Presentation on theme: "Insurance Institute of British Columbia June 6, 2013"— Presentation transcript:
1Insurance Institute of British Columbia June 6, 2013 P&C Insurance in British Columbia: Top Cases & Industry Developments 2012 – 2013Insurance Institute of British Columbia June 6, 2013
2TABLE OF CONTENTS Legislative Changes Duty to Defend Duty to Indemnify Defence CostsAdditional Named Insureds
3TABLE OF CONTENTS Exclusion Clauses Subrogation: Covenants to Insure “But For” “Material Contribution”Brokers and AgentsBad Faith
41. LEGISLATIVE CHANGES 2. DUTY TO DEFEND Raman Johal
51. LEGISLATIVE CHANGESLimitation Act , SBC 2013 c. 13 Insurance Act SBC 2012 c. 1
6LIMITATION ACT, SBC 2013 c. 13Came into force on June 1, 2013
7LIMITATION ACT Basic 2 year limitation period (default) Current 30 year ultimate limitation period replaced with a 15 year ultimate limitation periodDiscovery of act or omission
8LIMITATION ACT Contribution and Indemnity Postponement for infants and those under disabilityTransition Rules (s. 30)
9INSURANCE ACT, SBC 2012 c. 1Came into force on July 1, 2012
10INSURANCE ACT – Limitation Periods s. 22(1) of Old Insurance Act said: “Every action on a contract must be commenced within one year after the furnishing of reasonably sufficient proof of a loss or claim under the contract and not after.”Courts grappled with “reasonably sufficient proof”.B.C. Courts accepted two interpretations: (1) the “clear and unequivocal denial of benefits”; and (2) on submission of sufficient proof of loss.Courts found fairly long periods between date of loss and the furnishing of sufficient proof to be reasonable.
11INSURANCE ACT – Limitation Periods Courts sympathetic to insureds and would find that denials were not unequivocal or the proofs of loss insufficient.Given the uncertainty in the case law concerning the definition of “reasonably sufficient proof” and the impending changes to the Insurance Act, many insurers began to apply the two year limitation period in advance of the change in the law on July 1, 2012.
12INSURANCE ACT – Limitation Periods s. 23 of New Insurance Act: the limitation period for property losses is two years from the date the insured “knew or ought to have known the loss or damage occurred.”Regulation 213/2011: limitation period is not retroactive and does not apply to contracts that were in effect on July 1, 2012.
13INSURANCE ACT – Notice Requirements If liability for all or part of a claim is denied, claimants must be advised of a limitation period:five (5) business days after the insurer denies the claim and10 business days after the anniversary of the insurer receiving the claim if it is still open (i.e. not settled or denied).
14INSURANCE ACT – Notice Requirements Denial letters must be sent within 5 business days of denying a claim and the letter must reference the applicable limitation period and contain a statement that the limitation period is set out in the New Act.A letter must be sent within 10 days of the first anniversary of the insurer receiving the claim, if it is still open.Letters need not be sent if the insured has counsel, but the insurer may wish to send the letter in any event.
15INSURANCE ACT – Notice Requirements s. 4 of the Insurance Regulation; consequences for non-compliance with these notice provisions.If an insurer fails to provide the required notice, the running time of the applicable limitation period is suspended from the date on which notice should have been given and ending on the earlier of the following dates:the date that notice is given; orthe date that would cause limitation period to exceed 6 years after date cause of action against insurer arose.
16INSURANCE ACT – Notice Requirements While insurers need not redraft all policies in existence as of July 1, 2012, all new policies and policies that are renewed or replaced after that date are required to conform to the New Act.Dates must be carefully recorded to keep track of the limitation periods.Judgment required when establishing when an insured "knew or ought to have known" of a claim.Electronic Communication
172. DUTY TO DEFENDRoyal & Sun Alliance Insurance Co. of Canada v. Araujo, 2012 BCSC 1203 Dube v. BCAA, 2012 BCSC 1958 Dominion v. Hannam, 2013 NLCA 37
18DUTY TO DEFENDDuty to Defend may exist even where there is no Duty to IndemnifyPleadings govern the duty to provide a defenceInsurer required to provide a defence where facts alleged in the pleadings, if proven to be true, could require the insurer to indemnify the insured for the claim“mere possibility” that a claim within policy may succeedTrue nature of the substance of the claim
19RSA v. ARAUJO, 2012 BCSC 1203Teenager’s grandparents, dad and uncle live togetherTeenager injured in a fire [arson] at Defendants’ homeInsurer unsuccessful in obtaining a declaration that the homeowners policy excludes a bodily injury claim by the Teenager and that the insurer has no duty to defend or indemnify the grandparents, dad and uncle
20RSA v. ARAUJO, 2012 BCSC 1203Exclusion in personal liability protection section: “We do not insure claims made against you arising from…5. Bodily injury to you or any person residing in your household other than a residence employee;”“You or Your” means the person(s) named as Insured on the Coverage Summary page and, while living in the same household:his or her spouse;the relatives of either;any person under 21 in their care
21RSA v. ARAUJO, 2012 BCSC 1203Issue: was Teenager an unnamed insured or a person residing in the household?Teenager’s parents had joint guardianship and custodyPrimary residence with momLiberal access to dadDad exercised access at the grandparents house 2 to 3 times per month for one nightDad’s house: did not have own room; no belongings; no key to house; slept on sofa; no chores
22RSA v. ARAUJO, 2012 BCSC 1203Interpreting insurance contracts – Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33When language of policy ambiguous, court should give effect to clear language reading the contract as a wholeWhere ambiguous, the courts rely on general rules of contract construction – reasonable expectations; avoid unrealistic interpretationsWhen these rules of construction fail to resolve ambiguity – contra proferentumCoverage provisions interpreted broadly and exclusion clauses narrowly
23RSA v. ARAUJO, 2012 BCSC 1203“You” is confusing – can refer to each insured making the claim or any insured under the policy“I appreciate the objective of “plain language” contracts but the use of pronouns such as “you” and “your” are inherently ambiguous and the application of a definition that uses them invites ambiguity where the court is asked to interpret which “you” is being referred to in each context. In this Policy, I consider the use of the definition of “you” and “your” in the exclusion clause to be ambiguous.”
24RSA v. ARAUJO, 2012 BCSC 1203 “Any person residing in your household” Teenager part of “household” but not “residing” thereDual residences possibleMuch litigation over “residing”Evidence established that Teenager was a regular visitor to the home but did not reside thereExclusion clauses to be construed narrowly
25DUBE v. BCAA, 2012 BCSC 1958Student sued Teacher for assault and battery and negligenceTeacher asks insurer to defend the claimInsurer successfully obtained declaration that the homeowners policy excludes claims by the Student and that the insurer has no duty to defend or indemnify the Teacher
26DUBE v. BCAA, 2012 BCSC 1958No duty to defend or indemnify Teacher on assault and battery claims because of unambiguous exclusionthey are not torts resulting in “unintentional injury”exclusion clause: “bodily injury…caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy
27DUBE v. BCAA, 2012 BCSC 1958Two allegations in Student’s Notice of Civil Claim that are not derivative and could constitute negligenceExclusion clause unambiguous: “Sexual, physical, psychological or emotional abuse, molestation or harassment, including corporal punishment by, at the direction of, or with the knowledge of any person insured by this policy; or failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment.”
28DOMINION v. HANNAM, 2013 NLCA 37ATV owned by Mr. Hannam (neither registered nor insured)Son lends vehicle to friend who crashes it in gravel pitPassenger severely injured and sues Hannam family
29DOMINION v. HANNAM, 2013 NLCA 37Hannam’s homeowners policy excludes ownership, use or operation of a motor vehicleBut expressly insures off-road vehicles “which you do not own”Issue: who is “you”?
30DOMINION v. HANNAM, 2013 NLCA 37As in Araujo case, Court concludes “you” is inherently ambiguousCould mean either the individual insured or everybody who is insuredNo coverage for dad who actually owned ATV
31DOMINION v. HANNAM, 2013 NLCA 37But ambiguity means there is a possibility of coverage for son/motherTherefore insurer’s duty to defend is triggeredHow do we fix this?
323. DUTY TO INDEMNIFY 4. DEFENCE COSTS Nigel P. Kent
333. DUTY TO INDEMNIFY Liability coverage for “employee injury” Poole v. Lombard, 2012 BCCA 434Sam’s Auto Wrecking v. Lombard, 2013 ONCA 186
34POOLE v. LOMBARD, 2012 BCCA 434Law firm associates and articling students dinner paid for by firmAfter dinner, some attendees went to nightclubOne intoxicated associate lost his balance causing female articling student to fall and hit her head on concrete floor
35POOLE v. LOMBARD, 2012 BCCA 434Student suffers brain injury, sues law firm associate, ultimately awarded $6 million damagesAssociate had $1 million coverage under homeowners policy...obviously not enoughQuestion: coverage available under law firm’s CGL policy?
36POOLE v. LOMBARD, 2012 BCCA 434Policy provided coverage for additional insureds, namely(a) “your employees but only for acts within the scope of their employment [but] none of these employees is an insured for bodily injury to a co-employee while in the course of his or her employment”; and(b) “Any employee....but only with respect to their employment...with the [law firm]”
37POOLE v. LOMBARD, 2012 BCCA 434Court of Appeal holds no coverage under either clauseScope/course of employment conditions could not be met, so clause (a) not applicable“with respect to” (clause (b)) has a wider meaning but “line must be drawn on a commercially reasonable basis between what are essentially firm functions and what are essentially social functions”
38POOLE v. LOMBARD, 2012 BCCA 434No excess coverage available for the associateNote no appeal of Trial Judge’s rulings that (1) CGL had duty to defend associate and (2) CGL must reimburse homeowners insurer 50% of associate’s defence costs: Danicek v. Alexander Holburn, 2011 BCSC 65.
39SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186 Company’s VP and operations manager seriously injured when struck by a crane operated by employeeNot covered by Worker’s Comp so sued company and employeeCGL insurer denied coverage on basis of “employee injury exclusion”
40SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186 “this insurance does not apply to....bodily injury to an employee of the Insured arising out of and in the course of employment by the Insured”Does this apply to “executives” who are not covered by Worker’s Comp?Ruling: Even though he was an executive officer, he was still an employee of the company and the exclusion squarely applied
41SAM’S AUTO WRECKING v. LOMBARD, 2013 ONCA 186 Court recognized there was an “odd coverage gap”...the exclusion takes away coverage where an employer might wish to have it (work place injury not covered by Worker’s Comp)
424. DEFENCE COSTS ACE INA v. Aegis, 2012 ONSC 6248 (Contribution) Papapetrou v Ont. Ltd., 2012 ONCA 506 (Commercial Contracts)
43ACE INA v. AEGIS, 2012 ONSC 6248July 2008 hi-rise undergrounding parking area explosionProperty damage/bodily injury claims against Toronto Hydro totalling $55 millionACE INA provided primary CGL coverage to Toronto Hydro (coverage for defence costs in addition to stated liability limits)
44ACE INA v. AEGIS, 2012 ONSC 6248Toronto Hydro also had $45 million excess liability policy with AegisCoverage was for indemnity to pay “ultimate net loss” in excess of underlying coverage“ultimate net loss” defined to include both indemnity and defence costs with respect to each occurrence
45ACE INA v. AEGIS, 2012 ONSC 6248No express duty to defend in Aegis policy, just a “right to associate in defence” if they wish toACE made application to court for declaration Aegis was obliged to contribute to defence costs ($550,000 and counting)Argued excess cover was clearly going to be triggered and principles of equity required contribution;
46ACE INA v. AEGIS, 2012 ONSC 6248 Court denied contribution claim; Aegis policy contained no duty to defend (unlike ACE policy)...was simply a reimbursement coverThe two policies were not covering the same risk but rather were covering separate and clearly defined layers of risk (no overlap)
47ACE INA v. AEGIS, 2012 ONSC 6248Aegis policy expressly excluded indemnity for Toronto Hydro’s defence costs if they were “included in other valid and collectible insurance”Aegis policy limits were eroded (reduced) by any defence costs payment, so contribution would “prejudice” Toronto Hydro by reducing coverage otherwise availablePrimary insurer’s claim for contribution denied
48ACE INA v. AEGIS, 2012 ONSC 6248First reported case involving a contribution claim against an excess insurer whose policy does not contain a duty to defend....decision has been appealed and will be heard by Ontario Court of Appeal in September, 2013
49PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506 Winter maintenance/snow clearing service contractContract contained indemnity of building owner “against all claims, liabilities....arising out of ....the contract”Contract required maintenance Co to obtain CGL insurance with “owners as an additional insured”
50PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506 Contractor fails to get owner added to CGL coverageAccident happens, personal injury lawsuit ensues versus contractor and ownerOwner seeks order requiring contractor to assume its defence
51PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506 Trial Court orders contractor both to assume defence and to indemnify owner with respect to damagesOnt. CA sets aside order but requires contractor to pay owner’s solicitor/client costs of defending lawsuit“Premature to summarily enforce the indemnity provision until issues of liability and damages had been finally determined”
52PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506 However, contractor clearly breached contract by failing to obtain insurance for ownerRemedy is not ordering a duty to defend but rather an award in damagesAppropriate damages are an indemnity for the owner’s defence costs on a solicitor/client basis which otherwise would have been covered by the insurance
53PAPAPETROU v. 1054422 ONT. LTD., 2012 ONCA 506 Because of conflict arising out of indemnity clause, owner can choose its own counsel and contractor must pay that law firm’s legal fees for defending the lawsuitLesson: parties signing contracts requiring indemnities or liability insurance must ensure the necessary coverage is obtained
545. ADDITIONAL NAMED INSUREDS 6. EXCLUSION CLAIMS Satinder Sidhu
555. ADDITIONAL NAMED INSUREDS Vernon Vipers Hockey Club v. Canadian Recreation Excellence (Vernon) Corporation, 2012 BCCA 291Ontario Limited v. Farmers' Mutual Insurance Company (Lindsay), 2012 ONCA 210
56VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 Does the “but for” test apply to interpretation of “arising out of”Plaintiff attended multiplex to watch a hockey club playMultiplex owned by regional district and managed by recreation company
57VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 Plaintiff injured himself walking over large boulders and sued regional district and recreation companyRegional district and recreation company named as “additional insureds” on the hockey club’s CGL policy with American HomeRegional district and recreation company third partied hockey club and American Home claiming defence, contribution and indemnity
58VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 Policy contained exception that only insured “... in respect of liability arising out of the Named Insured’s operations” [emphasis added]Regional district and recreation company argued that:coming and going of fans to see a game was part and parcel of the hockey club’s “operations” and plaintiff’s injury arose out of those operations, and“but for” plaintiff’s attendance at game, he would not have fallen and injured himself
59VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 American Home argued mere presence of plaintiff at game is insufficient and “but for” test has been rejected by SCC as a means of interpreting “arising out of”The court considered 5 leading cases dealing with the interpretation of the phrase "arising out of":
60VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 Monenco Ltd. v. Commonwealth Insurance Co., SCC 49Saanich (District) v. Aviva Insurance Company of Canada, 2011 BCCA 391Citadel General Assurance Co. v. Vytlingam, SCC 46Lumbermens Mutual Casualty Co. v. Herbison, SCC 47Amos v. Insurance Corp. of British Columbia, CanLII 66
61VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 Court of Appeal found:correct interpretation of “arising out of” and “arising from” requires closer causal nexus than simple “but for” test;“arising out of” requires “an unbroken chain of causation” and connection that is more than “merely incidental or fortuitous”;no ambiguity and contra proferentum rule not applied;
62VERNON VIPERS V. CANADIAN RECREATION, 2012 BCCA 291 even allowing for a broad and liberal interpretation of the “operations”, no aspect of hockey club’s operations were alleged to have caused plaintiff’s injury;the most that pleadings alleged was that hockey club’s operations caused him to be in a place where, for unrelated reasons, he became injured; andperhaps facts enough to meet “but for” test but did not satisfy the more rigorous causal requirement.
631540039 Ontario limited. v. Farmers', 2012 ONCA 210 To what extent are courts at liberty to consider extrinsic evidence in determining whether the allegations against an additional named insured arose out of the named insured’s operationsSubcontractor electrocuted while working on sign located in front of commercial plaza
641540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Subcontractor’s surviving family members sued the landlord, owner of the hydro lines, and contractor that subcontracted the workLandlord was additional named insured under tenant’s CGL issued by Farmers’Additional insured “as landlord only” and “only with respect to liability arising out of operations by or on behalf of the tenant for interior decorating”
651540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Landlord’s application that Farmers’ defend was dismissedCourt of Appeal considered whether entitled to go beyond the pleadings and consider extrinsic evidence to determine the true “substance” and “nature” of the claim
661540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Landlord wished to have admitted evidence that contractor was retained by tenant to show that liability arose out of the operations of tenantLegal principles considered:the court must consider the substance and true nature of the claim;extrinsic evidence explicitly referred to in pleadings may be considered to determine the substance and true nature of the allegations;
671540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Legal principles considered (cont’d)court may not look to “premature” evidence; evidence which, if considered, would require findings to be made before trial that would affect the underlying litigation; andextrinsic evidence must relate to undisputed facts that do not require findings to be made before trial.
681540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Court of Appeal found:extrinsic evidence was disputed;even if admitted, extrinsic evidence would not support a duty to defend; andsubstance and true nature of the claim against landlord based on conduct as owner and occupier of plaza and not as landlord of the premises leased to the tenant.
691540039 ONTARIO LIMITED. V. FARMERS', 2012 ONCA 210 Extrinsic evidence exception to the pleadings rule cannot be used to demonstrate that pleadings that say one thing really mean something elseExtrinsic evidence rule cannot be used to convert claims against the landlord qua owner into claims against the landlord as landlord of the premises leased to tenant
70EXCLUSION CLAUSESO’Byrne v. Farmers’ Mutual Insurance Company, ONSC 468Hector v. Piazza, 2012 ONCA 26
71O’BYRNE V. FARMERS’, 2012 ONSC 468 What type or kind of environmental contamination is required for pollution exclusion to applyBuilding damaged by an oil leak from furnaceTenant tampered with furnace resulting in oil leakFarmers’ denied coverage to landlord on the basis of a pollution exclusion
72O’BYRNE V. FARMERS’, 2012 ONSC 468 Policy WordingThis policy does not insure againstloss or damage caused directly or indirectly by any actual or alleged spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of “pollutants”, nor the cost or expense of any resulting “clean up”, but this exclusion does not apply:if the spill, discharge, emission, dispersal, seepage, leakage, migration, release or escape of “pollutants” is the direct result of a peril not otherwise excluded on this policy;to loss or damage caused directly by a peril not otherwise excluded under this policy.
73O’BYRNE V. FARMERS’, 2012 ONSC 468 Pollutants defined as follows :“Pollutants” means any solid, liquid, gaseous or thermal irritant, or contaminants including odour, vapour, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
74O’BYRNE V. FARMERS’, 2012 ONSC 468 Legal principles relied on:use of words such as “discharge, dispersal, release and escape” reflect that the exclusion is directed to a pollutant that results in traditional environmental contamination;pollution exclusion does not apply to injuries caused by common irritants and contaminants emitted from a faulty furnace;
75O’BYRNE V. FARMERS’, 2012 ONSC 468 pollution exclusion can be reasonably interpreted as applying only to environmental pollution; andif exclusion is capable of more than one reasonable interpretation it is ambiguous and should be interpreted in favour of the insured.
76O’BYRNE V. FARMERS’, 2012 ONSC 468 Court held:pollution exclusion should be interpreted in favour of landlord such that it only excludes traditional environmental contamination;oil remained within the building and probably within 30 feet of furnace and did not amount to traditional environmental contamination such as oil seepage into soil; and
77O’BYRNE V. FARMERS’, 2012 ONSC 468 distinguished Corbould v. BCAA Insurance Corp.,  B.C.J. No (B.C.S.C.) where a storage tank spilled oil that seeped into the soil - case of traditional environmental contamination that was subject to the standard pollution exclusion.
78O’BYRNE V. FARMERS’, 2012 ONSC 468 Farmers’ also tried to deny coverage based on mechanical or electrical breakdown or derangement exclusionCourt rejected this position and found that there was no internal defect or problem in the furnaceExclusion was not intended to exclude damage caused by tenant
79HECTOR V. PIAZZA, 2012 ONCA 26Does the “property owned” exclusion in a CGL refer to property owned at present, in the past or bothPiazza purchased an apartment building that was renovated and sold to HectorHector sued Piazza with respect to faulty construction related to settling of the foundation
80HECTOR V. PIAZZA, 2012 ONCA 26Piazza was insured by AXA and sought coverage under a CGLAXA denied coverage on basis that policy excluded cover for property owned by the insured
81HECTOR V. PIAZZA, 2012 ONCA 26 The policy excluded coverage for: (y) property damage –(z) to property owned or occupied by or rented to the Insured, or, except with respect to the use of the elevators, to property held by the Insured for sale or entrusted to the Insured for storage or safekeeping [emphasis added]
82HECTOR V. PIAZZA, 2012 ONCA 26If the word “owned” referred only to the past tense, the exclusion would applyIf the word “owned” referred to the present as well as the past tense, policy could not be said to “clearly and unambiguously” exclude coverageInsurer must show that the exclusion “clearly and unambiguously excludes coverage” (Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada  S.C.J. 33)
83HECTOR V. PIAZZA, 2012 ONCA 26 Court held that: when read in context “property owned” can grammatically refer to property owned now or previously owned;exclusions in CGL policies, for the most part, deal with items that would be the subject of first-party coverage which is within the power of the insured to protect
84HECTOR V. PIAZZA, 2012 ONCA 26if “property owned” interpreted as referring to present tense only, property that was owned by the insured in the past, and that is subject to a third party claim, could fall within the ambit of coverage under the policy;this would not inconsistent with the intention of the parties to exclude first party liability coverage; and
85HECTOR V. PIAZZA, 2012 ONCA 26the word “owned” can refer to the present as well as the past tense; andpolicy cannot be said to “clearly and unambiguously” exclude coverage.
867. SUBROGATION: COVENANTS TO INSURE 8 7. SUBROGATION: COVENANTS TO INSURE 8. “BUT FOR” AND “MATERIAL CONTRIBUTION”Larry Munn
877. SUBROGATION: Covenants to Insure Kruger Products Ltd. v. First Choice Logistics Inc., BCCA 3Kruger, aka Scott stored finished and unfinished paper products in a warehouse operated by First Choice Logistics (“FCL”).Due to issues with forklifts (known to FCL) paper caught on fireEntire warehouse and all contents destroyed
88KRUGER V. FIRST CHOICE, 2013 BCCA 3 Kruger Products Ltd. v. First Choice Logistics Inc., BCCA 3Trial judge and Court of Appeal concluded FCL breached standard of care and caused lossSubrogated action by insurerA Warehouse Management Agreement governed Scott’s relationship with FCL
89KRUGER V. FIRST CHOICE, 2013 BCCA 3 Agreement contained a clause requiring Scott to maintain general liability insurance, tenant’s legal liability insurance and insurance on its inventory and property in the warehouseScott also agreed to add FCL as additional insuredAgreement also stated, “all insurance policies contemplated hereunder shall constitute and respond as primary coverage to any insurance otherwise available to Scott”
90KRUGER V. FIRST CHOICE, 2013 BCCA 3 Trial judge – bailor/bailee situation and warehouser had no insurable interest therefore landlord/tenant covenant to insure cases do not applyCourt of Appeal disagreed – there was an insurable interest given warehouser’s liabilityBut insurable interest not necessary where covenant to insure designed to benefit party against whom subrogated claim brought
91KRUGER V. FIRST CHOICE, 2013 BCCA 3 Scott paid insurance premiums, but not necessary negligent party payParties also acknowledged that Scott’s insurance primaryNo benefit from provision, if no tort immunity
92KRUGER V. FIRST CHOICE, 2013 BCCA 3 Tort immunity extends well beyond landlord/tenant situationsWho pays premium not importantClause to insure must be given meaningImportant to review insurance clauses in contracts (leases and otherwise) to determine if an immunity defence exists
938. “But For” and “Material Contribution” Clements v. Clements 2012 SCC 32The plaintiff, Mrs. Clements, a passenger on her husband’s (the defendant’s) motorcycleUnbeknownst to defendant, nail had punctured rear tireWhen accelerated to 120km/hr to pass car, nail popped out, tire deflated. Plaintiff thrown from motorcycle with resultant severe traumatic brain injurySome evidence bike overloaded
94CLEMENTS V. CLEMENTS, 2012 SCC 32 Defendant’s evidence questioned whether accident would have happened in any eventTrial judge could not say “but for” defendant’s negligence, plaintiff would not have been injuredHowever, found defendant liable on a material contributionCourt of Appeal disagreed regarding material contributionSCC disagreed re material contribution but ordered new trial and further consideration of “but for” test
95CLEMENTS V. CLEMENTS, 2012 SCC 32 Basic rule for recovery for negligence required plaintiff establish on a balance of probabilities that defendant caused injury on the basis of “but for”Only where impossible to determine which of a number of negligent acts by multiple actors caused the injury can the “material contribution” test be used
96CLEMENTS V. CLEMENTS, 2012 SCC 32 Cook v. Lewis (hunters); Walker Estate (tainted blood)Here – a single defendant case
97EDGAR V. JOHNSTON, 2013 SCC 18Plaintiff suffered from persistent bradycardia during her birth that caused permanent brain damage – spastic quadriplegia and cerebral palsySued obstetricianTrail judge found attempt to deliver by mid-level forceps procedure was a “but for” causeObstetrician breached standard of care by not ensuring sufficient back-up, namely anaesthetist in event C-section required
98EDGAR V. JOHNSTON, 2013 SCC 18Court of Appeal concluded evidence did not establish that forceps attempt caused the cord compression and resultant bradycardia – did not occur within secondsCourt of Appeal also concluded no evidence plaintiff could have been delivered earlier if there had been back-up
99EDGAR V. JOHNSTON, 2013 SCC 18SCC disagreed – trial judge had reason to find that causation was forceps attemptCausation a factual inquiry applying “but for” test and no palpable and overriding errorFinding of causation supportable – other evidence explained why the onset of the bradycardia was not immediateFinding regarding reasonable back-up also soundBurden of proof remains with plaintiff but scientific certainty not necessary
1009. BROKERS AND AGENTS 10. BAD FAITH Glen Boswall
1019. Brokers and Agents Ostenda v. Miranda 2012 ONSC 7346 Plaintiff claimed Zurich Insurance was (a) directly liable to him for failing to advise him of need to obtain additional underinsured motorist coverage; and/or (b) vicariously liable for an insurance broker’s failure to provide this advice.Insured was a transport driver for Synergy. JDIMI was Synergy’s insurance broker.JDIMI provided a “transportation package survey” to Zurich describing Synergy business and coverage sought. There was no request for underinsured motorist protection coverage for Synergy employees.
102OSTENDA V. MIRANDA, 2012 ONSC 7346Zurich undertook risk management survey and prepared risk assessment report including this statement, “By delivery of this Report, Zurich does not assume any responsibility for discovery, notification or elimination of hazards or risks.”Report did not mention that Synergy had no UMP coverage for drivers or comment on Synergy’s failure to request any.Zurich issued transportation package policy to Synergy in Unlike standard auto parties issued to private citizens, this policy had no UMP coverage.
103OSTENDA V. MIRANDA, 2012 ONSC 7346In 2008, Plaintiff suffered catastrophic injuries in road accident caused by a driver with little or no liability insurance.Plaintiff discovered he had no UMP coverage to make up any shortfall in damages award against other driver.Plaintiff sued driver, JDIMI and Zurich. Plaintiff then sought summary judgment against Zurich.
104OSTENDA V. MIRANDA, 2012 ONSC 7346 Judge addressed these issues: Regarding the non-inclusion of the UMP endorsement in the policy issued to Synergy, did Zurich stand exposed to liability equivalent to that of a broker?Was Zurich liable to the Plaintiff as principal for the mistakes of JDIMI as agent?
105OSTENDA V. MIRANDA, 2012 ONSC 7346Did Zurich stand exposed to liability equivalent to that of a broker?No.Judge noted that SCC in Fletcher v. Manitoba Public Insurance Co. (1990) found that an insurer selling policies directly had a responsibility to ensure customers received sufficient information to make intelligent decisions as to how much risk they were prepared to bear.However, in the present case, the policy sale was made through a broker. Judge noted Drader v. Sebastian (2009 SKCA) and Boudreau v. Ontario Soccer Assn. (2012 ONSC) which established that, in cases where experienced brokers are involved, an insurer owes no duty to customer to procure appropriate insurance coverage.
106OSTENDA V. MIRANDA, 2012 ONSC 7346Did Zurich stand exposed to liability equivalent to that of a broker? (cont’d.)Facts showed Zurich did not assume duty and public policy mitigated against imposing duty.Zurich’s risk assessment report came with express liability disclaimer.From public policy perspective, imposing upon insurers a similar duty to that undertaken by brokers would result in considerable duplication of effort.
107OSTENDA V. MIRANDA, 2012 ONSC 7346Was Zurich liable as principal for mistakes of JDIMI as agent?No.Judge found that evidence in this case fell “well short” of establishing that JDIMI had legal authority to represent Zurich so as to affect Zurich’s legal position. Therefore, there was no agency relationship.
108ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 Plaintiff claimed insurer was liable for failing to provide sufficient information for Plaintiff to make informed decision about purchasing optional additional income replacement benefits coverage as part of an auto policy.Plaintiff previously purchased auto policies from other insurers based on very competitive pricing.In 2003, Meloche Monnex (“MM”) made telephone sale of automobile policy to Plaintiff and wife. Coverage included mandatory minimum income replacement benefits.
109ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 MM sales representative used standard script to provide and record information. No detailed discussion of optional additional income replacement benefits. Plaintiff refused optional cover.November 2003 legislative change required every automobile insurer to offer optional income replacement benefits.MM’s subsequent renewal of Plaintiff’s policy came with sheet providing brief explanation of MM’s obligation to offer optional additional income replacement benefits.
110ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 Plaintiff badly injured in 2005 accident and sued MM for failing to explain optional additional income benefits.Trial judge addressed three issues:Did MM owe a duty of care to the Plaintiff?Did MM breach the applicable standard of care?Would Plaintiff likely have purchased optional benefits if properly offered?
111ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 Was there a duty of care?Yes.Fletcher v. Manitoba Public Insurance Co. (1990 SCC) established that that sale of automobile insurance is a business in the course of which information is routinely provided to customers with the expectation they will rely on it.
112ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 Did MM breach the standard of care?Yes.Questioned boiled down to whether MM must offer optional coverage in such a way that the customer can make a fully informed decision about what to purchase.Evidence of common industry practice is persuasive but not determinative.“To make the mandatory offer of optional coverages meaningful, customers must be given an understandable alternative which would allow them to measure the need for more coverage against risk and cost.”“The fact that [optional income replacement benefits] are less well known may increase the insurer’s practical obligation to explain their existence and the details of the optional coverage.”
113ZEFFERINO v. MELOCHE MONNEX, 2013 ONCA 127 Would Plaintiff have purchased if benefit was properly offered?No.Plaintiff’s history of seeking basic coverage and MM notes showing Plaintiff’s wife said there was “no need” for optional coverage both indicated Plaintiff would have declined optional additional income replacement benefits if offered.Therefore, there was no causal link between MM’s negligence and the Plaintiff’s lack of additional benefits.Trial decision upheld by Ontario Court of Appeal.
11410. Bad Faith Branco v. American Home Assurance Co. 2013 SKQB 98 Court made staggering punitive damage awards against disability insurers.Plaintiff employed by Saskatchewan company that operated mine in Krygzstan. American Home Assurance Co. (“AHAC”) provided workers with benefits based on Saskatchewan WCB coverage. Zurich Life Insurance Co. Provided long term disability benefits coverage.In December 1999, a steel plate fell on the Plaintiff’s foot. Following unsuccessful surgery, numerous doctors (including many seen at insistence of AHAC) pronounced him permanently unemployable.
115BRANCO V. AMERICAN HOME, 2013 SKQB 98 Judge found,Zurich had delayed dealing with claim and made offers to settle claim at significant discount despite acknowledging that full coverage applied.AHAC discontinued payment of benefits in order to create hardship on the Plaintiff and force him to accept a extremely low settlement offer.Judge ruled that both AHAC and Zurich breached duties of good faith. Of particular importance to this finding were the insurers’ lack of consideration for the overwhelming medical evidence, their deliberate behaviour, and their general disregard for hardship suffered by Plaintiff.
116BRANCO V. AMERICAN HOME, 2013 SKQB 98 $1.5 million in punitive damages awarded against AHAC and $3 million against Zurich!Judge specifically referred to $1 million in punitive damages awarded in Whiten v. Pilot Insurance (2002) and its apparent insufficiency in forcing insurers to abide by policies.Judge also awarded $450,000 in aggravated damages, an award that greatly exceeds the $335,000 cap on general damages set by the SCC in a catastrophic injury case!
117SGI V. WILSON, 2012 ONCA 106Trial judge awarded punitive damages against insurer in case where there was no actual loss of benefits, no claim for punitive damages, and a lack of compensable mental aggravation flowing from bad faith breach of a disability policy.Court of Appeal substituted award for cost of litigation to mitigate against anticipated loss of benefits.
118SGI V. WILSON, 2012 ONCA 106Plaintiff injured in two motor vehicle accidents and received rehabilitation accident benefits for over 10 years under her Saskatchewan Government Insurance (“SGI”) auto policy.Plaintiff’s treating therapists and team of health care providers retained by SGI recommended ongoing passive therapy.
119SGI V. WILSON, 2012 ONCA 106SGI sent file for review by independent physiotherapist and, based on her recommendations, advised the Plaintiff in November 2006 that treatment funding would be terminated in six months.Plaintiff sued for reinstatement of benefits and aggravated damages for breach of duty of good faith.Prior to the end of the six month expiry period, SGI advised it would reinstate the benefits conditional upon the Plaintiff dropping her claim for aggravated damages. The Plaintiff refused.
120SGI V. WILSON, 2012 ONCA 106The trial judge found SGI acted in bad faith but that the Plaintiff had not suffered sufficient mental distress to merit an award of aggravated damages.However, judge awarded,$15,333 in punitive damages made up of a general award of $7,500 plus $7,833 to compensate full legal costs to the date SGI offered to reinstate benefits; anda mix of full and double party/part costs based on SGI’s conduct at trial.SGI appealed.
121SGI V. WILSON, 2012 ONCA 106On appeal, SGI argued that breach of duty of good faith could not arise in absence of damages flowing from the breach of an express term in the underlying insurance policy. Because benefits were never cut off, there was no breach.Court of Appeal (“CA”) ruled that SGI made an anticipatory breach of the policy when it announced benefits would be suspended. Even without actual suspension of benefits, SGI had breached the policy and acted in bad faith.
122SGI V. WILSON, 2012 ONCA 106However, the Plaintiff had made no express claim for punitive damages in her pleadings and so the CA overruled the punitive damage award. This dispensed with the $7500 award for general punitive damages but the CA allowed the full pre-trial legal expense award on another ground - that these were the costs of mitigating against an anticipated loss flowing from the policy breach.
123QUESTIONS?These materials are necessarily of a general nature and do not take into consideration any specific matter, client or fact pattern.
124Nigel KentSatinder SidhuD. Lawrence MunnRaman JohalGlen Boswall