link to the decision.


The Landlord of an industrial warehouse structure entered into a commercial lease agreement with a Tenant. A fire started in the premises leased by the Tenant causing substantial damage to the building. The Tenant admitted negligence in the handling and storage of flammable chemicals. The Landlord carried insurance on the leased premises and passed the pro-rated cost of this insurance on to the Tenant. Much of the damage and loss resulting from the fire was covered by the Landlord’s insurance. The Landlord’s Insurers commenced an action against the Tenant.

The Court noted that it was a well-established principle that the question of whether or not a subrogated claim against a tenant can proceed is determined by the lease, and not by the insurance policies: see Ross Southward Tire Limited v. Pyrotech Products Limited, [1976] 2 S.C.R. 35. In Pyrotech, the majority of the Supreme Court of Canada decided that the subrogated Insurer was in the same position as the Landlord with respect to its rights to sue the Tenant. The decision is based upon the interpretation of the lease as to the allocation of risk between those two parties.

The Court set out the following principles extracted from the Supreme Court of Canada’s decision:

1)   Where a landlord covenants to insure, the tenant gains the benefit of that insurance unless there is an explanation to the contrary in the lease. If the covenant is not specific in describing the insurance, the court will consider what a standard policy covers. If the landlord obtains insurance beyond what is required by the lease, the tenant does not obtain the benefit of that extra insurance.

2)   Where a tenant covenants to pay for insurance to be purchased by the landlord and the landlord presents a bill to the tenant listing the amounts owing for insurance premiums and the tenant pays the bill, the tenant receives the benefit of whatever insurance policies the tenant reimbursed the landlord for, unless the lease should be taken as denying the tenant any benefits from those obligatory outlays.

In this case, the Court found that the Tenant had agreed to pay for insurance to be placed by the Landlord, including fire insurance. The Tenant was presented with a bill for the premiums and paid for the insurance pursuant to the lease. In these circumstances, the Court held that a subrogated claim against the Tenant could not proceed. The Court rejected the argument by the Landlord’s Insurers that the lease requirement that the Tenant obtain general liability coverage for the property including the Landlord as a named Insured on the policy altered the finding with respect to the allocation of risk as between the parties.

In the result, the subrogated action commenced by the Insurer of the Landlord was barred from proceeding.