The recent decision of Van Huizen v. Trisura Guarantee Insurance Company, reinforces that Courts have little interest in protracted coverage battles between parties.
The facts of the case are important but straight forward. There were three main entities. Mr. Barkley, Hastings Appraisal Services (“Hastings”), and Mr. Van Huizen. Mr. Barkley was a property appraiser. He was employed by Hastings. Mr. Van Huizen operated Hastings. Both Mr. Barkley and Mr. Van Huizen had their own professional liability insurance certificates.
In 2008, Mr. Barkley was hired to do an appraisal. It was alleged that he was negligent in his appraisal, resulting in an eventual loss for the property’s insurer when the mortgagor defaulted. The insurer commenced a claim against Mr. Barkley and Hastings for negligent appraisal. A second claim was commenced against Mr. Van Huizen alleging that Mr. Barkley was either his employee or agent and was therefore vicariously liable.
Mr. Van Huizen reported the claim to Trisura, which subsequently denied coverage claiming that the “wrongful act” of Mr. Barkley did not trigger coverage under the policy insuring Mr. Van Huizen.
Trisura alleged that Mr. Van Huizen had coverage only for a negligent act or omission committed by him personally. Their position was that because Mr. Barkley who prepared the appraisal, he could have coverage under the certificate of insurance issued to him but not Mr. Van Huizen. Although the policy included coverage for the vicarious liability of an employer, it required that the negligent act or omission be committed by the member to whom the certificate of insurance was issued. Alternatively, Trisura argued that if an employer was entitled to coverage for the vicarious liability that arose out of the professional services rendered by a member other than the one named in the certificate, Mr. Barkley was not an employee of Mr. Van Huizen or Hastings as both had denied same in their respective statements of defence that he was.
Mr. Van Huizen viewed the case in simpler terms. In the main action and the third party claim, he was alleged to have been Mr. Barkley’s employer and therefore vicariously liable for his negligent acts or omissions. He was insured both for legal claims arising from his personal actions and from his status as an employer. The denial that he was Mr. Barkley’s employer in his statement of defence or that he was vicariously liable did not have an impact on the duty to defend because it was the allegations in the statement of claim and third party claim that matter.
The court cited Coast Capital Equipment Finance Ltd v. Old Republic, 2018 ONCA 540, for the following principles of law on the interpretation of insurance contracts:
The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract.
Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.
Ambiguities will be construed against the insurer.
An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided.
Applying these principles and viewing the insurance contract as a whole, the court found Mr. Van Huizen had coverage for a legal claim arising from his own actions and also when it flows from his legal status as an employer of the alleged wrongdoer.
The Court found that under the policy, an insured does not have to be an appraiser; but he or she has to be an employer of someone who is and, if they are, the policy granted them coverage if they were alleged to be vicariously liable for the negligent acts or omissions of that member. As a result, Trisura had a duty to defend Mr. Van Huizen.
In parting, the court left the parties with this comment:
At its core, the liability issue is simple: did Mr. Barkley fall below the standard of care in preparation of the appraisal? Both he and Mr. Van Huizen carried insurance coverage for just this type of claim and yet, 10 years after that appraisal was done, litigation over coverage persists. I make this comment not in criticism of counsel but to affirm why, as the Court of Appeal has opined, these types of disputes need to be resolved expeditiously to avoid unnecessary costs and delay.
It is worth noting that in a perfect world, coverage litigation should be short and to the point. In many cases the issue should be determined solely on the pleadings and the contract of insurance. Courts will look for the reasonable interpretation of the clause that satisfies the contract as a whole. While creative and technical arguments have their place and should always be advanced, Justice Hurley would suggest that the ultimate question will be whether coverage makes sense in the circumstances.
An application was brought under rule 14.05(3)(d) of the Rules of Civil Procedure to determine rights that depend on contract interpretation. The applicant was National Gallery of Canada (“National Gallery”) and the respondents Lafleur de la Capitale (“Lafleur”) and Intact Insurance Company (“Intact”).
The application relates to two underlying actions arising out of a fatal trip and fall accident that occurred on August 27, 2013 on the National Gallery’s premises. Conrad Lafreniere, an employee of Lafleur, was performing routine maintenance work, cleaning leaves and debris, near the entrance ramp to the National Gallery’s underground parking garage. As a vehicle approached to enter the garage, Mr. Lafreniere moved over to the edge of the entrance ramp, fell over a concrete ledge, and suffered fatal injuries.
The first underlying action, against the National Gallery, was commenced by Mr. Lafreniere’s widow, Ms. Arsenault. The Workplace Safety and Insurance Board (“WSIB”) had a subrogated claim in relation to the claim commenced by Ms. Arsenault and payments made, by the WSIB, to her. The second underlying action, against the National Gallery, was commenced by Mr. Lafreniere’s mother and siblings pursuant to the Family Law Act.
The National Gallery and Lafleur entered into a Service Contract under which LaFleur was required to supply all labour and equipment to complete the interior and exterior maintenance throughout the premises. Lafleur was also responsible for properly training and supervising its employees and ensuring that all employees wore safety equipment and were kept safe while carrying out their work.
Under the Service Contract, Lafleur also agreed to indemnify and save harmless the National Gallery from all claims, demands, losses, costs, damages, actions, suits, or proceedings arising out of or in connection with its work under the contract.
Lafleur also agreed to obtain a CGL insurance policy under which National Gallery would be added as an additional named insured. The policy was issued to Lafleur by Intact.
In both underlying actions, the plaintiffs claimed that Mr. Lafreniere’s fall, and subsequent death, was caused by the negligence or breach of duty of the defendants, National Gallery and the Attorney General of Canada. All of the particulars of negligence, set out in paragraph 8, in the Statements of Claim related to design issues of the building and the property, including the failure to install a fence, railing or protective barrier in the area where Mr. Lafreniere fell, for example.
The National Gallery commenced a third party claim, in both underlying actions, against Lafleur for its failure to properly train Mr. Lafreniere, and also claimed contribution and indemnity from Lafleur.
Intact issued a Commercial General Liability policy to Lafleur. The National Gallery was named as an additional named insured under the policy by way of endorsement. The policy was with respect to the legal liability arising out of Lafleur’s operations under the Service Contract.
The court went on to examine the wording of the Services Contract between the National Gallery and Lafleur, in particular the paragraph dealing with “Indemnification by Contractor”. This section stated that Lafleur shall indemnify and save the National Gallery harmless from all claims . . . . “based upon, arising out of, related to, occasioned by or attributable to the activities of the Contractor, the Contractor’s servants, agents . . . in performing the Work . . . ”
The issue for the court was whether Lafleur and Intact owed a duty to defend the claims against the National Gallery in the underlying two actions.
In ultimately deciding in the negative, the court reviewed the leading case law, in this regard:
an insurer is required to defend a claim on behalf of an insured when the facts alleged in the pleadings, if proven true, would require the insurer to indemnify the insured for the claim: Progressive Homes Ltd v. Lombard General Insurance, 2010 SCC 33 (CanLII)
the duty of defend should, unless the contract of insurance indicates otherwise, be confined to the defence of claims which may be argued to fall under the policy: Nichols v. American Home Assuance Co., 1990 SCC (CanLII)
where there are multiple claims, or where only some of them are potentially covered, a court must assess the substance or the “true nature” of each claim contained within the pleadings to see if it falls within the scope of coverage: Papapetrou v 1054422 Ontario Ltd.2012 ONCA 506 (CanLII)
Following its review of these cases, the court agreed that the question of whether the duty to defend extends to the whole claim depends on the specific pleadings at issue and the resulting determination of the “true nature” of the claims.
In terms of the facts, in this application, the court concluded that in the underlying action brought in the name of Ms Arsenault, for WSIB’s subrogated interest, there was no duty on Intact to defend the National Gallery, for the following reasons:
The nature of the claim was really one of a subrogated workplace claim
The CGL coverage contained an exclusion for “Worker’s Compensation and Any Obligation of the Named Insured under a Workers’ Compensation plan”
The CGL coverage also contained an exclusion for bodily injury to an employee of the Insured arising out of and in the course of employment; Mr. Lafreniere was not an employee of the National Gallery nor in the course of employment with the National Gallery at the time of the accident
The Services Contract required that the National Gallery would be added as an additional insured – it was not listed as a named insured
The Certificate of Insurance required that the National Gallery was an additional Insured but only insofar as Legal Liability arising vicariously out of the operations of the Named Insured
With respect to the underlying action brought by the FLA claimants, the claim alleged that Mr. Lafreniere’s death was caused by the negligence of the National Gallery as occupier. The court found that the allegations in the Statement of Claim related to design issues of the building and the property and that the indemnity provisions in the policy must be read in conjunction with the allegations in the Statement of Claim.
The wording of the indemnity provision made it clear, to the court, that indemnity was “based upon, arising out of, related to, occasioned by or attributable to the activities of the Contractor.” Lafleur was the Contractor and was not named as a party in the Statement of Claim. There were no allegations in the Statement of Claim that alleged negligence or tortious activities of Lafleur so no indemnification could be triggered. The allegations in the Statement of Claim related to design and control by the National Gallery as occupier and, therefore, could not be related to or attributable to the activities of Lafleur.
The court went on to state that, on its face, the CGL policy would cover bodily injury and would be for the type of loss that was sustained. Even though there were no exclusions that applied, the major challenge, for National Gallery, was that the allegations in the Statement of Claim fell outside of the indemnity agreement.
The court concluded that the allegations in the Statement of Claim did not arise out of the activities of the Contractor, Lafleur. There were no allegations in the Statement of Claim that Lafleur or its servants did anything wrong; that is why the claim falls outside of the indemnity agreement.
Based on this analysis, the court found that neither Lafleur or Intact owed the National Gallery a duty to defend.
While this case does not offer anything new about the duty to defend, it provides a good analysis of the issues that arise in duty to defend disputes and a reminder that the allegations in the Statement of Claim must be carefully considered, along with the wording in the indemnity provision of the contract.
The matter of Rosen Express v. Northbridge is yet another case of stolen cargo for which Rosen sought coverage. The case underlines for insurers that courts will often take a broad approach to coverage and they must provide supporting evidence when alleging misrepresentation.
This case involved electronic goods which were ultimately destined for Best Buy in Quebec. Affidavit evidence supported that Greenway Carriers transported the goods to Rosen Express by leaving a Greenway trailer in Rosen’s yard. Rosen ultimately was tasked with delivering the trailer to Quebec. Notably, the Greenway and Rosen properties were directly beside one another.
The insurer argued that there should be no coverage for two reasons. First, it argued the goods were not in Rosen’s custody and thus not covered by the policy. In support of this, the insurer argued that the goods remained in Greenway’s trailer and it was a Greenway employee who completed the police report. The court rejected these arguments as speculative and accepted Rosen’s evidence that it intended to transport the goods using the Greenway trailer.
The court also found, based on the policy wording, that the cargo would be covered regardless of whether they were dropped off at the Rosen property. Greenway was found to be acting as Rosen’s agent and therefore the goods were considered to be in Rosen’s custody even if on the Greenway property.
Second, the insurer argued that Rosen made a material misrepresentation when it applied for insurance because it failed to disclose that it would be transporting electronic goods. There was a space on the application to specify the type(s) of electronic goods being transported, which was left blank. The application described the types of goods very generally, including “consumer goods”. In the application, Rosen provided evidence that electronics comprised 1 to 2% of its shipments.
Morgan J. rejected the insurer’s submission that there was a material misrepresentation. It was significant that the insurer did not provide any evidence to support that it was induced by the misrepresentation or that it would have treated the application differently. The court differentiated the case from one where an insured transports something drastically more dangerous or expensive than that declared on the application (e.g. explosives or gold bullion).
Although the court rejected the insurer’s coverage arguments, Rosen was not entitled to any compensation. There was a lack of evidence to support the value of the cargo as no claim had been made against Rosen. While there was some evidence on the bill of lading and post-loss amounts had been withheld from Rosen, the court was not satisfied that the cargo claim value could be determined with accuracy. Therefore, the court left for another day the issue as to whether the policy would respond to a cargo claim and the amount of same.
What happens when an auto insurer sends a policy termination notice to the named insured, but the named insured does not own the vehicle insured under the policy?
In Ontario (Minister of Finance) v. Traders General Insurance Co. (c.o.b. Aviva Traders) an individual was seriously injured as a passenger in a Hyundai motor vehicle owed by Peter Leonard. Peter Leonard’s spouse, Anne Leonard, had a policy with Traders that was terminated for non-payment of premiums prior to the accident. The Hyundai had been added to the policy a couple of years prior to the accident.
To cancel Anne Leonard’s policy, Traders had sent a termination notice by registered mail. It did not send a termination notice to Peter Leonard, and appeared to have no knowledge at the time of cancellation that he owned the Hyundai insured under the policy.
The injured party made a claim to the Fund for accident benefits and the Fund subsequently commenced a priority dispute with Traders, arguing – for a number of reasons – that the policy had been improperly cancelled and remained in force at the time of the accident.
The Superior Court sided with the Fund and held that Traders did not terminate the policy properly because it had failed to send the owner of the vehicle (Peter) a termination notice. The court stressed that owners must be properly identified at policy inception and thereafter, strict compliance with the statutory cancellation requirements is necessary, and insurers must notify named insureds of attempts to cancel a policy. The court held that under statutory condition 11, Traders could not validly cancel the policy unless it gave Peter Leonard fifteen days’ notice of the cancellation. Thus, the policy was not cancelled properly and the court ordered Traders to pay the Fund the amount of its accident benefits settlement with the injured person.
The Court of Appeal agreed with the Superior Court and dismissed the appeal. Among other things, the Court of Appeal held that Traders failed to comply with Statutory Condition 11 (1), which requires the notice to be given to “the insured”. In this case, Peter was an “insured” because he was the owner of the vehicle:
The policy that the appellant purported to terminate is an owner’s policy, which is defined in s. 1 of the Insurance Act as:
A motor vehicle liability policy insuring a person in respect of the ownership, use or occupation of an automobile owned by that person and within the description or definition thereof in the policy. [Emphasis added.]
It was never an issue in this case that before the purported termination, the policy was valid insurance that insured Peter Leonard as the owner of the insured vehicle.
Therefore, because the policy at issue was valid, and because it was an owner’s policy, the “insured” under that policy was Peter Leonard, the owner of the vehicles insured by the policy.
To summarize, the only issue was whether the notice of termination had the effect of terminating that policy. The notice was only sent to Anne Leonard, who was not the insured for the 1991 Hyundai vehicle because she did not own it. Because the notice of termination was not sent to the insured, as required by statutory condition 11(1), it was not effective to terminate the policy, and the trial judge made no error in so holding.
Traders should raise alarms for insurers who might not have done their due diligence when writing owners policies for people who might not have owned the vehicle being insured. This casereinforces the principle that auto insurers are held to extremely strict compliance standards when it comes to terminating an auto policy. The courts will not endorse a purported policy termination if the insurer failed to dot its I’s and cross it’s T’s.
Readers might recall the troubling decision in Echelon General Insurance Company v. Her Majesty the Queen, wherein the Superior Court held that an improperly terminated policy remains in full force and effect (in perpetuity) until the policy is terminated properly. Of course insurers rarely, if ever, revisit policies that have they have purported to terminate until a loss occurs, meaning that these improperly terminated policies can expose insurers to paying claims on policies that have not been generating any premiums for possibly many years.
To every insurer who writes auto policies, I ask: Do you know who owns the vehicles insured under your policies?
What happens when a Certificate of Automobile Insurance specifies that the policy includes coverages under certain endorsements, when those endorsements never make it onto the policy?
The Certificate and OPCF Endorsements
Ontario’s standard automobile policy (OAP1) offers a number of forms and endorsements that FSCO approves.
One such form is the Certificate of Insurance, which is an approved form that sets out, among other things, the specific terms of coverages and endorsements that form part of the policy in question. Although the standard Certificate is approved by the Superintendent of Insurance, insurers are allowed to submit their own version of a Certificate for approval, something that many insurers do.
Meanwhile, two of many available endorsements to the auto policy are, as follows:
An OPCF 23A endorsement provides for payment to a lienholder in the event of damage to the vehicle.
An OPCF 5 endorsement allows the lessor to rent or lease automobile(s) to the lessee who has completed the Ontario Application for Automobile Insurance - Owner’s Form (OAF 1). The endorsement expressly allows a lessor to rent or lease a motor vehicle to a lessee who has its own auto insurance policy. It also provides the standard auto coverages to a lessee under the policy as if the lessee were the named insured.
In Coast Capital v. Old Republic, a trucking company named 62254641 Canada Inc. (“622”) leased a 2008 Peterbilt tractor from a third party. Old Republic issued a Certificate of Automobile Insurance to 622 that described that vehicle. The Certificate also included a box for describing lessors and lienholders. The box stated:
Lienholders (to whom loss may be jointly payable) (if applicable)
AS PER OPCF 23A FORMS
Lessor (if applicable)
AS PER OPCF 5 FORMS
On June 15, 2012, 622 leased two more tractors, this time from Coast Capital. Coast Capital had informed its insurance broker in writing that it wanted third party liability coverage in the minimum amount of $2,000,000, and indicated “The policy must contain an OPCF #5 Permission to Lease or Rent Endorsement.” This document was found in Old Republic’s underwriting file. However, there was no evidence as to when it received that document.
On July 5, 2012, Old Republic issued an OPCF 25 Change Form showing 622 as the insured, and listing the two new Peterbilt tractors. The new tractors were identified as automobiles 2 and 4. The policy change that was noted on the form indicates “Automobile added to policy (Auto No. 2 and 4)”. The OPCF 25 also listed Coast Capital as the lessor of vehicles 2 and 4. It also recited that “all other terms and conditions of the policy remain the same”.
Of note, the OPCF 25 listed other related Endorsements that were mentioned in the original Certificate but failed to mention the OPCF 23A or 5 forms.
On November 12, 2012, one of the 2009 leased Peterbilt tractors (auto 2 or 4) was involved in a motor vehicle accident. Old Republic denied liability coverage to Coast Capital, taking the position that the OPCF 5 was not part of the policy.
The application judge held that the policy included an OPCF 23A form but did not contain an OPCF 5 form. He held that the OPCF 5 was never part of the Certificate of Insurance or added by the OPCF 25 form.
The Court of Appeal allowed the appeal and found coverage for Coast Capital under the policy. At the start of its analysis, the Court held that coverage under the standard auto policy is defined by the Certificate of Insurance on any given policy
The Certificate in question was not on the default Certificate form approved by the Superintendent, but it was on a FSCO approved form that Old Republic had submitted for its use. The Court noted that Old Republic had added the phrase “AS PER OPCF 5 FORMS” to the original Certificate in this matter, but that the phrase was not included on Old Republic’s approved form. The Court held that if Old Republic added the reference to the OPCF 5 on the Certificate in this case, the Certificate must have intended to include coverage for lessors and lessees – even though the actual OPCF 5 form was not attached to this policy. Further, had Old Republic included the phrase “AS PER OPCF 5 FORMS” to its approved Certificate, it would mean that its usual practice was to insure both lessees and lessors (as the OPCF 5 would do). The court concluded that if there was any ambiguity, it was caused by Old Republic’s uses of an “unapproved altered standard form”, and it would have to bear the consequences of doing so.
The Court also held that this finding was consistent with the commercial realities of the transaction. It concluded:
I conclude that the OPCF 5 endorsement is part of the Certificate; the insurer intended to provide liability coverage to both the lessor and lessee. The OPCF 25 Change Form did not delete that coverage, but added new vehicles. Absent deletion of the OPCF 5 coverage, I conclude that Coast Capital is entitled to the benefit of that coverage. Old Republic’s insertion of the OPCF 5 language into the Certificate accords with the commercial reality of the transaction. Old Republic was providing automobile insurance to a trucking company’s fleet. The trucking company leased multiple vehicles, to the knowledge of the insurer. It makes commercial sense for the lessors who were financing the purchase of the vehicles to protect themselves from liability as the owners of those vehicles when they would have no control over the trucking company operations.
There is nothing in the Certificate that suggests that the liability coverage described in the policy is solely for the benefit of the lessee.
The major takeaway from this case is that the Certificate of Insurance governs coverage under the policy. If the Certificate references a particular Endorsement on the policy that is not necessarily attached to the policy, the Court will defer to the coverage specified on the actual Certificate used in the case to determine coverage.
Insurance companies that insure leased/rented vehicles – and leasing/rental companies that lease/rent vehicles to others -- should review their various Certificates on a case-by-case basis to make sure they contain the coverages that the parties intended to be covered.
Does Uber’s fleet policy with Intact provide primary accident benefits coverage to passengers who do not have their own auto insurance policies? The first arbitration decision on this issue says “yes”.
In July 2016, FSCO approved a new standard fleet auto policy to provide primary coverage for private passenger vehicles engaged in “ridesharing” activities with a “transportation network company” or TNC. Intact Insurance then issued the fleet policy to Uber and Rasier Operations B.V., which contracts with individual “rideshare drivers” who use their own automobiles for Uber.
The policy was created to address a coverage gap in the standard OAP 1 auto policy in Ontario. Section 1.8.1 of the OAP 1 excludes coverage if the vehicle is being used to carry paying passengers. This meant that every time an Uber driver was operating a vehicle and engaged in Uber activities, he or she was violating the OAP 1 and driving without full coverage.
The policy purports to fill the coverage gap in the OAP 1 by eliminating the exclusion for “carrying paid passengers” noted in Section 1.8.1. Section 2 of the Endorsement under the policy (IPCF-6TN), specifies that the policy provides “primary coverage” for the automobile while it is being used for ridesharing purposes:
Ontario’s Accident Benefits Priority Scheme
Subsection 268(2) of the Insurance Act sets out a priority scheme for determining which insurer is responsible for paying a claimant statutory accident benefits after an automobile accident:
The claimant first has recourse against the insurer of an automobile in respect of which they are “an insured” (i.e., named insured, spouse, dependant, listed driver).
If recovery is unavailable under such policy, the claimant has recourse against the insurer of the automobile that they were in or which struck them.
If recovery in unavailable under such policy, the claimant has recourse against the insurer of any other vehicle involved in the accident.
Finally, if recovery in unavailable under such policy, the claimant has recourse against the Motor Vehicle Accident Claims Fund.
Ontario’s Priority Scheme and Uber
After Intact’s “Uber policy” was released, there was never any doubt that an Uber driver injured in an accident while driving for Uber would have recourse first against Intact, under the Uber policy, pursuant to section 2 of the Endorsement. There was also no question that a passenger who happened to have their own auto policy would have recourse against that policy for their accident benefits, pursuant to section 268 (2) of the Act.
However, Intact started taking the position that its policy did not provide “primary coverage” to passengers. Intact asserted that the second paragraph in section 2 of the Endorsement specifies that “for greater clarity…” Intact would be primary over any other policy insuring the rideshare driver. According to Intact, it followed that the policy was primary only with respect to the driver’s claims and not the passenger’s claims.
Intact also argued that any Uber vehicle was insured by two insurers at the time of an accident: The underlying insurer of the vehicle and Intact. Therefore, Intact asserted that passengers, who did not have their own policies, at the very least, would have coverage under both policies.
The First Uber Decision
In Northbridge v. Intact, the claimant passenger was involved in an accident while he was using an Uber to get from Point A to Point B. He applied to Northbridge for accident benefits, seeking recourse against the (underlying) insurer of the vehicle he was in. Northbridge then pursued a priority dispute against Intact, who took the position that it was not the primary payor of the passenger’s benefits.
Arbitrator Vance Cooper sided with Northbridge, finding that the wording in the Endorsement was clear, unequivocal, and unambiguous that the policy was primary for all accident benefits claims arising from passengers who did not have their own insurance:
However, the grant of coverage set out in Section 2. of IPCF 6TN - Coverage for Ridesharing Endorsement, goes further. It clearly, unequivocally and without ambiguity specifies that Intact, as the ridesharing insurer, provides primary coverage for the automobile only while the automobile is used in the pre-acceptance period and the postacceptance period. While Section 2 provides "greater clarity" for purposes of the rideshare driver's accident benefits coverage and the priority of third party liability coverage, this does not limit the grant of coverage specified in Section 2.
I am satisfied, on a plain reading of IPCF 6TN - Coverage for Ridesharing Endorsement, that Intact provides primary coverage for statutory accident benefits in relation to the claim of Romello B., being an occupant in the rideshare vehicle during the postacceptance period and by reason of Ramella B. having no access to any other policy of insurance (apart from the Northbridge policy).
Arbitrator Cooper also disagreed with Intact that the passenger could choose as between Intact and Northbridge. He held that Intact’s argument ignored the clear and unambiguous wording in the Endorsement, since it specifies that Intact is primary.
In my "humble" opinion, Arbitrator Cooper’s decision is right on the mark. Not only does it pay homage to the clear wording in the policy; it is consistent with the primary purpose of the policy, which is to fill the coverage gap in auto insurance during Uber activities. It also protects underlying insurers from paying benefits arising from risks they never intended to cover.
We expect Intact will appeal Arbitrator Cooper’s decision. In the interim, the Northbridge decision is a huge victory for underlying insurers, especially for those who not have any appetite for Uber risks.
My office is currently involved in several other arbitration cases against Intact on the same facts. Another hearing against Intact on the same facts is scheduled for June 18, 2018 before Arbitrator Philippa Samworth.
The Uber Coverage Debate appears to be far from resolved.
On May 9, the Ontario Superior Court released a decision which reminds us of three important lessons:
A court will allow juries to use their common sense to make decisions;
Telling your insurer you had a fur coat when you didn’t will probably be considered a wilful misrepresentation; and,
Relief from forfeiture is not an available remedy when you make a wilful misrepresentation.
In 2003, a fire occurred in the Pinders’ home, the Plaintiffs. The Pinders submitted a claim to their insurer, Farmers’ Mutual Insurance Company, for various items that they claimed were lost in the fire. Farmers’ Mutual denied coverage citing, among other things, that the Pinders were using portable electric heaters throughout their home and that they made wilfully false statements on the Proof of Loss form. In December 2017, a jury trial was conducted.
The jury decided that the Pinders were in fact using portable electric heaters to warm their house (presumably voiding coverage) and they did make wilfully false statements in the Proof of Loss form effectively voiding their insurance coverage. The Pinders brought a motion to, among other things, not enter the jury’s verdict on account that there was no evidence to support the jury’s finding and grant them relief from forfeiture.
Was there Evidence to Support the Jury’s Finding?
Yes. Justice Vallee noted that a judge may refuse to accept a jury’s verdict only when the decision is “bad in law or devoid of evidentiary support” – in other words, if there is no evidence to support the conclusion. This was not such a case.
The Pinders argued that throughout the trial, it was never established or even uttered that they used portable electric heaters to warm the majority of their house. Counsel for Farmers’ Mutual urged the jury to consider the totality of the evidence and infer that most of the house was in fact being warmed by portable heaters. Although circumstantial, Justice Vallee decided that there was enough evidence to allow the jury to come to their conclusion.
Is Relief from Forfeiture an Available Remedy?
No. Relief from forfeiture is a principle enumerated in s.129 of the Insurance Act and s.98 of the Courts of Justice Act. It is an equitable remedy that allows a court to “look past” an insured’s improper compliance with certain contractual or statutory requirements and force an insurer to maintain coverage for a loss.
Justice Vallee cited several cases which were appropriate candidates for such a remedy: a late filing of a notice to arbitrate, a Proof of Loss form that did not provide adequate particulars of items lost, or a party’s exaggeration of a claim designed for “puffery” or to establish a better negotiating position.
In this case, Farmers’ Mutual argued that the Pinders’ policy was void because they wilfully misrepresented items on the Proof of Loss. This was differentiated from alleging fraud as that would require the element of intent to deceive. During the trial, Ms. Pinder was cross-examined regarding each item on the Proof of Loss. She admitted that some items were duplications, some were described incorrectly, some values were wrong, and that some items didn’t exist. Among those items was a fur coat which, despite significant investigation, could not be proven to have ever been bought. In fact, considering that the Pinders were receiving social assistance and were using their RRSPs at the time in question, they simply could not have made such a lavish purchase.
The jury had the latitude to believe or not believe what the Pinders were saying and more importantly were not tasked with finding intent to deceive Farmers’ Mutual. The jury concluded that the Pinders did not make wilfully false statements regarding 29 items and did make wilfully false statements regarding 39 items, including the fur coat.
Justice Vallee concluded that this was not a case of improper compliance but one of wilful misrepresentation which did not invite relief from forfeiture as an available remedy.
Judgment was entered in favour of Farmers’ Mutual.
The moral of this story is simple: wilful misrepresentation does not require an insured’s intent to deceive their insurer – fraud, on the other hand, does. An insured has an obligation to investigate and report, to the best of their ability, the items that were lost and their accurate value. The courts will allow some flexibility regarding compliance with such contractual reporting obligations and may find it equitable to relieve an insured if strict compliance isn’t satisfied – wilful misrepresentation is not an instance when such relief will be granted.
It is also important to remember that courts will typically trust juries to use their judgment and life experience to consider the available evidence and come to their appropriate conclusions. We, like the courts, should trust juries to conclude that if it walks like a duck and quacks like a duck, it’s probably a furry duck.
Stas practices in insurance-related litigation. He has a broad range of experience including tort claims, accident benefits, subrogation, priority and loss transfer disputes, WSIB matters, and fraudulent claims. Read more...
Following the creation of the tort of intrusion upon seclusion in 2012, we have seen numerous cases that have clarified the application of same. In the most recent pronouncement, Oliveira v. Aviva Canada Inc., the Court of Appeal dealt with whether the duty to defend extends to an employee who allegedly improperly accessed the Plaintiff’s confidential information.
The facts of the underlying claim were as follows. The Plaintiff, J.L., was admitted to the emergency department of a hospital because of postpartum psychosis. Ms. Oliveira was a nurse at the hospital. The Plaintiff was treated there and at another hospital for approximately 18 days. Following her return home, the neighbour’s son began asking pointed questions about her health. J.L.’s health status, however, had never been shared with the neighbour. The Plaintiff became suspicious after she realized that the neighbour was a relative of Ms. Oliveira. When J.L. complained to the hospital, an investigation revealed that Ms. Oliveira had repeatedly accessed the Plaintiff’s hospital record without any valid reason.
Ms. Oliveira brought an Application for coverage under the hospital’s insurance policy. In this decision, the Court noted that the Hospital was insured by Aviva pursuant to a “Professional and General Liability and Comprehensive Dishonesty, Disappearance and Destruction Insurance Policy.” Hospital employees, like the Applicant, were additional insureds under the policy. Aviva argued that they did not owe a duty of care to Ms. Oliveira because the policy only applied where employees were “acting under the direction of” the Hospital and “only in respect of liability arising from the operations of” the Hospital. Since the Applicant was not doing either, then there was no duty to defend.
Specifically, Aviva alleged that Ms. Oliveira was a “lone wolf, deliberately engaging in activities that [were] not in any way related to her employment at the Hospital, and in fact [were] contrary to her obligations as an employee of the Hospital.” As she abused her position to access private information, she could not be acting under the direction of the Hospital. The Application judge rejected this argument because the policy specifically provided coverage for “invasion or violation of privacy” and for “invasion or violation of the right of privacy.” The policy did not limit coverage for privacy breaches or other torts to Hospital employees within a patient’s circle of care. The only qualification was that the employee had to be acting under the direction of the Hospital. The Judge held that whether an employee was acting under the direction of a named insured (in this case the Hospital) did not turn on whether there was actual personal control at the moment of the incident. Rather, control flowed from the relationship generally and from the employer’s ability to terminate the employee’s employment. The Court found that Ms. Oliveira was acting under the direction of the Hospital for the purposes of determining whether Aviva owed her a duty of care.
The second component that needed to be satisfied in order for the duty of care to be extended was that it only covered employees of the Hospital in respect of liability “arising from the operations” of the Hospital. On this point, Aviva argued that since Ms. Oliveira was not within the patient’s circle of care, her conduct did not arise from the Hospital’s operations. The Judge noted that in a hospital setting, intrusion upon seclusion captured inappropriate access to medical records. As a result, Aviva sought to use the very act that they agreed to insure against as an excuse to deny the duty to defend. The Court held that to accept Aviva’s argument would nullify a significant portion of the privacy coverage that the policy purported to afford. This was improper.
Aviva’s appeal was dismissed by the Court of Appeal who found that the language of the policy clearly covered claims for the invasion of privacy which included intrusion upon seclusion. Specifically, the Court of Appeal held:
The applicant was employed by the hospital as a nurse and while on duty, in the course of the hospital’s operations, to use the language of the policy (which would include the maintenance of patient’s health records), she accessed the records that she had apparently no business doing because she was not involved in J.L.’s care. The applicant was employed by the hospital, (she was essentially an employee 24/7) but was only acting under the direction of the hospital when she was on duty as such.
The Court of Appeal held that the common sense interpretation of the language supported a finding that Ms. Oliveira was entitled to a duty to defence. It was plain that the policy, in covering invasion of privacy, intended to cover the type of conduct alleged by the Plaintiff.
In light of this decision, in instances where the policy provides for broadened privacy coverage, the insurer is unlikely to be able to rely on those same provisions to deny a duty to defend. It remains to be seen, however, whether a duty to indemnify will be ordered in similar circumstances.
A recent Court of Appeal decision outlined the breadth of an insurer’s duty to defend.
In Ernst v. Northbridge Personal Insurance Corporation, the application judge ruled that the insurer had a duty to defend the driver of an ATV. The insurance policy extended coverage to an ATV if it was owned by the defendant driver and the defendant was not an occupier of the property on which the accident occurred (note, we are seeing more and more of these types of cases). The defendants were in the process of purchasing both the ATV and the property from the former owners, however the accident occurred before the closing date. The insurer denied coverage on the basis that at the time of the accident, the ATV was being operated on the ATV owner’s private property, and therefore was not considered an automobile.
In coming to the decision that the insurer was obligated to defend the defendant driver, the application judge explored possible outcomes rather than simply evaluating the pleadings, and he assumed that the defendants were not occupiers of the property (thereby triggering a duty to defend) because the former/potential current owners of the ATV were occupiers of the property at the time of the accident. Of note, it was unclear at the time of pleadings whether the defendants had finalized the purchase of the ATV from the original owners, as they were in the process of doing so.
On appeal, the Court of Appeal noted the law governing pleadings explained in Monenco Ltd. V. Commonwealth Insurance Co.,  2 S.C.R. 699, 2001 SCC 49 (CanLII), stating:
Whether an insurer is bound to defend a particular claim has been conventionally addressed by relying on the allegations made in the pleadings filed against the insured, usually in the form of a statement of claim. If the pleadings allege facts which, if tru, would require the insurer to indemnify the insured for the claim, then the insurer is obliged to provide a defence. This remains so even though the actual facts may differ from the allegations pleaded.
[I]t is not necessary to prove that the obligation to indemnify will in fact arise in order to trigger the duty to defend. … The mere possibility that a claim falling within the policy may succeed will suffice.
The Court noted that the pleadings included allegations both that the defendants were owners of the ATV and occupiers of the property, and that the ATV’s original owners were the owners of the ATV and occupiers of the property at the relevant time. The application judge found that the pleadings alleged facts that would permit a finding that the original ATV owners, and not the defendants, were the occupiers at the relevant time. Even if this was not ultimately factual, it was sufficient to trigger the appellant’s duty to defend. The Court found that there was no requirement that the allegations against the defendants be expressly pleaded in the alternative for the duty to defend to arise. The Court took no issue with the application judge reading the pleadings widely, and adopting a reading of the pleadings that supported a duty to defend.
The takeaway from this decision is that courts will read pleadings with a wide latitude in order to find a duty on an insurer to defend an insured. If there is a possibility, based on the pleadings, that there may reasonably be a situation in which the insurer will have the duty to defend, even though those facts might ultimately be proven false, there is a high possibility that a court will find a positive duty to defend. Insurers should hesitate to refuse to defend their insured if the pleadings are structured in a way that a court would find that a duty is possible. If you are unsure of your exposure in this regard, contact your lawyer to provide their opinion.
Gabe Flatt has an insurance law practice that has focused exclusively on insurance defence for the past 8 years. He has developed an expertise in complex priority and loss transfer disputes as well as general coverage issues.
On April 10, 2018, the Divisional Court released an important decision regarding ATV incidents outside of Ontario. Specifically, in Benson v. Belair Insurance Co. Inc., the Divisional Court considered whether the Claimant was entitled to statutory accident benefits arising from an incident while in British Columbia.
Mr. Benson was a resident of Ontario who had been living in British Columbia. He was injured after he fell from an ATV that was being driven on a public trail owned and occupied by the Northern Rockies Regional Municipality. The ATV was owned by a resident of British Columbia. Since there was no requirement that the ATV be insured in British Columbia, it was not.
At the time of the accident, Mr. Benson had his own insurance policy with Belair in Ontario. The policy was a standard OAP-1 that did not include coverage for any ATVs.
The Claimant applied under his own insurance policy for accident benefits. The Insurer denied coverage because the ATV was not an “automobile” within the meaning of the Statutory Accident Benefits Schedule – Effective September 1, 2010. The Claimant filed a dispute with the Financial Services Commission of Ontario. The Arbitrator found that the ATV was not an automobile. While the Claimant appealed the finding, the Director’s Delegate dismissed the appeal.
On Judicial Review, the Divisional Court noted that the question to be determined was whether an ATV that was owned, registered and operated in British Columbia was an automobile covered by the Ontario SABS.
The Divisional Court held that the appropriate legislation to be applied was the legislation in British Columbia. The ATV was operated and the accident happened in British Columbia. The decision to have, or not to have, insurance for this vehicle was made in British Columbia. As a result, British Columbia legislation must determine whether there is entitlement to benefits resulting from the accident.
Reference was made to the Court of Appeal’s decision in Adams v. Pineland Amusement Ltd. (2007 ONCA 844) which found that in determining a case of liability insurance, “the proper question is whether the vehicle [involved in the accident] required motor vehicle insurance at the time and in the circumstances of the incident.” Applying this question in the present case, at the time and in the circumstances of this accident, the ATV was not insured.
The Divisional Court also held that there was no basis to claim that Mr. Benson had a legitimate expectation that Belair would cover an accident involving ATVs as there were no ATVs listed on the subject insurance policy.
The last issue considered by the Divisional Court was the Ontario Off-Road Vehicle Act which stated that “no person shall drive an off-road vehicle unless it is insured under a motor vehicle liability policy” under the Ontario Insurance Act. The Divisional Court concluded that it was reasonable to assume that the provision only required this of ATVs in Ontario, not ATVs in British Columbia.
This decision is of assistance to insurers who are presented with claims outside of Ontario. It is clear that in determining whether the vehicle is an “automobile” within the meaning of the SABS, the trier of fact will consider the applicable law in the jurisdiction where the incident occurred; not the law in Ontario. A word of caution, however, the Divisional Court has left the door open for another party to argue that there was an expectation that the vehicle they were operating was an “automobile” under the SABS. This limited exception is only where a similar vehicle was listed on their own Ontario insurance policy.