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...
Risk of personal injury after vehicle stolen by two minors from commercial garage found not to be reasonably foreseeable.
The Supreme Court of Canada has weighed in on the duty of care owed by a business that stores vehicles to someone who is injured following the theft of a vehicle. This case arose after two teenagers drank alcohol, smoked marijuana, stole a vehicle from an unsecured car garage in town and subsequently crashed the vehicle. The passenger in the vehicle suffered a catastrophic brain injury and commenced a lawsuit against the driver, the driver’s mother (who supplied some of the alcohol) and the commercial car garage.
The issues the Court weighed in on were as follows:
Was the risk of personal injury reasonably foreseeable in this case?
Did the garage have a positive duty to guard against the risk of theft by minors?
Could illegal conduct sever any proximity or negate a prima facieduty of care?
Was the Risk Reasonably Foreseeable?
The Court commented that the foreseeability question must be framed in a way that links the impugned act (leaving the vehicle unsecured) to the harm suffered by the plaintiff (physical injury). It was not enough simply to determine whether the theft of the vehicle was reasonably foreseeable. The proper question to be asked was whether the personal injury suffered was reasonably foreseeable to someone in the position of the defendant when considering the security of the vehicles stored at the garage.
The Court noted that the evidence did not suggest that a vehicle, if stolen, would be operated in an unsafe manner, failed to address the risk of theft by a minor, and failed to address the risk of theft leading to an accident causing injury. To find a duty, there must be some circumstance or evidence to suggest that a person in the position of the defendant ought to have reasonably foreseen the risk of injury — that the stolen vehicle could be operated unsafely.
While in this case, it was argued that it was the risk of theft by minors that could make the risk of the unsafe operation of the stolen vehicle foreseeable, had there been other evidence or circumstances making the risk of personal injury reasonably foreseeable, a duty of care would exist.
Duty to Guard Against Risk of Theft by Minors
Although there was no need to address this given the conclusion that the injury was not reasonably foreseeable, the Court provided commentary on this issue. It was argued that the commercial garage was analogous to a commercial vendor of alcohol who has a duty to those who may be harmed by the damage caused by an intoxicated patron. The Court remarked that this analogy was misguided. While a garage benefits financially from servicing cars, they do not profit from or encourage the persons who steal cars. Having many vehicles does not necessarily create a risk of personal injury.
Additionally, the mere fact that the plaintiff was a minor was insufficient to establish a positive duty to act. Tort law does not make everyone responsible for the safety of children at all times.
Could Illegal Conduct Sever / Negate Duty of Care?
Although there was no need to address this given the conclusion that the injury was not reasonably foreseeable, the Court provided commentary on this issue. The notion that illegal or immoral conduct by the plaintiff precludes the existence of a duty of care has consistently been rejected by the Court. Whether the personal injury caused by unsafe driving of the stolen car is suffered by the thief or a third party makes no analytical difference to the duty of care analysis.
The Court concluded that, while the risk of theft was reasonably foreseeable, the evidence did not establish that it was foreseeable that someone could be injured by the stolen vehicle. There was no evidence to support the inference that the stolen vehicle might be operated in an unsafe manner causing injury. It concluded that a business will only owe a duty to someone who is injured following the theft of a vehicle when, in addition to theft, the unsafe operation of the stolen vehicle was reasonably foreseeable.
The Court made it clear that its decision was based on the evidentiary record in this case. This is not to say that a duty of care will never exist when a car is stolen from a commercial establishment and involved in an accident. Another set of facts and evidence may establish that the business ought to have foreseen the risk of personal injury. In this case, the plaintiff only established a risk of theft in general. However, there was nothing to connect the risk of theft of the car to the risk of someone being physically injured.
case has liability implications for both personal and commercial auto insurers. The Court did not accept that anyone that leaves a vehicle unlocked with the keys in it should always reasonably anticipate that someone could be injured if the vehicle were stolen, noting this would extend tort liability too far. Physical injury is only foreseeable when there is something in the facts to suggest that there is not only a risk of theft, but that the stolen vehicle might be operated in a dangerous manner. A commercial entity will not be held liable simply because it failed to properly secure vehicles on its premises. The Court has made it clear that plaintiffs must now jump an additional hurdle in order to establish a duty of care against an owner / entity with possession of a vehicle after the vehicle is stolen and personal injury ensues.
A Form 1, or Assessment of Attendant Care Needs, contains three parts/levels of attendant care. For each part/level, a particular hourly rate is assigned which is used to calculate an insured persons monthly attendant care needs. The hourly rate used in the Form 1 is governed by the applicable Superintendent’s Guideline.
In August 2017, the LAT released the decision of AH v. Belair Direct Insurance (2017 CanLII 56675 (ON LAT)). While this decision addressed various treatment plans, the main focus of this case was attendant care. The Adjudicator considered the invoices submitted to claim attendant care and found that the service provider did not provide the level of detail for each item as is normally indicated on a Form 1. Rather, only a general description of care was provided, which was essentially the same from month to month. The Adjudicator also noted that the service provider invoiced her services at the rate of $35.50 per hour. The Adjudicator concluded that the service provider did not provide a “proper breakdown of the levels of care provided and invoiced over and above the FSCO ACB Guideline”. The Adjudicator then went on to perform her own calculation of the services payable using the hourly rates set out in the Form 1 and Superintendent’s Guideline.
Overall, the “take away” from this case was that a service provider should only be charging the hourly rates outlined in the Form 1 for the services provided under each part/level of care.
This decision was controversial and caused some confusion in the industry.
In response, FSCO released a new Attendant Care Hourly Rate Guideline (Superintendent’s Guideline No 01/18) in April 2018. The accompanying Auto Bulletin (No. A-03/18) confirmed that the Guideline had been revised “to require that the maximum hourly rates set out in the guideline be used with the Assessment of Attendant Care Needs (Form 1) to calculate the monthly attendant care benefit”. This Bulletin also notes that “Previous guidelines could be interpreted to strictly apply the maximum hourly rates as the maximum payable for attendant care services, rather than using the hourly rates to calculate a monthly benefit as was originally intended.”
This new Guideline and Bulletin clarify that the hourly rates used in the Form 1 are merely a tool used to calculate the total amount of attendant care payable per month and is not intended to dictate the actual hourly rate that may be charged by a service provider for the care provided.
It is worth noting that, while this new Guideline technically only applies to accidents that occur on or after April 14, 2018, Adjudicators may find it persuasive when assessing attendant care claims arising from accidents that occurred prior to that date.
Julianne defends insurance claims covering all aspects of general insurance liability including motor vehicle accidents, occupiers’ liability, slip and falls, subrogated losses and general negligence claims. Read more...
On April 19, 2018 the Ontario Court of Appeal reversed the trial decision in MacIvor v Pitney Bowes, finding that the LTD policy in question covers claims that arise during the course of an employee’s employment, even if, as occurred in this case, the employee did not discover the claim for many years and had quit and started employment elsewhere in the meantime.
Mr. MacIvor suffered a severe back injury and a traumatic brain injury while participating in a company event while employed with Pitney Bowes. He was off work for four months post-accident and upon returning to work he struggled to perform at the same level he had pre-accident. Pitney Bowes reduced his work responsibilities overtime but the plaintiff continued to struggle and eventually quit.
Mr. MacIvor subsequently obtained employment with Samsung but, after less than a year there, he was terminated as his work was sub-par due his ongoing disabilities as a result of the accident.
The Court found that Mr. MacIvor only discovered the ongoing and permanent nature of his disabilities after Samsung terminated him. At that point, he made a claim under Pitney Bowes’ LTD policy.
An agreed statement of facts was submitted at the initial trial, with the parties agreeing that Mr. MacIvor was totally disabled from the time of the initial injury.
In rejecting the lower court’s decision that coverage ends when the employee ceased to be actively employed (ie when he resigned), the Court of Appeal held that the termination provisions did not exclude coverage for undiscovered disability claims that originated during the employee’s employment stating:
To so conclude would leave former employees in an untenable position of having no disability coverage from either their former or new employer. Such a result would be contrary to the very purpose of the disability insurance and the plain meaning of the coverage provision.
However, this alone did not resolve the issues between the parties in this case. Entitlement was still subject to the policy requirements to provide timely proof of claim and commencement of the action within the relevant limitation period.
Pursuant to the policy, proof of claim was required “within 90 days of the date benefits would begin”. Despite the passage of more than four years since the accident, and the finding that Mr. MacIvor had discovered his claim in August 2009, the Court held that the “the date benefits would begin” was after Mr. McIvor’s termination package from Samsung ended plus a month, since LTD benefits are paid in arrears. Despite what appears to be a very generous interpretation of when benefits would begin, Mr. MacIvor still did not file proof of claim within 90 days of this date, but did so about 100 days later instead. Although relief from forfeiture was not raised at trial, the Court of Appeal found it was in the interests of justice to grant relief here, citing a long list of factors, including the fact that Mr. MacIvor was injured during his employment, while covered by an LTD policy; that he did not appreciate the significance of his injury; the Insurer conceded his total disability as of the accident, and; that all of these facts had been known to the parties for years.
The Insurer also argued that the policy had a one-year limitation period to commence legal actions. However, the Court found that the provision also prevented any legal actions until 60 days had lapsed from the written proof of loss. In any event the Court concluded it was unlikely that the one-year limitation period would be upheld, referencing obiter from their 2014 decision of Kassberg v Sun Life Assuantce Company of Canada, 2014 ONCA 922 (CanLii), 124 O.R. (3d) 171.
All in all a very interesting decision, in circumstances that are unlikely to occur too often. However, Insurers, it may be time to revisit your policies to ensure they don’t provide for unintended exposure. Please feel free to contact me at firstname.lastname@example.org or 416-679-2781 x 210.
Lisa has an insurance law practice that has focused exclusively on insurance defence for 15 years. Her practice focuses on complex insurance-related litigation, including accident benefits and bodily injury. Read more ...
In a recent decision, of Wilken v. Sunlife, the Ontario Court of Appeal has confirmed that a long-term disability insurer is entitled to enforce the wording of the policy where a participant’s action or inaction would adversely vary an insurer’s interest.
The decision, Wilkens v. Sun Life Assurance Company, addressed the situation of Mr. Wilkens, an individual who was injured resulting from a motor vehicle accident while in the course of his employment. He elected to forgo Workplace Safety and Insurance Board (“WSIB”) benefits in order to pursue a tort claim. The appellant’s long-term disability insurer was considered a second payor under the policy and was entitled to an “offset” for any WSIB benefits the appellant was “eligible” for. The insurer took the position that despite electing to pursue a tort claim, at the time of the onset of disability, the appellant was “eligible” for WSIB benefits. Accordingly, it should be entitled to a credit despite the appellant retroactively electing to pursue a tort claim.
The motion judge, and subsequently the Court of Appeal, agreed.
The Court of Appeal adopted the motion judge’s reasoning that the plaintiff's voluntary decision to make a retroactive election, foregoing WSIB benefits to pursue a tort action, effectively would deny the insurer its contemplated and permitted offset, thereby elevating the insurer's relevant coverage obligation to a "first payor" status that obviously was not intended.
The Court found that the LTD carrier was entitled to deduct or offset the amount of WSIB benefits the appellant could have received had he exercised his entitlement to them, and not the amount of WSIB benefits actually received and retained in the wake of the plaintiff's retroactive election to proceed with his tort claim.
This decision continues to build on the Court’s decision in Richer v. Manulife Financial, 2007 ONCA 214. In the long-term disability context, courts will pay particular attention to the policy to give it its intend effect. This decision is also notable, as it has already been referenced in the recent FSCO decision of Pan v. Allstate, discussed further in our blog post here. In that case we raised the Court of Appeal’s rationale in Wilkins andArbitrator Smith relied on the decision in support of his finding that the Accident Benefits Insurer was entitled to deduct CPP disability benefits that may have been “available” but not yet applied for by the claimant.
These cases suggest that decision makers are treating the order of payment contemplated by the contract paramount to the individual claimant’s choice to selectively pursue benefits.
The full decision of Wilkens v. Sun Life Assurance Company, 2017 ONCA 975,can be found here.
Lisa has an insurance law practice that has focused exclusively on insurance defence for 15 years. Her practice focuses on complex insurance-related litigation, including accident benefits and bodily injury. Read more ...
Is a school bus company making a bus available for an employee driver’s regular use “at the time of the accident”, if she is not allowed to use the bus at the time of an accident?
In TD Insurance v. Dominion, the claimant worked for a school bus company, providing pick-up and drop off services before and after school. The school bus company operated during school hours, Mondays to Fridays. The company was closed on weekends.
On an unfortunate Sunday afternoon, the claimant was visiting a relative and was injured between two cars. She applied for accident benefits to TD Insurance, who was one of the insurers of a vehicle involved in the accident. TD brought a priority dispute against Trafalgar Insurance (the other insurer of a vehicle involved in the accident) and Dominion, the insurer of her school bus.
The claim against Dominion was based on the regular use provisions under the policy, which states that a person is deemed to be the named insured under a policy insuring a vehicle if, at the time of the accident, a company is making the vehicle available for her regular use.
The evidence was that the school bus driver was allowed to bring the bus home and park it on her driveway, which she did. She was allowed to use the bus for personal use between her morning and afternoon runs. But she was not allowed to use the bus at all after business hours and, particularly, on weekends when schools were closed.
At the time of the Sunday accident, the school bus was parked at her home. The evidence was that all drivers of this school bus company were not allowed to use any buses on Sundays. The wheels on the bus were not going round and round. The horn on the bus was silent. The wipers did not go swish swish swish. The people on the bus did not go up and down (because there were no people on the bus). On her driveway. Not all over town.
The arbitrator found that at the time of the accident, the school bus company was not making a bus available for the claimant’s use because, quite to the contrary, she was not allowed to use the vehicle on a Sunday. She found that the phrase “being made available” by a company required an act or active attention on the part of company to make the vehicle available.
On appeal, the Superior Court found that the arbitrator’s decision was reasonable and consistent with existing case law on regular use. The judge held:
In her decision, the Arbitrator considered the language of the statutory provision, the case law interpreting the provision, and the circumstances of Ms. Singh’s accident. Her conclusion that the school bus was not made available to Ms. Singh for regular use at the time of the accident and that, therefore, she was not a named insured pursuant to s. 3(7)(f)(i) of the SABS, was reasonable. Given the deference that must be accorded to the decision of an arbitrator interpreting her home statute in determining a priority dispute, I find no basis on which to disturb the Arbitrator’s decision.
The appeal decision is another example of how the courts are giving arbitrators deference and are becoming more reluctant to interfere with arbitration decisions. This highlights how important it is these days for insurers to win at the arbitration level.
The recent Superior Court decision of Nemchin v. Green by Corthorn J. is a significant win for auto insurers dealing with the deductibility of collateral benefits from large future loss of income awards. The plaintiff was injured in a motor vehicle accident in 2010. A trial took place in April, 2017. At the time of the trial, the plaintiff continued to receive long-term disability benefits from a third party insurer. At trial the plaintiff was awarded $600,000.00 for future loss of income. This was reduced to $540,000.00 for contributory negligence.
After the trial, two issues arose. First, the defendant sought an assignment of the plaintiff’s ongoing long term disability benefits pursuant to section 267.8(12(a)(ii), of the Insurance Act. Second, despite the finding in the recent El-Khodr and Cobb decisions, the plaintiff sought to have the judge use her discretion to alter the pre-judgment interest rate from 1.3% to 3.5%.
Regarding the assignment, the plaintiff opposed the defendant’s request because she argued it was not possible to match the $540,000.00 lump sum temporally to the ongoing disability benefits. She pointed out that the defendant opposed a jury question requiring the jury to break down any future payments by annual loss and duration. The defendant argued that the statutory provision or case law did not require “temporal matching”. Corthorn J. noted that the law in this area remained unsettled and the Court of Appeal was assembling a five member panel to hear Cadieux v. Saywall, 2016 ONC 7604, where they were expected to address the deduction of collateral benefits. However, the parties required finality in this matter and so she rendered her decision.
Corthorn J. granted the defendant an assignment until the plaintiff turned age 65 (when her LTD coverage ceased), or when the $540,000.00 had been fully paid by the LTD insurer. She also found that there was no basis to utilize her discretion to adjust the pre-judgment interest rate from 1.3% to 3.5%.
In her analysis, Corthorn J. confirmed that the burden of proving an assignment fell to the defendant. She addressed four main issues in determining whether the assignment should be granted. First, she found that it was undisputed that the plaintiff was in receipt of LTD benefits at the time of the jury verdict and would remain in receipt for as long as she met the disability test. Second, Corthorn J. agreed with the defendant that there was no requirement for “temporal matching”. Therefore, it fell to the trial judge to determine the duration of the assignment based on the record. Third, she found a global award for future loss of income did not preclude her from deciding the relevant issues. Finally, she found there was no risk the plaintiff would be undercompensated. The defendant is only entitled to an assignment once the plaintiff was paid the $540,000.00. At which point, the plaintiff would be fully compensated for her future loss of income. Relying on the decision of El-Khodr, Corthorn J. found the Court of Appeal’s commentary on the deductibility of Statutory Accident Benefits payments to be applicable.
This decision should be considered a significant success for defendants. It continues a growing trend in the case law where the deductibility of collateral benefits is addressed in a practical and holistic fashion. Overly technical jury questions requiring awards to be matched, year by year for a specific duration will not be required for a defendant to raise a claim for assignment.
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.