British Columbia Insurance Blog

Failure to disclose knowledge of a potential claim at the time of application may not exclude entitlement to insurance proceeds

Michael Thomas — Sun, 06 May 2012 09:35:16 -0800

The defendant insureds sought and were granted a declaration that their professional liability insurer was required to provide a defence in an action on the basis the insurer was not able to conclusively show that coverage would be excluded on the basis of the insureds' knowledge of a potential claim at the time they applied for the insurance.

Sydie v. Murad, [2011] O.J. No. 5381, November 28, 2011, Ontario Superior Court of Justice, P. Lauwers J.

This was an application by the defendants in an action seeking a declaration their insurer under a professional liability insurance policy was required to defend them and that they were entitled to select counsel of their own choice for which the insurer was obligated to pay. In the main action, the plaintiffs sued the defendants alleging breach of contract and negligence in respect of a home inspection done by the defendants in May 2007 on a home subsequently purchased by the plaintiffs. The plaintiffs became aware of a rodent infestation after they moved into the home and contacted the defendants regarding the situation in July 2007. In September 2007 the defendants obtained the professional liability insurance policy. In November 2007 the plaintiffs began the main action and the defendants sought coverage under the policy. The insurer denied coverage, claiming the defendants made a material misrepresentation at the time of application for the insurance. In the alternative, the insurer denied coverage of the basis of an exclusion in the policy which excluded coverage for any claim arising out of any act, error, or omission prior to the inception date of the policy and which the insureds knew or could reasonably have foreseen might be expected to be the basis of a claim.

The court reviewed the jurisprudence on the issue of the duty to defend, which establishes that there will be a duty to defend when there is a mere possibility that a claim within the policy may succeed. Because the threshold for the duty to defend is just the possibility of coverage, the burden is on the insurer to show that an exclusion clearly and unambiguously excludes coverage. The test for whether an insured has knowledge of an event or circumstance that could result in a claim is objective.

The insurer argued that the defendant insureds were aware of a potential claim as soon as they were contacted by the plaintiffs advising of the rodent infestation and asserting the defendants had misled them on the home inspection report. The defendants argued that the content of the inspection report and limitation clauses incorporated in the report were exculpatory and on that basis the defendants did not believe they faced a professional negligence claim from the plaintiffs. The evidence on what was communicated between the plaintiffs and the defendants was conflicting and were issues of fact that should be determined at trial. In the circumstances, the motions judge was unable to determine conclusively that the insurer did not owe the defendants a duty to defend. In the result, the insurer was ordered to proceed with the defence, without prejudice to its right to re-argue the issue later.

With respect to the defendants' application that they be entitled to choose their own defence counsel, to be paid for by the insurer, the court noted that in cases where there is an active and ongoing coverage dispute, the insured might reasonably perceive that defence counsel’s loyalty lies with the insurer and this might undermine the confidential relationship that should exist between counsel and client. The motions judge held that the prudent approach in this case was to avoid both the perception and the actuality of a conflict of interest by permitting the defendants to retain their own counsel, with the insurer being obligated to pay reasonable fees, disbursements, and taxes.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

The Nova Scotia Health Services Act permits the government to pursue nursing home care costs from injuries arising from an MVA

Michael Thomas — Tue, 01 May 2012 08:08:16 -0800

The Nova Scotia Court of Appeal upheld a decision finding that the provisions of the Nova Scotia Health Services and Insurance Act permit the government to pursue nursing home care costs from injuries arising from a motor vehicle action by way of subrogated action.

Slauenwhite v. Keizer, [2012] N.S.J. No. 89, February 23, 2012, Nova Scotia Court of Appeal, J.W.S. Saunders, L.L. Oland and M.J. Hamilton JJ.A.

This was an appeal from a trial decision interpreting the provisions of the Nova Scotia Health Services and Insurance Act, 1989, R.S.N.S. c. 197 (the “Act”) as to whether the province had a right of subrogation to claim against a person insured by a third party liability insurance policy for the costs of nursing home care that arose from injuries resulting from a motor vehicle accident. Pursuant to the provisions of the Act, the province recovered its costs for health care services for injuries arising from a motor vehicle accident by way of an annual levy on motor vehicle insurers. The cost of nursing home care was not included in the definition of health care services that were recoverable under the levy and the issue was whether the province retained a subrogated right to collect those costs. At issue were ss. 18(3) and (10) of the Act which provided as follows:

(3) Her Majesty in right of the Province shall be subrogated to the rights of a person under this Section to recover any sum paid by the Minister for insured hospital services, benefits under the Insured Prescription Drug Plan, ambulance services to which the Province has made payment or insured professional services provided to that person, and an action may be maintained by Her Majesty, either in Her own name or in the name of that person, for the recovery of such sum.

(10) This Section applies except where personal injury has occurred as the result of a motor vehicle accident in which the person whose act or omission resulted in the personal injury is insured by a policy of third-party liability insurance on or after the date this subsection comes into force.

The majority of the Nova Scotia Court of Appeal upheld the trial judgment that the province did retain its subrogated right to collect the cost of nursing home care in cases where the injury was caused by a motor vehicle accident in spite of the apparent contradiction between ss. 18(3) and (10). The Court noted that it was reasonable to infer that the exception provided for in s. 18(10) was limited to the health services covered by the levy, which did not include nursing home care costs.

In dissent it was held that the province did not have a subrogated right under the Act to collect the cost of nursing home care costs from injuries sustained in motor vehicle accidents. The dissenting judge held that the legislative history indicated that the Legislature had not intended the province to be able to recover nursing home care costs in these circumstances, and if they had so intended, this could have been achieved by amendments at the same time as the Act was changed to allow for nursing home care costs under s. 18(3) but was not done.

In the result, the appeal was denied and it was confirmed by the majority for the Court of Appeal that the province has a subrogated right to collect nursing home care costs for injuries sustained in motor vehicle accidents.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

An insured assaulted in a parking lot and placed in the trunk of his car may be entitled to benefits under his automobile insruance policy

Michael Thomas — Thu, 26 Apr 2012 09:28:54 -0800

The plaintiff was successful in arguing that injuries sustained during an assault in which the assailants made use of his vehicle were injuries that arose directly from the use or operation of the vehicle.

Martin v. 2064324 Ontario Inc., [2011] O.J. No. 5471, December 5, 2011, Ontario Superior Court of Justice, D.K. Gray J.

The plaintiff was assaulted and injured by two unknown assailants. In the course of the assault, the assailants made use of the plaintiff’s vehicle. The plaintiff brought an action against multiple defendants, including his own insurer under the unidentified motorist provisions of his policy and he also brought a claim for statutory accident benefits. The insurer brought a motion for summary judgment on the basis the plaintiff’s injuries did not arise from the use or operation of the automobile, but rather, the assault.

The plaintiff was assaulted when he was loading his vehicle in a parking lot. The assailants first forced him into the trunk of his vehicle, but then forced him into the front seat to assist in shifting the gears of the car. They drove to another parking lot and the plaintiff was pulled from the car and the assault continued. The vehicle was driven over the plaintiff’s foot; whether this was accidental or deliberate was not clear. The assailants then drove off in the vehicle and it was later found abandoned nearby.

In order to be eligible for statutory accident benefits the plaintiff had to be able to show the injuries arose directly out of the use or operation of the motor vehicle. For a claim under the unidentified motorist provisions it had to be shown the injuries arose directly or indirectly from the use or operation of a motor vehicle. The test for statutory accident benefits was considered first by the court as it was the more strict of the two.

In Amos v. ICBC, [1995] 3 S.C.R. 405, the Supreme Court of Canada established a two-part test to determine whether an injury arises out of the use or operation of an automobile. The first part, the “purpose test”, asked:

1. Did the accident result from the ordinary and well-known activities to which automobiles are put?

In this case the insurer conceded that the “purpose test” had been met.

The second part of the test addresses the issue of causation. Following Amos the wording of the statutory accident benefit provisions in Ontario was amended and subsequent caselaw established a narrower “causation test” applicable to statutory accident benefits in that province as follows:

2. Is there a direct or proximate relationship between the plaintiff’s injuries and the ownership, use or operation of his vehicle or is the connection between the injuries and the ownership, use or operation of the vehicle, indirect or merely incidental or fortuitous?

The court concluded that the injuries caused to the plaintiff in this case were directly connected to the use and operation of his vehicle. He was forced to assist one of the assailants in driving the car while the assaults were being committed; the car was driven to another parking lot where the assaults were continued; and the car was directly used to commit one of the assaults, namely, driving over his foot. As a result of this conclusion regarding the statutory accident benefits claim, there was no doubt that the plaintiff’s claim under the unidentified motorist provision could also be maintained. In the result, the court held the plaintiff’s injuries had occurred as a result of an “accident” as defined in statutory accident benefits provisions, and arose directly or indirectly from the use of operation of his automobile.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

Relatives living in a separate and distinct household may not be entitled to fire insurance from the non resident house

Michael Thomas — Mon, 23 Apr 2012 09:18:02 -0800

An application seeking a declaration that the defendant was an unnamed insured under the policy was dismissed when it was shown that the defendant, who was a relative of the insureds, maintained a separate and distinct household from the insureds.

Jomaa v. Jomaa, [2011] O.J. No. 5468, December 2, 2011, Ontario Superior Court of Justice, D.J. Power J.

This was a case in which the plaintiff’s insurer brought a subrogated action in relation to extensive fire and water damage caused to a two-unit residential property owned by the plaintiff insureds. The named insureds were Mohamad Jomaa, Mohamad’s wife, Monira Jomaa-Kayhan, and Samir Olleik, who had formerly been married to Mohamad’s sister, Rima. The defendant was Mohamad and Rima’s brother, Issam Jomaa. This was an application by Issam seeking a declaration that he was an unnamed insured under the plaintiffs’ insurance policy and, therefore, could not be named as a defendant in the action. At issue was whether Issam was “living in the same household” as any of the plaintiffs at the time of the loss so as to bring him within the definition of “Insured” under the policy.

The policy provided as follows:

‘INSURED’ means the person(s) named as Insured on the ‘Declaration Page’ and, while living in the same household:

(a) his or her spouse;

(b) the relatives of either; and

The policy did not define the term “while living in the same household.”

The property at issue consisted of two self-contained apartments in one building. When the plaintiffs initially purchased the property, Samir lived in the lower apartment with his then wife and Mohamad and Monira lived in the upper apartment. Later on, Mohamad and Monira moved out and Issam moved into the upper apartment to look after Mohamad and Issam’s mother, who later passed away. At the time of the fire, Issam lived in the apartment with his wife and child and did not share household obligations with any of the named insureds. At no time did Issam pay rent for living in the apartment. The evidence was unclear whether Samir was living in the lower apartment at the time of the fire.

The case authority on the issue established that the word “household” must be given a flexible meaning but could be defined as “… a collective group living in a home, acknowledging the authority of a head, the members of which, with few exceptions, are bound by marriage, blood, affinity or other bond, between whom there is an intimacy and by whom there is felt a concern with and an interest in the life of all that gives it a unity.” The motions judge found no basis upon which to conclude the defendant was an unnamed Insured. In the result, the plaintiffs were entitled to a declaration that they could continue with the action against the defendant, as he was not an unnamed insured under the policy.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

Disabilty benefits are generally deductible from motor vehicle damage awards in Ontario. Care should be taken to instruct the jury to do so.

Michael Thomas — Sun, 22 Apr 2012 12:42:49 -0800

Private long-term disability benefits are deductible from an award for past wage loss made by jury to plaintiff in respect of injuries sustained in a motor-vehicle accident, but only if the jury is instructed to deduct them.

Brown v. Campbell, [2011] O.J. No. 5991, December 5, 2011, Ontario Superior Court of Justice, M.J. Nolan J.

The issue before the Court was the deductibility of private long term disability payments from an award for past wage loss made by a jury to the plaintiff in respect of injuries sustained in a motor vehicle accident.

Section 267.8 of the Insurance Act, R.S.O. 1990, c. 1 8 provides for the deduction of collateral benefits received due to injuries suffered in a motor vehicle accident to avoid double recovery. The Court found that the disability payments were not deductible because the jury had not been instructed with respect to what use they could make of the disability payments the plaintiff was receiving. The Court held that this is a matter that the jury should be instructed on. Otherwise, there is no way to know whether they have made the deduction.

This case was digested by Cameron B. Elder of Harper Grey LLP.

A university may owe a general duty to defend professors from allegations of intellectual property theft by students

Michael Thomas — Wed, 11 Apr 2012 14:02:32 -0800

University insurer found to have duty to defend employees of university in context of claims by a former student for misappropriation of ideas and use of concepts.

Baiden v. Canadian Universities Reciprocal Insurance Exchange, [2011] O.J. No. 5850, December 15, 2011, Ontario Superior Court of Justice, C.J. Brown J.

Three insureds brought an application for a determination of their rights based on an interpretation of their policy of insurance issued by the insurer. The issue was whether the insurer had a duty to defend the insureds under the policy.

The insureds were a professor in the School of Engineering at Laurentian University, a research assistant, and a research development and prototyping company. The profefssor and the research assistant were principals of the insured company. There were two policies at issue, one that insured Laurentian University and a CGL policy that insured the company.

The three insureds were defendants in two actions commenced by a former graduate student at Laurentian University who was supervised by the professor. He alleged that the insureds had used his concepts and had them developed by the insured company.

The Court found that the policy insuring Laurentian University gave rise to a duty to defend and that the insurer could control the defence and retain counsel; however, the CGL insurer would be entitled to its own counsel with respect to those claims to which its policy responds.

This case was digested by Cameron B. Elder of Harper Grey LLP.

Insurers and brokers may not owe a duty to a third party to ensure that the insured is the owner of the vehicle

Michael Thomas — Mon, 09 Apr 2012 15:35:49 -0800

Two insurance companies and an insurance broker were found not to owe a duty to the actual owner of a vehicle to investigate the ownership of a vehicle when approving or issuing an application for insurance.

Barzo v. Chrysler Financial Services Inc., [2011] O.J. No. 5874, December 21, 2011, Ontario Superior Court of Justice, J. Mackinnon J.

The plaintiff Barzo was involved in a single vehicle accident. The alleged at-fault vehicle was owned by Chrysler and was uninsured at the time of the accident. The plaintiff sued Chrysler as the owner of the vehicle. The third party Perth Mutual Insurance Company had issued a policy to the alleged at-fault driver who described himself as the owner of the vehicle. That policy was cancelled for non-payment of premiums prior to the date of the accident. Chrysler third partied the company which brokered the policy, alleging negligence and failing to verify that Chrysler was the owner. Chrysler also third partied Economical Mutual Insurance Company, which had the prior policy on the vehicle.

All three third parties brought a summary trial application to dismiss the claims against them. Economical and Perth took the position that the case against them had no chance of success because neither owed a duty to Chrysler; neither had a contractual relationship with Chrysler, and no statute or regulation required them to investigate the ownership of the vehicle when approving an application for insurance. The broker took the position that it had no duty to Chrysler to verify the information it received as to ownership of the vehicle.

On the basis of the evidence, the Court concluded that there was no genuine issue for trial because none of the third parties owed Chrysler a duty of care at the material time. As a result, the third party claims were dismissed.

This case was digested by Cameron B. Elder of Harper Grey LLP.

An insured may be entitled to punitive damages if her insured unsuccessfully attempts to breach her for impaired driving

Michael Thomas — Thu, 05 Apr 2012 08:16:12 -0800

A plaintiff was successful in seeking a declaration that she was entitled to coverage on the basis that her motor vehicle insurer had not established she was impaired at the time of the accident and she was awarded punitive damages for the insurer’s bad faith conduct with respect to the claim.

McDonald v. Insurance Corp. of British Columbia, [2012] B.C.J. No. 372, February 24, 2012, British Columbia Supreme Court, S.K. Ballance J.

This was an action by the plaintiff seeking a declaration that she was entitled to indemnification by her insurer, the Insurance Corporation of British Columbia (“ICBC”), for all claims arising from a motor vehicle accident and for damages for bad faith for refusing to indemnify her and settling the civil action arising from the accident without involving the plaintiff.

On the night of the accident, the plaintiff had approximately two glasses of wine between 11:30 p.m. and 1:00 a.m. and then went out with a friend to get late night sushi. The plaintiff drove her mother’s vehicle and they went to pick up another friend. The plaintiff was stopped at a random road check at 4:12 a.m. and the officer noticed no signs of impairment. The accident occurred around 5:00 a.m. when the plaintiff took the wrong off-ramp from the highway and mistakenly turned left into the flow of traffic and collided head-on with another vehicle.

The plaintiff had difficulty providing a breath sample at the scene though she was given 5-7 chances to blow. She was arrested at the scene for refusal to provide a breath sample and for impaired driving. She was also issued a ticket for driving without reasonable consideration for others using the highway and received a 24-hour suspension and notice of driving prohibition. Subsequently, additional criminal charges of dangerous driving were laid against her. The charges for refusal to provide a breath sample and impaired driving were stayed five weeks before the criminal trial proceeded. Ultimately, the plaintiff pleaded guilty to the charge of driving without reasonable consideration which carried a penalty of a fine of $500.

ICBC conducted little investigation of its own until after the criminal trial was concluded. ICBC then took steps to interview and obtain statements from the two passengers in the plaintiff’s vehicle, speak to the two officers who attended the scene, and seek additional information from the plaintiff. However, the only substantive outcome of these efforts was communication with one of the officers involved. Only weak attempts were made to contact the other individuals and to obtain information from the road check where the plaintiff had been stopped earlier in the evening and no attempts were made to get further information from the plaintiff herself. During this time, ICBC retained counsel to defend the civil action on behalf of the plaintiff’s mother and the lessor of the vehicle but no counsel was retained to act for the plaintiff. ICBC settled the action on behalf of all three defendants but did not notify the plaintiff.

After the civil action was settled, ICBC decided to deny the plaintiff coverage on the basis of an “alcohol incapability breach”. The factors in ICBC’s decision that the plaintiff was incapacitated at the time of the accident were (1) the late hour of the accident, (2) the plaintiff’s failure to provide a breath sample at the scene, (3) the fact the plaintiff was driving the wrong way in a familiar area, (4) the plaintiff’s admission she had consumed alcohol, (5) the information obtained from one officer, and (6) the contents of the report of the other officer at the scene.

At trial it was found that there were several material difficulties with the first officer’s assessment of the plaintiff’s sobriety at the scene and the accuracy of his account to ICBC and also difficulties with the impressions formed by the second officer as recorded in her report. The judge concluded that it was due to inattentiveness that the plaintiff missed the road signs and the accident resulted when the plaintiff seriously misjudged her entitlement to turn left. The plaintiff’s substandard driving at the material time was unconnected to her prior alcohol consumption. In the result, it was held that ICBC had failed to meet its burden of proof that the plaintiff was incapacitated at the time of the accident. The plaintiff was entitled to indemnification for all claims arising from the accident.

The trial judge further found that ICBC had effectively made its coverage decision based on the information obtained from the first officer and had failed to thoroughly review the police file in full and pursue other aspects of the investigation. ICBC also acted unfairly in failing to advise the plaintiff of the settlement of the civil action when it was “essentially on the brink of deciding the plaintiff was in breach” and would not be indemnifying her. In the result, it was found that ICBC’s multiple failings in the investigation, assessment, and breach decision, and its misconduct in relation to the civil action contravened the duty of fair dealing and good faith owed to the plaintiff. The plaintiff was awarded $75,000 in punitive damages.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

Massage therapy may be a mandatory first party benefit under an ICBC policy of automobile insurance

Michael Thomas — Mon, 02 Apr 2012 09:39:00 -0800

An application seeking payment for the cost of massage therapy under the mandatory no-fault benefits provisions of the Insurance (Motor Vehicle) Act Regulation was allowed on the basis the term "physical therapy" may include massage therapy, provided the other requirements to receive no-fault benefits are met.

Raguin v. Insurance Corp. of British Columbia, [2011] B.C.J. No. 2262, November 29, 2011, British Columbia Court of Appeal, M.A. Rowles, M.E. Saunders and D.F. Tysoe JJ.A.

The two infant plaintiffs had been involved in a motor vehicle accident and both suffered soft tissue injuries. On the recommendation of their family physician, they had each received massage therapy treatment at a total cost of $742. An action on their behalf was brought against the defendant Insurance Corporation of British Columbia ("ICBC") seeking payment of no-fault benefits under Part 7 of the Insurance (Motor Vehicle) Act Regulation. The plaintiffs applied for an order for payment of the massage therapy expenses and ICBC brought a cross-application seeking dismissal of the action on the basis that the massage therapy expenses were not covered under the Regulation. The plaintiffs' application was allowed and ICBC's application was dismissed. This was the appeal from the order allowing the plaintiffs' application for payment of the massage therapy expenses.

At issue were the following two sections of the Regulation:

88(1) Where an insured is injured in an accident for which benefits are provided under this Part, the corporation shall, subject to subsections (5) and (6), pay as benefits all reasonable expenses incurred by the insured as a result of the injury for necessary medical, surgical, dental, hospital, ambulance or professional nursing services, or for necessary physical therapy, chiropractic treatment, occupational therapy or speech therapy or for prosthesis or orthosis.

88(2)(f) Where, in the opinion of the corporation's medical adviser, provision of any one or more of the following is likely to promote the rehabilitation of an insured who is injured in an accident for which benefits are provided under this Part, the corporation may provide any one or more of the following:

…

(f) funds for any other costs the corporation in its sole discretion agrees to pay.

The Court noted that the payments under s. 88(1) were mandatory whereas payments under s. 88(2) were at ICBC's discretion. Although the s. 88(1) benefits were mandatory, ICBC did have a limited power to challenge a claim under that section by requiring a medical examination to determine whether the expenses incurred were both necessary and reasonable.

The Court reviewed prior versions of the provisions. The earlier wording of s. 88(1) had originally required ICBC to pay for specifically enumerated services and also permitted for coverage of additional services and supplies. Following that, the "catch-all" was removed from the mandatory coverage provisions along with reference to the attending physician's opinion as to what was essential. Later on, prosthesis and orthosis were added to the list of mandatory benefits and the term "physiotherapy" in that section was renamed as "physical therapy". The Court concluded that it appeared that the trend in the legislation was toward specific enumeration of the type of mandatory benefits that could be covered and limitation of the role of the insured's physician regarding what type of service may be necessary.

One of the arguments made by ICBC was that by including massage therapy as a benefit payable under s. 88(1), it would open the floodgates to all manner of questionable procedures. The Court reviewed the relevant sections of the Regulation and the Health Professions Act and its related regulations which governed physiotherapists and massage therapists. Because the regulation of health professions pursuant to the Health Professions Act and the related regulations restrict the provision of designated services to registered practitioners of the designated health profession, to include massage therapy as a benefit payable under s. 88(1) would not open the floodgates to allowing claims for any type of procedure. The Court concluded that physical therapy is a mandatory benefit under s. 88(1) and that the dictionary definition and related regulatory definitions defined physical therapy as including massage. Though the Regulation did not specifically refer to massage therapy in s. 88(1), the Court concluded that physical therapy may properly be interpreted as including massage therapy. Provided that the other requirements stated in the section were met, massage therapy was payable under s. 88(1).

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP.

Lending a vehicle to an employee who is not licensed to drive may not breach insurance

Michael Thomas — Sun, 01 Apr 2012 08:07:19 -0800

Wawanesa Mutual Insurance Co. v. S.C. Construction Ltd., [2012] O.J. No. 316, January 26, 2012, Ontario Superior Court of Justice, E.P. Belobaba J.

An application for a declaration that statutory conditions of a policy of insurance had been breached and for a declaration that there was no obligation to defend and indemnify the insured. The application was dismissed.

SC Construction was a small family owned carpentry business. An employee named Jason asked to borrow a company vehicle one day because his car had broken down. He was permitted to take the vehicle home and to drive it back the next morning. Jason was not asked to show his driver’s licence to his boss before borrowing the vehicle. He was a 10 year employee and had been seen driving his own car to and from work almost every day. Jason did not have a valid Ontario driver’s licence. After borrowing the vehicle Jason was involved in an accident. He has since disappeared and did not defend a personal injury action that was commenced.

Wawanesa Mutual Insurance Company (“Wawanesa”) sought a declaration that their insured, SC Construction, had breached statutory conditions under the policy by letting an unlicensed employee drive their vehicle. They asserted that a condition was breached by letting Jason drive the vehicle when he was not authorized by law to do so and in failing to notify Wawanesa of a material change in risk. Wawanesa also asked for a declaration that it did not have a duty to defend or indemnify or to pay any costs or disbursements relating to the insured's defence of the personal injury action.

The test to be applied in determining whether Statutory Condition 4 had been breached was whether the insured had acted reasonably in all of the circumstances. It is a question of fact in each case. In this case, the Court found that the owner of SC Construction did not act unreasonably and therefore a breach of the statutory condition had not been established. There was no need to ask employees for licenses as they did not hire drivers. The owner of SC Construction had good reason to believe that Jason had a valid driver’s license.

Wawanesa also failed to establish that there was a material change in a risk which Wawanesa should have been notified of because Jason did not have regular or habitual use of the vehicle.

Wawanesa’s application was dismissed and cost were awarded to SC Construction. Wawanesa was obliged to defend and indemnify SC Construction.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

A person killed in a plane crash on a charter flight may not be entitled to life insurance.

Michael Thomas — Thu, 29 Mar 2012 07:44:51 -0800

McLean v. Canadian Premier Life Insurance Co., [2012] B.C.J. No. 198, January 31, 2012, British Columbia Supreme Court, J.K. Bracken J.

The plaintiff applied unsuccessfully for a declaration that she was entitled to accidental death benefits under a policy of life insurance following the death of her husband.

The plaintiff sought a declaration that she was entitled to a $1,000,000.00 death benefit under a policy of life insurance. Her husband had died in a crash while on a chartered airplane which had been hired by his employer. The defendant insurer submitted that the death did not fall within the terms of coverage in the accidental death benefit provision of the policy because the plaintiff’s husband did not die as a fare paying passenger on a “common carrier”, as defined in the policy.

It was found that the words of the contract were clear and unambiguous. The flight did not fit within the definition of a “common carrier” under the policy. To be a “common carrier” a person or business entity must be able to carry passengers no matter who they may be. If the service is only available to certain passengers and not the public at large, the carrier is not a common carrier. In this case, the passengers were selected and paid for by the husband’s employer. It directed the time of departure and the destination of the flight. No members of the public had access to the flight.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

Allegations of fraud need only be proven on a balance of probabilities in the civil insurance context

Michael Thomas — Sun, 25 Mar 2012 08:13:04 -0800

Slawter v. Insurance Corp. of British Columbia, [2011] B.C.J. No. 2595, September 2, 2011, British Columbia Provincial Court, D.A. St. Pierre Prov. Ct.J.

A dispute over the standard of proof to be applied in civil cases where an allegation of fraud is made. The Court found that the only standard of proof to be applied is the balance of probabilities.

The claimant maintained that the Insurance Corporation of British Columbia (“ICBC”) wrongfully denied his claim for compensation when he asserted that his vehicle had been stolen. ICBC felt the denial was warranted as their investigation revealed some inconsistencies in his reporting of certain details regarding the theft which led them to the conclusion that he had some responsibility for it. They asserted that the theft did not occur and that the claimant made wilfully false statements which invalidated his claim pursuant to s. 75 of the Insurance (Vehicle) Act.

There was a dispute between the parties about the applicable standard of proof where a claimant seeks to prove a loss and a right to indemnity and where an insurer raises affirmative defences like fraud or wilful false statements.

Following the Supreme Court of Canada decision in F.H. v. McDougall, 2008 SCC 53, the Court confirmed that there is only one standard of proof in civil cases - proof on balance of probabilities. Trial judges are responsible for scrutinizing evidence carefully regardless of whether there is a serious allegation of fraud, sexual assault or something else.

After considering all of the evidence The Court found that the claimant had led enough evidence to establish that on a balance of probabilities he had a valid policy of automobile insurance and that he suffered a loss. The Court noted that there were suspicious circumstances, but there was no clear and cogent evidence of fraud which met the standard of a balance of probabilities. The Court was also unable to conclude on the balance of probabilities that the claimant made wilfully false statements. The claimant was therefore entitled to be indemnified for his loss. Reasonable costs and disbursements were also awarded.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

Acceptance of unpaid premiums from a beneficiary under a life insurance policy may not create an entitlement for benefits

Michael Thomas — Thu, 22 Mar 2012 08:18:51 -0800

Paul v. CUMIS Life Insurance Co., [2012] B.C.J. No. 253, January 20, 2012, British Columbia Court of Appeal, M.E. Saunders, P.D. Lowry and S.D. Frankel JJ.A.

Appeal by an insurer from a trial judgment finding it liable under a mortgage life insurance policy. The appeal was allowed.

Mr. and Mrs. Paul had mortgage insurance with the applicant, CUMIS Life Insurance Co. (“CUMIS”). Mr. Paul passed away when the premiums had not been paid for 3 months. The policy stated that the insurance could be reinstated if the premiums were paid in 60 days.

After Mr. Paul’s death, Mrs. Paul contacted CUMIS and was erroneously advised that the policy would be reinstated upon payment of the premiums that were owing. CUMIS was unaware of Mr. Paul’s death at the time. Mrs. Paul paid the premiums owed before a claim for Mr. Paul’s death was made under the policy. CUMIS declined to pay the claim. It stated that the policy had erroneously been reinstated and attempted to return the premiums to Mrs. Paul, which she did not accept.

Mrs. Paul asserted that the policy did not lapse for non-payment of premiums and did not terminate prior to her husband’s death because the insurer did not give notice that it was terminating the policy by registered mail pursuant to 17(1) of the Insurance Act, R.S.B.C. 1996, c. 226. The trial judge found that notice was not required because the policy lapsed on its own terms and the insurer did not terminate it.

Ms. Paul also argued that the policy was validly reinstated after her husband died when she paid the premiums. The trial judge accepted that argument.

On appeal, the Court agreed with the trial judge that the policy had lapsed on its own terms and had not been terminated by the insurer. The Court also found that insurer was not liable to pay out pursuant to the policy. Given that there was no life to insure there was no continuing insurance risk and reinstatement was not possible.

The doctrine of waiver did not apply because a valid waiver requires complete knowledge, and a conscious intention to abandon ones rights. There would be no suggestion that the representative consciously abandoned CUMIS’ right to deny coverage when the insurance had terminated before Mr. Paul died. The doctrine of estoppel also had no application as Mrs. Paul suffered no loss by relying upon what CUMIS’ representative had said. She was not deprived of the right to obtain insurance on Mr. Paul’s life.

The appeal was allowed and the action was dismissed and costs awarded to the appellant.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

An expired medical certificate may perclude entitlement to life insurance proceeds for a pilot killed in a plane crash

Michael Thomas — Wed, 21 Mar 2012 15:43:37 -0800

Decision by insurer to deny payment on a life insurance policy following the death of the insured in a plane crash based on an exclusion clause requiring the insured to have the "required licence" to fly upheld because the insured's medical certificate had expired one year before the accident.

Gudzinski Estate v. Allianz Global Risks US Insurance Co. Limited, [2012] A.J. No. 5, January 9, 2012, Alberta Court of Appeal, J.E.L. Côté, J. Watson and FF. Slatter JJ.A

The appellant was the estate of a man who accidentally crashed his aircraft and died. He had insurance with the respondent. The insurer did not pay out on the policy on the basis of an exclusion clause. The policy provided that it “applies only if your aircraft is flown by an approved pilot … who has the required license … to fly…” The deceased had been issued an appropriate pilot’s license, but his medical certificate had expired over a year before the accident. The Court found that the policy did not call for a mere pilot’s license; it required more. It called for “the required license … to fly your aircraft”. The document which the deceased had on the day of the accident was not what he required in order to fly. What he required was a pilot’s license with an up to date (unexpired) medical certificate. In the result, the appeal was dismissed.

This case was digested by Cameron B. Elder of Harper Grey LLP.

Failing to obtain insurance may not give rise to an occurence under a CGL policy.

Michael Thomas — Tue, 13 Mar 2012 16:00:05 -0800

Application for a declaration of a duty to defend dismissed because there was no occurrence under the policy of insurance and there was no possibility of a duty to indemnify.

Co-operators General Insurance Co. v. Assn. of New Brunswick Cemeteries, [2012] N.B.J. No. 4, January 10, 2012, New Brunswick Court of Queen's Bench, J.L. Clendening J.

A fire occurred at Ocean View Cemetery Inc. (“Ocean View”), which destroyed a building and some equipment. Wawanesa Insurance (“Wawanesa”) issued a commercial insurance policy (the “Policy”) to the Association of New Brunswick Cemeteries (the “Association”). Ocean View was a member of the Association and was insured under the Policy.

The Policy had a limit of $100,000 and it was alleged there was no coverage for equipment at the Ocean View location. Wawanesa paid out the limit of the Policy as the loss was far in excess of the limit. Subsequently, Ocean View commenced an action against the Association for the uninsured loss. The statement of claim contained the following allegations against the Association:

(a) Failing to advise the plaintiff that the Insurance Policy did not cover its tools, machinery and equipment;

(b) Failing to transmit the June 2008 request for confirmation of coverage from the plaintiff to Assurance Vienneau;

(d) Failing to advise the plaintiff with respect to the various coverage provided by Wawanesa or other carriers regarding tools, machinery and equipment; and

(e) Failing to advise the plaintiff to purchase insurance coverage for its tools and equipment …

The Co-operators General Insurance Company (“Co-operators”), the current insurer of the Association, applied for a declaration that Wawanesa had a duty to defend the Association in the action commenced by Ocean View.

The commercial liability coverage section of the Policy provided coverage for “bodily harm” or “property damage” as a result of an occurrence. Co-operators argued that the statement of claim alleged that the Association, Harold Steeves (the Association’s secretary) and their broker were negligent and breached their duty of care and that this amounted to an occurrence such that Wawanesa owed a duty to defend. In response, Wawanesa asserted there were no allegations relating to “bodily harm” or “property damage” in the statement of claim.

The Court found the statement of claim clearly contained allegations of a breach of duty for failing to obtain sufficient insurance coverage. However, these allegations did not fall within the coverage provisions of the Policy. The court noted there was no coverage for errors and omissions under the Policy. As a result, there was no possibility of a duty to indemnify and therefore no duty to defend.

The Court also noted that failing to obtain insurance coverage was not an occurrence as defined in the Policy. The alleged negligence of the Association did not cause the fire. Therefore, there was no occurrence under the Policy.

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

To sue a broker an insured must prove on a balance of probabilities that he or she would have purchased additional insurance.

Michael Thomas — Sun, 11 Mar 2012 16:12:17 -0800

The insured’s motion for summary judgment against his broker was dismissed. The insured alleged his broker failed to properly offer optional income replacement benefit coverage as part of his automobile insurance policy. The Court found that although the broker had breached the applicable standard of care, the insured had not shown on a balance of probabilities that he would have purchased the income replacement benefit coverage if it had been properly offered.

Zefferino v. Meloche Monnex Insurance Co., [2012] O.J. No. 57, January 9, 2012, Ontario Superior Court of Justice, R.B. Reid J.

The insured was injured in a motor vehicle accident and as a result of his injuries he could no longer be gainfully employed. Subsequently, the insured commenced an action against his broker for allegedly failing to properly offer optional income replacement benefit coverage as part of his automobile insurance policy.

At the time the policy was sold, the broker was in the business of selling insurance by telephone to customers within certain organizations. The insured purchased an automobile insurance policy in September 2003 and renewed the policy in 2004.

The broker’s sales representatives used a standard script in their conversations with potential customers and the broker had records of conversations with the insured and his wife. The records indicated that optional benefits were refused in two conversations between the insured’s wife and the broker’s representative in September 2003. In February 2004, the broker’s sales representative recorded the following when discussing a vehicle change:

Discussed coverages. Clt chose to keep cov same.

In November 2003, an amendment to section 27(1) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 made the offer of optional income replacement benefits mandatory.

It was undisputed that the broker’s representative did not engage either of the plaintiff or his wife in a detailed discussion of the income replacement benefits or the additional cost of optional benefit coverage during discussions about the new policy in 2003, the vehicle change in 2004 and the renewal in 2004.

In order to successfully establish a claim in negligence, the insured was required to prove (a) that the broker owed the insured a duty of care, (b) that the broker breached the applicable standard of care and (c) that the insured would have purchased the optional benefits if they were properly offered.

The Court found the broker clearly owed the insured a duty of care. The insured relied on the information provided by the broker, the insured’s reliance was reasonable and the broker knew or ought to have known the insured would rely on such information.

With regard to the applicable standard of care, the Court accepted the insured’s argument that the mandatory nature of the requirement to offer optional benefits meant that the broker had an obligation to explain the optional benefits in such a way that the insured could make a fully informed decision about what to purchase. As a result, the Court found it was insufficient to simply offer the optional benefits without an explanation and a quote as to the additional costs that might be involved. The broker argued the conduct of its representatives was consistent with the industry standard. The Court held that there was a consumer protection purpose behind the need to offer optional benefits and further, general non-compliance with a statutory requirement did not mean that non-compliance was acceptable or sufficient to lower the applicable standard of care.

However, the Court found the insured had failed to prove on the balance of probabilities that he would have purchased the optional benefits if it had been properly offered. The insured had been with four other insurers between 1993 and 2003 and the insured had switched insurers in 2003 because of the low price offered through the broker. The Court found “there [was] no hint of any interest on the part of the [insured] and his spouse in coverage greater than the statutory minimum in any area”. Thus, the Court found the insured’s testimony to the effect that he would have secured additional income replacement benefit coverage had he understood what was being offered not to be credible. In the result, the insured’s action was dismissed.

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

The limitation period in section 259 of the Insurane Act, RSO, may not apply to a loss of use claim.

Michael Thomas — Thu, 08 Mar 2012 12:25:27 -0800

Successful application by the plaintiffs to add the insurer as a defendant. At issue was whether section 259.1 of the Insurance Act, which contains a one year limitation period, applied to the plaintiffs’ claim. The Court found that section 259.1 did not apply to "loss of use" and, therefore, the plaintiffs’ application was granted.

McMillan v. Poniatowski, [2011] O.J. No. 6102, December 22, 2011, Ontario Superior Court of Justice, N.B. Pickell Deputy J.

The plaintiffs were involved in a motor vehicle accident with Ms. Poniatowski. The plaintiffs had commenced an action against Ms. Poniatowski and now wanted to commence an action against their insurer for loss of use of their automobile.

The decisive issue was whether section 259.1 of the Insurance Act applied. If the section applied, the action was statute-barred. Section 259.1 reads as follows:

A proceeding against an insurer under a contract in respect of loss or damage to an automobile or its contents shall be commenced within one year after the happening of the loss or damage.

The issue for the Court was whether “loss or damage to an automobile or its contents” included "loss of use".

In B.F. Jones Logistics Inc. v. Rolko, [2004] O.J. No. 3518, Justice Lissaman noted:

It is a well-established principle of statutory interpretation that if a statutory provision specifically mentions one item but fails to mention another comparable item, then it is presumed that the legislature deliberately intended to omit the comparable.

The phrase “loss of use” is specifically mentioned in the following sections of the Insurance Act:

260. “... loss of or damage to or the loss of use of the automobile ..."

261(1). "... loss of or damage to an automobile and the loss of use thereof ..."

261(1.1). "... loss of or damage to an automobile and the loss of use thereof ..."

263(5)(a.1). "... damages to the insured's automobile or its contents or loss of use, ..."

The court concluded that when the Insurance Act is read as a whole it is clear that “the loss of or damage to an automobile”, “the loss of or damage to its contents” and “the loss of use” of the vehicle are separate and distinct heads of damages. Section 259.1 does not specifically mention “loss of use”. Therefore, loss of use was not covered by the one-year limitation in section 259.1 and the plaintiffs’ application was granted.

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

Broker Liable for Failing to Advise Insured of Vacancy Exclusion

Ryan Irving — Tue, 06 Mar 2012 08:53:20 -0800

An insured brought an action against his insurance broker for failing to advise him about the vacancy exclusion in his policy. The action was allowed and the insured was awarded damages.

Cheecham v. Saskatchewan Government Insurance [2011] S.J. No. 500, August 2, 2011, Saskatchewan Court of Queen’s Bench, B. Scherman J.

The plaintiff, Mr. Roy Cheecham, brought an action against his insurer, Saskatchewan Government Insurance, and his insurance broker, Meadow North Agencies Ltd. (“Meadow North”) after coverage was denied for damage sustained to his vacant rental property. The claim against the insurer had been dismissed following a summary judgment application on the basis that the policy excluded coverage for vandalism if the property was vacant. The issues left to be decided by the Court were whether Meadow North had breached a duty owed to the plaintiff as his broker, whether the breach was a proximate cause of the loss, and whether the plaintiff had breached his duty to advise of a material change in the risk thus voiding the policy.

In 1993 the plaintiff attended at Meadow North’s office and completed an application for insurance for the property. The policy was issued and renewed annually thereafter. A booklet that outlined the policy stated that coverage for vandalism while the property was vacant was excluded. It also stated that the plaintiff was required to notify the insurer within 30 days if the property became vacant. The insured was operating under the assumption that during those 30 days he would be coved for vandalism. That was not the case, as his coverage ended immediately upon vacancy.

In 2004, the property sustained $30,000.00 in damage shortly after the plaintiff’s tenants had vacated the property. The plaintiff asserted that he was not aware of vacancy exclusion.

The Court found that Meadow North breached the duty of care owed to the plaintiff and that it was a proximate cause of the loss. There was no evidence that the plaintiff was provided with the booklet that outlined the coverage and the exclusions, nor was he advised about the fact that coverage would not be provided immediately when the property became vacant. It was reasonably foreseeable that a policy holder may think that they had 30 days to advise of the vacancy. Meadow North had a stringent duty as an insurance broker to provide information and advice to the plaintiff about his insurance coverage, including any gaps it may have had.

The plaintiff was awarded $30,000.00 in damages, plus pre-judgment interest, and costs.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

An ultimate limitation period may not time bar a claim for benefits if the discovery of the potential claim was delayed.

Michael Thomas — Wed, 29 Feb 2012 14:47:28 -0800

The one year limitation period set out in clause 6(c) of the SEF 44 endorsement may start to run only when a judgment or binding settlement legally fixes the amount of those claims. This will often allow an injured person sue later than the ultimate "ten year" statutory section 3(1)(b) of the Limitations Act. Section 7(1) of the Limitations Act expressly allowes that extension. Alternatively, section 647 of the Insurance Act permits the contractual limitation period in the endorsement.

Shaver v. Co-operators General Insurance Co., [2011] A.J. No. 1411, December 15, 2011, Alberta Court of Appeal, C.A. Fraser C.J.A., J.E.L. Côté J.A. and D.C. Read J. (ad hoc)

This was an appeal by the insurer from the dismissal of its motion for summary judgment to dismiss the claim. The plaintiff was injured in a three car collision that occurred more than 10 years earlier. At the time of the accident, the plaintiff had his own insurance coverage for underinsured or uninsured motorist. The plaintiff came to believe that the compensation elsewhere might be inadequate. He then commenced the current action against his own insurer for coverage under the underinsured or uninsured motorist endorsement. His claim was commenced approximately six months after the plaintiff received a payout from the unsatisfied judgment fund at about ten years and two weeks after the accident occurred. The insurer brought a motion to have the claim dismissed on the basis that it was commenced after the expiry of the ultimate limitation period of ten years. The plaintiff argued that his claim was commenced within the time as the one year limitation period in the uninsured/underinsured motorist endorsement of his policy applied and that time limit only began to run on discovery, which occurred after he received his payout from the unsatisfied judgment fund.

The motions judge found that the limitation period in the uninsured/underinsured endorsement applied and that it did not begin to run until the plaintiff had received his payout from the unsatisfied judgment fund. This decision is an appeal of the motions judge's ruling.

The Alberta Court of Appeal held that the Insurance Act does not contain any direct freestanding limitation period. As such, there are three possible time limits for suing. The first is the two year general limitation period found in section 3(1)(a) of the Limitations Act. The second is the ten year limitation period in section 3(1)(b) of that Act. The third limitation period is the contractual one year period in clause 6(c) of the SEF 44 endorsement on the plaintiff's insurance policy.

The defendant insurer relied on the ten year period in section 3(1)(b). The defendant insurer stated that the ultimate ten year period did not depend on discoverability. The plaintiff relied on the contractual limitation period in clause 6(c).

The Court found that the contractual period expressly only begins to run on discovery. Clause 6(c) provides that time starts to run

"…from the date upon which the eligible claimant or his legal representatives knew or ought to have known that quantum of the claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the action occurred."

The court held that the time under clause 6(c) may start to run only when a judgment or binding settlement legally fixes the amount of those claims. The court went through a number of reasons why this would take a long period of time. Specifically, the court noted that the endorsement defines the claim payable to the insured as being net of a number of possible payments, including "an unsatisfied judgment fund". Thus, one would not only have to look at the quantum of the plaintiff's claims but also the funds available to pay it. It would also involve actions by and information from other entities, and from other injured claimants.

The court upheld the validity of the contractual time limit noting that section 647 of the Insurance Act states that a suit under such coverage "must be commenced within the limitation period specified in the contract…." The court further held that section 647 of the Insurance Act should prevail over section 7(a) of the Limitations Act as section 647 is narrower and more specific. The court then went on to consider the possibility that if section 7 of the Limitations Act did prevail, that the proper interpretation of section 7(1) and (2) of the Limitations Act was to determine what the last day the Act allowed the plaintiff to sue and whether the contract chose a date earlier or later than that. The court held that if the contract chose an earlier date, then the contract was invalid. However, if the contract chose a later date, the contract notation period would be valid.

The court held that a contractual clause 6(c) limitation period would often purport to let the injured person sue later than the ultimate "ten year" statutory section 3(1)(b) of the Limitations Act. The court held that sections 7(1) of the Limitations Act expressly allowed that. And, in any event, section 647 of the Insurance Act permits the contractual limitation period in the endorsement in issue here.

The court dismissed the appeal, the summary dismissal motion, and sent the suit to trial on its merits, free of any limitations defence.

This case was digested by Katherine E. Tinmouth and edited by David W. Pilley of Harper Grey LLP.

A claims administrator may owe a duty of good faith to an insured.

Michael Thomas — Tue, 21 Feb 2012 14:16:38 -0800

Where an insurer acts as a claims administration service only but makes decisions regarding the adjudication of claims, computation and issuance of benefits it owes a duty to the insured to act in good faith as it was adjudicating claims and benefits. As such, the traditional tort of intentional procurement of breach of contract is broad enough to capture bad faith actions by an adjuster that bring about the rejection of a meritorious claim for insurance benefits.

LeBlanc v. Atlantic Blue Cross Care, [2011] N.B.J. No. 446, December 12, 2011, New Brunswick Court of Queen's Bench, G.S. Rideout J.

The plaintiff was insured under a group disability insurance with her employer for short and long term disability benefits. She received payments under this policy between March 2003 and December 2004. In December 2004, the defendant, Blue Cross, denied further benefits to the plaintiff. The defendant determined that she was not disabled and discontinued the payments. The plaintiff commenced this action.

The defendant claimed that it was not a proper party to the action and asked that the matter be dismissed. The New Brunswick Court of Queen's Bench severed the issue of whether the plaintiff had a cause of action against the defendant for payment of disability benefits from the remaining issues. This judgment is in respect of those issues.

The province of New Brunswick established a self insured group plan for the benefit of certain employees which included the plaintiff. The plan provided for long term disability benefits to employees. A Standing Committee on Insured Benefits ("SCIB") was established with a mandate to make recommendations to the province with respect to benefits provided under the plan. The defendant entered into an Administration Services Only Contract (hereinafter "A.S.O. contract") with SCIB. The defendant states that pursuant to the A.S.O. contract, they provided claims administration services only. The defendant therefore argued that it was not a proper party to the action.

The defendant pointed out that under the A.S.O., SCIB provided the funding for benefits and assumed liability for all payments of long term disability benefits. Paragraph 10 of the A.S.O. contract provides that "the SCIB is liable for payments of benefits under the Plan […] such payments are not guaranteed by Blue Cross".

The court reviewed provisions of the long term disability plan and the A.S.O. contract. The A.S.O. contract set out a schedule of services to be provided by the defendant and said under the heading "Claims Services" that the defendant was to provide adjudication of claims, computation and issuance of benefits.

Three cases were cited by counsel as being on point, Palk v. Canada Life Insurance Company, [1994] N.B.J. No. 562, Young v. Saskatchewan, [1991] S.J. No. 16 and Uy v. Great-West Life Assurance Co., [2003] O.J. No. 5216. The defendant submitted that all three cases stood for the proposition that an employee under a plan with an A.S.O. contract cannot sue an administrative service provider under that plan.

The court noted that the plaintiff dealt with Blue Cross only. All her payments came by way of Blue Cross cheques, all her claims were submitted to Blue Cross, and all were evaluated and either paid or denied by Blue Cross. She had no dealings with the SCIB, nor was the SCIB involved in evaluating her claims.

The court cites the decision of Walsh v. Nicholls and CGU Insurance Company of Canada, 2004 NBCA 59. The plaintiff argued that the Walsh decision stood for the proposition that the defendant had mandatory obligations to act in good faith as it was adjudicating claims and benefits; this made the defendant liable to the plaintiff. The court accepted that the Walsh decision stood for the proposition that the traditional tort of intentional procurement of breach of contract is broad enough to capture bad faith actions by an adjuster that bring about the rejection of a meritorious claim for insurance benefits.

The court held that the defendant determined that the plaintiff's disability benefits should be terminated. As such, the court held that the defendant had more duties and authorities than the insurance companies in the previously noted cases. The defendant was to provide "adjudication of claim, computation, and issuance of benefits". The court held that this was not done in consultation with the SCIB. The court held that if an adjuster can be a proper party in a tort action, as in the circumstances of the Walsh case, that an administrator could fall into that same position or would be a proper party in a lawsuit.

As such, the court held that Blue Cross had not discharged the burden of establishing that it was not a proper party or that the plaintiff's claim against it was without merit.

This case was digested by Katherine E. Tinmouth and edited by David W. Pilley of Harper Grey LLP.