Slide 1

Report
P&C Insurance in British Columbia:
Top Cases & Industry Developments
2012 – 2013
Insurance Institute of British Columbia
June 6, 2013
TABLE OF CONTENTS
1. Legislative Changes
2. Duty to Defend
3. Duty to Indemnify
4. Defence Costs
5. Additional Named Insureds
2
TABLE OF CONTENTS
6. Exclusion Clauses
7. Subrogation: Covenants to Insure
8. “But For” “Material Contribution”
9. Brokers and Agents
10. Bad Faith
3
1. LEGISLATIVE CHANGES
2. DUTY TO DEFEND
Raman Johal
1.
LEGISLATIVE CHANGES
Limitation Act , SBC 2013 c. 13
Insurance Act SBC 2012 c. 1
5
LIMITATION ACT, SBC 2013 c. 13
Came into force on June 1, 2013
6
LIMITATION ACT
• Basic 2 year limitation period (default)
• Current 30 year ultimate limitation period replaced with a
15 year ultimate limitation period
• Discovery of act or omission
7
LIMITATION ACT
• Contribution and Indemnity
• Postponement for infants and those under disability
• Transition Rules (s. 30)
8
INSURANCE ACT, SBC 2012 c. 1
Came into force on July 1, 2012
9
INSURANCE ACT – Limitation Periods
• s. 22(1) of Old Insurance Act said: “Every action on a
contract must be commenced within one year after the
furnishing of reasonably sufficient proof of a loss or claim
under the contract and not after.”
• Courts grappled with “reasonably sufficient proof”.
• B.C. Courts accepted two interpretations:
(1) the “clear and unequivocal denial of benefits”; and
(2) on submission of sufficient proof of loss.
• Courts found fairly long periods between date of loss and
the furnishing of sufficient proof to be reasonable.
10
INSURANCE ACT – Limitation Periods
• Courts sympathetic to insureds and would find that
denials were not unequivocal or the proofs of loss
insufficient.
• Given the uncertainty in the case law concerning the
definition of “reasonably sufficient proof” and the
impending changes to the Insurance Act, many insurers
began to apply the two year limitation period in advance
of the change in the law on July 1, 2012.
11
INSURANCE ACT – Limitation Periods
• s. 23 of New Insurance Act: the limitation period for
property losses is two years from the date the insured
“knew or ought to have known the loss or damage
occurred.”
• Regulation 213/2011: limitation period is not retroactive
and does not apply to contracts that were in effect on
July 1, 2012.
12
INSURANCE ACT – Notice Requirements
• If liability for all or part of a claim is denied, claimants
must be advised of a limitation period:
– five (5) business days after the insurer denies the claim
and
– 10 business days after the anniversary of the insurer
receiving the claim if it is still open (i.e. not settled or
denied).
13
INSURANCE ACT – Notice Requirements
• Denial letters must be sent within 5 business days of
denying a claim and the letter must reference the
applicable limitation period and contain a statement that
the limitation period is set out in the New Act.
• A letter must be sent within 10 days of the first
anniversary of the insurer receiving the claim, if it is still
open.
• Letters need not be sent if the insured has counsel, but
the insurer may wish to send the letter in any event.
14
INSURANCE ACT – Notice Requirements
• s. 4 of the Insurance Regulation; consequences for
non-compliance with these notice provisions.
• If an insurer fails to provide the required notice, the
running time of the applicable limitation period is
suspended from the date on which notice should have
been given and ending on the earlier of the following
dates:
– the date that notice is given; or
– the date that would cause limitation period to exceed 6
years after date cause of action against insurer arose.
15
INSURANCE ACT – Notice Requirements
• While insurers need not redraft all policies in existence as
of July 1, 2012, all new policies and policies that are
renewed or replaced after that date are required to
conform to the New Act.
• Dates must be carefully recorded to keep track of the
limitation periods.
• Judgment required when establishing when an insured
"knew or ought to have known" of a claim.
• Electronic Communication
16
2.
DUTY TO DEFEND
Royal & Sun Alliance Insurance Co. of Canada v. Araujo,
2012 BCSC 1203
Dube v. BCAA, 2012 BCSC 1958
Dominion v. Hannam, 2013 NLCA 37
17
DUTY TO DEFEND
• Duty to Defend may exist even where there is no Duty to
Indemnify
• Pleadings govern the duty to provide a defence
• Insurer required to provide a defence where facts alleged
in the pleadings, if proven to be true, could require the
insurer to indemnify the insured for the claim
• “mere possibility” that a claim within policy may succeed
• True nature of the substance of the claim
18
RSA v. ARAUJO, 2012 BCSC 1203
• Teenager’s grandparents, dad and uncle live together
• Teenager injured in a fire [arson] at Defendants’ home
• Insurer unsuccessful in obtaining a declaration that the
homeowners policy excludes
a bodily injury claim by the
Teenager and that the insurer
has no duty to defend or
indemnify the grandparents,
dad and uncle
19
RSA v. ARAUJO, 2012 BCSC 1203
• Exclusion in personal liability protection section: “We do
not insure claims made against you arising from…5. Bodily
injury to you or any person residing in your household
other than a residence employee;”
• “You or Your” means the person(s) named as Insured on
the Coverage Summary page and, while living in the same
household:
– his or her spouse;
– the relatives of either;
– any person under 21 in their care
20
RSA v. ARAUJO, 2012 BCSC 1203
• Issue: was Teenager an unnamed insured or a person
residing in the household?
• Teenager’s parents had joint guardianship and custody
• Primary residence with mom
• Liberal access to dad
• Dad exercised access at the grandparents house 2 to 3
times per month for one night
• Dad’s house: did not have own room; no belongings; no
key to house; slept on sofa; no chores
21
RSA v. ARAUJO, 2012 BCSC 1203
• Interpreting insurance contracts – Progressive Homes Ltd.
v. Lombard General Insurance Co. of Canada, 2010 SCC 33
• When language of policy ambiguous, court should give
effect to clear language reading the contract as a whole
• Where ambiguous, the courts rely on general rules of
contract construction – reasonable expectations; avoid
unrealistic interpretations
• When these rules of construction fail to resolve ambiguity
– contra proferentum
• Coverage provisions interpreted broadly and exclusion
clauses narrowly
22
RSA v. ARAUJO, 2012 BCSC 1203
• “You” is confusing – can refer to each insured making the
claim or any insured under the policy
• “I appreciate the objective of “plain language” contracts
but the use of pronouns such as “you” and “your” are
inherently ambiguous and the application of a definition
that uses them invites ambiguity where the court is asked
to interpret which “you” is being referred to in each
context. In this Policy, I consider the use of the definition
of “you” and “your” in the exclusion clause to be
ambiguous.”
23
RSA v. ARAUJO, 2012 BCSC 1203
• “Any person residing in your household”
• Teenager part of “household” but not “residing” there
• Dual residences possible
• Much litigation over “residing”
• Evidence established that Teenager was a regular visitor
to the home but did not reside there
• Exclusion clauses to be construed narrowly
24
DUBE v. BCAA, 2012 BCSC 1958
• Student sued Teacher for assault and battery and
negligence
• Teacher asks insurer to defend the claim
• Insurer successfully obtained declaration
that the homeowners policy excludes
claims by the Student and that the
insurer has no duty to defend or
indemnify the Teacher
25
DUBE v. BCAA, 2012 BCSC 1958
• No duty to defend or indemnify Teacher on assault and
battery claims because of unambiguous exclusion
– they are not torts resulting in “unintentional injury”
– exclusion clause: “bodily injury…caused by any
intentional or criminal act or failure to act by: (a) any
person insured by this policy
26
DUBE v. BCAA, 2012 BCSC 1958
• Two allegations in Student’s Notice of Civil Claim that are
not derivative and could constitute negligence
• Exclusion clause unambiguous: “Sexual, physical,
psychological or emotional abuse, molestation or
harassment, including corporal punishment by, 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 sexual, physical,
psychological or emotional abuse, molestation or
harassment or corporal punishment.”
27
DOMINION v. HANNAM, 2013 NLCA 37
• ATV owned by Mr. Hannam (neither registered nor
insured)
• Son lends vehicle to friend who crashes it in gravel pit
• Passenger severely injured and
sues Hannam family
28
DOMINION v. HANNAM, 2013 NLCA 37
• Hannam’s homeowners policy excludes ownership, use
or operation of a motor vehicle
• But expressly insures off-road vehicles “which you do
not own”
• Issue: who is “you”?
29
DOMINION v. HANNAM, 2013 NLCA 37
• As in Araujo case, Court concludes “you” is inherently
ambiguous
• Could mean either the individual insured or everybody
who is insured
• No coverage for dad who actually owned ATV
30
DOMINION v. HANNAM, 2013 NLCA 37
• But ambiguity means there is a possibility of coverage
for son/mother
• Therefore insurer’s duty to defend is triggered
• How do we fix this?
31
3. DUTY TO INDEMNIFY
4. DEFENCE COSTS
Nigel P. Kent
3.
DUTY TO INDEMNIFY
•Liability coverage for “employee injury”
•Poole v. Lombard, 2012 BCCA 434
•Sam’s Auto Wrecking v. Lombard, 2013 ONCA 186
33
POOLE v. LOMBARD, 2012 BCCA 434
• Law firm associates and articling students
dinner paid for by firm
• After dinner, some attendees
went to nightclub
• One intoxicated associate lost his balance causing
female articling student to fall and hit her head on
concrete floor
34
POOLE v. LOMBARD, 2012 BCCA 434
• Student suffers brain injury, sues law firm associate,
ultimately awarded $6 million damages
• Associate had $1 million coverage under homeowners
policy...obviously not enough
• Question: coverage available under law firm’s CGL
policy?
35
POOLE v. LOMBARD, 2012 BCCA 434
• Policy provided coverage for additional insureds,
namely
(a)
“your employees but only for acts within the scope
of their employment [but] none of these employees is
an insured for bodily injury to a co-employee while in
the course of his or her employment”; and
(b)
“Any employee....but only with respect to their
employment...with the [law firm]”
36
POOLE v. LOMBARD, 2012 BCCA 434
• Court of Appeal holds no coverage under either clause
• Scope/course of employment conditions could not be
met, so clause (a) not applicable
• “with respect to” (clause (b)) has a wider meaning but
“line must be drawn on a commercially reasonable
basis between what are essentially firm functions and
what are essentially social functions”
37
POOLE v. LOMBARD, 2012 BCCA 434
• No excess coverage available for the associate
• Note no appeal of Trial Judge’s rulings that (1) CGL had
duty to defend associate and (2) CGL must reimburse
homeowners insurer 50% of associate’s defence costs:
Danicek v. Alexander Holburn, 2011 BCSC 65.
38
SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186
• Company’s VP and operations manager seriously
injured when struck by a crane operated by employee
• Not covered by Worker’s Comp so sued company and
employee
• CGL insurer denied coverage on
basis of “employee injury
exclusion”
39
SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186
• “this insurance does not apply to....bodily injury to an
employee of the Insured arising out of and in the course
of employment by the Insured”
• Does this apply to “executives” who are not covered by
Worker’s Comp?
• Ruling: Even though he was an executive officer, he
was still an employee of the company and the
exclusion squarely applied
40
SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186
• Court recognized there was an “odd coverage gap”...the
exclusion takes away coverage where an employer
might wish to have it (work place injury not covered by
Worker’s Comp)
41
4.
DEFENCE COSTS
•ACE INA v. Aegis, 2012 ONSC 6248 (Contribution)
•Papapetrou v. 1054422 Ont. Ltd., 2012 ONCA 506
(Commercial Contracts)
42
ACE INA v. AEGIS, 2012 ONSC 6248
• July 2008 hi-rise undergrounding parking
area explosion
• Property damage/bodily injury claims
against Toronto Hydro totalling $55 million
• ACE INA provided primary CGL coverage to Toronto
Hydro (coverage for defence costs in addition to stated
liability limits)
43
ACE INA v. AEGIS, 2012 ONSC 6248
• Toronto Hydro also had $45 million excess liability
policy with Aegis
• Coverage was for indemnity to pay “ultimate net loss”
in excess of underlying coverage
• “ultimate net loss” defined to include both indemnity
and defence costs with respect to each occurrence
44
ACE INA v. AEGIS, 2012 ONSC 6248
• No express duty to defend in Aegis policy, just a “right
to associate in defence” if they wish to
• ACE made application to court for declaration Aegis
was obliged to contribute to defence costs ($550,000
and counting)
• Argued excess cover was clearly going to be triggered
and principles of equity required contribution;
45
ACE INA v. AEGIS, 2012 ONSC 6248
• Court denied contribution claim;
• Aegis policy contained no duty to defend (unlike ACE
policy)...was simply a reimbursement cover
• The two policies were not covering the same risk but
rather were covering separate and clearly defined
layers of risk (no overlap)
46
ACE INA v. AEGIS, 2012 ONSC 6248
• Aegis policy expressly excluded indemnity for Toronto
Hydro’s defence costs if they were “included in other
valid and collectible insurance”
• Aegis policy limits were eroded (reduced) by any
defence costs payment, so contribution would
“prejudice” Toronto Hydro by reducing coverage
otherwise available
• Primary insurer’s claim for contribution denied
47
ACE INA v. AEGIS, 2012 ONSC 6248
• First reported case involving a contribution claim
against an excess insurer whose policy does not
contain a duty to defend....decision has been appealed
and will be heard by Ontario Court of Appeal in
September, 2013
48
PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506
• Winter maintenance/snow clearing service contract
• Contract contained indemnity of building owner
“against all claims, liabilities....arising out of ....the
contract”
• Contract required maintenance Co to obtain CGL
insurance with “owners as an additional insured”
49
PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506
• Contractor fails to get owner added
to CGL coverage
• Accident happens, personal injury
lawsuit ensues versus contractor
and owner
• Owner seeks order requiring contractor to assume its
defence
50
PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506
• Trial Court orders contractor both to assume defence
and to indemnify owner with respect to damages
• Ont. CA sets aside order but requires contractor to pay
owner’s solicitor/client costs of defending lawsuit
• “Premature to summarily enforce the indemnity
provision until issues of liability and damages had been
finally determined”
51
PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506
• However, contractor clearly breached contract by
failing to obtain insurance for owner
• Remedy is not ordering a duty to defend but rather an
award in damages
• Appropriate damages are an indemnity for the owner’s
defence costs on a solicitor/client basis which
otherwise would have been covered by the insurance
52
PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506
• Because of conflict arising out of indemnity clause,
owner can choose its own counsel and contractor must
pay that law firm’s legal fees for defending the lawsuit
• Lesson: parties signing contracts requiring indemnities
or liability insurance must ensure the necessary
coverage is obtained
53
5. ADDITIONAL NAMED INSUREDS
6. EXCLUSION CLAIMS
Satinder Sidhu
5. ADDITIONAL NAMED INSUREDS
• Vernon Vipers Hockey Club v. Canadian Recreation
Excellence (Vernon) Corporatio​n, 2012 BCCA 291
• 1540039 Ontario Limited v. Farmers' Mutual Insurance
Company (Lindsay), 2012 ONCA 210
55
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
•
Does the “but for” test apply to interpretation of
“arising out of”
•
Plaintiff attended multiplex to watch a hockey club play
•
Multiplex owned by regional district and managed by
recreation company
56
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
•
Plaintiff injured himself walking over large boulders and
sued regional district and recreation company
•
Regional district and recreation company named as
“additional insureds” on the hockey club’s CGL policy with
American Home
•
Regional district and recreation company third partied
hockey club and American Home claiming defence,
contribution and indemnity
57
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
•
Policy contained exception that only insured “... in
respect of liability arising out of the Named Insured’s
operations” [emphasis added]
•
Regional district and recreation company argued that:
o coming and going of fans to see a game was part
and parcel of the hockey club’s “operations” and
plaintiff’s injury arose out of those operations, and
o “but for” plaintiff’s attendance at game, he would
not have fallen and injured himself
58
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
•
American Home argued
mere presence of plaintiff at
game is insufficient and “but for”
test has been rejected by SCC as a means of
interpreting “arising out of”
•
The court considered 5 leading cases dealing with the
interpretation of the phrase "arising out of":
59
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
o Monenco Ltd. v. Commonwealth Insurance Co.,
2001 SCC 49
o Saanich (District) v. Aviva Insurance Company of
Canada, 2011 BCCA 391
o Citadel General Assurance Co. v. Vytlingam, 2007
SCC 46
o Lumbermens Mutual Casualty Co. v. Herbison, 2007
SCC 47
o Amos v. Insurance Corp. of British Columbia, 1995
CanLII 66
60
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
•
Court of Appeal found:
o correct interpretation of “arising out of” and
“arising from” requires closer causal nexus than
simple “but for” test;
o “arising out of” requires “an unbroken chain of
causation” and connection that is more than
“merely incidental or fortuitous”;
o no ambiguity and contra proferentum rule not
applied;
61
VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291
o even allowing for a broad and liberal interpretation
of the “operations”, no aspect of hockey club’s
operations were alleged to have caused plaintiff’s
injury;
o the most that pleadings alleged was that hockey
club’s operations caused him to be in a place
where, for unrelated reasons, he became injured;
and
o perhaps facts enough to meet “but for” test but did
not satisfy the more rigorous causal requirement.
62
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
To what extent are courts at liberty to consider
extrinsic evidence in determining whether the
allegations against an additional named insured arose
out of the named insured’s operations
•
Subcontractor electrocuted while working on sign
located in front of commercial plaza
63
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
Subcontractor’s surviving family members sued the
landlord, owner of the hydro lines, and contractor that
subcontracted the work
•
Landlord was additional named insured under tenant’s
CGL issued by Farmers’
•
Additional insured “as landlord only” and “only with
respect to liability arising out of operations by or on
behalf of the tenant for interior decorating”
64
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
Landlord’s application that Farmers’ defend was
dismissed
•
Court of Appeal considered whether entitled to go
beyond the pleadings and consider extrinsic evidence
to determine the true “substance” and “nature” of the
claim
65
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
Landlord wished to have admitted evidence that
contractor was retained by tenant to show that
liability arose out of the operations of tenant
•
Legal principles considered:
o the court must consider the substance and true
nature of the claim;
o extrinsic evidence explicitly referred to in pleadings
may be considered to determine the substance and
true nature of the allegations;
66
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
• Legal principles considered (cont’d)
o court may not look to “premature” evidence; evidence
which, if considered, would require findings to be
made before trial that would affect the underlying
litigation; and
o extrinsic evidence must relate to undisputed facts that
do not require findings to be made before trial.
67
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
Court of Appeal found:
o extrinsic evidence was disputed;
o even if admitted, extrinsic evidence would not support
a duty to defend; and
o substance and true nature of the claim against landlord
based on conduct as owner and occupier of plaza and
not as landlord of the premises leased to the tenant.
68
1540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210
•
Extrinsic evidence exception to the pleadings rule
cannot be used to demonstrate that pleadings that say
one thing really mean something else
•
Extrinsic evidence rule cannot be used to convert
claims against the landlord qua owner into claims
against the landlord as landlord of the premises leased
to tenant
69
EXCLUSION CLAUSES
•O’Byrne v. Farmers’ Mutual Insurance Company,
2012 ONSC 468
•Hector v. Piazza, 2012 ONCA 26
70
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
What type or kind of environmental contamination is
required for pollution exclusion to apply
•
Building damaged by an oil leak from furnace
•
Tenant tampered with furnace resulting in oil leak
•
Farmers’ denied coverage to landlord on the basis of a
pollution exclusion
71
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
Policy Wording
This policy does not insure against
a) loss or damage caused directly or indirectly by any actual or
alleged spill, discharge, emission, dispersal, seepage, leakage,
migration, release or escape of “pollutants”, nor the cost or
expense of any resulting “clean up”, but this exclusion does not
apply:
i.
ii.
if the spill, discharge, emission, dispersal, seepage, leakage,
migration, release or escape of “pollutants” is the direct
result of a peril not otherwise excluded on this policy;
to loss or damage caused directly by a peril not otherwise
excluded under this policy.
72
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
Pollutants defined as follows :
o “Pollutants” means any solid, liquid, gaseous or
thermal irritant, or contaminants including
odour, vapour, fumes, acids, alkalis, chemicals
and waste. Waste includes materials to be
recycled, reconditioned or reclaimed.
73
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
Legal principles relied on:
o use of words such as “discharge, dispersal, release
and escape” reflect that the exclusion is directed to
a pollutant that results in traditional environmental
contamination;
o pollution exclusion does not apply to injuries
caused by common irritants and contaminants
emitted from a faulty furnace;
74
O’BYRNE V. FARMERS’, 2012 ONSC 468
o pollution exclusion can be reasonably interpreted
as applying only to environmental pollution; and
o if exclusion is capable of more than one reasonable
interpretation it is ambiguous and should be
interpreted in favour of the insured.
75
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
Court held:
o pollution exclusion should be interpreted in favour
of landlord such that it only excludes traditional
environmental contamination;
o oil remained within the building and probably
within 30 feet of furnace and did not amount to
traditional environmental contamination such as oil
seepage into soil; and
76
O’BYRNE V. FARMERS’, 2012 ONSC 468
o distinguished Corbould v. BCAA Insurance Corp.,
[2010] B.C.J. No. 2125 (B.C.S.C.) where a storage
tank spilled oil that seeped into the soil - case of
traditional environmental contamination that
was subject to the standard pollution
exclusion.
77
O’BYRNE V. FARMERS’, 2012 ONSC 468
•
Farmers’ also tried to deny coverage based on
mechanical or electrical breakdown or derangement
exclusion
•
Court rejected this position and found that there was no
internal defect or problem in the furnace
•
Exclusion was not intended to exclude damage caused
by tenant
78
HECTOR V. PIAZZA, 2012 ONCA 26
•
Does the “property owned” exclusion in a CGL refer to
property owned at present, in the past or both
•
Piazza purchased an apartment building that was
renovated and sold to Hector
•
Hector sued Piazza with respect to faulty construction
related to settling of the foundation
79
HECTOR V. PIAZZA, 2012 ONCA 26
•
Piazza was insured by AXA and sought coverage under
a CGL
•
AXA denied coverage on basis that policy excluded
cover for property owned by the insured
80
HECTOR V. PIAZZA, 2012 ONCA 26
•
The policy excluded coverage for:
o (y)
property damage –
o (z) to property owned or occupied by or rented to
the Insured, or, except with respect to the use of the
elevators, to property held by the Insured for sale or
entrusted to the Insured for storage or safekeeping
[emphasis added]
81
HECTOR V. PIAZZA, 2012 ONCA 26
•
If the word “owned” referred only to the past tense,
the exclusion would apply
•
If the word “owned” referred to the present as well as
the past tense, policy could not be said to “clearly and
unambiguously” exclude coverage
•
Insurer must show that the exclusion “clearly and
unambiguously excludes coverage” (Progressive
Homes Ltd. v. Lombard General Insurance Co. of
Canada [2010] S.C.J. 33)
82
HECTOR V. PIAZZA, 2012 ONCA 26
•
Court held that:
o when read in context “property owned” can
grammatically refer to property owned now or
previously owned;
o exclusions in CGL policies, for the most part, deal
with items that would be the subject of first-party
coverage which is within the power of the insured
to protect
83
HECTOR V. PIAZZA, 2012 ONCA 26
o if “property owned” interpreted as referring to
present tense only, property that was owned by the
insured in the past, and that is subject to a third
party claim, could fall within the ambit of coverage
under the policy;
o this would not inconsistent with the intention of
the parties to exclude first party liability coverage;
and
84
HECTOR V. PIAZZA, 2012 ONCA 26
o the word “owned” can refer to the present as well
as the past tense; and
o policy cannot be said to “clearly and
unambiguously” exclude coverage.
85
7. SUBROGATION:
COVENANTS TO INSURE
8. “BUT FOR” AND
“MATERIAL CONTRIBUTION”
Larry Munn
7.
SUBROGATION: Covenants to Insure
Kruger Products Ltd. v. First Choice Logistics Inc., 2013
BCCA 3
• Kruger, aka Scott stored finished and unfinished
paper products in a warehouse operated by First
Choice Logistics (“FCL”).
• Due to issues with forklifts (known to FCL) paper
caught on fire
• Entire warehouse and all contents destroyed
87
KRUGER V. FIRST CHOICE, 2013 BCCA 3
Kruger Products Ltd. v. First Choice Logistics Inc., 2013
BCCA 3
•Trial judge and Court of Appeal concluded FCL breached
standard of care and caused loss
•Subrogated action by insurer
•A Warehouse Management Agreement governed Scott’s
relationship with FCL
88
KRUGER V. FIRST CHOICE, 2013 BCCA 3
• Agreement contained a clause requiring Scott to
maintain general liability insurance, tenant’s legal
liability insurance and insurance on its inventory and
property in the warehouse
• Scott also agreed to add FCL as additional insured
• Agreement also stated, “all insurance policies
contemplated hereunder shall constitute and respond
as primary coverage to any insurance otherwise
available to Scott”
89
KRUGER V. FIRST CHOICE, 2013 BCCA 3
• Trial judge – bailor/bailee situation and warehouser
had no insurable interest therefore landlord/tenant
covenant to insure cases do not apply
• Court of Appeal disagreed – there was an insurable
interest given warehouser’s liability
• But insurable interest not necessary where covenant to
insure designed to benefit party against whom
subrogated claim brought
90
KRUGER V. FIRST CHOICE, 2013 BCCA 3
• Scott paid insurance premiums, but not necessary
negligent party pay
• Parties also acknowledged that Scott’s insurance
primary
• No benefit from provision, if no tort immunity
91
KRUGER V. FIRST CHOICE, 2013 BCCA 3
• Tort immunity extends well beyond landlord/tenant
situations
• Who pays premium not important
• Clause to insure must be given meaning
• Important to review insurance clauses in contracts
(leases and otherwise) to determine if an immunity
defence exists
92
8. “But For” and “Material Contribution”
Clements v. Clements 2012 SCC 32
•The plaintiff, Mrs. Clements, a passenger on her husband’s
(the defendant’s) motorcycle
•Unbeknownst to defendant, nail had punctured rear tire
•When accelerated to 120km/hr to pass car, nail popped
out, tire deflated. Plaintiff thrown from motorcycle with
resultant severe traumatic brain injury
•Some evidence bike overloaded
93
CLEMENTS V. CLEMENTS, 2012 SCC 32
• Defendant’s evidence questioned whether accident
would have happened in any event
• Trial judge could not say “but for” defendant’s
negligence, plaintiff would not have been injured
• However, found defendant liable on a material
contribution
• Court of Appeal disagreed regarding material
contribution
• SCC disagreed re material contribution but ordered new
trial and further consideration of “but for” test
94
CLEMENTS V. CLEMENTS, 2012 SCC 32
• Basic rule for recovery for negligence required plaintiff
establish on a balance of probabilities that defendant
caused injury on the basis of “but for”
• Only where impossible to determine which of a number
of negligent acts by multiple actors caused the injury can
the “material contribution” test be used
95
CLEMENTS V. CLEMENTS, 2012 SCC 32
• Cook v. Lewis (hunters); Walker Estate (tainted blood)
• Here – a single defendant case
96
EDGAR V. JOHNSTON, 2013 SCC 18
• Plaintiff suffered from persistent bradycardia during her
birth that caused permanent brain damage – spastic
quadriplegia and cerebral palsy
• Sued obstetrician
• Trail judge found attempt to deliver by mid-level forceps
procedure was a “but for” cause
• Obstetrician breached standard of care by not ensuring
sufficient back-up, namely anaesthetist in event
C-section required
97
EDGAR V. JOHNSTON, 2013 SCC 18
• Court of Appeal concluded evidence did not establish
that forceps attempt caused the cord compression and
resultant bradycardia – did not occur within seconds
• Court of Appeal also concluded no evidence plaintiff
could have been delivered earlier if there had been
back-up
98
EDGAR V. JOHNSTON, 2013 SCC 18
• SCC disagreed – trial judge had reason to find that
causation was forceps attempt
• Causation a factual inquiry applying “but for” test and no
palpable and overriding error
• Finding of causation supportable – other evidence
explained why the onset of the bradycardia was not
immediate
• Finding regarding reasonable back-up also sound
• Burden of proof remains with plaintiff but scientific
certainty not necessary
99
9. BROKERS AND AGENTS
10. BAD FAITH
Glen Boswall
9. Brokers and Agents
Ostenda v. Miranda 2012 ONSC 7346
•Plaintiff claimed Zurich Insurance was (a) directly liable to
him for failing to advise him of need to obtain additional
underinsured motorist coverage; and/or (b) vicariously
liable for an insurance broker’s failure to provide this
advice.
•Insured was a transport driver for Synergy. JDIMI was
Synergy’s insurance broker.
•JDIMI provided a “transportation package survey” to
Zurich describing Synergy business and coverage sought.
There was no request for underinsured motorist protection
coverage for Synergy employees.
OSTENDA V. MIRANDA, 2012 ONSC 7346
• Zurich undertook risk management survey and prepared
risk assessment report including this statement, “By
delivery of this Report, Zurich does not assume any
responsibility for discovery, notification or elimination of
hazards or risks.”
• Report did not mention that Synergy had no UMP
coverage for drivers or comment on Synergy’s failure to
request any.
• Zurich issued transportation package policy to Synergy in
2006. Unlike standard auto parties issued to private
citizens, this policy had no UMP coverage.
OSTENDA V. MIRANDA, 2012 ONSC 7346
• In 2008, Plaintiff suffered catastrophic injuries in road
accident caused by a driver with little or no liability
insurance.
• Plaintiff discovered he had no UMP coverage to make up
any shortfall in damages award against other driver.
• Plaintiff sued driver, JDIMI and Zurich. Plaintiff then
sought summary judgment against Zurich.
OSTENDA V. MIRANDA, 2012 ONSC 7346
• Judge addressed these issues:
– Regarding the non-inclusion of the UMP endorsement in
the policy issued to Synergy, did Zurich stand exposed to
liability equivalent to that of a broker?
– Was Zurich liable to the Plaintiff as principal for the
mistakes of JDIMI as agent?
OSTENDA V. MIRANDA, 2012 ONSC 7346
• Did Zurich stand exposed to liability equivalent to that of
a broker?
– No.
– Judge noted that SCC in Fletcher v. Manitoba Public Insurance
Co. (1990) found that an insurer selling policies directly had a
responsibility to ensure customers received sufficient information to
make intelligent decisions as to how much risk they were prepared to
bear.
– However, in the present case, the policy sale was made through a
broker. Judge noted Drader v. Sebastian (2009 SKCA) and Boudreau v.
Ontario Soccer Assn. (2012 ONSC) which established that, in cases
where experienced brokers are involved, an insurer owes no duty to
customer to procure appropriate insurance coverage.
OSTENDA V. MIRANDA, 2012 ONSC 7346
• Did Zurich stand exposed to liability equivalent to that of
a broker? (cont’d.)
– Facts showed Zurich did not assume duty and public policy
mitigated against imposing duty.
• Zurich’s risk assessment report came with express liability
disclaimer.
• From public policy perspective, imposing upon insurers a
similar duty to that undertaken by brokers would result in
considerable duplication of effort.
OSTENDA V. MIRANDA, 2012 ONSC 7346
• Was Zurich liable as principal for mistakes of JDIMI as
agent?
– No.
– Judge found that evidence in this case fell “well short” of
establishing that JDIMI had legal authority to represent
Zurich so as to affect Zurich’s legal position. Therefore,
there was no agency relationship.
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• Plaintiff claimed insurer was liable for failing to provide
sufficient information for Plaintiff to make informed
decision about purchasing optional additional income
replacement benefits coverage as part of an auto policy.
• Plaintiff previously purchased auto policies from other
insurers based on very competitive pricing.
• In 2003, Meloche Monnex (“MM”) made telephone sale
of automobile policy to Plaintiff and wife. Coverage
included mandatory minimum income replacement
benefits.
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• MM sales representative used standard script to provide
and record information. No detailed discussion of
optional additional income replacement benefits.
Plaintiff refused optional cover.
• November 2003 legislative change required every
automobile insurer to offer optional income replacement
benefits.
• MM’s subsequent renewal of Plaintiff’s policy came with
sheet providing brief explanation of MM’s obligation to
offer optional additional income replacement benefits.
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• Plaintiff badly injured in 2005 accident and sued MM for
failing to explain optional additional income benefits.
• Trial judge addressed three issues:
– Did MM owe a duty of care to the Plaintiff?
– Did MM breach the applicable standard of care?
– Would Plaintiff likely have purchased optional benefits if
properly offered?
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• Was there a duty of care?
– Yes.
– Fletcher v. Manitoba Public Insurance Co. (1990 SCC)
established that that sale of automobile insurance is a
business in the course of which information is routinely
provided to customers with the expectation they will rely
on it.
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• Did MM breach the standard of care?
– Yes.
– Questioned boiled down to whether MM must offer optional coverage
in such a way that the customer can make a fully informed decision
about what to purchase.
– Evidence of common industry practice is persuasive but not
determinative.
– “To make the mandatory offer of optional coverages meaningful,
customers must be given an understandable alternative which would
allow them to measure the need for more coverage against risk and
cost.”
– “The fact that [optional income replacement benefits] are less well
known may increase the insurer’s practical obligation to explain their
existence and the details of the optional coverage.”
ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127
• Would Plaintiff have purchased if benefit was properly
offered?
– No.
– Plaintiff’s history of seeking basic coverage and MM notes
showing Plaintiff’s wife said there was “no need” for optional
coverage both indicated Plaintiff would have declined optional
additional income replacement benefits if offered.
– Therefore, there was no causal link between MM’s negligence
and the Plaintiff’s lack of additional benefits.
• Trial decision upheld by Ontario Court of Appeal.
10. Bad Faith
Branco v. American Home Assurance Co. 2013 SKQB 98
•Court made staggering punitive damage awards against
disability insurers.
•Plaintiff employed by Saskatchewan company that
operated mine in Krygzstan. American Home Assurance Co.
(“AHAC”) provided workers with benefits based on
Saskatchewan WCB coverage. Zurich Life Insurance Co.
Provided long term disability benefits coverage.
•In December 1999, a steel plate fell on the Plaintiff’s foot.
Following unsuccessful surgery, numerous doctors
(including many seen at insistence of AHAC) pronounced
him permanently unemployable.
BRANCO V. AMERICAN HOME, 2013 SKQB 98
• Judge found,
– Zurich had delayed dealing with claim and made offers to settle claim
at significant discount despite acknowledging that full coverage
applied.
– AHAC discontinued payment of benefits in order to create hardship on
the Plaintiff and force him to accept a extremely low settlement offer.
• Judge ruled that both AHAC and Zurich breached duties
of good faith. Of particular importance to this finding
were the insurers’ lack of consideration for the
overwhelming medical evidence, their deliberate
behaviour, and their general disregard for hardship
suffered by Plaintiff.
BRANCO V. AMERICAN HOME, 2013 SKQB 98
• $1.5 million in punitive damages awarded against AHAC
and $3 million against Zurich!
• Judge specifically referred to $1 million in punitive
damages awarded in Whiten v. Pilot Insurance (2002) and
its apparent insufficiency in forcing insurers to abide by
policies.
• Judge also awarded $450,000 in aggravated damages, an
award that greatly exceeds the $335,000 cap on general
damages set by the SCC in a catastrophic injury case!
SGI V. WILSON, 2012 ONCA 106
• Trial judge awarded punitive damages against insurer in
case where there was no actual loss of benefits, no claim
for punitive damages, and a lack of compensable mental
aggravation flowing from bad faith breach of a disability
policy.
• Court of Appeal substituted award for cost of litigation to
mitigate against anticipated loss of benefits.
SGI V. WILSON, 2012 ONCA 106
• Plaintiff injured in two motor vehicle accidents and
received rehabilitation accident benefits for over 10
years under her Saskatchewan Government Insurance
(“SGI”) auto policy.
• Plaintiff’s treating therapists and team of health care
providers retained by SGI recommended ongoing passive
therapy.
SGI V. WILSON, 2012 ONCA 106
• SGI sent file for review by independent physiotherapist
and, based on her recommendations, advised the
Plaintiff in November 2006 that treatment funding
would be terminated in six months.
• Plaintiff sued for reinstatement of benefits and
aggravated damages for breach of duty of good faith.
• Prior to the end of the six month expiry period, SGI
advised it would reinstate the benefits conditional upon
the Plaintiff dropping her claim for aggravated damages.
The Plaintiff refused.
SGI V. WILSON, 2012 ONCA 106
• The trial judge found SGI acted in bad faith but that the
Plaintiff had not suffered sufficient mental distress to
merit an award of aggravated damages.
• However, judge awarded,
– $15,333 in punitive damages made up of a general award
of $7,500 plus $7,833 to compensate full legal costs to the
date SGI offered to reinstate benefits; and
– a mix of full and double party/part costs based on SGI’s
conduct at trial.
• SGI appealed.
SGI V. WILSON, 2012 ONCA 106
• On appeal, SGI argued that breach of duty of good faith
could not arise in absence of damages flowing from the
breach of an express term in the underlying insurance
policy. Because benefits were never cut off, there was no
breach.
• Court of Appeal (“CA”) ruled that SGI made an
anticipatory breach of the policy when it announced
benefits would be suspended. Even without actual
suspension of benefits, SGI had breached the policy and
acted in bad faith.
SGI V. WILSON, 2012 ONCA 106
• However, the Plaintiff had made no express claim for
punitive damages in her pleadings and so the CA
overruled the punitive damage award. This dispensed
with the $7500 award for general punitive damages but
the CA allowed the full pre-trial legal expense award on
another ground - that these were the costs of mitigating
against an anticipated loss flowing from the policy
breach.
QUESTIONS?
These materials are necessarily of a general nature and
do not take into consideration any specific matter, client
or fact pattern.
Presented By:
Nigel Kent
604.643.3135
[email protected]
D. Lawrence Munn
604.643.3160
[email protected]
Satinder Sidhu
604.643.3119
[email protected]
Raman Johal
604.643.3145
[email protected]
THANK YOU
Glen Boswall
604.643.3125
[email protected]

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