British Columbia Insurance Blog

Claims of deceit will generally not give rise to insurance coverage

Michael Thomas — Mon, 06 May 2013 14:29:18 -0800

No coverage under homeowner policy for claim against vendor for fraudulent misrepresentation leading to sale of home.

Chrysanthis v. Ali, [2013] O.J. No. 1239, March 18, 2013, Ontario Superior Court of Justice, D.F. Baltman J.

The defendant insured sold his house to the plaintiffs who later sued the insured for failing to disclose damages caused by an earlier fire. The insured launched a third party claim against his insurer for coverage under his homeowner policy. The insurer brought an application for summary judgment on the basis that the policy did not cover the claims being advanced by the plaintiff and therefore, there was no duty to defend.

The plaintiffs' claim against the insured was for fraudulent misrepresentation and breach of contract. It was alleged that the insured had assured the plaintiffs that there had never been a fire or smoke damage to the property. When the plaintiffs moved into the residence, they learned that the insured had received a cash settlement to fix damage from a fire to the kitchen.

The insurer submitted that the claims for breach of contract and misrepresentation were, in essence, about deliberate acts of concealment by the insured and could not be considered "unintentional" bodily injury or property damage as provided for under the policy.

The court held that when the statement of claim was read in its entirety, it was clear that the claim against the defendant was one of fraud. The court found it implausible that the insured could have forgotten or been mistaken about whether there was a fire and about whether he received a cash payment in compensation. The court found that this omission could not be mere oversight or attributable to carelessness and the only possible inference was that he lied about that fact in order to facilitate a sale. Consequently, the court found that there was no plausible way to categorize the claim as anything other than deceit and therefore beyond the scope of the policy.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

Subcontractors may not benefit from a third party lease.

Michael Thomas — Mon, 06 May 2013 14:25:10 -0800

Defendant construction company could not benefit from a clause in a lease between the plaintiff lessee and a third party lessor requiring plaintiff to obtain construction insurance to defeat a claim by the plaintiff against the defendant arising out of damage to the plaintiff's building caused by the defendant and its subcontractors.

Bank of Nova Scotia v. Lockerbie & Hole Industrial Inc., [2013] O.J. No. 1167, March 14, 2013, Ontario Superior Court of Justice, E.M. Morgan J.

The plaintiff, the lessee of the Scotia Plaza building in Toronto, brought a claim against the defendant, PCL Constructors Canada Inc., the lead contractor on a renovation project. The contract between the plaintiff and PCL required that PCL take out an insurance policy to cover the value of the project and for builder's risk insurance.

While PCL and its subcontractors, including the defendant Lockerbie, were performing work under the contract, there was a large leak which caused substantial damage to the plaintiff's property, which damage was the subject matter of the action.

The plaintiff's lease with the lessor, a wholly-owned subsidiary, required the lessee to insure the building in the event of construction or reconstruction. When PCL and the other defendants learned of this, they advanced a subrogation bar defence arising from the plaintiff's obligation as lessee under the land lease to insure the building. PCL submitted that as a contractor, it was a third party beneficiary under the lease. PCL and its subcontractors brought an application for summary judgment dismissing the plaintiff's claim.

The court concluded that PCL and the other defendants were hoping for a windfall due to the provisions of the lease. The key was that, in breach of the lease, the plaintiff did not actually have insurance coverage. The court held that PCL could not benefit from the provision of the lease to which it was not a party and that had been superseded by the construction contract it entered into with the plaintiff. The court dismissed the application for summary judgment.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

An insurer may be added as a defendant after the expiration of an applicable limitation period

Michael Thomas — Mon, 06 May 2013 14:19:01 -0800

Application to add insurer providing uninsured motorist coverage as defendant allowed after expiration of applicable limitation period.

Tomescu v. Sarhan, [2013] O.J. No. 1059, March 11, 2013, Ontario Superior Court of Justice, T.A. Bielby J.

The plaintiff insured brought an action arising out of a motor vehicle accident. The plaintiff initially sued the defendants but had difficulty identifying their insurer. It was not until the defendants were examined for discovery that the plaintiff determined that the defendants had no insurance. The plaintiff sought then to add its own insurer as a defendant since the insurer's policy with the plaintiff included uninsured motorist coverage. The application to add the insurer as a defendant was brought outside the limitation period.

The insurer opposed the application to be added as a defendant and argued that the plaintiff had not exercised due diligence in ascertaining the identity of the defendants' insurer. The court was satisfied that the plaintiff had exercised due diligence and the application was allowed.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

An insurer who has complied with the express terms of the contract may still breach its duty of good faith and fair dealing

Michael Thomas — Mon, 29 Apr 2013 12:44:09 -0800

The Court of Appeal substantially allowed the appeal from a motion decision striking out numerous claims in a proposed class action relating to the sale and administration of four types of life insurance policies. The plaintiffs' claims for breach of duty of good faith and fair dealing and for deceit and fraud were not mere reiterations of the plaintiffs' claim for negligent and fraudulent misrepresentation and should be allowed to stand. Their claim for breach of contract was based on ambiguious terms in the contract and was likewise allowed to stand. A claim relating to settlement entered into by the defendant insurer was struck out on the basis that no relief was being claimed.

Kang v. Sun Life Assurance Co. of Canada, [2013] O.J. No. 768, February 25, 2013, Ontario Court of Appeal, J.I. Laskin, M. Rosenberg and S.T. Goudge JJ.A.

This was a proposed class action involving plaintiffs who had purchased four different types of universal life insurance policies that had been sold to class members by Metropolitan Life Insurance Co. (“MetLife”) between 1983 and 1998. The defendant, Sun Life Assurance Company of Canada (“Sun Life”) was the successor corporation of MetLife and was sued in that capacity and for its own role in administering the policies. Sun Life brought a successful motion to have a number of the plaintiffs’ claims struck out on the basis that the pleadings did not disclose a reasonable cause of action. The plaintiffs’ principal claim was for negligent or fraudulent misrepresentation and this claim was not challenged.

On appeal, it was noted that in order for a claim to be struck out, the onus was on Sun Life to show that it was plain and obvious that the claim could not possibly succeed. With respect to the plaintiffs' claims for breach of duty of good faith and fair dealing, the Court of Appeal held that the motions judge had framed the plaintiffs’ claims too narrowly as an allegation that Sun Life had breached its duty of good faith by failing to administer the policies in accordance with the representations made during the sales process, rather than in accordance with the policies as they were written. The Court of Appeal noted that neither the motions judge nor Sun Life had provided any Canadian authority for the proposition that an insurer who has complied with the express terms of the contract cannot have breached its duty of good faith and fair dealing. The plaintiffs were able to point to the case involving a franchisor-franchisee relationship where it was held that “the fact that contractual terms are ultimately complied with, does not mean that there has been no breach of the duty of good faith”. It was held that the same proposition may apply in the insurance context and the plaintiffs’ claim could possibly succeed. Furthermore, the Court of Appeal found that the plaintiffs’ claim on the basis of the breach of a duty of good faith and fair dealing was being advanced on the basis of allegations that Sun Life failed to disclose or remedy misrepresentations made by MetLife when the policies were sold and it was held that it was at least arguable that an insurer’s duty of good faith precludes it from concealing from its insureds facts it knows to be inaccurate. Furthermore, the plaintiffs also claimed that Sun Life breached the duty of good faith and fair dealing by obtaining releases and entering into settlements without making full disclosure or by knowingly and systematically refusing to honour legitimate claims made by its insureds. Sun Life acknowledged the viability of the claim regarding systematic denial of legitimate claims. The Court of Appeal concluded that it was clear that the jurisprudence on the duty of good faith and fair dealing, generally and as it applies to the insurance relationship is not settled and, therefore, an allegation that the duty has been breached should not be dismissed on a preliminary motion. It was held that the claims for breach of the duty of good faith and fair dealing should be allowed to go forward.

With respect to the claims regarding breach of contract, the motions judge held that there were no express terms of the contract as alleged by the plaintiffs and that the express terms of the contract stood against any implied term. He therefore concluded that it was plain and obvious that there was no tenable breach of contract claim. The Court of Appeal disagreed that the express terms of the policy in question were as clear as the motions judge considered them to be. The term “maximum premium” was not defined anywhere in the policy but there was a chart titled “maximum premium” showing the corresponding rates for various forms of coverage. There was no express provision that Sun Life could charge a policy holder more than the maximum premium. It was held that at the very least, the meaning of the term “maximum premium” was ambiguous and the claim ought to stand.

With respect to the claims for deceit and fraud, it was held that those claims were distinct from the plaintiffs’ claim for negligent or fraudulent misrepresentation. The allegations of deceit and fraud concerned Sun Life’s ongoing conduct in administering the policies, long after the sales process during which MetLife made the alleged initial misrepresentations and the claims should not have been struck out.

The plaintiffs had also alleged that Sun Life entered into settlements with and obtained releases from class members without disclosing to them that their policies were sold on the basis of misrepresentation. They claimed that this was a breach of the duty of good faith and fair dealing and was also deceitful conduct. Those claims had been struck out on the basis that the pleadings did not reveal a cause of action and there was no representative plaintiff advancing a claim in respect of those allegations. The Court of Appeal held that the motions judge was correct to strike out those allegations because even though the plaintiffs had incorporated the claims regarding the releases and settlements into their duty of good faith claims and their deceit and fraud claims, they had not requested any specific relief in relation to policyholders who had entered into those agreements. The plaintiffs were given leave to add a claim for rescission or declaratory relief in relation to the releases.

In the result, the plaintiffs were substantially successful in their appeal and the allegations concerning breach of the duty of good faith and fair dealing, breach of contract, and deceit and fraud were allowed to stand.

This was was originally summarized by Emily M. Williamson.

An insured who is not authorized by law to operate a motor vehicle may be entitled to uninsured automobile insurance under his or her policy

Michael Thomas — Mon, 29 Apr 2013 12:38:16 -0800

The defendant insurer sought dismissal of a claim for coverage under the uninsured automobile provisions of a policy. The claim had been denied on the basis the insured was in breach of the statutory conditions of the policy. The insurer brought a motion for summary dismissal and the motion was dismissed. The insurer appealed and the Court of Appeal upheld the motion decision, holding that the statutory conditions did not apply to uninsured automobile coverage. The Court of Appeal also held that the Limitation Act applied to a cross-claim brought by the Minister of Finance under the Motor Vehicle Accident Claims Act, but stayed the application to have the cross-claim dismissed.

Bruinsma v. Cresswell, [2013] O.J. No. 770, February 22, 2013, Ontario Court of Appeal, J.I. Laskin, H.S. LaForme and A. Hoy JJ.A.

This was an appeal from a motion for summary judgment in a matter involving a claim under the uninsured automobile coverage provisions of a motor vehicle policy. At the time of the accident in question, the plaintiff was driving with a suspended driver’s license and the defendant insurer denied coverage on the basis that driving with a suspended driver’s license was a breach of the policy and therefore disentitled the plaintiff to coverage, including uninsured automobile coverage. On the motion for summary judgment, the motion judge held that the breach of the policy did not disentitle the plaintiff to the uninsured automobile coverage under the policy. There was also a cross-claim against the insurer by the Minister of Finance in relation to coverage under the Motor Vehicle Accident Claim Fund and the insurer sought dismissal of the Minister’s claim on the basis that it was barred by the limitation period. The motion judge held that the Limitations Act did not apply to the Minister’s cross-claim.

The Court of Appeal upheld the motion judge’s conclusion that the plaintiff was not disentitled to uninsured automobile coverage under the policy due to the fact he drove without a valid license, but for different reasons. The statutory conditions on which the insurer sought to rely to deny coverage were found in two different sections of the “OAP 1”, the standard Ontario automobile owners’ policy in place at the time. Section 8 of the OAP 1 policy dealt with the statutory conditions that applied to all automobile policies in Ontario. The statutory condition at s. 4(1) of Section 8 provided that "the insured shall not drive or operate … the automobile unless the insured … is authorized by law to drive or operate it". The wording of s. 1.4.5 contained in Section 1 of the OAP 1 policy was the same in all material respects to the wording of statutory condition 4(1) and it was concluded that s. 1.4.5 was a statutory condition that had been included in Section 1 for convenience.

At issue was whether these statutory conditions applied to the uninsured automobile coverage provided under Section 5 of the OAP 1 policy. This issue was determined by the interplay of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”); Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676 (“Reg. 676”); and the Schedule that forms part of Reg. 676 (the “Schedule”). The Schedule included s.10 which provided that “insofar as applicable”, the statutory conditions contained in a motor vehicle liability policy also applied to payments under uninsured automobile coverage under a policy. This appeared to conflict with s. 234(3) of the Act, which provided that, “except as otherwise provided in the contract”, the statutory conditions, including statutory condition 4(1), did not apply to uninsured automobile coverage. The Court of Appeal found that if one considered that s. 10 of the Schedule had been enacted prior to the amendments to s. 234(3) of the Act, the apparent conflict between the two was resolved. It was significant that s. 10 of the Schedule began with the words “insofar as applicable …”. By subsequently enacting s. 234(3) that specifically provided that “except as provided in the contract” the statutory conditions did not apply to uninsured automobile coverage, the legislature had signified that the statutory conditions were not applicable to uninsured automobile coverage unless the insurance contract itself explicitly provided otherwise. Section 5 of the OAS 1 policy dealt with uninsured automobile coverage and s. 5.1.1 stated that Section 5 described the terms and conditions applicable to the uninsured automobile coverage. The Court of Appeal held that statutory condition 4(1) did not apply to uninsured automobile coverage either by operation of s. 5.1.1 of the policy or by virtue of Regulation 676.

With respect to the limitations issue, in the Court below, the motion judge had reasoned that the Limitations Act could not affect the Minister of Finance's right to defend the action pursuant to s. 8(2) of the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41 (the "MVACA"). That section allowed the Minister to assume the defence of an action upon the default of the defendant in filing a statement of defence and the motion judge reasoned that the default of the defendant personally could not take away the Minister’s right to defend the action. The Court of Appeal disagreed. Section 19(2) of the Limitations Act provided that the limitation period set out in any other act was of no effect unless it was listed in the schedule to the Limitations Act. The MVACA was not listed in the schedule. The Court of Appeal held that, given the clear wording of s. 19(2) it was not open to the motion judge to conclude that the Limitations Act was not applicable to the Minister under the MVACA. However, the Court of Appeal stayed the insurer’s summary judgment motion with respect to its limitation argument as there was nothing to be gained by permitting the motion to proceed. This was because if the Minister’s claim against the insurer was dismissed but the plaintiff proceeded to obtain judgment against the defendant driver and then seek payment out of the Motor Vehicle Accident Fund under the MVACA, the Fund could then assert in defence that it did not have to pay because the policy should have responded. The issue of coverage would then have to be determined, regardless of the limitation issue.

In the result, the appeal was dismissed.

This case was originally summarized by Emily M. Williamson.

Damages associated with the loss of marijuana plants is limited to $1,000 per plant

Michael Thomas — Mon, 29 Apr 2013 12:28:15 -0800

An action for coverage under a homeowner's insurance policy to recover the full value of legally cultivated marijuana plants was dismissed. Coverage was limited to $1000 per plant as per the extended coverage provisions of the policy. The fact that the plants were not grown for "landscaping" purposes did not bring them under the general contents coverage under the policy.

Stewart v. TD General Insurance Co., [2013] O.J. No. 955, March 7, 2013, Ontario Superior Court of Justice, J.A. Ramsay J.

The plaintiff was insured by the defendant under a policy of homeowner's insurance and had submitted a claim to the defendant in relation to the theft of a number of marijuana plants he was growing in his backyard. The plaintiff had licenses to possess and cultivate marijuana issued under the Marihuana Medical Access Regulations, SOR 2001 227. The defendant’s position was that coverage under the policy was limited to $1,000 per plant and it paid out $11,000 to the plaintiff for the claim. The plaintiff brought two separate actions claiming for the full value of the stolen plants and damages for breach of contract, mental stress and physical pain, breach of fiduciary duty and infliction of mental and physical suffering. The plaintiff brought this motion for summary judgment on liability in both actions.

The relevant provisions of the policy were as follows.

COVERAGE

Coverage B – Personal Property (contents)

1. We insure the contents of your dwelling and other personal property you own, wear or use while on your premises which is usual to the ownership or maintenance of a dwelling.

EXTENSIONS OF COVERAGE

15. Trees, shrubs and plants

Trees shrubs and plants being part of your landscaping on your premises. We will pay up to 5% of the limit of insurance applicable to your dwelling, subject to a maximum of $1,000 for any one tree, shrub or plant including debris removal. You are insured against loss cause (sic) by fire, lightning, explosion, impact by aircraft or land vehicle, riot, vandalism or malicious acts, theft or attempted theft.

The defendant argued that the only coverage available with respect to the plants under the policy was provided by paragraph 15 of “Extended coverage”, which limited compensation to $1,000 per plant. The plaintiff argued that the plants were personal property and were covered under “Coverage – B”. He further argued that the extended coverage for trees, shrubs and plants did not apply because the marijuana plants were not part of the landscaping.

The motions judge noted that the scheme of the policy seemed to provide for general types of coverage and then to provide coverage pursuant to the extended coverage provisions for specific items not covered in the general provisions. The motions judge commented that it would be a stretch to say that Coverage B, which is principally concerned with contents, covered items that were not contained in the dwelling. Furthermore, in the context of the policy as a whole, to ignore paragraph 15, which speaks directly to the loss of the plants, and to follow instead a general provision of doubtful application would strain the meaning of the policy. The motions judge also rejected the plaintiff’s restrictive definition of landscaping, noting that the dictionary definition of landscaping did not necessarily exclude plants that were laid out for reasons other than aesthetic. In the result, it was held that if paragraph 15 of “Extended coverage” did not cover the lost plants, neither did any other provision in the policy.

The defendant insurer had also argued that an excluded peril for damage relating to grow-ops limited recovery in this case. The motions judge held that that exclusion dealt with the damage caused by growing or production of drugs, not with the loss of the drugs themselves, and therefore did not apply in the circumstances.

In the result, it was held that the maximum recovery permitted by the policy was $1,000 per plant, which had been paid by the defendant and the plaintiff’s claim for additional recovery under the policy was dismissed.

This case was originally summarized by Emily M. Williamson.

A fleet vehicle may be insured if it is generally used for the insured purpose, despite the fact that it is damaged while being operated for an unrated use

Michael Thomas — Mon, 29 Apr 2013 12:21:11 -0800

The action for coverage under a commercial motor vehicle insurance policy was allowed where the court held that the coverage available for a higher rated vehicle could be substituted for the coverage for a lower rated vehicle provided that the coverage on the owner's other vehicles was correctly rated for their general use, even if they were operating in excess of their insured range on the day in question.

Streeper Contracting Ltd. v. Insurance Corp. of British Columbia, [2013] B.C.J. No. 389, British Columbia Supreme Court, L. Fenlon J.

The plaintiff insured was the owner of a fleet of commercial vehicles used for hauling oil rig equipment between lease sites in the oil and gas fields of northeastern British Columbia, primarily on short hauls within 100 km. One of the plaintiff’s heavy commercial vehicles, Unit 50, was involved in a serious accident while it was engaged in a 700 km haul along with several other vehicles from the insured’s fleet. The Insurance Corporation of British Columbia (“ICBC”) denied coverage on the basis that Unit 50 was operating outside of its insurance coverage at the time of the accident.

Unit 50 was insured for hauling goods within a 160 km range. It was agreed that Unit 50 was operating in excess of its insured range at the time of the accident. The insured sought to rely on the following provision of Schedule 1, Table 2, s. 2(5) of the Insurance (Motor Vehicle) Act Regulation, B.C. Reg. 447/83, which provides that coverage from a higher-rated vehicle can be used to cover a lower-rated vehicle:

s. 2(5) Where

(a) a group of 2 or more vehicles is registered in the name of the same owner ... and

(b) each vehicle in the group is correctly rated according to its use,

The owner … may, without breaching a condition of section 55(2)(a), use, on not more than 6 days in a calendar month, a lower rated vehicle in the group in place of a higher-rated vehicle in the group.

On the day of the accident, the insured was using four trucks on the haul that were rated for distances over 550 km, seven trucks that were rated for distances up to 550 km, and Unit 50, which was rated for distances up to 160 km. The insured also had two additional vehicles in its fleet that were not being used on the day of the accident that were rated for distances over 550 km. ICBC took the position that the insured could not bring itself within the coverage afforded by s. 2(5) because several of the vehicles being used on the job were operating beyond the distance they were insured for (i.e. most were insured for distances up to 550 km, but were engaged in the same 700 km hall). Therefore, ICBC argued that the insured did not meet the prerequisite that each vehicle in the group must be “correctly rated according to its use”.

The trial judge reasoned that the requirement for every vehicle to be “correctly rated according to its use” could only make sense if the word “use” referred to the general use to which a vehicle is put. This is so because the phrase “each vehicle” refers to the entire fleet, including the two vehicles involved in the substitution, one of which by definition is not correctly rated for an intended use and needs to “borrow” a higher-rated vehicle’s insurance coverage. Therefore, the question to be asked is whether the owner has insurance coverage in place on its fleet of vehicles that is correctly rated for the way they are usually operated. In this case, there was no evidence that the insured’s trucks were not insured in accordance with their general use. It was held that the use of some vehicles contrary to the terms of the insurance contract did not invalidate the insurance of those vehicles that were being operated within the terms of the policy. If Unit 50 was being used in the substitution of another vehicle on the day of the accident, the fact that some of the insured’s other vehicles were not covered would not nullify a substituted coverage on Unit 50.

The evidence established that the insured had specifically turned her mind to the issue of the available insurance coverage for Unit 50 for the purposes of the job and decided to substitute the insurance from a higher-rated vehicle to cover it. In the result, it was held that Unit 50 was covered pursuant to the substitution provision at the time of the accident.

This case was originally summarized by Emily M. Williamson.

There is no statutory duty obligation a broker to offer an insured optional income replacement benefits

Michael Thomas — Mon, 08 Apr 2013 11:38:08 -0800

A claim against an insurance broker for the failure to advise about optional coverage. The action was dismissed.

Godina v. Tripemco Burlington Insurance Group Ltd., [2013] O.J. No. 613, February 12, 2013, Ontario Superior Court of Justice, R.B. Reid J.

In 2004 the plaintiff was seriously injured in a motor vehicle accident and he was left permanently disabled. He sued the defendant insurance broker for its failure to properly advise him about the purchase of optional income replacement benefits when he had purchased motor vehicle insurance prior to the accident. More specifically, it was alleged that the defendant was negligent in failing to assess the plaintiff’s risk, in failing to advise him as to adequate coverage, and in failing to advise him of his exposure in the event of a loss.

The representatives of the defendant who dealt with the plaintiff testified that throughout their involvement, they followed their invariable practice of explaining the optional benefits and asking whether the basic benefits would be sufficient in the event of injury. They accepted the plaintiff's decision to decline coverage without giving him a premium quote for optional benefits.

The Court found that the defendant broker owed the plaintiff a duty of care. The plaintiff had the onus of establishing a breach in the standard of care. The plaintiff did not put forth any expert evidence. Rather, he relied on the statutory Accident Benefits Schedule (“SABS”) to the Insurance Act and argued that there was a statutory duty to offer optional income replacement benefits.

The defendant broker called an expert who testified that the conduct of the defendant's representatives met the standard of care for insurance brokers in Ontario. He was of the opinion that the defendant acted in accordance with the standard by advising the plaintiff of the existence of optional benefits, explaining what the optional benefits were and asking whether the minimum coverage would be sufficient in the event the plaintiff was unable to work. Once the plaintiff had declined coverage, there was no continuing obligation to make further recommendations or to quote the additional premium.

The plaintiff’s case was dismissed. The Court held that it is not reasonable to impose a standard of care based solely on a statutory duty applicable to insurers without specific authority for doing so. The plaintiff failed to satisfy his onus to establish that the defendant's conduct breached the applicable standard of care on a balance of probabilities.

Even if the plaintiff had proven that there was a breach in the standard of care, the Court found that he had still not proven an entitlement to damages. He did not establish that he would have purchased the coverage. The plaintiff’s history with the defendant broker indicated that he only purchased the minimum coverage allowed by law. The coverage at issue would have raised his premiums by 13%. The Court also found that the plaintiff’s action was statute barred as it was commenced after the expiry of the two year limitation period.

This case was digested by Kim Yee of Harper Grey LLP.

An injured person is unable to obtain uninsured motorist coverage from an insurer solely on the basis of the entitlement to statutory accident benefits from that insurer

Michael Thomas — Mon, 08 Apr 2013 11:34:28 -0800

A motion was brought by the Motor Vehicle Accident Claims Fund to determine whether Aviva Insurance was obliged to provide uninsured motorist coverage to the plaintiff. The Court determined that the plaintiff was not entitled to uninsured motorist coverage from Aviva.

McKenzie v. Zhang, [2013] O.J. No. 638, February 11, 2013, Ontario Superior Court of Justice, E. Frank J.

The plaintiff was a pedestrian who had been struck by a bus. The driver was an employee of the defendant bus company. The company was a named insured under a motor vehicle liability policy issued by Aviva. The bus was not a listed vehicle under that policy at the time of the accident. The plaintiff applied to Aviva for payment of statutory accident benefits. Aviva paid the accident benefits without disputing the plaintiff’s entitlement to them.

The plaintiff commenced a tort action against the driver and the bus company. The defendants were noted in default. The action was defended thereafter by the Motor Vehicle Accident Claims Fund (“the Fund”). The plaintiff also commenced an action against Aviva for uninsured motorist coverage. Aviva denied that it was obliged to provide her such coverage. The Fund took the position that Aviva was required to respond to the tort claim and the claim for uninsured coverage by virtue of the fact that they had paid accident benefits to the plaintiff.

The Court first considered whether the payment of accident benefits had been made in error by Aviva. In accordance with the Aviva policy, the bus company would add and remove vehicles listed on the policy. The bus had been listed as an insured vehicle before the accident, was removed from the policy and relisted a week later. The Court found that there was a sufficient connection to obligate Aviva to respond to the plaintiff's application. The accident benefits paid were not made in error. Rather, Aviva had a statutory obligation to pay them.

The Court then considered whether the plaintiff, through the payment of accident benefits, became an insured and was therefore entitled to uninsured motor vehicle coverage from Aviva. It was found that there was no Aviva policy pursuant to which the plaintiff could be an insured. Therefore, she is not entitled to uninsured motorist coverage from Aviva. An injured person is unable to obtain uninsured motorist coverage from an insurer solely on the basis of the entitlement to statutory accident benefits from that insurer.

This case was digested by Kim Yee of Harper Grey LLP.

A vacant property may not be entitled to fire insurance

Michael Thomas — Mon, 08 Apr 2013 11:30:29 -0800

A plaintiff filed a claim against his insurer after his home was destroyed by fire. The plaintiff’s claim was dismissed.

Duguay v. Lloyd's Underwriters, [2012] N.B.J. No. 438, October 31, 2012, New Brunswick Court of Queen's Bench - Trial Division, R. Léger J.

On May 20, 2009, the plaintiff purchased a house which he insured with the defendant insurer. On August 25, 2009, the house was completely destroyed by fire. The plaintiff claimed against the insurer pursuant to the policy. The insurer denied the claim on the basis that it had not been notified that the property had been vacant from the time the insurance policy had come into effect until the date of the loss, contrary to an exclusion clause. Alternatively, the insurer alleged that the plaintiff had failed to disclose the fact that the property was tenanted which constituted a material change in the risk to the insurer.

Before the plaintiff could move into the home after he purchased it in May of 2009, several renovations needed to be completed. The insurance broker was advised that once the renovations were completed, the plaintiff would be living in the home. The broker’s understanding was that the renovations would take a few days. The renovations were never completed and the work on the home stopped in late July or early August. The plaintiff never moved into the home.

The plaintiff asserted that a family friend, Mr. McGraw, moved into the home and resided there between July 17, 2009 and the date of the fire. Mr. McGraw spent only a few nights a week at the home, had very few personal possessions there, and the home did not have electricity or running water at the time. Mr. McGraw also testified that he never paid rent.

The Court found that the property was vacant within the meaning of the policy for more than 30 days. Given the evidence, Mr. McGraw could not be considered an occupant who had moved into the home when the renovations ceased.

The Court noted that if Mr. McGraw had moved into the home within the meaning of the insurance contract, the claim would still not have been covered. If Mr. McGraw was a tenant, the plaintiff would have been obliged to notify the insurer of that fact as it constituted a material change to the insurer’s risk. The plaintiff had not done so. The plaintiff’s failure to notify his insurer of the change in circumstances voided the insurance contract. In the result, the plaintiff’s claim was dismissed.

This case was digested by Kim Yee of Harper Grey LLP.

An insurer may have an obligation to defend a claim after it's limits have been exhausted

Michael Thomas — Tue, 26 Mar 2013 13:17:31 -0800

Application for a declaration that pursuant to the Insurance Act, R.S.O. 1990, c. 1.8 and Ontario’s Standard Automobile Policy (“SAP”) the insurer had no obligation to defend its insured against a claim after paying its policy limits to the plaintiff. The application was dismissed and the insurer was ordered to continue to bear the cost of defending the insured.

Jevco Insurance Co. v. Malaviya, [2013] O.J. No. 394, January 29, 2013, Ontario Superior Court of Justice, E.M. Morgan J.

The insured was covered under the SAP for motor vehicle insurance through the insurer. The insured had the minimum liability limit ($200,000). The insured was in a motor vehicle accident and the plaintiffs claimed substantially more than the liability limit.

The insurer settled with the plaintiffs for the policy limit but the action continued against the insured.

The insurer took the position it had no further liability to pay damages and no further duty to defend the insured.

The insured argued the SAP requires a full defence of the action until it is tried or a settlement is reached. The insured submitted the SAP was not clear and the doctrine of contra proferentem should apply and the interpretation most favorable to the insured should govern.

The court declined to apply the contra proferentem rule because the SAP was not drafted by the insurer, but by the legislature. As a result, the insurer should not be under an “interpretive handicap in seeking to decipher it”.

The SAP is produced by the Superintendent of Financial Services under authority of the Insurance Act. The court found that the object of section 245(b) of the Insurance Act is to ensure that insureds have defence counsel for insured claims.

Neither the Insurance Act nor the SAP say, or suggest, that the insurer must bear the cost of defending insureds only up to the policy limits. In contrast, section 245(b) of the Insurance Act provides that the defence costs of a claim are to be borne by the insurer. The court noted there is no limiting language in section 245 and dismissed the insurer’s application.

This case was originally summarized by Aaron D. Atkinson and originally edited by David W. Pilley.

Lost wages may not be included in the definition of insured claim in an automobile policy

Michael Thomas — Tue, 26 Mar 2013 13:09:57 -0800

Application by the insurer for a declaration that it was not required to pay a portion of the judgment obtained by the plaintiff for lost wages. The insurer argued the lost wages were included in the definition of "insured claim" under section 106 of the Insurance (Vehicle) Regulation. The insurer’s application was dismissed.

Jordan v. Lowe, [2013] B.C.J. No. 170, January 18, 2013, British Columbia Supreme Court, P.M. Willcock J. (In Chambers)

The plaintiff obtained judgment against the insured for damages for injuries sustained in a motor vehicle accident. The plaintiff missed work as a result of his injuries and he was compensated by payments drawn from the City of Vancouver Police Department sick bank.

The insurer claimed the amount paid to the plaintiff from the Vancouver Police sick bank was a “benefit” or “compensation similar to benefits”, and therefore included in the definition of an “insured claim” under section 106 of the Insurance (Vehicle) Regulation.

The insurer argued the phrase “compensation similar to benefits” was broad enough to include payments as sick bank benefits whether or not it formed part of a plan of insurance.

The plaintiff said the insurer’s obligation to indemnify him should not be reduced by benefits that do not have some element of insurance. The plaintiff relied on Lopez v. Insurance Corporation of British Columbia, [1993] B.C.J. No. 811, where the Court of Appeal found that the words “any benefit” in section 106(1) imported some element of insurance. This decision flowed from the subheading of section 106, “Exclusion of other insured loss”, and the fact that the words “any benefit” were part of the definition of “insured claim”.

The Insurance (Vehicle) Regulation was amended after the decision in Lopez v. Insurance Corporation of British Columbia. The amendment added the words “compensation similar to benefits” to the definition of an "insured claim". The insurer argued this signaled the legislature’s intention to expand the definition. Further, this expansion brought into the definition of an “insured claim” benefits that are not paid pursuant to insurance and the definition no longer necessarily imported an element of insurance.

The court referred to Lopez v. Insurance Corporation of British Columbia and found that while the legislature had expanded the definition of what constituted compensation or a benefit, it did not remove the subheading or exclude from the insurer’s liability anything other than “insured claims”.

The court concluded that payment of sick leave benefits to police officers employed by the City of Vancouver Police Department do not have about them an element of insurance. Therefore, they are not an “insured claim”.

This case was originally summarized by Aaron D. Atkinson and originally edited by David W. Pilley.

An insurer may not be able to set aside default judgement taken against an insured

Michael Thomas — Tue, 26 Mar 2013 10:42:49 -0800

Dismissal of a motion by the insurer (statutory third party) to set aside summary judgment on liability against its insureds (the defendant driver and the defendant owner) because the insurer was attempting a collateral attack on a prior order refusing to set aside default judgment against one of the insureds (the defendant owner).

Roy v. Lapointe, [2013] O.J. No. 557, February 4, 2013, Ontario Superior Court of Justice, M.P. Eberhard J.

Belairdirect Insurance was the insurer of the defendant driver and the defendant owner. The insurer denied coverage for the defendant driver but responded on behalf of the defendant owner.

The defendant driver and the defendant owner were noted in default. The insurer brought a motion to set aside the default judgment against the defendant owner. The insurer’s motion was dismissed.

The insurer subsequently filed a motion seeking to be added as a statutory third party pursuant to section 258(14) of the Insurance Act, R.S.O.1990, c. I.8. The plaintiff filed a motion for summary judgment on the issue of liability against the defendant driver and the defendant owner. The summary judgment motion was heard first and the court granted summary judgment. The insurer did not attend the summary judgment motion because it was not yet a party.

The insurer was subsequently added as a third party and it brought a motion to set aside the summary judgment. The insurer argued it would be a miscarriage of justice if the summary judgment operated to limit the insurer’s statutory right to contest liability and damages. The insurer argued the default judgment was effectively set aside by the act of allowing the insurer to enter the action as a statutory third party.

The court found that the insurer’s actions after its motion to set aside default judgment against the defendant owner was dismissed were a collateral attack on that order. The insurer only sought to add itself as a third party after the defendant driver was noted in default and the insurer’s motion to set aside the noting in default was dismissed. The court refused to go behind the order declining to set aside default judgment and dismissed the insurer’s motion.

This case was originally summarized by Aaron D. Atkinson and originally edited by David W. Pilley.

A person injured while loading his car may not be entitled to automobile benefits

Michael Thomas — Tue, 05 Mar 2013 14:30:05 -0800

The use or operation of a vehicle does not directly cause impairment where the injury is caused by an intervening act that cannot reasonably be said to be part of the “ordinary course of things” associated with the use or operation of a vehicle. An injury does not arise directly or indirectly from the use or operation of a vehicle where the involvement of a vehicle is merely ancillary or fortuitous to the injuries inflicted.

Martin v. 2064324 Ontario Inc. (c.o.b. Freeze Night Club), [2013] O.J. No. 172, January 17, 2013, Ontario Court of Appeal, E.A. Cronk, G.J. Epstein and S.E. Pepall JJ.A.

This was an appeal of a motion judge's order that the insured was entitled to no-fault statutory accident benefits ("SABs") and indemnification for damages for personal injuries from an automobile insurer. The issue on appeal were: i) whether the insured was injured as a result of an "accident" for the purpose of s. 2(1) of the Statutory Accident Benefits Schedule - Accident on or after November 1, 1996 under O. Reg. 403/96 to the Insurance Act, R.S.O. 1990, c. I.8 (the "Act"); and ii) whether the insured's injuries arose "directly or indirectly from the use [or] operation of his automobile as contemplated in s. 239(1) of the [Act]", thereby triggering the indemnity provisions of his automobile policy.

The insured was assaulted by two assailants while loading his car in the parking lot after finishing work. The assailants pepper sprayed the insured and forced him into the trunk of his car. The men bashed the insured's head while making him drive the standard transmission vehicle. After driving to another parking lot, the men pushed the insured’s head to the ground and kicked his chest and sides. The assailants broke two of the insured's fingers. The assailants then got back into the vehicle and drove away. As they were leaving, they drove over the insured’s foot.

The insured submitted a claim to the insurer for SABs and indemnity under the unidentified, uninsured and underinsured coverage provisions in his automobile policy. The insured alleged that he sustained numerous on-going injuries including injuries to his hands, head (including a head injury from when his head struck the trunk of his car), right foot, right knee, torn muscles and psychological harm. The insurer denied his claim. The insured brought an action against the insurer, the two assailants and his employer.

The insurer moved for summary judgment in the form of an order dismissing the insured's claim. The insurer argued: i) the insured was not involved in an "accident"; and ii) the insureds injuries were not caused by the use or operation of an automobile. The motion judge denied the insurer's motion and granted a declaration that the insured was injured as a result of an accident and his injuries arose "directly or indirectly from the use [or] operation of his automobile”.

The court of appeal allowed the appeal in part. The motion judge concluded the insured's vehicle was "part of the instrumentality through which the assaults were committed" and so the causation element was established for the purpose of the SABs provision. The Court of Appeal overturned this finding and stated the motion judge failed to appreciate that the causation test set out by the Supreme Court in Amos does not apply to the interpretation of "accident" in the schedule. Instead, the modified causation test applied. The court went through the second branch of the modified causation test as set out by the same court in Downer v. Personal Insurance Co., 2012 ONCA 302, and concluded the assaults on the insured, rather than the use or operation of the vehicle, were the direct causes of the insured's injuries. The motion judge failed to inquire as to whether an intervening act which was not part of the ordinary "course of things" or "the normal incident of the risk created by the use or operation of the car" resulted in the injuries. The court concluded the insured was not injured as a result of an “accident”, with the possible exception of the injury he sustained to his right foot.

With respect to the indemnity claim, the court considered s. 239(1)(a) of the Act which contemplates loss or damage "arising … directly or indirectly from the use or operation of [an insured] automobile". The court noted this is broader than the provision for SABs requiring that the injuries be directly caused by an accident. In this case, the injuries arose from assaults rather than the conduct of the assailants as motorists. The court rejected the argument that the insurer reasonably expected to provide indemnification for injuries arising from assaults which only incidentally involve a vehicle. It concluded that, with the possible exception of the foot injury, the insured's injuries did not arise directly or indirectly from the use or operation of his automobile. The claim for indemnification was bound to fail and the insurer was entitled to summary judgment dismissing of the action save for the claims concerning the foot injury.

This case was originally summarized by Djuna M. Field and originally edited by David W. Pilley.

Joint litigatin privilege dissolves when one party takes action against the other

Michael Thomas — Tue, 05 Mar 2013 14:17:10 -0800

Litigation privilege does not automatically attach on the basis that litigation counsel has been retained in relation to an incident. Litigation privilege that arises between parties will dissolve if one party takes action against the other.

Jetport Inc. v. Global Aerospace Underwriting Managers (Canada) Ltd., [2013] O.J. No. 156, January 10, 2013, Ontario Superior Court of Justice, R.F. Goldstein J.

This was an appeal from the decision of a master ordering a representative of the respondent, Jones Brown Inc. ("Jones"), to answer questions about a meeting and to produce documents in relation to the meeting. The documents were in the possession of Jones and another party, Jetport Inc. ("Jetport"). The order at issue was made pursuant to an application by Global Aerospace Underwriting Managers (Canada) Limited ("Global").

Jetport operated an aircraft charter company. Jones was an insurance broker that placed an insurance policy on Jetport's aircraft with Global, an insurance underwriter. An accident occurred and Jetport submitted a claim which was denied by Global. Jetport claimed against Global for denying its insurance claim. Global claimed against Jones seeking contribution and indemnity. Jetport also claimed against Jones for negligence and breach of contract. The three related actions were consolidated.

The meeting in question was conducted after Jetport retained litigation counsel in relation to the accident. At the meeting, the position of Global was discussed. Jones was present at the meeting. The three actions commenced after this meeting.

Jetport argued the dominant purpose of the meeting and the creation of documents, which were the subject of the master's order, was anticipated litigation and litigation privilege attached. Jones and Global submitted that Jetport failed to lay a proper evidentiary foundation for the privilege claim and, regardless of whether privilege did arise, it dissolved when Jetport decided to bring an action against Jones. The master agreed with Jones and Global.

The judge applied the standard of correctness as he found this was a decision involving a finding of fact and law. The judge upheld the master's order and stated that, even if litigation privilege had existed, it was dissolved by reason of Jetport's action against Jones.

This case was originally summarized by Djuna M. Field and originally edited by David W. Pilley.

When a policy lapses in accordance with the terms of an insurance contract, the contract dictates the future relationship between the parties

Michael Thomas — Tue, 05 Mar 2013 14:08:39 -0800

Where coverage under an original policy lapses in accordance with its own terms, the principles of contract formation, rather than contractual interpretation, may apply in determining whether a new policy has come into existence.

Khosah v. Canada Life Assurance Co., [2013] B.C.J. No. 99, January 11, 2013, British Columbia Court of Appeal, R.T.A. Low, D.M. Smith and A.W. MacKenzie JJ.A.

The issue on appeal was whether the beneficiary's deceased husband, the insured, obtained temporary insurance coverage from the insurer while the insurer processed the insured's application for reinstatement of a term life insurance policy that had lapsed due to non-payment of premiums.

The insured was intially issued a life insurance policy by the insurer under which the appeallant was a beneficiary. The policy lapsed due to non-payment of premiums. The policy provided, with respect to reinstatement, that the insured must submit a reinstatement application with evidence of insurability and that the reinstatement policy would come into force at the date on which the insurer approved the application for reinstatement.

The insurer sent the insured a contract change form which was an "omnibus form" and could be used as an application for reinstatement. The form also contained a temporary insurance agreement section. The insured filled in more than was required for an application for reinstatement, including a section which mentioned temporary insurance, but did not fill out the temporary insurance agreement section. The insured also sent in a cheque for an amount larger than what was required to cover his arrears.

In January the insured forwarded the necessary evidence of insurability. The insurer processed the application on February 8 and decided to deny reinstatement. The insured died on February 13. The insurer sent a letter denying reinstatement on February 16.

The beneficiary brought a claim against the insurer arguing the insured was covered by a temporary insurance policy. This action proceeded by way of summary trial. The trial judge found the critical issue was whether a contract for temporary insurance between the insured and the insurer had come into excistence. The trial judge applied the principles of contract formation and considered whether there had been offer and acceptance.

The trial judge found that, the application in question constituted an offer by the insurer to provide temporary insurance to qualified persons. In this case there was no offer made by the insurer because the application form was provided to the insured on the basis of his application for reinstatement and the applications instructions did not contemplate completion of the temporary insurance application section on such an application. Acceptance of the offer for temporary insurance would occur when a qualified applicant completed the application, including the temporary insurance agreement section. In this case, there was no evidence indicating the insured had unequivocally accepted the temporary insurance agreement.

The trial judge concluded there had been no offer of temporary insurance by the insurer and, even if there had been, there was no acceptance on the part of the insured. The Court of Appeal upheld the trial judge's decision and stated there was no error in applying principles of contract formation rather than contract interpretation.

This case was originally summarized by Djuna M. Field and originally edited by David W. Pilley.

A lessee with an option to purchase may be an owner

Michael Thomas — Tue, 05 Mar 2013 13:44:11 -0800

A lessee with an option to purchase a vehicle is an "owner" under s. 1 of the Motor Vehicle Act. Other insurance policies contemplating an "owner" must be read in light of this definition.

Lombard General Insurance Co. of Canada v. Canadian Direct Insurance Inc., [2013] B.C.J. No. 41, January 11, 2013, British Columbia Supreme Court, P.D. Leask J.

The plaintiff insurer, Canadian Direct Insurance ("CDI"), brought a petition seeking a declaration that the respondent insurer, Lombard General Insurance ("Lombard"), was a co-primary insurer of the defendant.

The action arose out of a motor vehicle collision involving the defendant. At the time of the accident, the defendant was in the course of employment and driving a vehicle which was being leased to his father. The defendant lived with his father at the time of the accident. The defendant had received permission from his father to drive the vehicle. The father was leasing the vehicle with an option to purchase it at the end of the lease term from the lessor. The vehicle was insured by the Insurance Corporation of British Columbia ("ICBC") and by CDI.

Lombard insured the defendant's employer and its employees in certain circumstances. The relevant coverage provision in the Lombard policy provided indemnification to employees for motor vehicle accidents if they were operating a vehicle with the consent of the owner, in the course of employement, and the vehicle in question was not owned in whole or in part by a person whom the employee resided with.

The only issue in dispute was whether the vehicle was “owned in whole or in part” by the father within the meaning of the policy. If so, then the accident was not insured by Lombard.

The court held there was no ambiguity as to the meaning of the term "owned in whole or in part". The court refered to s. 1 of the Motor Vehicle Act R.S.B.C. 1996, c. 318 (the "MVA") which defines 'owner' to include "a person in possession of a motor vehicle under a contract by which he or she may become its owner on full compliance with the contract". A lessee with an option to purchase a vehicle may become its owner on full compliance with the contract. The court found the Lombard policy must be interpreted in light of the s. 1 MVA definition. The father was an owner of the vehicle under the MVA because he was in possession of the vehicle under a contract by which he may become its owner on full compliance with the contract. As he was an owner under the MVA, he was also an owner under the Lombard policy. Accordingly, his vehicle was not insured under the Lombard policy and CDI's application was dismissed.

This case was originally summarized by Djuna M. Field, and originally edited by David W. Pilley.

An insured is entitled to pursue a tort claim for his actual loss after deducting no fault benefits

Michael Thomas — Mon, 18 Feb 2013 14:24:36 -0800

Insured entitled to maintain an action under s. 103 of the Automobile Insurance Act (Saskatchewan) against the defendants in respect to a claim for the difference between the amount the insurer contributed towards his rehabilitation and living assistance costs and his actual costs, and the difference between the income replacement benefits paid by the insurer and his actual yearly income loss.

Acton v. Britannia (Rural Municipality, No. 502), [2012] S.J. No. 791, December 20, 2012, Saskatchewan Court of Appeal, J. Klebuc C.J.S., M.A. Gerwing and G.R. Jackson JJ.A.

The insured appealed from a decision of the Queen's Bench in Chambers in which the judge declared that the insured was not entitled to maintain a tort action against the Rural Municipality of Britannia No. 502 and Ron Handel Farm Ltd. pursuant to s. 103(2) of The Automobile Accident Insurance Act, R.S.S. 1978, c. A-35 to recover certain losses.

The insured was involved in a single vehicle rollover accident on a road maintained by the defendants. The insured suffered serious injuries and was left in a C6 spastic quadriplegic condition with a neurogenic bowel and bladder. He was unable to be gainfully employed and required rehabilitation services, living assistance and other care items. The insured was entitled to no fault benefits through Saskatchewan Government Insurance. The insured claimed those benefits but did not fully cover his actual cost for rehabilitation, living assistance and other cost of care items he reasonably required. Consequently, he commenced an action against the defendants to recover damages for the difference between the amount the insurer contributed towards his rehabilitation and living assistance costs and his actual costs as well as the difference between the income replacement benefits paid by the insurer and his actual yearly income loss.

The Court of Appeal held as follows:

(1) an insured may bring a tort action to recover damages for economic loss pursuant to s. 103(1)(a)(iii) if the benefits paid or payable by the insurer to or on behalf of the insured pursuant to Division 3 and Division 7 will never exceed the insurer's s. 112(3) liability cap;

(2) the term "economic loss" in s. 103(1)(a)(iii) includes the gap between the actual reasonable cost of rehabilitation, living assistance and other items reasonably required, and the amount recoverable from the insurer for those items;

(3) the insured is entitled to maintain his tort action for the purpose of recovering his out-of-pocket costs to the extent that he is not entitled to recover those costs from the insurer; and

(4) the right of the insured to pursue the defendants for damages equal to his net loss of self-employment income as a farmer is not limited by the provisions of s. 103(1)(a)(i)(B).

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

An insurer will be responsible for paying administrative fees associated with damage caused by an insured

Michael Thomas — Mon, 18 Feb 2013 14:18:19 -0800

Insured was liable to pay a 10% administrative fee levied by Nova Scotia Department of Transportation and Infrastructure Renewal for the repair of a culvert damaged by motor vehicle driven by an employee of the insured.

Nova Scotia (Attorney General) v. Jacques Home Town Dry Cleaners, [2013] N.S.J. No. 4, January 3, 2013, Nova Scotia Court of Appeal, J.W.S. Saunders, L.L. Oland and J.E. Fichaud JJ.A.

The issue before the Nova Scotia Court of Appeal was whether the insured, Jacques Home Town Dry Cleaners, and therefore its insurer, were responsible for a 10% administration fee levied by the Nova Scotia Department of Transportation and Infrastructure Renewal ("NSDOTIR") for overhead expenses relating to the repair of a culvert which was damaged by a vehicle driven by an employee of the insured. The culvert cost $669.40 to repair and added to this cost was a 10% administration/overhead fee of $66.94 which the insurer refused to pay.

The Nova Scotia Supreme Court had found that the 10% administration fee was reasonable, not arbitrary or artificial, was suitably linked to the damages claimed, and did not include any mark-up for potential profit. As a result, the court found that the insured was responsible to pay the fee.

The Court of Appeal considered it settled law that overhead expenses are recoverable as part of the cost of effecting repairs to damaged property. The issue is one of proof. In this case, there was no evidence as to why a 10% fee was charged. However, there was affidavit evidence that certain specific administrative tasks not otherwise budgeted for were in fact undertaken on account of the insured's negligence and that an administrative fee was levied to offset these overhead expenditures which were an added expense to the NSDOTIR. The Court of Appeal inferred from this that an expense of $66.94 was actually incurred in having to oblige staff to oversee the repair of the culvert.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

Strict proof of business loss may not be required when the insured peril destroys documentation

Michael Thomas — Mon, 18 Feb 2013 11:40:14 -0800

When the particulars of a loss are destroyed by the insured peril the court will be more sympathetic to the insured when determing the quantum of the loss

Visual Design Consultants Inc. v. Royal and Sun Alliance Insurance Co. of Canada, [2012] N.S.J. No. 682, December 18, 2012, Nova Scotia Supreme Court, R.W. Wright J.

The insured brought an action against its insurer for damages for business interruption loss. The insured was a graphic design firm whose premises were destroyed by Hurricane Juan. Most of the insured's electronic equipment was destroyed. At the time of the disaster, the insured had a commercial policy with the insurer which provided coverage for "business interruption loss; increased cost of working; and professional fees toward the cost of hiring accountants and other professionals to assist the insured in making a claim". The insured and insurer were unable to agree on the amount of the loss.

The court considered the impact of the hurricane on the insured's business, the relevant sections of the insurance policy, the indemnity period, and concluded that the insured had met its evidentiary burden of proving a business interruption loss in the aggregate amount of $230,990.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.