Mark Skorah & Jim Doyle
Insurance Law.
Kenneth Smith (Cathryn Waker, Corrigan Cassidy)
Hey, I went through this class without a CAN, and a bunch of people had to pull together to get one done.
Hope this helps, as I know this course can be a little disjointed.
1) Introduction:
a) What do insurance lawyers do?
i) Review policies and draft them
(1) Read, Draft.
ii) Give advice on circumstances
iii) Defend the insurer if insurance is denied.
b) What is Insurance law?
i) Insurance law underlies much of what goes on in different litigations; it is the deep pockets most
judges will be looking for.
ii) It is essentially applied contract law
(1) Comes from the shipping industry, men at coffee houses deciding whether to take on some
risk.
iii) Canadian courts like the American and English aspects of the law
iv) In Statutory interpretation, American courts have a lot of sway
c) Basic Principles of Risk Management
i) Subrogation
(1) The principle that the INSR can step in and take the name of a tortfeasor or plaintiff, even
sue a third party.
ii) Underwriter
(1) Used to be when a decision was made to a piece of paper would be passed around, the
people willing would write their names under the policy.
(2) Imprecise meaning: the insurance company
(3) Precise: The person (inside the company) accepting the risk
(4) If it is more than one INSR, then it is known as a subscription policy.
iii) Premium:
(1) Payment INSR receives for agreeing to insure
iv) Risk:
(1) The actual subject matter of the project
v) Contingencies:
(1) Fire, Flood, earthquake
(2) Described as the perils not in the risk
vi) Payment of the loss:
(1) Insurance companies are split into halves, one making the policy, the other handling the
claims.
(a) Claims department looks at the loss, and assesses it with adjustors:
(i) They look at the nature and the size of the loss.
(ii) Claims examiners: watch over the litigation
(b) SIR:
(i) Self insured retention:
1. Pay a larger deductible to avoid large premiums.
(2) Agents v Brokers
(a) Insurance brokers are usually there to get deals for individuals, and are not tied to
companies.
(b) Agents will try to get the best deal for the company they are tied to.
vii) Policy Limits:
(1) The specific amount of insurance
(a) First level: Primary policy
(i) Liability, 1, 2, or 5 million.
(ii) Usually have deductible.
(iii) If large policy, INSR will try to maintain control over the claim.
(b) Subscription policy:
(i) Sharing the risk with other INSRs
(c) Re-insurer: second level of insurance that insures the risks the INSR has undertaken,
done two ways:
(i) Treaty: blanket agreement with other INSR
(ii) Facilitative contract: one off, per policy basis.
(2) There is primary and excess insurance:
(a) Excess is just supplementing the primary, taking it from one to ten million.
viii) Indemnification:
(1) Even with more than one insurance policy, you cannot recover more than your actual loss.
(a) Exceptions:
(i) Life insurance: don’t have to show amount of loss.
(ii) Collateral benefits: obtained by foresight, is separate, should not be deducted from
insurance payment.
ix) Named v all risk policies: See below
d) Types of Insurance Contracts:
i) Property
(1) First party insurance
(a) Underwriters will assess the likely hood of certain events.
(b) Fire insurance:
(i) Most basic, started as fire and extended, does not cover burglary.
(ii) Commonly now called the mutli-peril policy
1. Only covers the named perils.
2. Thus named-peril policies.
(c) All risks:
(i) Covers everything but the named perils
(ii) Many claims hear where INSRD thought it was this kind.
(d) Course of Construction:
(i) Insured for only the anticipated time of construction.
ii) Liability:
(1) Deals with insurers damages to a third party to the contract
(2) CGL:
(a) Against liability for bodily injury and damages, not usually for damages due to the
negligence of professionals.
(3) ENO:
(a) Errors & omissions: malpractice insurance.
(b) Usually spread the risk, as risk pool is similar, the risk can be assessed more accurately.
(i.e. know what types of mistakes DR.’s might make).
(4) DNR:
(a) For directors & officers who have caused losses to their corporations through negligence.
(5) Wrap-up liability:
(a) Covers trades on a construction site.
iii) Hybrid: first party liability & 3rd party.
(1) Homeowner’s policy: covers property & persons.
(2) Small business
e) Nature of Insurance
i) Insurance is an agreement to assume someone else’s risk of loss
(1) It has to be a matter of chance – not a certainty.
(2) Saindon:
(a) Facts: guy has an argument with his neighbor, raises his lawnmower up and cuts off
fingers.
(b) Issue: Did he intend to do this? If he did there is no coverage through home insurance.
There is if it was an accident.
(3) Insurance works on the basis of large numbers.
(a) Insurance companies are interested in claims/loss ratio’s
(b) The idea is that INSR are not making a profit off of the premiums, they are making money
by investing them before they have to pay out the claims.
(c) If interest rates are high enough, and the gap long enough, then the INSR makes money.
(d) As interest rates decline, premiums go up.
ii) Policy considerations:
(1) Do not offer policies to people with a large amount of risk
(a) Flood insurance will not be given to those in a flood plain.
(2) Moral hazard:
(a) If a person is in a risk pool, and they have insurance, they may be less inclined to act in a
safe manner.
(b) Insurance companies look at these risk pools and give them higher premiums.
iii) Risk must be assessed by the underwriter
(1) Good faith: INSR and INSRD owe each other good faith.
(a) Have to be absolutely candid with one another.
iv) Basic Mud: Acronym
(1) Big Book: collection of risk for stats
(2) Adverse selection minimized through knowledge
(3) Sustainable over a number of years, so reserves can be built
(a) New insurance companies may undercut, but eventually have to jack the rates or leave
the area of insurance, as they ignore this.
(4) Information readily available from reliable sources about the hazard.
(5) Consistent with solid existing insurance practices, systems, customs of law.
(6) Moral hazard is low or manageable
(7) Uncertainty: one of these must be uncertain of the loss:
(a) Will it occur?
(b) When?
(c) How much will it cost?
(8) Demand must be affected so there are customers.
f) Risk: most contracts are
i) Executory: will be preformed
ii) Executed: is preformed at the time of formation.
iii) Aleatory:
(1) This is insurance.
(2) Contingent of a future event that may or may not happened
(3) If it does, the INSR is out for many times that of the premiums
(4) If it doesn’t the INSRD is out for the premiums.
(5) It is an asymmetrical contract: thus there are disputes.
(a) Some are simply about who the parties are.
(b) Others are about the INSRD having not paid enough, or INSR not having contemplated
this event in the risk pool.
(6) Insurance is not about making profit
(7) Foresight and payment
(a) INSR will only indemnify for actual damages done.
(b) INSR can sue third parties through subrogation.
2) Fortuity:
a) What is an Accident?
Purely Fortuitous Blameless event  Negligent act  Grossly Negligent  Reckless act  Action intended to
cause loss
i) In a Third party claim:
(1) People are suing, turning to the insurer, saying they entitled to the claim.
(2) Insurer can respond by saying it wasn’t an accident.
(a) All actions in some sense are intentional
(b) Courts are clear that even though a specific action may be intentional, it does not
necessarily negate the outcome being accidental.
ii) There are different ways in which policies deal with what is a fortuity.
(1) Named Peril policies: clearly outlining what is fortuitous: fire, death, lightening,
(2) All Risk: The INSR doesn’t specify what kind of accident.
(3) Courts at CL will analyze whether there was an underlying accident.
iii) British & Foreign Marine Insurance Co. v Gaunt [1921] H.L.
(1) Facts: Shipement of wool arrives damaged – Damage occurred between the cutting of
a wool off a sheet and loading it onto a ship. There is a small analysis of how the tarps
should have been used and were not, and this turns the day. They are fighting about
normal wear and tear.
(2) Issue: Was the soaking of the wool due to some accidental negligence, or ordinary
wear and tear associated with shipping.
(3) Held: This was accidental.
(4) Reasons: Here the argument is about whether the wool was damaged from some set of
events that occurred due to the nature of the endeavor, that is transporting the wool,
or some unforeseen accidental event. Although ordinary wear and tear is not covered,
nor the “Vice” inherent in the thing being transported (its individual sensitivities),
negligence is. Here the men were negligent in there not tarping the wool.
(5) Ratio: ordinary wear and tear is not covered as fortuitous. Sensitivities of a risk that
lead to damage are also not accidental.
iv) Brennan v Economical Mutual (2000) Ont. Superior Court of Justice
(1) Facts: Tenant’s move out and landlord finds soot all over the house that was caused by
the excessive burning of candles. INSRD is claiming against all risk policy for physical
loss or damage, INSR wants to have it excluded as ordinary wear and tear.
(2) Issue: Was the excess of soot a part of ordinary wear and tear or fortuitous?
(3) Held: Not accidental, claim dismissed.
(4) Reasons:
(a) Court looks at the whole intent of the K, must reasonably promote the intent of the
parties, avoiding any interpretation that gives a windfall to either party.
(b) Here the parties were insuring against an accident-taking place, for the court, it was
hard to say that this was a fortuitous result. Court thinks that this was the inherent
and inevitable outcome.
(5) Ratio: Fortuity is limited by the party’s ability to foresee the results of their actions.
(6) *prof thinks this is a poor decision*
(a) He figures that it is hard to say that the tenants would have been able to forsee the
type of damage that arose from their actions.
(b)
v) Celestica Inc. v ACE INA
(1) Facts: Celestica enters into K Xerox for a modulator. Sub contractor makes a
transformer that is a problem. Celestica wants ACE to cover the damages, insurer
denies. The issue is around the definition of occurrence.
(2) Issue: can a manufacturers defect or design flaw be an occurrence/accident?
(3) Held: Claim denied
(4) Reasons:
(a) The court distinguishes this case from Canadian Indemnity Co. v. Walkem where a
crane collapsed due to negligent repair. Here the court said that the INSRD was
indemnified due to the event, if it had not collapsed and remedial action had
simply taken place, it is unlikely that there would be coverage.
(b) Here, Celestica is trying to make sure their customer is happy, but there is no real
damaging event, no real accident.
(c) Do not want the presence of insurance to obviate the need for work to be done
properly the first time.
(5) Ratio: Manufacturer design flaws are not accidents, unless they cause some event that
leads to damage.
b) The Subjectivity requirement
i) Coverage will not be granted to the INSRD if they had reason to know or expect the loss was
going to occur.
(1) A person can claim coverage for arson, unless they knew the arsonist or were associate with
this person.
ii) CBG v INA (US CA third circuit)
(1) Facts: CBG sues for business interruption (some loss of profits). CBG had an all risk policy
against business interruption, with a specific endorsement for loss of profits due to an
occurrence. Design defects in a building made failure inevitable, insurances was saying this
could not be an accident.
(2) History: District judge basically goes back to the old rules, holding that design defects could
not be fortuitous.
(3) Held: Claim approved
(4) Reasons: Court said that CBG did not know about the design defects at the time they took
out the policy. The court says you cannot use hindsight to assess the intentions of the
parties.
(5) Ratio: Subjectivity is assessed at the inception of the policy – no hindsight.
c) Intentional Acts: Moral Hazard and ‘courting the risk’
i) Crisp v Delta Tile and terrazzo (Ont. CA.)
(1) Facts: Guy wanted slate, was too expensive, had a different floor put in, it needed grinding.
Tells the guy to blow the dust outside, the idiot blows it upstairs into the house. Grinder
brings claim against the INSR
(2) Issue: Was the dust-damage a fortuitous outcome of the work being done?
(3) Held: for INSR, could not recover.
(4) Reasons: There was a deliberate courting of the risk with knowledge of the risk and the
defendant could have cared less if damages were caused by the dust going upstairs.
(5) Ratio: No recover where there is a deliberate courting of the risk of a natural, foreseeable,
probable consequence of an action.
ii) Candler v London & Lancashire Guarantee & Accident
(1) Facts: poorly educated but highly successful business man, likes to challenge himself. Gets
drunk while talking to a friend, is super hazardous, decides he is going to fool around on
the railing 20 stories up. Falls, dies.
(2) Issue: Is a person who engages frequently in risky activity allowed to claim losses from
damages that result from such a risk?
(3) Held: for INSR
(4) Reasoning: The insured knew the risk and actually courted it, in this situation it could not be
regarded as unforeseen, unexpected accident as contrasted with if the railing had given
way. He was aware of the danger of falling.
(5) Ratio: you cannot claim an accident occurred when you undertake some risky activity that
ends in a risk that was foreseeable at the time the activity was undertaken
iii) Court here looks at foreseeability.
(1) What about the stuntman who falls to his death?
(a) He is covered: he is a profession, and has safety mechanisms in place.
(b) Is it really that different?
(2) What about running a light?
(a) Could say it is reasonably foreseeable that you might get in an accident.
(3) What is the difference between the railing and the red light?
(a) Likelihood of harm that might result
(b) Many people will run red light, but will not balance on railings.
iv) Trynor Construction v Canadian Surety:
(1) Facts: Tractor trailer goes across a bridge, it breaks and the trailer falls in. The Driver had
examined the bridge before hand, so he was aware there was some risk.
(2) Held: For INSRD
(3) Reasoning: Court saw this as an accidental, fortuitous and undersigned incident. Looks at
the degree to which the individual is courting the risk.
(4) Ratio: Just because something is foreseeable, does not mean it always negates the accident
if that foreseeable event takes place.
v) Soucek Estate v Atlantic Mutual Life Assurance Co.
(1) Facts: guy gets in a barrel and goes up 180 feet, cuts the rope and hits the side of the tank.
(2) Held: for INSRD
(3) Ratio: see Trynor
vi) Canadian Indemnity v Walkem Machinery. * Seminal Case
(1) Facts: Walkem knew of the dangers of crane and its faulty repair, but sold it to some
unsuspecting person.
(2) Held: for INSRD
(3) Reasoning: an accident is any unlooked-for mishap or occurrence, and an un unlooked-for
mishap or an untoward event which is not expected or designed. Not every unexpected
mishap though is an accident.
(4) Ratio: Incident will be accidental as long as the resulting injury or damage is unintended.
vii) Co-op Fire and Cas co. v Saindon
(1) Facts: guy gets in a fight with neighbor, who proceeds to chop off his hand with a
lawnmower.
(2) Ratio: If an act is likely to cause injury, it may not be intentional but if reckless enough, it is
not an accident.
d) Intentional Harm Exclusion
i) Martin v American International insurance
(1) Facts: Doctor injects himself with overdose of Demerol; it was below lethal does though.
(2) Issue: Does the doctor’s estate get to avail itself of accidental death benefit in policy?
(3) Held: For INSRD
(4) Reasons: Doctor knew the risk of injecting Demerol, so he was courting the risk, but here it is
not difficult to determine if the death was expected or not. He was aware of how much
Demerol he actually needed, and how much was too much. Thus it was an unexpected
overdose.
(5) Ratio: Ask what a reasonable person endowed with the facts and beliefs of the insured
would expect.
3) Themes:
i) The facts of these cases really drive these.
ii) The words of the insuring agreement really matter here; beyond this the whole straight-line
approach is bunk.
iii) Must look at whether the result was intended
(1) What would a reasonable person imbued with the knowledge and beliefs of the insured
Expect?
iv) Insurance Policy on 445
(1) General policy does not have description of any of the terms
(2) Have definitions.
(a) Really go through the policy carefully.
(3) Insuring agreement
(a) What INSRD has to go through to get themselves insured
(b) Under limits, box 4, you get a bunch of different categories, listing every type of coverage
and the limit.
(c) You Cannot read the policies enough times,
(i) Must look and see what the agreement takes away in the exclusion
(ii) It is what the insured has to do to collect.
(iii) These all have some outlines, but they are different in many substantive ways.
(4) Look at Declaration:
(a) Named INSRD, additional named should be here also.
(i) For each occurrence, i.e. a million will be the limit
(ii) Aggregate limit: the max for the total losses over the life of the policy.
(5) Endorsements attached to the policy (446):
(a) Can occur during any point in the policy year
(6) Minimum premium:
(a) INSR will ensure there is a minimum retained premium regardless of the length of the
insurance.
(b) This is a way to protect the INSR for people not devolving risks.
(7) Table of contents (447)
(8) Insuring agreement for bodily injury and property damage liability (448)
(9) 460: definition of property damage:
(a) Loss of use: have a widget, damage could be .50, but you might lose its use for days
trying to get the .50 cent part.
(b) Accident usually refers to one time events, occurrence is used to cover repeated
exposure.
4) Anatomy of Insurance Polices – Declarations; insuring agreements; Externality.
i) Insuring agreement: part of a policy that sets out what is being insured.
ii) Exclusions: things removed from the policy
iii) Exceptions: Exclusions to an exclusion – will not create coverage
iv) Warranty:
(1) A specialized term of the contract
(2) If there has been a breach of the warranty, the whole policy is void.
(a) E.g. if a warranty says there has to be continuous monitoring of a premises, and there
isn’t, if a robbery takes place there is no insurance coverage.
v) Endorsement: coverage added to the policy.
(1) Most commonly where someone adds a new location, policy will be endorsed to add in new
location.
vi) Insurance Act BC:
(1) Sets certain conditions into an insurance policy.
vii) Additional named insured:
(1) Party is named in the declarations page
(2) Was always thought that the liability of the additional named flowed through original
insured.
(3) Duty to defend found in many of these cases, can add additional expenses for insurers.
viii) Additional insured
(1) Is broader than additional named insured.
(2) Can include all members of a household, etc.
ix) Occurrence:
(1) Is the accident or triggering event
x) Claims Made:
(1) Professional liability insurances are based on claims made,
(a) At the beginning of the year, you say whether you have an outstanding claim against you.
(b) This is a way of wiping out the past, saying they do not need to worry about it.
(c) Insurer will not cover these outstanding liabilities.
xi) Claims over amount insured for
(1) INSR still has a duty to defend any claim over the coverage amount, and must try to bring
the claim down within the amount insured for.
xii) Indemnity agreement:
(1) Talks about perils insured against.
(2) Duty of indemnity is defined as direct loss, amount is least of
(a) Actual cash value
(i) If you have something that has depreciated, actual cash value will be much less than
what you paid for it, and far less that what it might cost to replace it.
(b) Replacement cost
(i) Often used for homes, even of you have an old house worth nothing, you can get the
same house replaced at higher than present cost.
1. Usually means actually replacing the house, not cash.
xiii) Insurable interest.
(1) You must have some connection to the property to qualtify for insurance, ,
(a) Cannot have policies taken out on other people’s lives, like gambling.
(b) If I have stuff in a warehouse, I can insure the warehouse because I have an interest in
seeing the warehouse not be damaged.
(2) Temporary location: Wingtat v Aviva
(a) In this case, Wingtat stored its poultry in an off-site holding facility the address of which
was not on the declarations page. The court took the view that the policy did not require
this address and dismissed Aviva’s appeal.
(3) Co-insurance:
(a) Insurer doesn’t want to carry all the risk, so they claim their needs to be other insurance.
(b) Insurer will insure on the basis that a property is worth X, if it turns out to be a million
more, there will be a penalty in proportion to this.
(i) This allows the insurer to properly underwrite,
(ii) Reduces moral hazard.
5) Externality
i) This is the event that must happen.
ii) The idea of externality is that you have some mishap or occurrence (Gaunt, wool shipping)
(1) In Gaunt, the court said there was nothing to constitute a mishap or occurrence, it got the
ball rolling.
iii) Triple Five v Sim
(1) Facts: Rollar Coaster design fails, as the track hadn’t been spaced properly, it could not be
seen by the naked eye,
(2) History: INSR losses at trial, policy did have exclusion for design errors though
(3) Issue: really was about whether the damage was caused by the design, or by an accident in
the fabrication.
(4) Held: for INSR
(5) Reasons/ratio: The court reasons that in an all risk policy, there has to be insurance for
perils which are external to the property, not inherent in it.
iv) Wang v Metropolitan: Ontario CA 2004
(1) Facts: Mother dies in childbirth from amniotic fluid embolism. There is a 200,000 accident
benefit attached to her life insurance. Rider provides that if she dies directly and
independently of any illness, she does not get the 200,000
(2) Issue:
(a) Did the motions judge err in her rejection of a distinction between natural causes and
accident?
(b) Was Mrs. Lyn’s death due to the fluid embolism an accident?
(c) Did the motions judge err in restricting her analysis to whether the pregnancy was an
illness?
(3) History: Motions judge thought that this was an accident, as the odds were extremely rare.
Court of appeal reversed, saying a death by natural causes could not be an accident.
(4) Held: Found for INSR
(5) Reasons: Charron J.A.
(a) The court basically said that the Motions judge was in error when she applied the test
from Martin v American International Insurance to this case. The test is not the
expectancy test (i.e. whether she would have expected to die), but whether the average
person would have said that this was an accident.
(b) The Court held that the amniotic fluid embolism was an illness, and this is what killed
the mother (not the pregnancy). Therefore, as it was an illness, it could not be an
accident.
(6) Ratio:
(a) Majority decision: as long as the resulting injury or death is unexpected, unintended, or
unforeseeable, then it is accidental (From Martin v American International). Though this
is not an appropriate test to use when the death is of natural causes.
v) Look at if the average person would have said that this was an accident.
vi) Guillet v American Home Assurance.
(1) Facts: Stroke occurs during a basketball game, `INSRD claims under his policy.
(2) Reasons: The court goes through his agreement, Loss must result from injury, caused by an
accident, directly and independently of all other causes.
(a) Here there is no evidence that anything other than the basketball game could cause
neck torsion or turning – no direct evidence of trauma.
(b) The Court held that the accident definition in Martin of accident was good, in that this
was an unforeseeable event coming out of a basketball game, and was thus an accident.
(c) Borins J. gives a large dissent:
(i) Was it the basketball game that cuases the stroke, and thus an external event, which
lead to the injury, or was it the stroke that caused the injury and thus was more like
the illness we saw in Wang.
(ii) Borins J. basically claims that it was the Stroke
(3) Ratio: Loss must result from an injury external to the individual, and must be an
unforeseeable event.
vii) There is an interesting question when looking for externality if it is basically manufacturing the
argument that makes the case for externality.
(1) And externality is something unusual, not necessarily part of your daily activities
(2) Think about what a normal person would term an accident
viii) Kolbuc v Ace Ina Insurance
(1) Facts: Accute flaccid paralysis as a result of a mosquito bite with west Nile
(2) Issue: Was this an “accident” in the meaning of the policy
(3) Held: For INSR
(4) Reasons: Talk about this loss from exposure to the elements, Court goes through a classic
look
(a) at the agreement
(b) and considers the term accident referencing Want and Martin.
(c) At 38, they decide that rarity does not result in an accient. His injuries were caused by
the actions of the mosquito that bit him, but nothing in unexpected or unnatural about
a mosquito bite.
(d) There is some externality here, something occurs from without the body, but it is not
enough
(5) Ratio: Externality may occur with unexpected outcomes, but you still need to see if it is
within the ordinary meaning of the term “accident.”
(a) This decision is in keeping with Wang, that natural causes are not really accidents.
ix) Additional Cases on syllabus:
(1) Gibbens, Cdn. National Rwy v Royal and Sun alliance, Progressive homes
b) Contractual control of the scope of risk: Tort liability and Business Risk.
i) Andrews v George SCC
(1) Facts: Company makes some glue, sells to lumber companies, de-lamination results in
damages.
(2) Issue: Can this be said to be an accident?
(3) Held: for INSR
(4) Reasons: Kerwin J. Talks about the meaning of accident, saying the defective condition was
unexpected or desired and thus an accident. But there was an agreement to assume liability
on behalf of one of the companies, and therefore, due to this contract, there can be no
recovery.
(a) Dissent finds no accident within the meaning of the endorsement.
(5) Ratio: There is no right to recover from the insured if the party has already assumed liability
already under a separate contract.
ii) Privest Properties Ltd. v Foundation Company of Canada.
(1) Facts: Contractor did massive renovation of a building using materials containing asbestos,
huge costs in removing it, and a business interruption claim. The contractor knew that this
product had asbestos. Tries to get the insurer to defend him.
(2) Issue: Were the third party insurers under any obligation to defend the action
(3) Held: for INSRD
(4) Reasons: McEachrin, really doesn’t think it appropriate for the insurance to have to cover
occurrences in the business world. If a building starts defacing, that is really up to the
contractor to fix, unless there is something that may cause injury.
(a) However, when we look at the duty to defend, there is a question where some small
part of the problem would be covered. If this is the case, then there is a duty to defend
that arises.
(i) This can lead to situations where the insurer is paying for the whole litigation, but
only having to actually indemnify some small part of the issue.
(ii) INSR will be able to use their lawyer in these cases though.
(iii) INSR will likely settle and get the tab.
(5) Ratio: Courts will not cause INSR to indemnify the INSRD if the issue arises out of some
negligence during the ordinary course of business. However, the INSR may have a duty to
defend the INSRD if they are sued and there is a possibility that the INSRD is covered for
some part of that claim
6) Long tail Risks and Claims made Policies
i) The question in the next case is what happens when there is a long period of time between the
negligent act and the harm that is suffered?
ii) Pickford Black v Cdn General
(1) Facts: Accident caused due to shifting cargo at sea, the question was whether the
negligence was committed during loading in Halifax, or after the ship set sail. The policy in
question stipulated in an exclusion that they were not liable for accidents outside of
Canada or the US
(2) Held: for INSR
(3) Reasons: Court basically said that the event of the negligence at the docks was severed
from the accident at sea, so as to be severed in the chain of causation. Ritchie J. holds that
the accident here was the shifting of the cargo. The policy essentially didn’t apply to these
types of events and so the INSR got away without paying.
(4) Ratio: Contra Proferentum can be used to construe ambiguous terms in the INSRD’s favor,
but only where the words are actually ambiguous
iii) Cansulex
(1) In this case there was more negligent storage resulting in another accident, again the
courts saw the chain of causation in these cases as having been broken by the amount of
time and events that elapsed between the negligence and the actual down.
b) Long tail Theory
i) There are four trigger theories that have been used by the courts to explain this at different
times.
(1) Exposure theory: exposure to harmful condition will be sufficient to cause damage within the
meaning of the CGL policy.
(2) Manifestation theory: holds that damage does not occur until injury or disease becomes
apparent
(3) Continuous theory: developing injury or damage represents a continuous series of new
injuries, every insurance policy in effect from the first exposure or discovery is triggered
(4) “injury in fact” theory: asks when the injury or damage actually incurred – injury need not be
manifest, but must exist in fact.
ii) Looking at the long tail theory and thinking about how it might apply in a given situation:
(1) Looking at women’s birth control pills, and the synthetic estrogen. Women who took the
drug would later find out that their female fetus would develop cancer. The question
becomes, which INSR during the following sequence becomes liable?
(a) Drug is manufactured, prescribed; patient takes it, fetus gets it, cancer occurs, diagnosed.
(b) What tends to be used is the continuous trigger theory, take all the insurers on the risk
over the time and roll them all together and divide up the liability.
(c) Time or risk, typically, insurers move in an out of exposure.
iii) Privest Properties:
(1) Ratio: Here, proactively repairing defective workmanship means no coverage, but if it causes
harm to a person or property, then there will be coverage.
(2) Can see here we are dealing with the manifestation theory of coverage
iv) University of Saskatchewan:
(1) Facts: Building has problems, starting to rust and begins to collapse, building built with
wrong materials, use of galvanized steel pins was an error. Piece of the building had fallen.
(2) Issue: Which INSR should be liable? The one on risk at the time of the building or the
current?
(3) Held: the current
(4) Reasoning: See the different long tail theories at work, when the brick fell would be the
manifestation theory (123), when the pins were actually exposed to water would be the
exposure theory. The court in this case says there is no compartmentalized theory that will
have application to every insurance policy.
(5) Ratio: Plain logic dictates that where there has been progressive and hidden damages
occurring over time, the loss should be when the damage becomes apparent (exposure
theory)
v) Claims made policies v Occurrence polices:
vi) Reid Crowther
(1) Facts: the INSR sold a [policy to the insured to indemnify them against liability to thir parties.
The policy was a “claims-made” policy so the INSRD would only be covered for claims “firstmade” to them during the new policy period.
(2) Issue:
(a) Do successive claims for damages arising out of the same negligent act constitute
separate claims; and if so,
(b) Was the second claim in this case made during the currency of the policy?
(3) Reasoning: The claims made policy insures the INSRD, as they are, not based on ongoing
issues from the past. This is different than an occurrence policy, which covers liabilityinducing events occurring during the policy term, irrespective of when an actual claim is
presented. Conversely, “claims made” policies cover liability-inducing events if and when a
claim is made during the policy term, irrespective of when the events occurred.
(4) Ratio: When interpreting insurance contracts, the courts will use three principles to interpret
the insurance contract:
(i) Contra Proferentem:
1. Rules are construed against the drafting party
(ii) The broad interpretation of coverage clauses and the narrow interpretation of
exclusion clauses
(iii) The fulfillment of the reasonable expectations of the parties.
7) Insurable interest
i) The basic principle here is that you have an interest in the property that you have insured.
(1) Thus, you have a personal stake in the outcome of whether an accident happens.
(2) Insurance companies like this, because they have better odds in the wager that you will take
care of your things.
ii) Because you have an interest when the peril occurs, you suffer a loss:
(1) This is the loss against which you are indemnified.
(2) In a wager, you have nothing to lose but the wager, in an insurance contract, you may lose
the risk.
iii) Keys to interpretation:
(1) Determine the intention of the parties who made an agreement – reasonable commercial
intention
(2) Read policy against person who drafted it
(3) Look the doctrine of Contra Proferentum
iv) Factual Expectancy test
(1) Policy considerations:
(a) Courts keen to avoid wagering,
(b) Indmentification
(i) Flows from the idea that you cannot get more than your interest
(ii) If you do get more, you are considered to hold it in trust for the one who lost.
(c) Very Broad definition of insurable interest would create situations where those with very
small legal interest could destroy their property and collect.
(d) These issues do not apply to life insurance policies.
v) Kosmopolous
(1) Facts: This guy had a leather goods store which he incorporated. He did not really change
the way he did business, and when he insured the store he did so without putting down the
name of the corporation. A fire destroys his premises, and the INSR denies payment.
(2) Issue: Does Kosmopolous have an insurable interest in the property?
(3) Held: for INSRD
(4) Reasoning:
(a) Macuara was the old principle that took a strict legal rights and obligations look at the
rules; this case said that since the assets belonged to the corporation the INSRD would
be out of luck.
(i) Courts were wary of allowing people to conduct: wagering under guise of insurance:
(ii) Policy favoring the limitation of indemnity
(iii) Policy to prevent temptation for people to destroy their property
1. Moral hazard would be increased.
(b) Wilson finds a loophole here: she looks at the context and see’s that Kosmo is the sole
shareholder of the company, which is a significant enough interest to recognize that he
has an insurable interest.
(c) There is a lot of talk in this decision about whether or not there is the right kind, or
enough, interest in the property, eventually it is found that the policies around this
definition allow it to be construed broadly enough to capture the sole shareholder of a
corporation.
(5) Ratio: Follow the factual expectancy test: if an insured can demonstrate “some relation” or
concern in the subject of the insurance, he will have sufficient interest.
vi) Scott v Wawanesa: Scotty’s on fire!
(1) Facts: teenage Son sets house on fire
(2) Issue: does the son have an insurable interest thereby disbarring the whole family from
collecting on the insurance for his criminal action
(3) Held: The court applied the Factual expectancy test in this case, and found that the son who
set the house on fire, did in fact have an insurable interest.
(4) Ratio: The test is whether you benefit from the continued existence of the risk, or suffer
detriment from its damage. Interest has to be pecuniary, not notional, although not
necessarily legally enforceable.
vii) Assad v Mutual insurance Group
(1) Facts: Guy offers his car in exchange for debt, so the debtor takes it and does not look into
the circumstances. Didn’t know or care about the origins of the vehicle. It was stolen; A
then makes an insurance claim for loss of the vehicle. INSR doesn’t want to pay for the loss
of the vehicle because Assad did not have an insurable interest in a hot vehicle.
(2) Issue: did Assad have an insurable interest in the stolen vehicle?
(3) Held: Ont. CA held that there were policy reasons to deny coverage.
(4) Reasoning:
(a) There is really no reason not to apply the factual expectation test here with a positive
outcome for Assad, he had much invested in the vehicle and suffered detriment for its
loss.
(b) However, even though this may be the case, there can be no insurable interest in stolen
property if the INSRD is willfully blind to the origin of the property. IN this case, he was
willfully blind and thus, he cannot have an insurable interest.
(5) Ratio: Factual expectation test is not the whole story, as if someone acts in the absence of
good faith, they will not have an insurable interest.
8) Indemnity
a) Insurance contract provides indemnity against losses –
b)
c)
d)
e)
f)
i) The INSRD is to be made whole and put into a position that he would have otherwise been in.
ii) This flows through subrogation, and back through the insurable interest
iii) It is a practical way of looking at how the insurance works.
iv) It is a policy of the principles of insurance; it binds the whole thing together.
Methods to Ascertain the loss:
i) Actual Cash value
ii) Replacement cost
Not all insurance contracts are indemnity
i) Life insurance:
(1) Not indemnity – simply assigns a cashe value to your life
ii) Disability:
(1) Policies provide wage indemnity for work, usually a % of income
iii) Valued Policy
(1) Where a specific value is assigned to the risk, does not cover actual loss.
Rule of Indemnity:
i) Never should be compensated more than fully for damages sustained.
ii) The law and equity take a dim view of double recovery.
Subrogation:
i) When an INSR has indemnified insured, or is at risk of having to fully indemnify the insured, the
INSR is allowed to step into the insured’s shoes and exercise any and all rights the insured has to
diminish the INSR’s loss.
Glynn v Scottish union National Insurance co.
i) Facts: INSRD claimed for injuries to him and his wife from a car accident. He had a standard
auto-policy, and the expenses for the injuries were of the type covered in the policy. INSRD sued
and got full expenses from the accident, then claimed against the INSR.
ii) Issue: Is this a contract of indemnity, and thus a contract for subrogation?
iii) Held: yes, even though it did not say so.
iv) Ratio: All contracts are contracts of indemnity unless they explicitly say otherwise. Since this is
the case there is also a contract for subrogation, which leads to the fact that you cannot double
claim damages.
g) Castellain v Preston and others
i) Facts: A fire damages a hose while it is under a K for sale. Vendor claims insurance and
gets it. K for sale of the house is complete but the vendors do not give the insurance
money to the purchasers. Nor do they spend it to repair the house. Purchasers sue for
the money, but fail, so INSR sues for the money from the vendors to recover on the
basis that there was no loss.
ii) Issue: Could the INSR gets its money back, as the INSRD had not actually sustained a
loss?
iii) Held: yes, it was a contract for indemnity so it can recover.
iv)
Ratio: In a K of indemnity, the INSRD is entitled to be compensated for the loss and
nothing more. Subrogation allows the placing of the INSR in the position they would
have been in, but without a loss there should be no indemnity.
h) Confederation life v Costen
i) Facts: Had two policies from confederation life, they paid in full she then sued a 3rd party. After
she paid lawyers fee’s she had recovered 75%. They said she had recovered more than they
thought she would, but she paid the fee’s to get it from the 3rd party.
ii) Issue: Can the INSR subrogate and thus get the monies she won?
iii) Held: No
iv) Ratio: The costs associated with the recovery are part of the recovery: unless they cover all the
costs they cannot subrogate.
i) Globe & Rutgers Fire Insurance Co. v Truedell, 1927
i) Facts: City doing roadworks with steam roller causes spark and a fire. This burns down some
buildings. INSRD claims on insurance. INSR pays with knowledge that INSRD will be suing the
city and that INSRD will refund INSR if they recover. INSRD then wants to settle with the city
for a 12000 loss, INSR wants to be refunded proportionally. Insurance company says they
would not have to pay Tuedell were it not for the city’s negligence, so they have as much of an
interest as he does. INSR refuses to agree that INSRD can keep all the money, INSRD settles.
INSRD says INSR cannot recover from him unless he acted in bad faith or is overcompensated.
INSR argues that they were in equity subrogated, and INSRD was not allowed to settle without
their consent.
ii) Issue: Can INSRD bring an action against a 3rd party without being fully indemnified?
iii) Held: Insured may bring action provided he acts bona fide.
iv) Ratio: Subrogation does not arise until full payment, satisfaction or indemnity is provided for. If
the INSRD does not get the full indemnity, there is not automatic subrogation, the right to
bring action remains with the INSRD. Once indemnified, the money must be returned.
9) Subrogation:
i) Insured is entitled to receive full recovery but not more than that.
ii) The insured keeps control of the litigation unless they cede it to the INSR.
iii) Settlements will be shared by
(1) Pro rated:
(2) Shared by the percentage owed.
iv) Obligation on Insured
(1) In cases where the insured has prejudiced the INSR’s right to subrogation, there are 4
scenario’s
(a) INSR pays loss in full, subrogates – INSR get entire recovery
(b) INSR pays loss in full, insured sues tortfeasor & recovers – insured must pay recovery to
the INSR
(c) INSR pays loss in full, insured releases tort feasor from liability
(i) Insured still liable to pay INSR if he has prejudiced its rights
(d) INSR only partly indemnifies insured – insured recovers all losses from tortfeasor
(i) Insured liable for the portion paid.
v) Statutory subrogation BC Insurance Act.
(a) s. 130 (1) The insurer, on making any payment or assuming liability therefor under a
contract of fire insurance is subrogated to all rights of recovery of the insured against any
person, and may bring action in the name of the insured to enforce those rights.
(b) (2) If the net amount recovered after deducting the costs of recovery is not sufficient to
provide a complete indemnity for the loss or damage suffered, that amount must be
divided between the insurer and the insured in the proportions in which the loss or
damage has been borne by them respectively.
(2) At common law, insured gets first crack at the settlement, the insured must be made whole
first.
(a) This section suggests that the amount must be divided between the insured and the
INSR.
(b) Rules of subrogation have been modified by statute.
(3) Subrogation use in the statute is not the same as the use under common law. In common law
it gives 3 rights:
(a) Right to start an action
(b) Right to conduct an action
(c) Right to share in proceeds of a recovery.
(4) In the statute, the INSR has the right to start the action as well as share in the proceeds, but
if the insured has not been fully indemnified yet, he has an interest still and the insured gets
to carry out an action.
vi) Bars to subrogation
(1) Major rule is that an INSR cannot subrogate against its own INSRD.
(a) If I caused the damages, INSR cannot sue me for the money I claim against him (obvious)
(2) If there are two insured’s insured under the same K, then if one causes a loss to the other,
they will be immune from subrogation.
(3) UK: to defeat the possibility of circularity, if suing insured, you will be liable to the insured for
it, your suing yourself.
(4) In Canada: Where two insured’s a similar insurable interest, they will be treated as one
(Commonwealth Construction)
(a) The Insurer has no greater rights than the insured when they subrogate.
(b) If you guarantee liability in a K, you will be removing the rights of the insurer to defend
you, this could make the INSR really not want to touch your risk.
b) Riverside Equipment:
i) Facts: Action is commenced in the name of Riverside Equipment Inc. by the insurer of
McRea waste management Ltd., Wellington, to recover sums Wellington paid to replace
a tub grinder that Riverside leased to McRea. Wellington claims that it may cause
Riverside to bring an action against its insurer on the basis of subrogation. The insurer,
Marine Office, claims this action is misconceived.
ii) Ratio: Subrogation cannot be brought by an insurance company in the name of another
third party would was not connected to the insurance contract. You cannot subrogate
for someone you have not paid
c) Pacific Forest Products
i) Facts: Axa and Lumberman’s are two insure’s. Pacific has a contract with GBA to perform
various logging activities. A term in the K required GBA to carry insurance, which is a
250,000 dollar deductible with Axa. Pacific also has insurance with Lumberman’s, but for
a 100,000 dollar deductible, and they use it to claim a 1,000,000$. Thus they get 900
thousand out of it. Pacific has a term in their K with GBA which holds that they will be
liable for the costs of firefighting incurred by Pacific. So Lumberman’s wants to subrogate
Pacific to take advantage of that contractual provision.
ii) Issue: Can Lumberman’s sue Axa? Or must it sue GBA directly?
iii) Held: Pleadings must be amended
iv) Reasons: Lumberman’s has no cause of action against Axa. If any cause of action exists it
will be between Pacific and GBA, and perhaps therefore Pacific and Axa. But it will be for
Pacific’s 100,000 dollar deductible because GBA said it would indemnify Pacific for money
it paid. This is because there are two insurances on the same risk that is double insurance
for Pacific. It is not for subrogation then, which might be used to sue a third party for
their tort, but falls under the heading of Contribution, where Pacific is allowed to claim
for the monies it lost, but not Lumberman’s for the 9 hundred thousand they lost.
v) Ratio: Where two insurances both Guarantee the same risk, one cannot sue the other
for money it pays out on the risk, but both are seen as contributors.
10) Interpretation:
a) Principles
i) Always look to the intention of the parties.
ii) Try to interpret meaning in the context of the contract
iii) Unless K is ambiguous, court will not read against the insurer (Contra Proferentum
b) Consolidated Bathurst v Mutual Boiler and Machinary SCC, 1980
i) Facts: Company was engaged in production of paper and wood products, Several tubes in the
heat exchanges malfunctioned and cause damage to the tubes and heaters, resulting in a
temporary closing of the plant. INSRD is claiming for the damages, arguing that the hydraulic
hammer caused the damage, whereas the INSR is arguing that it was corrosion that is excluded
from the term accident. Experts have a hard time figuring out what actually caused the damage.
ii) Policy states:
(1) Accident, means any sudden and accidental occurrence to the Object, or part thereof, which
results in damage to the Object and necessitate repair or replacement of the Object, or part
thereof, which results in damage to the object and necessitates repair, replacement of the
object or part thereof, but accident shall not mean
(a) depletion, deterioration, corrosion, or erosion of material
(b) wear and tear
(c) leakage of any valve, fitting, shaft seal, gland packing, joint or connection
(d) the breakdown of any vacuum tube, gas tube or brush
(e) the breakdown of any structure or foundation supporting the object or any part thereof,
nor
(f) the functioning of any safety device or protection device;
(2) To pay the insured for loss or damage to property of the insured directly caused by such
accident to an Object or if the Company so elects to repair or replace such damaged
property.
iii) Issue: Is the loss recoverable considering this definition of accident?
iv) Held: At trial and CA: damage was caused by corrosion and the case is dismissed.
v) SCC: appeal allowed, the insurer must pay for at least the cost of down time, but not for the
repair of the corroded pipes themselves.
vi) Ratio:
(1) In interpreting an insurance contract
(a) Give effect to the intent of the parties when entering the K
(b) Normal rules of construction, from the whole of the contract
(c) Contra Proferentem only applied of ambiguity persists.
(2) Courts should be loath to support a construct enabling the insurer to pocket the premium
without risk, or a construction that allows the insured to achieve a recovery that could
neither be sensibly sought nor anticipated at the time of formation of K.
(3) Literal interpretation is not applied if it would lead to unreasonable results.
vii) Reasons: Etsey J. a good case to look at the reasoning:
(1) Here the courts said that there was the term directly or indirectly used elsewhere in the
policy, but not with regards to the corrosion.
(2) The definition of accident may mean no coverage where corrosion is involved, or it may have
meant that the cost of repairing was not covered, but other losses might be.
(3) Where ambiguity exists, use Contra Proferentum.
(a) Step 1.
(i) Effect must be given to the parties intention
(ii) Do not use Contra Proferentum to create ambiguity.
(b) Step 2
(i) Where it is found, then use the doctrine.
(ii) If he is trying to protect himself from liability, let him prove that he chose his words
clearly and aptly.
(4) Look at the whole contract, literal meanings should not be applied where doing so would
bring about unrealistic results, which would not have been contemplated in a commercial
atmosphere.
(5) Where they may bear two constructions, always take the more reasonable one, which would
produce a fair result, again looking towards intention.
viii) Dissent:
(1) Saunders J:
(a) Looking at the plain language of the contract, there was no ambiguity, it is simply that all
damages due to corrosion or otherwise were excluded unless it was direct damage to the
tubes themselves.
(b) The dissent here is really not about the principles, just the result.
ix) Note: Modern approach is to look at the reasonable expectations of parties, the one that wins is
the most reasonable.
c) Scalera v Loyds underwriters.
i) Facts: Defense was sought by an alleged perpetrator of sexual assaults under his homeowners
policy which contained a general liability section.
ii) Issue: Was the INSR liable to defend the claim of sexual tort?
iii) Held: For INSRD
iv) Ratio:
(1) The court is looking at reasonable expectations (Among many other things), if the wording is
ambiguous look at the reasonable expectations of the parties.
(2) In the US, they have ascending definitions.
(a) First provide for what the INSRD should expect to receive
(b) Some of the cases go further and say the Insured is entitled to all the coverage expected
to be provided under the policy
(c) Reasonable expectations of applicants and beneficiaries, even if in conflict with the
wording of the policy of insurance.
(3) In the US, once in this world, you can go places you will never be able to take interpretation
in Canada.
(a) If you are arguing these, go to American authorities, they are well worth examining as
they do carry weight.
11) “Commercial Efficacy” Principle
a) Indem Insurance v. Excel Cleaning: 1954 SCC
i) Facts: Excel was a portable cleaning service. Had a third party indemnity, and an exclusion clause
which read:
(a) Policy does not apply to damage to or destruction of property owned, rented, occupied,
or used by or in the care, custody and control of the insured.
(2) In the process of cleaning, there was carpet damage; INSR would not pay because the INSRD
was in care, custody and control of the carpet.
ii) Issue: By cleaning the carpet, was INSRD in care custody and control of it?
iii) Held: No, the INSR must pay.
iv) Reasoning: if you were to read it the way the INSR was asking, there would have been no liability
insurance at all.
v) Ratio: If there is more than one way to read the insurance contract, and one way essentially
removes any risk of loss, the other interpretation should be used in favour of the INSRD, a
court should not allow the INSR to pocket the premiums with no risk.
vi) Reasons:
(1) Etsey: with exclusions like these there would be no coverage left
(2) Rand: Did not have care and custody as the INSR said he did/
(3) Cartwright actually dissents: Interpreting the words in the popular sense means that the
cleaner did have care control and custody.
b) Andreas Pizza Mill Ltd v Sovereign General Insurance 1997, BCCA
i) Facts: Pizza joint had fire and business interruption insurance; Warranty reads
(1) In consideration of the premium charged it is agreed during the policy period the burglar
alarm system installed at the insured’s premises will be maintained in proper working order
and connected at all times when then premises is not open for business
(2) Alarm system was installed, byt then on night of fire, son forgot his keys and thus did not set
the alarm.
(3) Insurance contends that this was a breach of warranty.
(4) The INSRD says connected meant physically connected, and the system was, even though the
numbers had not been punched.
ii) Issue: what is the meaning of connected?
iii) Held: means physically connected.
iv) Ratio: Insurance contract remains a contract, and in the event of two possible meanings, the
court will look to see which promotes the parties intentions and is most reasonable in
promoting a sensible commercial result.
v) Reasoning:
(1) Dissent: Hall
(a) Undue refinement and an over technical approach is neither in the interest of the insured
or the insurer.
(b) The construction urged by the INSR is commercially sensible and in accord with the
expressed intention of the parties as reflected by the language of the K.
(2) Finch:
(a) The clause said connected when not open for business, but staff had to be on premises
when it wasn’t open for business, so this meant physically connected was the most
reasonable interpretation.
(b) Here there were clearly two meanings, and one had a more commercially sensible result.
(c) If both are reasonable results, pick the one that favours the INSRD, using Contra
Proferentum
c) Grace Farms:
i) Facts: Manure truckload spills, Insurer says there is a pollution exclusion, and so will not cover
the loss of the manure because it polluted someone’s property.
ii) Issue: Can Manure be pollution if the INSR is insuring a Manure business?
iii) Held: No
iv) Reasoning: They spread Manure, that is the business. Use rules above.
d) Palliser Regional Schools Division v Aviva Inserance (ABQB)
i) Facts: Pollution case, Palliser is a coal mining town that was mined out. 3rd parties without
knowledge of the School district removed topsoil exposing a coal bed. Wind blows coal into the
subdivision. Neighbors sue the School board who goes to INSR. INSR tried to rely on pollution
exclusion, Neighbors, in part, are suing for inadequate remediation of the issue.
ii) Issue: Can the INSR rely on the exclusion?
iii) Held: No, they have a duty to defend the action.
iv) Ratio: Court will ignore plain meaning of the contract when it suits them? Express limitation
provisions may be read in favor of INSRD where the type of event that triggers a provision was
not the type of event that the parties had contemplated when agreeing to the provision.
v) Reasoning:
(1) Court agrees that coal dust is pollution, General policy provisions apply but does the
exclusion also apply such that they have no duty to defend?
(2) Kellogg Canada v Zurich: a floor sealant fumes ruined cereal, the INSR successfully relied on
pollution exception. Court distinguishes this case because Palliser did not cause the
pollution.
(a) In Kellogg, the company was polluting via a buisiness activity, but Pallisar had little to do
with the damages done to them.
(3) This type of pollution was not in the contemplation of the parties, and so the courts said it
will be interpreted against the INSR
(4) The pollution clause was for special cases of pollution, not those that are risked on a daily
basis.
(5) Looks at Scalera and Bathurst and discusses Contra Proferentum ad reasonable expectations,
and that they should not apply a literal meaining when it would give an unrealistic result to
the K as contemplated by the parties.
(6) Pollution that occurred here was outside the reasonable contemplation of the parties.
PROBLEMS OF INTERPRETATION CONTD...
*As of July 1st the Innocent Insured will be resolved (see below)
Innocent Insured
Stolberg v. Pearl Assurance Company Ltd (1971) SCC
Facts:

Stolberg is sued when an employee dies while at work - he was 3 incorporated companies
Stolberg is the only one who was sued - even though he was not an employee of Stolberg but of
Stolberg Mill Construction
The Policy: Covers bodily injury or death at any time resulting there from, sustained by any employee
of the Insured while engaged in his duties as such, other than assumed under any agreement.

Policy only covers JOHN STOLBERG only with respect to liability arising out of operations of his
3 companies as their interest may appear

Exclusion clause: Bodily injury, sickness, disease, including death at any time resulting from
any employee of the Insured while engaged in duties as such other than that assured under any
agreement.
*common ground that the deceased, King, was not an employee of the appellant John Stolberg but
was an employee of Stolberg Mill Construction.

Issue: Do the words "by any employee of the Insured" exclude from the coverage claims against
Stolberg arising out of the death of King who was an employee by another names insured (Stolberg
Mill Construction).
 What does as “their interests may appear” mean?
Argument: Pearl Assurance argued that the policy was suppose to exclude liability that arises against
any 4 of the named insured - by the words "any employee of the insured"

Stolberg argues that the policy clause was meant to exclude only claims by an employee against
his own employer and king was not an employee of Stolberg.
Procedural History: Found to be in the exclusion clause by Trial and Court of Appeal.
Court of Appeal Dissenting:

Found that the interpretation of Stolberg was preferable as it took into account the wording "as
their interest may appear" These words indicate that those of the named insured, whose interests
are involved in a particular claim are the insured in respect of it, which is equivalent to saying
that the person who seeks indemnity is the insured in respect of that particular claim. If that is so
he is also the insured for the purpose of the exclusion clause, and it is only his liability to his own
employee that is excluded.
Analysis:

The SCC agreed with the Dissent at CA and said that to deny coverage would mean to read the
exclusion clause instead of as written "sustained by any employee of the Insured" to be read as if
it said " sustained by any employee of any Insured"

The insurance agreement was amended and the definition of "Insured" was defined as
any one of the insured or more...however liability was not imposed on any one of the other
insured

There is generally a leaning towards coverage.
Decision: Stolberg was entitled to indemnification
Scott v. Wawanesa Mutual Insurance Co. (1989) SCC
Facts:

The 15 year old son burns down the house of his parents
The Policy: the insurance agreement states in its exclusion: ...loss or damage caused by a criminal or
wilful act or omission of the Insured or of any person who has property is insured hereunder.

Insured is defined as (1) the Named Insured (2) is resident of his household, spouse, the
relatives of either, and any person under the age of 21 in the care of the insured
Procedural History:

The Trial Court found that there was coverage and the son had a separate and severable
interest from his parents

The Court of appeal found that the son had been deprived of an interest as he had an interest in
using the home and that this interest was inseparable from that of his parents.
Issue: Is whether the exclusion coverage applied to cover the wrongful act or omission of an insured
applies only to the insured responsible for the act or omission or whether it applies not only to that
insured but also to an innocent insured?
Analysis:

Strong Dissent: Laforest:

Proff likes the modern approach - A reasonable person, unversed in the niceties of insurance
law, would in purchasing a fire policy, expect the policy naming them as an insured without
qualification would insure them to the extent of their interest. Moreover a reasonable person
would expect that they would lose the right to recover for their own wilful destruction. But the
same person would find it anomalous result if informed that they stood to lose all if their spouse
burned down their house - There is several liability

Essentially using the broad definition of insured that is suppose to be of benefit – but here is
was found to be prejudice by saying because of this broad definition you are denied coverage.

Looks to the ambiguity in the language.. Looked to the word "the" insured. Found that the word
"the" qualifies the word insured in the exemption clause and it is correct to interpret that clause
as meaning only that when the coverage of the policy as to a particular insured committed a
criminal or wilful act then has the insured coverage been avoided.

Dissent says that even if I used the old approach I would come to the same decision in relation
to coverage.

If the son had lost property in a fire and he went to seek coverage under the policy he
would be flatly denied as he would be told he is not the named insured and his interest is
separate from the interest of the home

Cannot find that the son’s interest would be separate interest in one situation and then
found to be inseparably connected in another.

Majority decision: The majority looked to the WORDS of the statute and found that they were
unambiguous and insurer was denied. The son clearly was in one of the covered and definition of
the insured, and the family is therefore coverage is excluded.
Decision: Coverage denied
Riordan v. Lombard Insurance Company (2003) BCCA
Facts:
There was an intentional fire done by a foster child this time
AXA paid the full coverage and went against Lombard for that amount - entitled to subrogate
The Lombard Policy: We do not insure loss or damage resulting from any intentional or criminal act
or failure to act by:
a.
Any person insured in the policy; or
b. Any other person at the direction of any person insured by this policy.


Personal Property coverage insured "your residence and other person property you own, wear
or use, while at your premises, including pp which is usual to the ownership and maintenance of
residence

"You" and "yours" mean the person(s) name as insured, while living in the same
household, the relatives of or any person under 21 in their care.
AXA policy: covered against wilful or criminal act of the foster child if the normal policy denies
coverage.

Issue: Did the foster child fall within the coverage of "you" and "yours" in the Lombard Policy?
Analysis:

You and yours is the important wording - found that he comes within the meaning - Occupation
- he is found by the trial judge to have been living in the house of the insured under their care

While the differing use of "you and yours" and "insured" could have caused problems and
confusion - however in this case they do not when looked at the wording in the exclusion policy.

Here it was found that the only persons who were entitled to claim under the policy was the
parents

There is no definition of "insured" in the policy so need to look to how it is being use elsewhere
in the act

If there was ambiguity they should consider the reasonable expectations of the party

The words of the policy seemed to be clear enough

The reasonable expectation doctrine is a tool to resolve, rather than to create ambiguity.
Decision: He was properly excluded under the policy.
Godonoago v. Khatambaksh
Facts:

A child is bullied and beaten up by a group of 6 children, 2 of the children are very aggressive
and are the ones who caused the injuries. The mother of the two brothers encouraged the other
son to engage in the beating
Analysis:

The test is whether there is a claim that might result in indemnity for the defendant. - Duty to
defend

The action was commenced in negligence as they are claiming against the parents for the failure
in their upbringing and in discipline of their children

Because the boys were excluded for wilful acts - the insurance company is trying to say because
the sons are excluded so should the parents

In my view a proper interpretation of the policy is that the parents and the two children are
each separately insured to the face value of the policy. The insurer does not have to respond to
that claims against both of the sons because their separate policies exclude claims arising from
bodily injuries cause intentionally by them.

They are sued in negligence, which is not an excluded claim, and the fact that the pleadings
allege intentional assaults by their children their does not disentitle them to coverage.
**There is important in the manner in which you form your claim - if it is intentional you may not
get coverage - if it is negligence may not be excluded from liability.
Proximate Cause
Leyland Shipping Co v. Norwich Union Fire (1918) * he likes this case! HL
Facts:



The ship is torpedoed during the war - it puts a hole in the side but it does not sink
The ship is brought back to shore and is tied up on the dock
There was a storm coming and she was sent out to sea to float outside the harbour and be
anchored.
Analysis:

Warranting can be described as if something is not met then the insurance is void.

Lord Finlay - Found that the fact that it found temporary "shelter" on the harbour did not break
the chain of causation that she was going to sink because of the torpedo - the effort to prevent is
from sinking was unsuccessful

Lord Viscount says that if you asked an ordinary man what was the cause of the ship sinking he
would say it was because she was torpedoed.

But couldn't you also argue that the ship would not have sunk except for the fact that it
was moved away from the dock

The chain of causation is a handy expression but the figure is inadequate. Causation is not a
chain but a net. At each point influences, forces, events, precedent and simultaneous, meet and
the radiation from each point extends infinitely.

Lord Shaw- The proximate cause is that which is proximate in time - REJECTED

It is not a situation that it is either the first cause or the last cause. The cause which is truly
proximate is that which is proximate in efficiency. The efficiency may have been preserved
although other causes may meantime have sprung up, which have yet not destroyed it, or truly
impaired it, and it may be culminate in a result of which it still remains the real efficient cause to
which the event can be ascribed - here that is the torpedo
*Canada has basically followed Leyland
*It is common sense and it is based on the facts! It has application outside the marine context.
SCC has endorsed leyland
Ford Motor Co of Canada v. Prudential Assurance (1959) SCC
Facts:
On December 3rd there is a strike, the weather changes and there is a deep freeze and there is
significant damage done to the plant.

No employees were permitted into the building and there was no heat for 14 days
The Policy: denied coverage for loss due to physical damage to property insured caused by cessation
from work, interruption of work or change in temperature.

There would be coverage for damage to the first instance caused by riot – by the
additional insurance

Issues:

The substantial question is whether the damage was caused by the cessation of work or by
interruption to process or business operations or by change in temperature. Damage caused in
this way was within the exclusion defined in the cl.(c) of the supplement contract. CAUSATION
issue.

Was the riot the substantial cause of the loss?
Analysis:

The trial judge found that the property damage and loss of profit was all caused from the riot –
but he found that there could not be any recovery from loss within the exclusion clause.

Trial court and CA found that the riot was a continuing event and was operating along with the
other causes mentioned in the exclusionary clause, and whether these are called concurrent
causes or concurrent proximate causes, the loss due to physical damage to the property arising
when these causes operate is excluded
 Clearly that it was in the contemplation of the parties that a riot would lead to direct and
indirect causes of loss – cessation of work, property damage, etc.

This is similar to a case that has a policy for fire but excludes explosion - if there is a fire that
later leads to an explosion the insurance company is only required to pay for damage done by the
fire - not that of the explosion. The exclusion of the explosion is not limited to an explosion from a
cause other than a fire.
Decision: There were two concurrent causes of harm – riot & cold temp - and one was excluded so
denied coverage.
*The Canadian approach had been if there are concurrent causes and one of them leads to
exclusions then that loss will be excluded.
*a properly framed exclusionary clause and oust coverage
Wayne Tank and Pump v. Employers Liability Assurance Corporation (1974) HL
Facts:




Wayne tank provides a pump that was defective, that would melt, would explode and cause
damage
The employee opens up the pump and starts it and it is left open and it causes an explosion
(negligence)
They tried to turn to their insurer for indemnification
The Policy: The company will not indemnify the Insured in respect of liability consequent upon
(5) death injury or damage caused by the nature of condition of any goods of the containers
thereof sold or supplied by or on behalf of the Insured.
Analysis:

There are two causes of damage: the poor quality of the product and the negligence of the
employee

One of that is in the covered and one that is not - then there will not be coverage

To treat proximate cause as if it was the cause which is proximate in time, as I have said is out of
the question. The cause which is truly proximate is that which is proximate in efficiency

What was the effective or dominant cause of the fire? To that question I would answer that
it was the dangerous installation of a pipe which was likely to melt under heat. It seems to me
that the conduct of the main in switching on the heating tape was just the trigger - the
precipitating event which brought about the disaster

Where there are two perils both of which are proximate causes of the loss and in an open policy
the ship owner could have recovered on either, then, if one of those perils is excluded by the
warranty the underwriters are not liable. The loss is not apportionable and hence no part can fall
under the policy

If there are two proximate causes of the loss and one cannot be said to be clearly more
dominant - no effort should be made to separate out the causes - rather there should be found
that there are two causes of loss. If one of the proximate causes is an excluded peril then there is
no recovery
Decision: Not covered
CCR Fishing and Bank of Montreal v. British Reserve Insurance Co (1990) SCC
Facts:
A ship sinks - there are cap screws that are completely inappropriate and they corrode and
there is someone who fails to close the valve - water gets on the boat and it sinks. (faulty product
& negligence)
The Policy: The term perils of the sea, refers only to fortuitous accidents or causalities of the seas.

Analysis:

This was a fortuitous cause as it was due to the negligence of employee and negligence in
choosing the wrong bolts

In the case at bar the loss resulted from sinking of the ship due to the ingress of sea -water. This
loss would not have occurred on land. The requirement that the accident be "of the sea" is
therefore met.

But the test is not whether the defect which started the causal chain that led to the loss is one
that could occur exclusively at sea, but rather whether the accident itself --in this case the sinking
of the ship - is one could occur at sea.

This is a bit odd- a ship can only sink at sea - seems like anything could be covered

It is unrealistic to exclude from consideration any one of them, provided it has contributed to
the loss. What is essential in order to establish that the loss is "fortuitous" is an accident caused
by the intervention of negligence, or adverse or unusual conditions without which the loss would
not have occurred.

The question of whether insurance applies to a loss should not depend on metaphysical debates
as to which of various causes contributing to the accident was proximate. Apart from the
apparent injustice of making indemnity dependent on such fine and contestable reasoning, such a
test is calculated to produce disputed claims and litigation. It should be sufficient to bring the loss
within the risk if it is established that viewed in the entire context of the case, the loss is shown to
be fortuitous in the sense that it would not have occurred save for an unusual event nor
ordinarily to be expected in the normal course of things

The following procedure should be followed in determining whether a loss was proximate
caused by a peril of the sea. First, the cause of the loss should be ascertained. It should then be
asked whether the loss is fortuitous in that it would have occurred but for an accident or
unforeseen event brought about by negligence of adverse or unusual conditions.
Decision: Caused by accident – need to look at both of the causes and not separate them out.
Pavlovic v. Economical Mutual Insurance Co (1994) BCCA
Facts:
There was damage done to the property when the soil started to deteriorate. Sometime
between the issuance of insurance and the policy the waterline providing domestic water supply
to the house ruptured and water flowed, circulated through and under the ground producing
signs of damage to the brick and concrete work once the soil deteriorated.
The Policy: There was an all risk policy. It excluded damage caused by seepage or leakage of water
below the surface of the ground including through sidewalks, driveways and foundations, walls of
basement UNLESS the loss resulted from escaped water from public water main or swimming pool
equipment.

Analysis:
One could fairly say that the appellant’s loss was "caused by" the last event in time, subsidence
of the soils around the dwellings foundations – proximate in time. Or one could say that the
appellants' loss was caused by the first identified event in time, namely the rupture of the water
service line.

There is a great importance of choosing language and could have limited liability by using word
such as "contributed to - or indirectly & directly"

The fact that some insurers do use such language it was possible for the insurer to choose
language which would not have left the meaning of the exclusion clause open to doubt. ambiguous meaning construed against insurer contra proferendum

Then looks to the ordinary reader - He would think that if struck with the facts that in this case
the leakage or seepage of water occurred outside the insured building and that most of the
damage was caused by soil's subsidence, and the building subsequent collapse
*Court finds to be excluded needs to be DIRECTLY caused by water seepage – since the proper
language was not employed
Decision: entitled to coverage.

Triple Five Corp v. Simcoe & Fire Group (1997) ABCA
Facts:
The mall had argued that the American concurrent approach should be taken 
We have two difficulties with this rule. 1. it seems directly opposed to the operation of an
exclusion, which by definitions is to make an exception to a more general rule. Second, it
seems to lead to the conclusions that there can be no exclusions. We say this because there
is of course no coverage in the first place unless one can say the loss can be tried to insured
peril. Thus, the prerequisite condition for non-operation of an exclusion of an exclusion will
always apply. As a result, no exclusion can be effective

Mall tried to rely on CCR but court would not accept it applied in this case.
Decision: Did not answer the question because found there was only one cause of the loss not two!

Ontario Limited v. Derksen (2001) SCC
Facts:
The contractor owned a supply truck and it had automobile insurance and he also had
insurance for CGL and there was a policy for any excessive claims.

At the work site an employee placed a steel plate unsecured on a cross-member of the tow bar
while cleaning up the work site. He then drove the truck down the highway and the steel base
plate flew off the tow bar and went through the windshield of a bus killing a child and harming
three others.

Two negligent causes the cleaning up of the work site and drive with an unsecured metal plate
in truck.
The CGL Policy: covered bodily injury from work place but excluded coverage for any damage or
injury caused by an automobile accident
The Automobile Policy: cover for bodily injury and death result from owning, using of operating the
vehicle.

Analysis:

There is found to be two causes of the negligence. First is the negligent clean up of the work site
and second the negligent securing of the metal plate.

The motions judge held that the injured parties can claim under all three of the insurance
policies
CCR Fishing is applied by the courts in this case - reaffirms that it applied beyond marine
policies

Found that it is undesirable to infer which of the two concurrent causes was the source of the
harm. The cause of the accident was not solely the use of operation of the automobile. The work
site negligence cannot be characterised as being part of the loading of the automobile. Nor was
the use of the automobile the "proximate cause of the accident." His conclusion is respect of the
causation is reasonable and supported by the law – there were two operating causes of the harm

For the foregoing reason, I decline to adopt the presumptions that there where there are
concurrent causes, all coverage is oust if one of the concurrent causes is an excluded peril. If an
insurer wished to oust coverage cases where covered perils operate concurrently with excluded
perils, all it has to do is expressly state it in the insurance policy
Decision: entitled to coverage under any of the policies
*Ford supports the motion that a properly framed exclusion clause can oust coverage. * distinguished
Wayne tank as not Canadian

Insurance Amendment Act
Classification of Insurance:
KP pacific Holdings Ltd. v. Guardian Insurance Co
Facts:
The issue was surrounding a multi peril policy - was it governed by the fire provisions or was it
governed by the general proceedings?
The insurance act was unchanged from 1925 - which never was set up to deal with multi-peril
insurance
Based on fire insurance - it was suppose to be brought within 1 year from the loss
Under the general it was to be brought within 1 year from the filling of loss
The outmoded category-based Act contained rules based on old classes of insurance.
Found that part 5- fire insurance does not apply to multi-peril policies
As of 2003 but the BC legislature on notice to change the legislation to deal with the issue of
comprehensive policies







Objectives of the Insurance Amendment Act








Improved Coverage for consumers
Better Access to documents
Enhanced dispute-resolution mechanism
Do not apply to: Marine Policies as it is Federal Regulated
Does not apply to vehicle insurance as that is governed by ICBC.
It takes out Part 5 (fire insurance)
As of July 1st the new insurance Act will be in place.
The innocent co-insured problem was going to be taken out of the problem with the
introduction of new legislation - however this change will not be taken
Part 2: Will not apply to policies that are currently in effect - it will not come into effect until the
policies are renewed.

Benefit: gives insurance companies a year to get up to date and does not result in existing
claims to be amended.

Part 2 has been expanded and amended and applied to multi-peril policies
Innocent Co-Insured




Was overturned for policy reasons - if a contract contains a term or provision that would
otherwise prevent recovery would only apply to:
a.
Whose act or omission caused the loss or damage
b.
Who abetted or colluded in the act or omission
c.
Who - consented to the act AND knew or ought to have known that the act or omission
would cause the loss or damage
This will allow the innocent insured to recover their interest in the property.
After June of 2011 this has been in effect
This only applies to natural persons - does not cover corporations!
Subrogation

The New act makes pro-rata sharing of subrogation proceeds applicable to all policies - whereas
the old act only covered fire claims

There is no requirement fully indemnify insured before insurer acquires subrogates
interest - you get the amount that you lost!
Ex: 750K loss. 500 is covered by insurance and 250 not insured. Will get the amount of the
loss.
Subrogation
28.7 (1) The insurer, on making a payment or assuming liability under a contract, is subrogated to all
rights of recovery of the insured against any person, and may bring an action in the name of the
insured to enforce those rights.
(2) If the net amount recovered after deducting the costs of recovery is not sufficient to provide a
complete indemnity for the loss or damage suffered, that amount must be divided between the insurer
and the insured in the proportions in which the loss or damage has been borne by them respectively.
Relief from Forfeiture

The new Act - statutory discretion for courts to grant broader relief of non-compliance

Imperfect compliance may allow for the law and equity act were as complete non-compliance
will not allow for this
Limitation Provisions

There is a 2 year limitation period - the starting date varied with the type of policy at issue
previously

Starts from the date of the loss or when the insured knew or ought to have known about the
loss.

*subject to s.7 Limitation Act people under disability or minors – time does not start running till
adult or become competent
Restrictions on Fire Insurance

The new Act prohibits coverage exclusions related to fire insurance unless identified by
Regulation

Wants there to be consistency in similar policies

You can include as fire exclusions: criminal act or omission, riot, civil commotion, war,
invasion, act of a foreign enemy, hostilities, civil war, rebellion, terrorism, vacancy if more
than 30 days.

Goals: establish more consistency in policies:

If you are going to cancel an insured's insurance you need to send them by mail a notice of this cannot be done electronically
Paul v. Cumis (2011) BCSC * Guest Lecturer Case
Facts:
Insured borrower took out mortgage.
The husband has a life insurance policy that would pay to the mortgage upon his death
Coverage was for $393 Automatically - the premiums were up to date even though occasionally
there would be an overdraft 2006 to 2008

On sept 24, 2008 they tried to take out the insurance put was in over draft - so it was not taken

A letter was sent on Oct 2nd saying that there coverage would lapse if there premiums were not
up to date - 3 weeks to pay

Another letter sent that said that the policy had been lapsed as of Aug 28th.

They then took out a second mortgage and paid the CRA and the insurance premiums

She went to New Zealand and her husband later died on Nov 23rd

Was told that 3 months would due - she paid it
The Policy: 31 days, after 60 days needed another application of evidence of insurability (they never
did this)

Insured tried to argue that s.17 requires that for termination to be considered they need to
notice of loss by mail.

Insurer said that it did not need to exercise this right as insurance was terminated
automatically and s.17 does not apply to creditors group - The court agreed.



Issue: Was there a waiver done by the insurance company and therefore entitled to life insurance?
Analysis:
 The test for waiver was set out in Saskatchewan River Bungalow v. Maritime Life Assurance.

A party should not be allowed to go back on a choice where it would be unfair to another party
to do so

Waiver Test: will only be found 1. had the full knowledge of right 2. Conscious decision to
abandon legal right.

Because they did not request a new application and that since they did not do this they had
waived their right 
Estoppel: Found that the party would be protected by estoppel

BUT There was no longer an insurable risk - as there is no insurable interest as he was already
dead - it was a surety that he was dead.

Further the policy was the husbands policy - what role did the wife have in this plan -nothing!

No question of waiver arises: call center representative could only have made statement on
mistaken belief that Mr. Paul was still alive

No estoppel because Mrs. Paul suffered no loss; she was to deprived of the opportunity to
obtain insurance on Mr. Paul's life because he was already dead.
Policies & Materiality
Materiality:


The insurer would have not accepted the risk or would have charged a different rate
then the fact is material
This is based on the "reasonable insurer"



The test requires a court to view the non-disclosure through the eyes of a reasonable or
prudent insurer rather than through the eyes of a reasonable or prudent insurer rather than
though the eyes of the actual insurer or the actual insured involved in the case.
Second, the test provides a clear criteria for determining whether the non-disclosure
was critical in formation of the contract
Undisclosed information is not material if:
1.
There would be a lower premium
2.
Had no effect on the premium and the decision to provide coverage
3.
Merely delayed the formation of the contract
Misrepresentation and nondisclosure
13 (1) A contract is not rendered void or voidable by reason of any misrepresentation, or any failure
to disclose on the part of the insured in the application or proposal for the insurance or otherwise,
unless the misrepresentation or failure to disclose is material to the contract.
(2) The question of materiality is one of fact.
Perils insured against
122 (1) Subject to subsection (4) of this section and to section 129 (a), in any contract to which this
Part applies, the contract is deemed to cover the insured property
(a) against fire, whether resulting from explosion or otherwise, not occasioned by or happening
through
(i) in the case of goods, their undergoing any process involving the application of heat,
(ii) riot, civil commotion, war, invasion, act of foreign enemy, hostilities, whether war be declared or
not, civil war, rebellion, revolution, insurrection or military power,
(b) against lightning, but excluding destruction or loss to electrical devices or appliances caused by
lightning or other electrical currents unless fire originates outside the article itself, and only for
destruction or damage occurring from the fire, and
(c) against explosion, not occasioned by or happening through any of the perils specified in paragraph
(a) (ii), of natural, coal or manufactured gas in a building not forming part of a gasworks, whether fire
ensues from it or not.
(2) Unless a contract to which this Part applies otherwise specifically provides, it does not cover the
insured property against loss or damage caused by contamination by radioactive material, directly or
indirectly, resulting from fire, lightning or explosion within the meaning of subsection (1).
(3) If property insured under a contract covering that property at a specified location is necessarily
removed to prevent loss or damage or further loss or damage to it, that part of the insurance under
the contract that exceeds the amount of the insurer's liability for any loss incurred must, for 7 days
only or for the unexpired term of the contract if less than 7 days, cover the property removed and any
property remaining in the original location in the proportions which the value of the property in each
of the respective locations bears to the value of the property in them all.
(4) Nothing in subsection (1) precludes an insurer giving more extended insurance against the perils
mentioned, but in that case this Part does not apply to the extended insurance.
(5) An insurer that has a business authorization for fire insurance may include in its insurance
contracts a clause or endorsement providing that, in the case of livestock insured against death or
injury caused by fire or lightning, the word "lightning" is deemed to include other electrical currents.
Effect of statutory conditions
126 (1) The conditions set out in this section are deemed to be part of every contract in force in
British Columbia, and must be printed on every policy with the heading "Statutory Conditions", and
no variation or omission of or addition to any statutory condition is binding on the insured.
(2) In this section "policy" does not include interim receipts or binders.
Misrepresentation
1. If any person applying for insurance falsely describes the property to the prejudice of the insurer,
or misrepresents or fraudulently omits to communicate any circumstance which is material to be
made known to the insurer in order to enable it to judge of the risk to be undertaken, the contract is
void as to any property in relation to which the misrepresentation or omission is material.
Material change
4. Any change material to the risk and within the control and knowledge of the insured avoids the
contract as to the part affected by the change, unless the change is promptly notified in writing to the
insurer or its local agent; and the insurer when so notified may return the unearned portion, if any, of
the premium paid and cancel the contract, or may notify the insured in writing that, if the insured
desires the contract to continue in force, the insured must, within 15 days of the receipt of the notice,
pay to the insurer an additional premium; and in default of such payment the contract is no longer in
force and the insurer must return the unearned portion, if any, of the premium paid.
Fraud
7. Any fraud or wilfully false statement in a statutory declaration in relation to any of the above
particulars vitiates the claim of the person making the declaration.
Salvage
9. (1) The insured, in the event of any loss or damage to any property insured under the contract,
must take all reasonable steps to prevent further damage to any such property so damaged and to
prevent damage to other property insured under this contract including, if necessary, its removal to
prevent damage or further damage to it.
(2) The insurer must contribute proportionately towards any reasonable and proper expenses in
connection with steps taken by the insured and required under subparagraph (1) of this condition
according to the respective interests of the parties.
Unjust exclusions
129 If a contract
(a) excludes any loss that would otherwise fall within the coverage prescribed by section 122, or
(b) contains any stipulation, condition or warranty that is or may be material to the risk, including,
but not restricted to, a provision in respect to the use, condition, location or maintenance of the
insured property, the exclusion, stipulation, condition or warranty is not binding on the insured if it is
held to be unjust or unreasonable by the court before which a question relating to it is tried.
Scope of Risk
Dobson v. Sotheby (1827)
Facts:




A building was described as a barn, it was given the lowest insurance rate and it was not
suppose to contain a fire
They were agricultural buildings but not strictly a barn
They need to be tarred and as such a tar barrel was brought inside and boiled over and
took fire
Coverage was denied saying that it was not described properly enough to be a barn and
for the fire being lit inside
The policy: There should not be fire in the building to be cover aged.
Analysis:


While a barn was not the best description of the property it was found to be close
enough and the insurance rate would have been the same
If the insurance company did not want there to be habitually a fire in the premises they
might have expressed that or if there could never be at anytime a fire - conditions only support
the habitual use of a fire.
Decision: Policy was not forfeited in this case
Ratio: Stands for that you need to have it mostly right, does not need to be completely right
description for it to be considered material
Cooper v. Toronto Casualty Insurance Co (1928) ONCA
Facts:

A house burnt down while it was unoccupied - it was less than 30 days
The Policy: It was required that if the property was vacant or unoccupied for more than 30
consecutive days they need to notify the insurance company. The insurance only applies when it was
occupied as a private dwelling.
Analysis:
When someone is back in and back out then insurance company will not be successfully
in denying coverage

It is contrary to the policy of our statutes that an insurance company should be able to
cut down the risk by a choice of few words in inconspicuous type printed so that they are not
likely to be observed.
Decision: The court was critical of doing this but the expression was part of the contract and where
entitled to deny the coverage
*shows how the wording of the contract is so key!!

MeltCalfe v. General Accident Assurance Co of Canada. (1929) ONCA
Facts:
The house had a fire and some of the property was damaged. She was not living there
everyday but she was coming back every other day to check on it.
The Policy: If it is unoccupied for more than 30 consecutive days then the loss will not be covered.

Analysis:
Since she was coming back frequent enough - she was not living there but was coming
back every other day

Found that the words "only while occupied as a private dwelling" cannot be interpreted
in the absolute and literal strictness, every time the respondent stepped for one moment outside
of her house, for during that moment she would not be in personal, physical occupation of the
house as a private dwelling.

Some intermittency in personal physical occupation must necessarily have been in the
contemplation of the parties. The insurance company cannot have contemplated that the
plaintiff must constantly immured in her house.
Decision: entitled to the coverage as it was not unoccupied

Carter v. Boehn (1766) HL
Facts:
There was insurance on a property and it was during the war times
Whether or not in applying for the insurance whether they applicant should have
disclosed certain facts about the risk of being attacked.

There were letters back and forth about worried about invasion and weak forces
The Policy: is against loss from being destroyed by, taken by or surrendered to any European enemy.


Issue: Was there concealment of material facts?
Analysis:
The governing principle is applicable to all contracts and dealings. Good faith prohibits
either party, by concealing what he privately knows, to draw the other into a bargain from his
ignorance of that fact and his believing the contrary. But either party may be innocently silent as
to the grounds open to both.

There was concealment is that he did not disclose the condition of the place.

The second possible concealment was that it not having disclosed that, from the French
not being able to relieve their friends upon the costs, they might make them a visit - Found that
this was mere speculation - and did not amount to misrepresentation. This fact could be better
judged by the underwrite in London vs. Those confine at the Fort.

The third concealment is that he did not disclose the letter from Mr. Winch mention the
design of the French the year before - found that this was innocent silence as it was known that
they had been there for a year

The reason of the rule against concealment is to prevent fraud and encourage good faith.
If the defendant objections were to prevail in the present case, the rule would be turned into an
instrument of fraud. The underwrite here, knowing the governor to be acquainted with the state
of the place, knowing that he apprehended danger and must have some ground for the
apprehension, being told nothing of either and signed the policy without asking the question
Decision:
 He accepted the policy - in the hopes no attack would happen but if it did happen he could go
back and say sorry void for misrepresentation. Cannot rely on this apprehension later when he
could have brought it up before accepting the policy.
 Everyone knew about the situation – you don’t have to disclose something that was public
knowledge, mere speculation
*generally courts will look when they are looking to misrepresentation prior to the acceptance
of the policy. What information or questions would likely have affected the insurance?

Coronation Insurance Co v. Taku Air Transport (1991) SCC
Facts:




Taku owned a small airline in BC and he had a number of accidents in previous years and
was denied his coverage.
He sought new insurance and did not disclose the accidents or the number of seats.
He said he had only 4 seats when in fact he had 5. Only had coverage for the 4, he got in a
plane crash and 5 died.
The insurance company denied coverage for failing to accurately disclose his accident
history and the number of seats on the plane – as these were said to be material
misrepresentation.
Analysis:
Was the non-disclosure of this risk of his previous accident history material? Yes but
could have checked.

Taku argued that his accident history could have been obtained. The insurance
companies have an easy ability to check to see if there was been any previous accidents can look
to the database of flying - it would not be a hard onus for the insurance company to learn of the
accidents. (4 of the 7 SCC judges).

Found that the insurance company failed to meet their due diligence - and cannot complain
about the failure to disclose the information

Where the policy of insurance required by statute of regulation is primarily for the benefit of
the members of the flying public and not just the insured, the insurer must take some basic steps
to investigate the flying record of the air carrier applying for the insurance

3 of the judges say that the insurer had no obligation to inform itself of the
accident history of Taku. And the common law does not impose a duty of investigation on the
insurer - The failure of an insurer to investigate a risk should not by itself deprive the insurer of
the right to avoid the contract on the basis of a failure by the insured to disclose material facts.

Failure to disclose proper number of seat?

Found that his insurance policy was void because he failed to disclose the correct
amount of seats and that was in his exclusive knowledge. The number of seats was essential
because that affected the price of the premiums would have been more money to cover an
additional passenger.
*What an insured ought to have known and what a reasonable insurer would have done or inquired
into in the circumstances.
Decision: Failure to disclose number of seats results in policy being void- misrepresentation

Life Insurance:




The insured and applicant is required to disclose all material facts that are in the
person's knowledge.
If the insured provides incomplete or inaccurate information which is material to the
contract, the insured is in breach of the disclosure obligation, regardless of whether the failure
to disclose was committed innocently or with "good faith or negligence or forgetfulness or
mistake or misjudgement"
If the insured provides incomplete or inaccurate information about a matter which is or
ought to be within his knowledge, the insured has breached the statutory disclosure duty for life
insurance
There is an ongoing duty for automobile or fire insurance to advise the insurer of any
material changes
Henwood v. Prudential Insurance Co of America (1967) SCC
Facts:
A young girl was hospitalized for a brief period for anorexia and depression and saw a
doctor for these reasons.

She died in a car accident and they tried to deny coverage because she did not disclose
seeing a doctor for these reasons.
The Policy: asked whether she had been treated by an physician or other practitioner for or had any
known indication of: nervous mental disorder, paralysis or severe or frequent headaches. Asked if she
had gained weight in the past year? Said no to both.

Analysis:
The test is a reasonable insured - no evidence was called on behalf of the appellant to
contradict the categorical statement made by the respondent own doctor to the effect that if the
true information had been available to the respondent, the premium rate for the policy would
have been a very high one.
Decision: Found that it was enough to void the policy as material
Dissent:
 If what the insurance company said about denying liability was automatically accepted then it
would require the court to hold that the respondent in reciting its policy automatically recites
the policy of a reasonable insurer. If one were to arrive at such a conclusion, then any
idiosyncrasy of an individual company expressed in its policy would bind the court to hold that
non-disclosure of facts which were not in accordance with that idiosyncrasy was automatically
material
*If you are going to be calling evidence as an insurer you would want to call evidence from some an
outside person or outside insurance company - want to show that it is common practice and followed
by all insurance companies. Or you would want to call evidence to show why specifically you are
charging lower premiums and that is why it should be rejected because it was known it would charge
more.

Kruska v. Manufacturers Life Insurance (1984) BCSC
Facts:
She did not disclose that she had previous hospitalization for her alcoholism at a de-tox
centre- 2 previous times

She also did not disclose that she was treated for pneumonia

At the time would have the words "illness" brought into her mind alcohol consumption
and hospitalization? No.
The Policy: If there is material misrepresentation the policy will not be rendered void in the absence
of fraud render the policy voidable. Need fraud to void the policy!

Issue: Did this amount to misrepresentation or non-disclosure of material risk?
Analysis:





There is no evidence to support that the question of illness would have put either Dr.
Little of the insured's mind to the question of alcoholism. - The evidence is that the hallmark of
the word alcoholism is that the person in unable to admit they have a problem to themselves.
Asked whether she had any illness, injury operation or treatment or consulted by a
doctor..She said no which is clearly false!
To deny coverage the insurer needs to prove that information concerning the insured's
alcoholism and her hospital admissions for this treatment were material to the risk accepted by
the insurer.
The test of materiality is whether the facts in question "would influence the judgement
of a prudent or reasonable insurer in fixing the premiums or in deciding whether to accept the
risk.
The evidence was such that a person with drinking habits similar to the insured's are
poor risks when compared with the average age is material. The disclosure would have put the
insurer on guard and they would have made careful inquiry into the personal habits of the
insured

There is also abundant of medical information to show alcohol abuse causes
significant increase in mortality and other diseases

The test for Fraud is whether there is a false misrepresentation, made knowingly
without belief in its truth, or recklessly without care whether it is true or false. Nothing less than
this will suffice for the defendant to succeed in this case.
Decision:


On the facts of the case fraud has not been proven. There has been misrepresentation
and non-disclosure of material facts. But the court was not satisfied that the insured did this
knowingly or recklessly so as to find the actions to be fraudulent.
Did not amount to fraud so entitled to coverage
Binders, Renewals and Lapses in Coverage:







In order to satisfy the insured's need for immediate coverage without compromising its
own ability to fully assess the insured's risk factors, an insurer may agree to provide the insured
with interim or temporary coverage
By agreeing to provide interim coverage, an insurer is not legally obligated to issue a full
policy insurance. The temporary coverage is provided so that the insurer can make a well
reasoned decision about whether to issue the full coverage requested.
Interim coverage remains in effect until:

The coverage is superseded by the insurer issuing a full policy

The temporary agreement is legally terminated by one or both of the parties, or

The agreed upon time expires.
Termination: An insurance contract can be terminated in one of three ways:
 By the natural expiry of the time period specified in the contract
 By mutual agreement; or
 By unilateral procedure.
Renewals: Generally, the purpose of a renewal is to maintain insurance coverage beyond the
originally agreed termination date, without any time gaps in the coverage. Whether a given
contract has been renewed or not is a question of fact. Need to look to the nature of the original
policy and the renewal procedure employed.
 Continuous policy: a life insurance policy - assuming that it will continue on until the
death of the insured such policies provide for further extensions to the term of an
existing contract, subject to the rights of either of the parties to terminate the
contract. In a continuous policy questions of formation are answered by reference to
the original offer and acceptance that initiated the coverage.

Non-Continuous policy: If you wish to continue on with this insurance you need
to apply to the insurer for renewal and tender the renewal premiums - but they are
not bound to the renewal. Involves the situation where a separate and distinct
contract comes into existence at each renewal.
Grace Periods: When an insurer offers to renew an insurance policy upon the insured
paying an additional premium, it is common for the insurer to expressly stipulate a grace period
during the new premium payment will be accepted beyond the expiry date of the original policy.
 If an insured loss occurs during the time, the loss is still covered as long as the premium is
paid within the grace period.
 Life Insurance Policies: 30 day grace period for the renewal of life insurance contracts.
Where a grace period is provided, the courts have held that the grace period includes a
holiday and weekends, but if the final day of the grace periods is a holiday, then payment
on the next business day is acceptable.
Reinstatement of Lapsed Contract: It is open to the insurer and the insured to agree to
reinstate a lapsed policy.


Reinstatement simply means that the parties enter into another insurance contract, but on
the same terms conditions as the original contract.
In absence of evidence to the contrary the insurance policy is not retroactive
Scottish & York Insurance v. Metrix Insurance (2006) BCSC
Facts:



It was a jewellery store was robbed for 2.5M
They had a recent insurance policy - part of the policy was certain closing and opening
practices (these were not followed because she had not seen them yet or signed off on them)
They paid the insurance but then they pursued the broker because the documents were not
signed as they were suppose to – and they were never read.
Analysis:
 The warranties were found not be enforceable because they had not been signed and she had not
read the warranties and the signature would constitute as a counter-offer and unless and until
she accepted them they were not enforceable against her, and she had no knowledge of them
LLA Logging Ltd v. Saskatchewan Government Insurance (2004) SKCA
Facts:
 They had insurance on a delimber for a logging company The policy was changed after the Insurance company experienced unacceptable losses from the
commercial forestry industry
 As a result insurance premiums went up and they were required to have FSS on any property
worth more than $100,000
 They had a fire suppression system (FSS) that was designed to put out fires, however it
malfunctioned and the delimber was destroyed by fire
 LLA logging did not have the FSS serviced or inspected by an authorized services man of the
system- It was found to have been improperly installed and not properly maintained
The Policy: required the fire suppression system to be checked every year to make sure it was in
working condition
Analysis:
 If it was found to be a new policy then one must examine the facts of determining whether there
was a breach of warranty and the condition at the time of loss
 The policy was renewed based on automatic renewal system - the new warranty about the FSS
was not explained to LLA logging and it was not drawn to his attention. But they were told there
were changes – need to check your policy!!
 They found that the contract existed and he should have known about this - however even though
he did not do any continuous checking the policy only came into effect and he still had until July 5
1996 months to technically check the device and the loss occurred on May 27th 1996.
Decision: Coverage was granted because of the dates! IMPORTANCE OF FACTS AND SPECIFICS OF
THE CASE
Bains v. National Life Assurance Co. (1997) BCCA
Facts:
 Bains had a life insurance policy in the amount of $100,000 and it came into affect Nov 2 1989 and
he died on August 6 1990


He has stopped payments on his policy on Aug 2, 1990
Payments were made regularly till July and when he was considering switching to a insurance
company with lower premiums
 Another life insurance policy was issued on July 21 1990.
Policy: Life insurance policies allow for a 30 day grace period – if paid within that time entitled to
compensation.
Issue:
 Does the 30 day grace period apply and thus entitle him to compensation?
Analysis:
 There could not be found any termination of the policy, there was no specific termination date and
no notice of termination
 The argument was advanced that Bains could not have intended to have two life insurance policies
at one time and therefore it should not be covered.
 This argument was rejected as previous cases have been allowed. Can have two life
insurance policies!!
 Tried to argue that the insurance policy did not come into effect until there has been a full year of
payments
 I find nothing whatever in the Insurance Act to support the proposition that, where the
insured elects to pay the premium in monthly instalments, the policy is conditional until
the first full annual premium has been fully paid.
Decision: Coverage found - had to pay premium for month of august
Saskatchewan River Bungalows v. Maritime Life Assurance Co (1994) SCC
Facts:
 He had a life insurance policy that was to be paid annually
 He failed to make a payment on July 26th and the policy lapsed - a letter was sent requesting a
payment of $1,345.
 A cheque was apparently mailed prior for $1300 and they then sent the difference of the amount
that they were short for $45
 The insurance company never received the payment by mail
 They receive a letter on Feb 2nd saying that they still needed payment - however it was sent to an
address that was not normally used by the party and they did not receive the letter until April and
they searched for the loss cheque
 New cheque was not sent until July - the cheque was refused
 The husband was terminally ill with cancer by this time and insurance was refused.
Issue: Was there waiver by still asking for payment even though policy lapsed?
Analysis:
 Looks at the concept of waiver in policy: waiver will be found only where the evidence
demonstrates party waiving had:

Full knowledge of the rights

An unequivocal and conscious intention to abandon them
***The waiver tests clearly establishes that the central feature of waiver is the insurer's
intention to give up a known contractual right - strict enforcement: specifically, the right to
require the insured to fulfill a contractual obligation of the right to refuse payment of insurance
proceeds where the insured has already failed to fulfill a particular contractual obligation.
The respondent identified a number of factors to support that Maritime did not "clearly
and unequivocally intend to waive its right to timely payment. As they acknowledged the
acceptance of the $45 but was waiting for further payment

The letter in November said that the policy is "technically" out of force and requires
immediate repayment - this shows that they were not following the strict rights of the contract

While this constituted a waiver - did this waiver extend out until July?
 Once they opened the mail in April they clearly became aware of Maritime's intention to
retract its waiver. They then did not send payment for 3 months. Had they sent payment
then it still would have been open. Even if there was imposed the 30 day grace period
commencing April - they missed it by not paying until July.
 Under equitable estoppel a party should not be allowed to go back on a choice when it would be
unfair to the other party to do so – Here not inequitable because they did not pay till July!

Decision:
 Not entitled to compensation *shows how the cases are very fact driven ** See Cumis for more waiver!
Material Change in Risk & Compliance with Warranties:



Any change material to the risk and within the control and knowledge of the insured avoids the
contract as to the part affected by the change is promptly notified in writing to the insured - within
15 days of the receipt of the notice, pay to the insurer an additional premium if needed and in
default of such payment the contract it no longer in force
It is all about balancing the risk - the duty to disclose is an ongoing duty - cannot have an insurance
for an undisclosed risk
In Mutual Life Insurance Co v. Ontario Metal Products dealt with a claim for life insurance - in a
response to a questionnaire he stated that he had not been prescribed medication and had not been
treated by a physician in the past 5 years - one and a half year later after the insurance policy was
in place he died of cancer. Found that he was taking tonic injections -tried to deny coverage saying
he did not disclose the tonic injections. The court found that the tonic injections were not material
facts and they would not have affected the premium paid - entitled to the life insurance policy.
The Reasonable Insurer Test
 First, the test requires a court to view the non-disclosure through the eyes of a reasonable and
prudent insurer rather than through the eyes of the actual insurer or the actual insured involved
in the case. Second, the test provides clear criteria for determining whether the non-disclosure
was critical to the formation of the contract.

The undisclosed information must be such that if disclosed coverage could have
reasonably been refused or a higher premium could have reasonably been charged.

Undisclosed information is not material if it would have:
i.
Lowered the premium
ii.
Had no effect on the premium and the decision to provide coverage, or
iii.
Merely delayed the formation of the contract.
Within the Insured's Knowledge

The insured's disclosure obligation applies only to facts which the insured knows or
which the insured reasonably ought to know. This knowledge requirement refers only to the
insured's awareness of the facts themselves and not to the insured's appreciation of the
significance of those facts to the insurance contract.

The insured is under no obligation to disclose facts which are already in the knowledge
of the insurer.

Presumed knowledge of the insurer includes matters known to the general public and facts
which are available and customary or well known in the field which it insures. (Taku &
Carter v. Boehm)
Lejeune v. Cumis Insurance Society (1992) SCC
Facts:
 A fire destroyed the respondent's apartments and the insurance company refused to
compensate him on the ground that the premises were not used in accordance with their
description in the policy. Suppose to be used for a “private dwelling” used to hold meeting for
youth a few hours a day.
The Policy: Described that the premises were to be used and occupied "solely as a dwelling place or
private summer or seasonal residence"
Decision: The property was not used for the purposes that were covered in the policy as there was
mixed use of the premises and therefore was not entitled to compensation
Marche v. Halifax Insurance co (2006) SCC* not often cited
Facts:
 Fire destroyed a rental property - insurance policy denied coverage as there was a material
change in risk and they had not notified them that the property was vacant.
 Her brother moved into the place but only sporadically paid rent - she wanted him to leave and he
wouldn't so she cut off the water.
 She had not told the insurance company that anyone else lived in the house or was sometimes
vacant - she claimed she did not know she had too
The Policy: any change material to the risk and within the control and knowledge of the insured shall
avoid the contract as to the part affect thereby, unless the change is promptly notified in writing.
Analysis:
 The insurance company asserts that the property being unoccupied amounts to a material change
in risk.
 Nothing in the policy says that the change needs to be ongoing - just that such a change shall avoid
the policy unless they are promptly notified.
Decision: Determined that the vacancy was unrelated to the fire and had been rectified prior to the
loss occurring and found that a statutory breach need not be causally connected to the loss
*This decision is somewhat unclear because regardless of whether the material change is related to
the loss or has been cured at the time of the loss, the insured's duty to report material changes is
absolute and fair, pursuant to the doctrine of utmost good faith, the insurer is entitled at all times to
full disclosure of information that is pertinent to its underwriting decisions.
 Further the case does not clarify the issue of whether the insured's duty to report material change
is fairly interpreted as entitling the insurer to deny coverage where the material change is
unrelated to the loss and is rectified prior to the loss occurring
Dunningham v. St. Paul Fire & Marine Insurance Company (1963)
Facts:
 There was a fire in the business premises – had 39%

Insurance company is denying coverage as less than 50% of the inventory was in the safe as
required by the warranty.
Analysis:
 While there was the provision in the policy it was not in effect when the policy was originally
purchased but rather was introduced some 4 months later
 However the requirement was not unreasonable and the warranty is found to be valid as they
make common sense in the business sense.
Decision: Since these warranties have not been complied with the policy is void
Case Existological Laboratories (1982) BCCA
Facts:
 There was a policy that required by warranty that the night watchmen be on duty - he was not at
the time of the ship sinking
 The warranty had nothing at all to do with the sinking of the ship or the loss
 Claiming that there was a breach of warranty, and not entitled to coverage
Analysis:
 Essentially if there was no night watchman present, or even if there was a night watchman present
on earlier nights, between the hours of 2200hrs and 0600hrs, then the policy does not give rise to
liability on the part of the assured.
 They cannot have intended that is the watchman was late one night or sick and did not come into
work that the policy would be rendered invalid
Decision: The limitation on the risk has no effect in this case as not reasonable or in the
contemplation of the parties
*Non-disclosure or material change in risk that somehow the insurer has to show that the change was
actually causative (THIS IS NOT PART OF THE TEST) * the test is that we would have written the
policy different had we known of the difference.
Prejudice to the Insurer Options:

Having established the insured's breach of its disclosure duty, the insurer must also provide a
court with evidence to establish that the breach caused real harm or prejudice to the insurer by
inducing the insurer to enter into a contract
 Need to show that they would have acted as a reasonable insurer which would have been
to deny coverage
Effects and Consequence of the Insured's Breach: from (Ellis v. London Canada Insurance Co)
 To repudiate the contract on the basis of the breach, or
 To treat the contact as valid and subsisting despite the breach, or
 To treat the contract as valid despite the breach but to cancel the contract in accordance
with the statutory provisions authorizing unilateral termination

To treat it as repudiating the contract is to treat the policy as being void ab initio, subject
to any obligation owed to a third party.

The failure of the insured to disclose material changes in the renewal application
will entitle the insurer to repudiate the renewed contract.

Need to refund the premiums from the date of the breach

If the insurer fails to tell the insured that the contract is repudiated or otherwise
misleads the insured into believing that the contract is in effect notwithstanding that
breach the insured may successfully argue that the insurer waived its right to repudiate the
contract.
The Duty to Defend & Indemnify
The Deductible






As a matter of mutual agreement between the parties, indemnity insurance policies typically
provide for a deductible. A deductible is the portion of a loss which the insured agrees to bear
before the insurer's obligation to pay arises.
A principle of the deductible is that they address the "moral hazard" inherent of insurance.
“Moral Hazard “refers to the chance that the existence of insurance will increase the likelihood
of the insured event.
The deductibles offer a consumers choice whether to make the claim or not
Second, high deductibles permit high-risk drivers to obtain insurance coverage
Finally, the use of deductibles disclaim small losses, where the administrative costs of resolving
these claims outweigh their settlement value.
Obligations of an Insured
1.
2.
Notice of Loss
Proof of loss - the burden of proof rests on the insured to establish a right to recovery under
terms of the policy
This requires the insured claiming recovery that they: (Dimaria v. Pilot Insurance co.)
a.
Had a valid insurance policy
b. A loss has occurred
c.
The loss occurred during the time period covered by the policies
d. The loss falls within the coverage of the policy
e.
The amount of the loss is in the policy limits
Fraud by the Insured

Under the common law, the insured's fraud in advancing a claim entitles the insurer to avoid all
obligations under the contract.

By committing fraud an insured forfeits all benefits under the policy

The results may be modified by contract and sometimes by statutory provisions
Duty to Defend and Indemnity Under a Liability Insurance Policy

Liability insurance is designed to protect an insured against financial loss which may be
incurred if the insured is sued by a third party.

To fulfill their obligation the insurance company must:
1.
Pay for and instruct legal counsel in defending the insured against a third party claim.
This is the "duty to defend"
2.
Pay for any judgement awarded to the third party against the insured. This is the "duty
to indemnify"

Both of these duties arise as a matter of contract between the insured and the insurer

This is beneficial from the insured's perspective as it is obviously advantageous to have the
legal costs of defending a third party action covered.







From the insured's perspective the duty to indemnify the insured makes it desirable have
control of the defence of the third party action. The insurer can prevent liability imposed on the
insured or to minimize any judgement obtained against the insured, thereby reducing the
financial impact of the insurer's obligation to indemnify
How do you determine whether they are entitled to indemnity or duty to defend?
What does the court use to determine whether this is a situation that will fall within coverage?
Don’t have to defend or indemnify if either is not within the insuring agreement or falls within
an exclusion!
A pleading that says that you intentionally kicked the plaintiff in the head - intentional tort. This
would likely take it out of most policies out of accident or negligence.
In the Maritimes they would look at the defence - as it gives some background to the situation
In BC however the court says that you do not look at extrinsic evidence - your client will not be
allowed to file an affidavit that he thought it was consensual – Look to the pleadings!
Nichols v. American Home Assurance Co (1990) SCC
Facts:



Nichols is a lawyer and he stated the wrong price in requesting a mortgage - getting a mortgage
for $10,000 more than the price of the property
It was against the policy to obtain a mortgage for more than 90% of the costs of the property
Indemnity was denied as the insurance company claimed that his actions were fraudulent and
the policy does not insure against the fraudulent actions
Analysis:

The Supreme Court of Canada sided with the American Home and concluded that the insurer
had no obligation to defend Mr. Nichols against the fraud claim.

The court held that the insurer's duty to defend arises only if, assuming that the facts as alleged
in the pleadings were proven true, the insurer would have an obligation to indemnify the insured.
***"The pleadings rule" The pleadings govern the duty to defend. An insurer must defend if the
pleadings in the third party action raise "the mere possibility that a claim within the policy may
succeed.
Non-Marine Underwriters Lloyds London v. Scalera (2000) SCC
Facts:
Scalera was one of five bus drivers who were sued by a young girl for sexual assault.
The pleadings raised allegations of battery, negligent, battery, negligent misrepresentation and
breach of fiduciary duty.

The insurer refused to provide defence costs because:
The policy: specifically excluded coverage for "bodily injury or property damage caused by any
intentional or criminal act


Analysis:

The court held that based on the pleadings the duty to defend was not triggered.

The court held that all of the causes of actions were based on the same act - which was an
intentional act - all of these allegations were related to sexual assault which was based on nonconsensual act which is an intentional act.

The court affirmed that the pleadings are important in determining the action but is not solely
based on the pleadings.
Want to look at the true nature of the claim – can’t simply frame your pleadings to make it fit
within indemnity. (ie: negligence)
Decision: Denied as the policy does not cover intentional acts.
The Test of Indemnity from Scalera
1. Without attempting to determine the merits of the claim and assuming that all of the claimant's
factual allegations are true, the court must determine which of the legal assertions contained in
the pleadings "could potentially be supported by factual allegations"
2. Where multiple claims are properly pleaded, the court must determine whether any of the
claims are entirely derivative of another.

A claim is derivative if it arises from the same action and causes the same harm

A claim for negligence will not be derivative if the underlying elements of the negligence
and of the intentional tort are sufficiently disparate to render the two claims unrelated.

If both claims, the intentional and negligence claims arise from the same action and
cause the same harm, the negligence claim is derivative and it will be subsumed into the
intentional tort for the purpose of the exclusion clause analysis
3. Having identified the properly pleaded, non-derivative claims the court must determine
whether any of these claims if proven would require the insurer to provide indemnity.

Monenco Ltd v. Commonwealth Insurance Co
Facts:






A subsidiary of Monenco, 67669 Alberta, was being sued by Suncor to recover damages with
respect to a major fire which occurred at Suncor's tar plant.
Suncor alleged that the extent of the fire damages was caused by the propagation of fire along
the PVC cables which had been supplied and installed by a group of engineers operating a joint
venture
Suncor argued the Monenco failed to warn about the potential dangers of the PVC cables
Monenco defended and settle the claim with Suncor with an assistance of another liability
insurer who paid all of the settlement and defence costs that were more than $1M.
Monenco then commenced this action against Commonwealth Insurance Co another of its
liability insurers, to recover $1M in defence costs
Commonwealth claimed it was not liable because of exception clauses of "turnkey" and
"professional services"
Analysis:

The SCC requires an assessment of pleadings to ascertain the "substance" and "true nature" of
the claims by considering whether "the factual allegations...in their entirety..could possibly
support the plaintiff's legal claims.

The court held that in determining the duty to defend, a court is entitled, at a minimum, to look
at extrinsic evidence which is expressly referred to in the pleadings. Information that has been
explicitly referred to in the pleadings may be considered to determine the substance and true
nature of the allegations.

Found that it fit into the exception of turn key - and is therefore exclude whether an insurer's
duty to defend is triggered

The pleadings rule provides that an insurer is obligated to defend a third party claim on behalf
of its insured where the allegations pleaded, if proven to be true, would fall within policy
coverage. There merits are NOT to be considered. This means that the duty to defend is broader
than the duty to indemnify because an insurer may be responsible to defend a third party action
for which, if successfully defended, the insurer will not be obliged to provide indemnity


The allegations in the pleadings are to be read generously, but with regard to the substance, or
true nature of the allegations rather than with regard to the literal wording of the pleadings.
To determine the "true nature" of the allegations, court should look at which of the allegations
can be supported by the factual allegations in the pleadings and which allegations are merely
derivative of others. The court may look to extrinsic evidence explicitly referred to in the
pleadings.
Marjak Services ltd v. ICBC (2004) BCCA
Facts:


Had a policy under ICBC that they would defend in the name of the insured for damages
brought against the insured.
He was on a road trip for work with his colleague and his colleague was suffering from a
diabetic shock and he did not pull over until he returned to BC and as a result he suffered
personal injuries and required a kidney transplant.
Analysis:

ICBC denied coverage as they said that the policy is triggered only by damage arising from the
use or operation of the motor vehicle, delay per se in seeking medical attention - unrelated as it is
to the use of the vehicle - could not trigger coverage.
Decision: There would be no potential liability and thus the policy did not have to defend
Modern Livestock v. Kansa General Insurance Co (1993) ABSC
Facts:


Counsel for Mr. Mousseau argues that Kansa had a duty to defend only those allegations made
in the pleadings which if proven could attract coverage. In this case those would be the
allegations of negligence.
Modern's cost to defend the entire counterclaim was $148, 460.

There is no way of determining how much of that amount represents the cost of
defending only the potentially insured losses
Analysis

The American authorities state that: Once a third party has raised allegations against an insured
which potentially fall within the coverage provided, the insurer is obligated to defend its insured
fully until it can confine the possibility of recovery to claims outside the coverage of the
policy..Therefore, it is clear that that where a claim potentially may become one which is within
the scope of the policy the insurer's refusal to defend at the outset of the dispute is a decision it
makes at its own peril
Decision:

Where a complaint in an action against one to whom a policy of liability insurance has been
issued states the different causes of action or theories or recovery against the insured, and one
such cause is within the coverage of the policy but the other is not, the insurer is bound to defend
with respect to those which, if proved, are within coverage.
**The authorities do seem to suggest that where a clear demarcation can be drawn between
covered and non-covered claims, the duty to defend would arise only in relation to the covered
claims.
Sue & Labour Clauses



A sue and labour clause is a contractual provision which obligates the insured to take
reasonable steps to protect insured property from further loss or damage when the property has
been partially damaged by an insured risk.
A sue and labour clause also impacts upon the payment obligations of the insurer, however, by
requiring the insurer to pay for all or some of the costs of the insured's preservation efforts.
The clause benefits the insurer by imposing a duty on the insured to mitigate against further
damage which would otherwise be payable by the insurer under the policy and to preserve the
insurer's potential salvage interest in insured property which has already been damaged (Benson
& Hedges v. Hartford fire co)

As a corollary to this payment obligation, the insurer can refuse to pay for further
damage to the insured who fails to fulfil its sue and labour responsibility

The cost must be related to a loss falling within policy coverage. The insurer is not
responsible for costs incurred by the insured in preventing loss which is not covered by the
relevant policy. (Triple Five Corp v. Simcoe & Erie)

The cost of prevention needs to be reasonable

The costs must have been incurred to prevent damage from the materialized risk. The
insurer is liable for mitigation expenses, not for cost of preventive measures (Benson &
Hedges v. Hartford fire co)
Property Policies
a.
Duties After Loss, Salvage, Sue and Labour
Dane v. Mortgage Insurance Corporation (1984) HL
Facts:

The defendant had insured the payment of the deposit receipt according to the contract made
between the depositor and the bank - that the bank will pay the amount at the date fixed by that
contract for payment.
Analysis:

The policy is not a guarantee that the bank will be able to pay; it is a positive direct contract that
if the bank does not pay a certain amount on a fixed day, the insurer will pay that amount

If the bank had not failed, but had remained in perfect credit, and it had some untenable ground
refused to pay the plaintiff at the time when, according to the deposit note, payment was due, the
plaintiff would not be bound first to sue the bank, the policy is made for the very purpose among
others of preserving her from necessity, she would be entitled to receive payment from the
defendants, the insured, but then, if after they had paid her, the bank discovering their mistake,
were to pay her the amount of the deposit, she would be bound to account for it to the
defendants, or on the other hand, if the bank still refused to pay, she would be bound to allow the
defendants to sue in her name.
Canadian General Electric v. LiverPool &Globe Insurance (1981) SCC
Facts:

Vapours and fumes were escaping from a storage tank and were coming from the manhole.
Neither the fireman nor those present testified that they had given any consideration to closing
the manhole containing the fumes as this would have resulted in a build up of pressure and
explosion.
The defendant argues that the fireman had a right to close the manhole cover in order to seal off
the fumes, and had they done so the corrosive damage (which was the major cause of the
respondent' losses) would have been prevented.
The Policy: It covered damage caused by fire, lightening and explosion of natural, coal or
manufactured gas.

Analysis:

The insurance company argues that GE had no right to do argue they could have closed the
cover because, simply put, it would be an attempt by the respondent to terminate an uninsured
loss by creating a risk within the coverage of the policy, namely the risk of explosion

Imminent peril is that in such a case would prompt a prudent insured person to remove the
goods; it must be such as to inspire conviction that to refrain from removing the goods would be a
violation of a moral duty

Essential to an understanding of the rules and its application is the condition that before
liability arises there must be an operating peril of the type of category described and
covered in the insurance contract.

The danger must be present in the sense that unless something is done, damage will
ensue. Then damage suffered as a result of the preventive measure will be recoverable even though no insured risk proceeded it.

The critical question at this stage of the proceeding is not whether the insured event has
occurred but whether or not the damage occasioned by the insured arose by reason of a
preventative action taken to avoid an imminent risk covered by the contract. This would mean
that they prevented the explosion by leaving the manhole open – NOT THE CASE!!
Decision:
 This however is to convert a risk of damage from an insured source - into a risk of damage from
explosion which was an insured risk. The law does not countenance an insured bringing on the
happening of an event so as to reclassify the damages suffered from those related to an uninsured
risk.
Benson & Hedges v. Hartford Fire Insurance Co (1978) SCC
Facts:




A bottling tank ruptured or exploded causing the death of two employees and extensive damage
to the premises.
They hired a professional engineer who did an investigation to determine the cause of the
explosion - it was determined that the rupture was due to poor workmanship in the construction
- and poor welding.
They also retained the service of Independent Inspection to inspect all the other tanks and
related equipment, defective welding was found in other tanks, and they then had it fixed and the
new welding re-examined.
Benson & Hedges is trying to recover from the insurance company these actions.
Legal Rules:
Salvage Statutory Conditions no. 9
(1) The insured in the event of any loss or damage to any property insured under the contract,
shall take all reasonable steps to prevent further damage to such property, and removal to
prevent damage
(2) The insurer shall contribute pro rata towards any reasonable and proper expenses in
connection with the steps taken by the insured and required of (1)
Sue and Labour
The acts of the insured or the insurers in recovering, saving and preserving the property insured
in case of loss or damage shall not be considered a waiver or an acceptance of abandonment
Issue:

Is No.9 limited to "prevent damages" that would otherwise normally result from the peril that
has already come into operation or whether it also extends to averting the occurrence of another
peril so as to prevent the damage that would normally be the peril?
Analysis:

The cost of detecting the cause of the explosion is part of the loss suffered by the respondent as
a result of the explosion. One cannot be expected to repair damaged property without knowing
the cause of the damage. This is recoverable

The work of inspecting the un-ruptured tanks did not per se prevent any damage or further
damage to any property insured under the policies - the risk of explosion was not reduced by the
inspection but by the re-welding that was done.

This amount for the inspection was recoverable to the extent that the respondent was
obligated by (1) no.9 to correct the faulty workmanship in the tanks that had exploded

The obligation of the respondent in relation to the statutory condition of No.9 was limited to
preventing damages resulting from the explosion of tank No.67 it did not extend to correcting the
faulty workmanship in the unexploded tanks so as to reduce the risk of explosion in these tanks,
such a risk was another hazard which existed independently and was not the result of the
explosion of tank 67. It was made known by the explosion not caused by it.

Dissent: Three justices dissented on this point. Found that the risk was continuing and
indivisible. Shows that the dividing line between a materialized risk and an un-materialized
risk is fine!
Decision: The first action was allowed to correct and inspect tank exploded – all other action denied as
you the policy cannot be stretched to cover them
Co-Insurance:
Thompson v. Montreal Insurance Company (1849)
Facts:



The Fire policy in this case insured the plaintiff against loss to stock in his shop, to a limit of
$1000.
The actual value of the stock was $4000.
The plaintiff suffered from a loss by fire and was water damaged, the loss was assessed at $400
Analysis:

It is every day proactive that a person insures upon his house of goods for a party only of the
value, being willing, as regards the remainder, to take the risk of loss upon himself, and it is
equally within the daily experience that in such cases where a loss has been suffered equal to the
full amount of the insured, that sum is paid and not merely such proportion of that sum as would
correspond with the proportion between the sum insured and the whole value of the property on
which the assurance was effected.
Examples of Co Insurance.
Did/Should X Loss – Deductible = Amount Paid to Insured.

100% co-insurance clause.

ACV of property is $10,000


Insured must carry at least 100% of $10,000 = $10,000 coverage
Insured purchases coverage to limits of $15,000 No co-insurance penalty
Example 2:

100% co insurance clause

ACV of Property $200,00

The coverage limits of the purchased policy are only $100,000 when $200,000 coverage is
required.

Co-insurance applies and any loss is multiplied by $100,000/$200,000 = 50%

Suffer from a $10,000 loss, insured only gets $5,000 (50%)
Example 3:

90% co-insurance clause

ACV of Property $100,000

Insure must carry at least 90% of $100,000 = $90,000

Coverage limits for $85,000

Therefore co-insurance applies

Any loss is multiplied by $85,000/$90,000 = 94.4%

Suffer a $25,000 loss, insured recovers 94.4% of 25,000 = $23,600
Valued Policies
Glynn v. Scotish Union (1963) ONCA
Analysis:

By the appropriate words the insured and the insurer may agree that the property insured, if
lost or destroyed shall be admitted by both at the date or loss or destruction of a predetermined
value. In such a case the parties merely waive the necessity of the insured proving the amount of
the loss and agree that the property shall be regarded by both the insured and the insurer as
being the agreed value; but the obligation of the insured to prove the fact of his loss remains.
Re Art Gallery of Toronto v. Arena Insurance (1961) ONSC
Facts:
Six paintings were stolen with a value of $1,045,000. When the paintings were recovered the
value was $631,000 because they had been cut off the frames and painting cracked from the
transportation of stolen paintings.

In this case these were 3 different insurance valuation policies.
Valuation Policies: Section A covered named paintings that were valued over $3000. Section B
covered sculptures and statutes that were described and had a certain value. Section C covered
miscellaneous items that were not described and were limited to a value of $3000 each.
Analysis:

Need to look to the wording of the insurance policy.

There was co-insurance that applied to Section C only - and in the event of the loss the company
shall be liable for no greater proportion than amount thereby insured (%) amount.

However as no value is placed on any of the items cover under this Section No.9 can have
no application as it refers to articles as to which the parties have agreed and which valued
appear opposite the respective articles

Here there is nothing limiting only in the event of total loss and the sum to be paid by Aetna
Insurance to the Art Gallery is for the partial loss they sustained if to be determined by applying

the percentage of the actual depreciation resulting from the theft agreed values as set out in the
policy
Duty to Defend Part two:
Simultaneous Death
Re Law Estate (1946) BCSC
Legal Rules:

S.123 of the Insurance Act: Where the person whose life is insured and any one or more of the
beneficiaries perish in the same disaster it shall be prima facie presumed that the beneficiary or
the beneficiaries died first. (meaning the insurance would go to the estate - or to another
surviving beneficiary or as however directed by the policy or asministratrix)

Section2.1 Commorientes Act Where two or more persons dies in circumstances rendering it
uncertain which of them survived the other or others, such deaths shall for all purposes affecting
the title to property be presumed to have occurred in the order of seniority, and accordingly the
younger shall be deemed to have survived the older.

S.2.2 this provision will be read and construed subject to s.123
Analysis:

In this case it requires that the beneficiary, here the wife, is presumed to have died first in so far
as the insurance moneys reprsented by the proceeds of the policies of which she was designed as
the beneficiary are concerned.

Section 2.2 clearly says that it will be construed subject to S.123 meaning, s.123 is in operation
Re Topliss Estate (1957) ONSC
Facts:



The wife was the named beneficiary in the policy and she was younger than her husband.
The husband and wife both perished in the flood and it was not known who died first.
Determined that the funds should be paid to the estate because of S.123 and not to the wife
Misrepresentation of Claims
Anastov v. Halifax Insurance (1987)
Facts:
The insured after the loss described a whole bunch of things that they had gone out and bought
to replace the goods that they had lost.
The Policy: If there is a loss the Insurance will cover those things that have been repaired or
promptly replaced.

The insurer had not required that they back up the proof of loss - dumbasses

Analysis:

The insurance act requires that it is sworn to be true. If not and it is not true then it vitiates all
payment and you will not get anything – ouch!!
She actually did not repurchase the things she lost and the Insurance company is claiming it will
not indemnify for anything else as she had not purchased them - and was committing fraud

A person who makes a fraudulent claim could not be permitted to recover at all. The contract
for insurance is one of perfect food faith and should be maintained – here the insurance company
is only arguing no further payment.

The judge found that the statements were material. The claim was not payable unless the goods
had been replaced. They knew that was required by policy; so they told the adjuster that they had
been replaced in order to collect under the policy - however this was found to be incorrect and it
does not require the claim needs to be paid to be vitiated.

The trial judge found that there had been no prejudice because the insurance company
had not paid for claims that were lied about - rejected

The insurance did not smart thing - they paid all other heads of damages but did not pay for the
stuff that they lied about

Insurance still depends on good faith and honesty,
Decision: Insurance company wins!

Inland Kensworth v. Commonwealth Insurance (1990)
Facts:




He had insurance on his vehicle that required that he get the vehicle inspected on the opening
of every season or if employed year round every 108 days. If there are any requirements to be
fixed that it must be done with 7 days
He was aware that he had not had his truck inspected as required - but had not done so
Holm was involved in an accident that caused $43,000 in damage
He ended up back dating the inspections to show that it had been done at the appropriate time fraud
Analysis:

For fraud or a willfully false statement about the quality or condition of the insured property the subject of the claims is material is it is capable of affecting the mind of the insurer regarding
the claim.

In this case the fraud was discovered before the insurer paid the money, but it is not necessary
that the insurer show actual prejudice. If that were so then only successful frauds would avoid
coverage.
 This essential rejects what was said by trial judge in Anastov – don’t need actual
prejudice
** Test for fraud in Kuska!!
School District & Opreheim v. Lloyds Underwriters (2003)
Facts:




The District owned a baseball field that they rented out to Apollo's Hockey Club for a baseball
tournament
They were required to get insurance for the event - which they did through Lloyds.
Someone was rounding second base when they broke their ankle on a imperfection in the field
They sued in negligence for not maintaining the field properly and for failing to warn about the
inadequate field.
Analysis:



Lloyds tried to argue that the allegations against District are made against it as an owner of the
property not as a promoter of the tournament

Tried to argue that it did not arise out of the operations of Apollo for the tournament.
This argument is rejected as the pleadings in the case connect the injury of Mr. Mayo closely to
the very activity that Lloyds agreed to insure.
Lloyds is liable to cover
Sanich v. Aviva
Facts:


He sues when he was hit in the head with a lacrosse ball on his way to dog lessons- direct
negligence
Saanich the manager of the lacrosse is trying to rely on the insurance company to defend the
action
Analysis:

The duty to defend is governed by the pleadings

The duty to defend is broader than the duty to indemnify in the sense that the duty to defend
arises where the claim alleges acts or omissions falling within the coverage, while the duty to
indemnify arises only where such allegations are proven at trial

The CA took the view that there is an obligation when it is tied to the (para 12) the extent to
which the alleged liability out of the named insured's activities - using it for lacrosse - if using it
for playing lacrosse - it arises out of lacrosse and is entitled to indemnification

There is a causal link between the alleged delict of Saanich and the injury to Mr. Wright; the
unbroken chain of causation, alleged in the pleadings encompasses both the actions of the
unknown lacrosse player and the actions of Saanich that placed Mr. Wright in a position to be
struck by the lacrosse ball. (could have had nets up - could have directed people in dog training
through different route)

The true nature of the substance of the claims is arising out of the lacrosse associations
activities, in the context of Saanich's role in facilitating them, whether or not liability to the
lacrosse association.

There is no independent fault alleged against Saanich which would support an action in
negligence absent the activities of the lacrosse association.
Bad Faith In Defending Liability Claims
Shea v. Manitoba Public Insurance Co (2003) SCC
Facts:
 Two-month-old infant was seriously injured in a single-vehicle accident in a car driven by his
father and owned by a family friend. It became apparent early on in the course of litigation that
the infant would never recover from his brain injuries, and would need full-time care for the rest
of his life. Sued ICBC and Manitoba.
 Manitoba conducted the defence in both actions – it was obvious that the claim would exceed the
limits of the policies. Ended up being $900,000 with interest.
 They argued that Manitoba should have settled the claim as they personally could not afford the
damages.
The Manitoba Policy: The car owner was insured against motor vehicle liability risks by the Manitoba
public with policy limits of
$300,000.
ICBC Policy: The father/driver was insured by ICBC
Analysis:
The Insurer has a continuing good faith obligation - need to put the interest of the insured
before their own interests

The duty to defend is not limited to claims that fall only within the limits of coverage.
The duty to defend includes an attempt to minimize the amount of any damages assessed
against the insured, since he may escape all personal responsibility (his own $$$), although
he may be liable legally.

The insurance company knew that it could have an argument to be made that all the
prejudgement interest payments made could be deducted off the total award because there
should not be double recovery. (could have reduced $100,000 interest)

They should have told them of the conflicting interest and his right to outside counsel - the fact
that the insured is at the mercy of the insurer for the purposes of settlement negotiations give
rise to a justified expectation that the insurer will not act contrary to the interest of the insured.
Decision: As a result of its failure to settle the tort action in these circumstances, Manitoba was
found liable for the full amount of the judgment.

Fredrickson v. ICBC (1990) BCCA
Facts:
Fredrickson allowed a 17 year old girl to drive his car and she ended up crashing it
She was found to be the cause of the accident - she later sued Fredrickson for allowing her to
drive the car while she was intoxicated

The action was tried and no attempts were to settle and the claim exceeded by $600,000 the
policy limits
Issue: Did ICBC breach there FD duty?


Analysis:

To apply the law of FD to such a situation would be to distort the essence of the relationship
between insured and insurer liability contract and to throw all of the risk created by the insured
having purchased inadequate coverage on the insurer

It will always be in the interest of the insured that the insurer accept an offer to settle that is
within the limits of the policy. It will always be in the interest of the insurer to refuse such an
offer if there is a reasonable chance of avoiding liability or settling for less than the limits.
Decision: stands for the proposition that an exposure in excess of policy limits sets up a potential
conflict between the Insurer and Insured, but that potential does not in and of itself give rise to a
requirement that the Insurer retain independent counsel for its Insured.
Note: ICBC has the right to take control of the litigation and can admit liability. Bad faith in defending
the liability claim - this happens a lot - found to have breached their obligation
MacDonald Case - 75,000 punitive damage award it looks as they did a quick job
Khazzaka v. CGU Insurance Co
Facts:



There was a fire - The insured says it was an accident
The firemarshall found that it was an accident and occurred likely as described by the insured supported by the evidence
The insurance company hired their own adjuster - the adjuster was suspicious and they end up
denying the claim saying that there was arson.


The jury finds that there is evidence to support that there should be punitive damages because
of the egregious conduct of the insurance company
The court wanted to give a "non-suit" for a directed verdict
Analysis:

The insurer acted in bad faith and over a three year period in resisting when it should have
know was a valid claim. The appellant knew the insured was a small businessman dependent
upon his partially destroyed building for his income. It knew him to be in debt. The punitive
damage award is justified in such a circumstance
Auto Insurance Chart
Overview of Claims
No tort – single vehicle, driver at fault
Can get part 7 no fault only, no UMP
Tort – vs vehicle driver.
Prove liability (negligence) for claim.
Insurance comes from owner’s policy, owner’s
policy on different vehicle (if household member
of driver), or driver’s certificate.
Part 7 allowed (deduction from Tort per s.83
IVA)
Tort – against manufacturer/repairer
CGL policy, not auto.
Tort – Insufficient Insurance
UMP claim vs. ICBC ($1m).
Hit and Run (s.24 Insurance Act)
Sue ICBC as nominal D. $200k limit, Part 7, UMP
Tort – vs vehicle owner.
Prove liability (negligence/defective car), or
vicarious liability (MVA s.86 – possession with
consent/family member)
Insured by owner policy, Part 7 allowed
(deduction from tort award per s.83 Ins. Veh.
Act.)
Uninsured – sue motorist, likely no assets.
Direct claim to ICBC. $200k limit + UMP/Part 7.
Relevant Legislation
Limitations
s.17 – [Re: Part 7] Action… against the corporation… must be commenced within one year [of cause
of action] or as the regulations may provide in the case of any coverage.
s.24 – [Re: Hit and Run SUMMARY] If there is bodily injury and it is a hit and run, may bring an
action against ICBC as nominal defendant. Must give written notice within six months.
s.76(7) – [Re: Third Party Rights SUMMARY] An action must not be brought against an insurer after
the expiration of one year.
Health Care Costs Recovery Act excerpts
Purpose: allows gov’t to recover from wrongdoer the costs and expenses in providing health care to
an injured person.
s.24 – [Application of Act SUMMARY] Re: Personal injury – does not apply in relation to health care
services provided re: personal injury from motor vehicle covered by Insurance (vehicle Act)
Important Provisions from Motor Vehicle Act (MVA)
s.3 – [Registration, license and insurance SUMMARY] – Owner of car or trailer must register the
vehicle with ICBC, get a license and get an owners certificate.
s.86 – [Responsibility of owner or lessee SUMMARY] – In the case of a vehicle in possession of its
owner, or a person driving it who is living with and is a member of the family of the owner, or has
permission from the owner, is the agent. Same for a lessee. (SEE ACT – LONG SECTION)
Vicarious Liability/Implicit Consent
Godsman v. Peck (1997 BCCA) – [Re: Imp. Consent for Loan to Third Party] Test for implied consent in vic.
Liability is “would consent have been given as a matter of course if it was asked.” Would owner have been
expecting and okay with transfer to TP? Evidence should be given to support that; mere possibility is not enough
to impose liability.
Bliefernich v. Freeman (1998 BCCA) – Owner will be liable if they gave the borrower consent to get
possession of vehicle, even if the vehicle is then driven by the borrower in breach of terms of loan.
Rolleman v. Blackmon (2002 BCSC) – Where two people are “living with and as a member of the
family” (s.86 MVA) with each other, they can impose vic. Liability on owner, even where one drove
car owned by the other even when specifically told not to. Must be evidence of a family dynamic.
Snow v. Saul (2010 BCCA) – “S.86 does not on its face ‘deem’ one to have owner’s consent when he or
she does not have it in fact; nor does it impose a ‘legal’ definition of consent that is.[different from]
the ordinary and natural meaning of the word.”
Ontario Minister of Transport v. CGI Co. (1971 SCC) - implicit consent may include acquiescence, but
person giving consent must have turned mind to the particular question.
Yeung v. Au (2006 BCCA aff’d SCC) – Under s.86(3), owner of leased vehicle not exempt from vic.
Liability regardless of the type of lease (ie: whether there was a residual right to purchase or not.)
Bad Faith
Shea v. Manitoba Public Insurance Corp. (1991) – Insurer has a duty to take affirmative steps to
attempt settlement within limits, and must give equal consideration of interest of its insured.
McGee v. ICBC (2008 BCCA) – No duty to pay for costs of independent legal advice where only
element of potential conflict is the possibility of an excess judgment.
McDonald v. ICBC (2012 BCSC) – Alcohol related criminal charges trigger legitimate question re:
coverage, but ICBC displayed unfortunate readiness to breach on almost no grounds. Duty of fair
dealing/good faith owed contravened. Plaintiff is indemnified and given $75k punatives.
Overview of Owner’s Certificate (Part 2)
s.1(1) IVA – “owner’s certificate” is a certificate issued to an owner under the plan
s.10 Regulation – a valid owner’s certificate has coverage under Part 6 (third-party liability], Part 7
[no-fault accident benefits], sections 147 [inverse liability – ie: you crash outside BC in Canada or the
U.S. and local law says you can’t claim against the other driver] and 148 [uninsured or hit and run in
Nunavut, the Yukon, NWT, or the U.S.] and Division 2 of Part 10 [underinsured motorist protection].
Third Party Liability Coverage
General Indemnity
Who is insured (regulation 63)? 1) Person named in owner’s certificate. 2) Another driver with
consent of owner. 3) Member of owner’s household. 4) Personal rep. of deceased owner. 5) Officer,
employee, partner or household member where not individually owned. 6) Passenger (for operation
of vehicle only).
What is ins. Protected against (reg 64)? Legal liability for personal injury/property damage arising
[from] use or operation of… vehicle in Canada, US, or vessel travelling between the two countries.
To What Limit (Regs 67 and 69)? Third party limits $200,000. Insurance on vehicle is primary. Any
other owner’s certificate on another vehicle applies only to extent of higher limit (s.77).
Ie: if primary is $200k and secondary is $500k, then secondary applies for the upper $300k.
Extension of Indemnity – When operating vehicle not described in their owner`s certificate.
-Insured (reg 65) is a person named in an owner’s certificate, a member of the owner’s household, or an employee, partner
or spouse of an employee or partner.
-While driving any other vehicle except in connection with garage business, carrying passengers for hire, where the vehicle
is not licensed, an exempt vehicle under the Act, or without consent and no reasonable belief in consent.
Extension to Passenger (Reg 66)
-Summary – extended to passenger who operates any part of the vehicle while it is being operated by an insured, who
causes injury to another person or property that is not in or on the vehicle, or in the care/custody/control of the insured.
First Party Liability
Re: Inverse Liability (Reg s.147), uninsured, hit and run in Territories or USA (s.148), Part 7 and UMP
(s.148.1).
Driver’s Certificate (Part 4) – a certificate issued under Part 4 or its regulations to a person who,
under the MVA, may obtain a driver’s license and the certificate may be part of the DL or a separate
document.
-Excess to any coverage under owner’s certificate (s.50). Applies only to extent limits exceed primary
insurance.
-Usually applies with uninsured vehicle or out of province claim where OOP vehicle has lower limits.
Third Party Liability Coverage of driver’s certificate
-insures:
-a BC resident with a driver’s license (Reg 42/43 – see regulations)
-who is driving a vehicle not owned or leased by the insured or a household member (Reg 49)
-against legal liability for injury/damage arising out of “use or operation” in Canada/USA
-up to $200,000 (Reg 49.1)
-Except where operating without consent/reasonable grounds to believe consent was given, or where operating a
garage business, carrying passengers for hire, car is owned or regularly operated by insured, not licensed by MVA
and no reasonable grounds to believe it is licensed, or when operating an ATV.
First Party Coverage of driver`s certificate.
-insures:
-BC resident (Reg 42) with DL and household members.
-For Part 7 benefits, hit and runs in Canadian Territories and USA, and UMP.
Third-Party Liability (Part 6 ss. 63-77)
Re: Use and Operation of a Vehicle: s.64
Legislation s.64 – Subject to section 67, [ICBC] shall indemnify insured for liability… for injury or
death... that (a) arises out of the use or operation by the insured of a vehicle in an owners certificate
and (b) occurs in Canada or the USA… or on a vessel travelling [between them].
Fraser Valley Taxi-Cabs Ltd. v. ICBC (1993 BCCA) – When determining if injury was caused by the use
and operation of a motor vehicle, apply: (1) the purpose test and (2) the chain of causation test.
Different version for Part 7 benefits. SEE BELOW
-Purpose test: did injuries arise from ordinary
-Chain of Causation Test: If the chain is broken
and well-known activity to which an automobile
by an intervening act which is the factor causing
is put?
liability, then NOT from use and operation.
Reliance Petroleum Ltd. v. Stevenson states that
this is meant to be plain meaning – regular uses
of car as means of accommodation or service.
Amos v. ICBC (1995 SCC) – When determining if injury was caused by use or operation re: Part 7
benefits, change the chain of causation test – difference is that there just has to be some nexus or
causal relationship (lower standard – doesn’t have to be direct or proximate, just can’t be incidental
or fortuitious.)
Citadel General Assurance Co. v. Vytlingam (2007 SCC) – Uses Fraser Valley Cabs. Chain of causation
must link conduct of motorist as motorist to injuries being claimed. Coverage is not automatically
denied to victims just because tortfeasor is engaging in criminal activity.
Lumbermans Mutual Casualty Co. v. Herbison (2007 SCC) – Uses FV Cabs. Intevening act may not
always break chain of causation if act can be considered ‘not abnormal incident of the risk” created
by use of car, or is likely to arise in ordinary course of things. Causal link must exist and be a link in
the unbroken chain – it is not enough that the car just ‘in some manner’ contributes to the injury.
Post Herbison: Letkeman v. Cuitko
Post Herbison: Martin v. 2065324
Police chase; vehicle blocked; police officer
Injuries directly connected to use and operation
pulling driver from car when assaulted, chain
where plaintiff shoved into truck, assaulted,
broken.
forced to help shift gears while being assaulted,
more assault – if car is instrumental then not
broken.
Other cases (all before Vytlingam/Herbison – need to be considered in light of them)
McIndoe v. ICBC (1990) [Police Shooting] – Police constable’s revolver accidentally fired, hitting a
passenger in fleeing motor vehicle. Plaintiff gets Part 7 Benefits.
ICBC v. City of Vancouver (2000) [Police Shooting] – Injury resulting from accidental gunshot while
engaged in tactical maneuver in car arises from use/operation.
Dabish v. Garies [Dismantling Car] – Insured cut an old Mazda in half. Fire ensued from hitting gas
tank. Not use or operation because not one of the ordinary and well-known activities that
vehicles are used for.
Yip v. Davies [Dismantling Car] – Draining fuel tank of motorcycle before taking it apart to salvage it
is not use.
Meadowview Heights Ltd. v. Revivo (2004 SC – aff’d BCCA) [Dismantling Car] – Exclusion in
homeowner policy (excluding claims for use of motor vehicle) did not apply to claim from fire
occurring during removal of parts from a parts car as the car was not operable at the time of the fire.
Morowietz v. Moroweitz (1986 ONCA) [Repairs] – Insured repairing van on driveway – fire is found
to be use.
Shelton v. ICBC (1993) [Repairs] – Draining gas to repair tank caused fire to rented house is use.
Munro Estate v. Johnston (1994) [Repairs] – repairs to exhaust – sparks from powder grinder being
used on a detached exhaust assembly is considered use.
Thacker v. Lavell [Repairs] – insured filling spare gas can, lit cigarette lighter to look for top, caused
fire. Not use or operation.
Passmore v. Sherrell (1999 BCSC) [Repairs] – tire repair is use of vehicle, even where done away
from it.
AG v. Connelly (1992 BCCA) [Criminal Act] – motorist intentionally dragged cop by grabbing him and
driving off – officer can sue his insurer to get insurance coverage (s.55(7.1) breach for intentional act
of violence by means of a vehicle).
Chan v. ICBC (1994 BCCA) [Criminal Act] – passenger injured by brick thrown from car has claim
arising from use or operation against ICBC – unidentified motorist.
Collier v. ICBC (1995 BCCA) [Criminal Act] – use of vehicle to assault (by blocking flight path of
fleeing stag party victim) is not a well-known use to which cars are put so it does not fit purpose.
Boell v. Schinkle (1991 Ont HC) [Dogs] – dog jumps out of car window into a motorcycle path. Act of
negligence from use/ownership.
Taylor v. Maris (2004 BCCA) [Dogs] – failure to contain dog in box of pickup truck = use.
AXA Pacific v. Elwood (2000 BCSC) [Other] – passenger grabbed steering wheel causing loss of
control. Homeowner policy excludes – grabbing wheel is use or operation.
Cella v. McLean (1997 ONCA) – ***[DRUNK DRIVER]*** - non-owner passenger failing to stop
drunk from driving is not “use or operation” in a homeowner policy, so the homeowner must
defend
Twylight Pressure Controls Ltd. v. ICBC (2000 BCCA) – explosion caused during filling aux. gas tank is
“use”, but general liability insurer must also defend.
Derkson v. 539939 Ont. Ltd. (2001 SCC) – where two concurrent causes of loss, one auto-related, one
not, both policies must apply.
Unger v. Unger (2003 ONCA) – alleged employed negligence in hiring, training, supervising employee
driver all related to use/operation – auto insurer, not CGL, defends.
Marjak Services v. ICBC (2004 BCCA) – failure to stop vehicle and get medical assistance for ill
passenger is ‘use’ of vehicle.
Weeks v. Aviva Canada Ltd. (2006 NSSC) – exclusion in homeowner policy applied to claim vs parents
for bad driving training of sone whose negligence in driving an ATV caused injury.
McLean v. Jorgenson (2005 ONCA) – plaintiff injured while trying to help neighbour to start
snowmobile by lifting rear as insured revved engine. No cause of action.
AXA Insurance Co. v. Dominion of Canada General Insurance Co. (2004 ONCA) – injury caused by using
bungee cord to secure boat to trailer for transport is use/operation.
Djepic v. Belair Direct (2006 ONCA) – homeowner policy only applies to plaintiff blinded while trying
to strap a mattress onto roof of his car in his driveway.
Cooperators General Insurance Co. v. Murray (2007 ONCA) – parental failure to supervise/discipline
son who was driving in a single car accident – derivative of negligent driving claims and excluded
from coverage under homeowner policy by auto exclusion.
V-Twin Motorcycle School v. ICBC (2010 BCSC) – Plaintiff fell while pushing MC, got hurt. Attending
training school. Use and operation.
PRINCIPLE OPERATOR
4 Key Points
1) Relevant time to determine PO is at the time of application (Rai).
2) Burden is on ICBC to prove misrep. Or breach of PO (Rai)
3) Writing down the wrong PO or saying no PO on the application is the same thing (Lexus Holdings)
4) If the PO changes during the duration of the term, theres no obligation to change or report it (s.19(2) Regulation).
IVR s.1 - `principle operator` is the person who will operate the vehicle… for the majority of the
time…
IVR s. 19(2) – must report PO if known.
Forfeiture of all Coverage if PO Misrepresented
IVR s. 75 – misrepresenting the PO is ground for forfeiture of ALL COVERAGE under s.75 of the Act.
Grey v. ICBC (1993 BC Prov. Ct) – No clear definition of PO, the total duration of time operating the
vehicle may not be determinative – courts look at who had primary care/custody/control.
Rai v. ICBC (2005 BCSC) – Onus on ICBC to prove fraud. Relevant time to see if misrep is the date on
which person applied for insurance.
Deol v. ICBC (2007 BCSC) – PO can only be established by ICBC after a period of time had elapsed –
evidence of intended use was not determinative.
Nerbas v. ICBC (2007 BCSC) – a signed statement to ICBC re: PO is not determinative.
Lexus Holdings International Inc. v. ICBC (2009 BCSC) – used Rai and Deol; no distinction between
declaring no PO and misrepping the PO.
Breaches (Part 5)
Different breaches of s.55 of the Regulation:
1. non-permitted use: s.55(2)
2. driver license breach: s.55(3)(a)
3. illicit/prohibited transportation: s.55(3)(b)
4. escape/avoid arrest: s.55(3)(c)
5. race or speed test: s.55(3)(d)
6. operating vehicle with unregistered and unlicensed trailer attached: s.55(4)
7. owner-permitted breach by driver: s.55(5)
8. intentional act of violence: s.55(7.1)
9. intoxicating liquor, drug, or other intoxicating substance, or criminal conviction: s.55(8)
Non-permitted use breach.
 includes breaching (a) declared use, (b) time and territory in which vehicle may be operated, and (c) kinds of goods or number
of passengers to be carried in a vehicle
 results in loss of coverage only under s. 49 (DC) and Part 6 (Mandatory 3 rd party liability coverage)
 uses: Pleasure use only; to and from school/work only; to or from work/school where under 15km; to or from
work/school where part is public transport; all household members have 10 years experience; seniors
 there is no breach for use if premium is greater/equal to that which should have been paid: s.55(7)
o if pay for business use and crash while driving for pleasure, still covered
 can operate vehicle for higher rated purpose if not more than 6 days in a calendar month
o do not need to be consecutive days – therefore cannot be non-permitted use breach in first 6 days of month
McKay v. ICBC (1984) – where car is incorrectly rated for use, but accident occurs when car is being
used for actual declared use, no breach.
Hudson v. ICBC – insureds car vandalized when unattended part-way to work. Car-pooled with others
more than the permitted use for vehicle pleasure-rated. Dismissed – vehicle was used to go part way
to and from work – finds for ICBC.
DL Breach (s.55(3)(a))
 if not qualified (competent) or authorized (licensed) to drive: loss of Part 7, UMP, and 3 rd party liability
 breaches can be caused by not following restrictions on license (though s.55(3.1) of the IVR carves out exceptions for some
things related to learners’ licenses)
 Per s.55(3.1) amendment to IVR – no longer a breach of Regs to operate a vehicle contrary to restrictions.
OLD BREACH CASES
London Canadian Ins. Co v. Verbeek (1972) – driving at night without req’d glasses = breach
Blatter v. ICBC – operation of motorcycle with learners – conditional on no passengers – breach of
Part 6/7
Lewis v. ICBC – driving motorcycle without endorsement – no Part 7.
Vance v. ICBC – driving contrary to demo permit, claim denied.
Jassal v. Hera – driver with learners gets no coverage because of no supervisor.
Lu v. ICBC - innocent motorist who drove with expired DL gets no Part 7.
ICBC v. Linley – unlicensed struck ped in a field. No MVA requirement to have DL for offroading. No
coverage because insurance requires qualified by law.
Anderson v. ICBC – quadripelegic Part 7 claim braeched where DL was suspended.
ICBC v. Gosal – no breach by either owner or driver where, unknown by either of them, son’s DL had
been suspended.
ICBC v. Jones – Suspended DL for failure to attend re-exam. ICBC wanted to be reimbursed. No proof
that suspension notice served, dismissed – ICBC loses.
Illicit/Prohibited Transportation s.55(3)(b)
Blackstock v. ICBC (1983 BCSC) – breach where the purpose of vehicle use is to transport drugs. No
breach where use of vehicle is to transport passenger, who happened to have drugs.
ICBC v. City of Vancouver (1997) – prohibited transport does not include transport of driver/occupant
who is suspected of theft.
Escaping/Avoiding Arrest s.55(3)©
McDougal v. Wawanesa – Cop chasing guy – was the chase a ‘race/speed test’? No, but this is a 1969
case that was around before s.55(3)(d) put into reg so he’d be caught by ‘race/speed test’ probably.
Race or Speed Test s.55(3)(d)
Act/Regulation does not apply to vehicle being used in a contest/show/race if activity is on a track or
other location that is closed to all other vehicle traffic, and if there’s an element of a race or speed
test.
Blackstone v. ICBC (1983) – race requires more than one vehicle. Speed test requires that the vehicle
be tested in some way or racing against the clock. Merely driving at very high speed is not a speed
test.
McGill v. ICBC – following another car at high speed and passing it is not a race or speed test.
Murray v. ICBC – driving car at high speed to “see what it could do” is speed test.
Permitted Impaired Driver to Drive: s.55(5)
Cooperative Fire and Casualty Co. v. Richie (1983) SCC – Test for breach of condition: “if ins. Knew or
ought to have known, under all the circumstances, that the person he permitted to operate his
vehicle would operate it in a manner not permitted by his policy, he would be liable to reimburse
insurer” – including drunk driver.
Troha v. Thurn (1985 SCC) – court won’t take judicial notice of what owner should have known based
on blood alcohol test. Evidence must be led, burden on insurer.
Ondrik v. Coleman (1985 BCCA) – no breach of owner/passenger where dead driver was drunk
driving, and expert evidence says 90% of persons show impairment. Not enough evidence to find that
the insured should have known that driver too impaired.
Stobbe Estate v. ICBC 91992) – breathalyser reading, expert evidence, eye witness to high speed,
erratic driving, sufficient to establish breach.
Nielson v. ICBC (1997 BCCA) – no breach of Reg. 55(5) where owner/passenger 45% contrib.. neg for
riding with driver with .21 BAC.
Laurie v. ICBC (2010 BCSC) – must be evidence that driver is impaired for section to apply.
Permitting Unlicensed Driver to Drive: s.55(5)
Peter v. SG10 (1956) – where insured allows a car to be used by unauth’d and unqualified driver if
permission is express or implied, or if he fails to take reasonable precautions to avoid the statutory
condition.
Circle M. Freight Lines v. ICBC (1979) – failure to follow longstanding industry practice of inspecting
prospective employee’s DL is unreasonable, even if employee is recommended.
Nimmo v. Manitoba Public Insurance co. (1989) – owner in breach where makes no inquiry whether
18 year old had DL.
Kennedy v. ICBC (1993) – statement by operator that she had previously op’d motorcycles in Alberta
not enough to avoid breach.
Chilcotin Holidays Ltd. v. ICBC (1997) – no breach by corporate owner where reasonable inquiries did
not discover employee had no valid DL.
Border Trucking Ltd. v. ICBC (1999) – no breach by owner who failed to notice impending expiry date
on employee’s driving record extract.
Intentional Act of Violence s.55(7.1) [for running someone down cases]
AG v. Connolly (1992) – motorist dragged cop by grabbing arm and driving off – cop can sue insurer.
Lindbergh v. ICBC (1992) – insured decides to kill himself by running stop signs – last min change of
heart. Breach.
Collier v. ICBC (1995) – use of vehicle to commit criminal assault is not a well-known use – does not
meet purpose test.
Breaches for Motor Vehicle Related Criminal Code Offences Reg s.55(8)-55(9)
Kulbaba v. ICBC (1981 BCSC) – to prove breach of regs for intox, ICBC must establish on BOP that
deceased was incapable of exercising proper control, not just that there was some impairments.
Expert evidence may be sufficient but not always.
Smissen v. ICBC (2004) – despite breathalyser reading of 0.15, evidence of no erratic driving from
independent following driver was enough to prove no breach. Test: Can accident be avoided if
insured was sober? If no, then no breach.
McDonald v ICBC (2012 BCSC) ***[RECENT SUMMARY OF LAW]*** - ICBC must prove that palintiff’s
state was beyond impairment to the point where he was incapable of driving properly. Must prove
there is incapacity to exercise proper control and that alcohol caused it.
PART 7 ACCIDENT BENEFITS
Notice of Claim – s.97 – must notify ICBC within 30 days of accident particulars, and within 90 days give proof of claim.
S.97(2) – NOT LIABLE TO THOSE WHO FAIL TO COMPLY TO THE PREJUDICE OF ICBC.
Limitation – s.103 – cannot sue for benefits after 2 years.
PART 8 HIT AND RUN
Corporation not liable if owner has not within 48 hours made a police report without reasonable cause. (s.107 Regs – SEE
REGULATION)
PART 13 – Schedule 10 (Prescribed Conditions Own Damage)
S.5(1) – [Requirements if loss of or damage to vehicle] – must notify insurer and file written statement within 90 days.
S.8(3) – [Time and manner of payment of money] – any action against insurer must start within 3 years of date of loss.
WHO IS ENTITLED TO PART 7 BENEFITS?
-anyone injured or killed in an MVA in BC, or a BC resident injured or killed in an MVA in North America.
-Exceptions: s.90 (where injury or death is caused by a weapon – other than a vehicle), s.96 restrictions (non-BC resident
not in a BC car, unlicensable occupant of vehicle, occupant of unlicensed vehicle unless they reasonably believed it was
licensed, someone trying to kill themselves, occupant of a vehicle being used for illicit trade, and where injury or death was
caused by sickness/disease, unless that disease was directly caused by the accident), or in a s.55(3) breach.
Who is insured?
-person in owner’s or driver’s certificate, or their household, or an occupant of a BC licensed/insured car, a cyclist/ped hit
by a BC insured car, or a BC resident claiming hit and run or uninsured vs. ICBC.
Benefit Types
-TTD BENEFITS - s.80 disability benefits for employed person
-TTD total temporary disability – 75% of gross average weekly earnings to max of $300
-payable for max 104 as TTD
-bring into account EI, WCB, etc – if they’re over $300/wk then no Part 7.
-after 104 weeks, payments go to age 65 or end of disability (whichever is sooner) – after that, CPP picks up.
-HOMEMAKER BENEFITS – s.84
-s.78 homemaker means the male or female keeper of a household who does the majority of housekeeping without
pay.
-reimbursement of reasonable expenses incurred to hire replacement to a max of $145/wk.
-payable for max of 104 wk, then to age 65 or end of disability.
-MEDICAL/REHAB BENEFITS – s.88
-s.88(1) mandatory – reimbursement for all reasonable medical, surgical, hospital, nursing, therapy etc. – max
liability to a max of $150000 per insured.
-unlimited liability but likely to be very narrowly interpreted by adjuster.
-FUNERAL EXPENSES – s.91 -reimbursement to a maximum of $2500
-DEATH BENEFITS – s. 92(2) - $500-5000, depends on age of deceased/position in household.
-SUPPLEMENTAL DEATH BENEFIT – S.93(1) – where survived by spouse and one or more dependant, or by more than
one dependant, $100 per survivor after death bennies paid out.
-ADDITIONAL DEATH BENEFIT – s.93(2)(a) and (b) – where deceased insured survived by spouse or one or more
dependants or by a spouse and one or more dep., $145/wk for 104 weeks for first survivor, $35/wk for 104 weeks for each
additional survivor.
-All excluded if breach of s.96 restricted.
ADMINISTRATIVE PROCESS
Heare v. ICBC (1989 BCCA) – permissive nature of entitlement doesn’t give unfettered discretion.
Must be exercised fairly by objective standard.
Charles v. ICBC – ICBC cannot avoid responsibility to pay by not arranging for medical advisor to
examine plaintiff.
Carter v. ICBC - ICBC had no jurisdiction to review no fault benefits every 12 months.
DEFINITION ISSUES
Bradley v. ICBC – monthly living allowance paid
Martin v. ICBC - person not employed when
as part of job training by gov’t does not mean
entered into an agreement to begin work when
insured is employed
roads permit.
Watson v. ICBC – insured’s mom who lives 3
McIvor v. ICBC – weekly housecleaning for aunt
miles away not member of family for Reg 84(2)
sufficient to be ‘employed person’
Kennedy v. ICBC – kickboxer training for 3rd pro
Lancaster v. ICBC- not employed when on WCB
fight is employed.
benefits at date of accident.
LIMITATION ISSUES
Nordquist v. ICBC – claims made 8.5 years after MVA barred. 2 years.
Roy v. ICBC – infants claim for additional medical benefits more than 2 years after previous year is
barred – s.7 of the limitations act does not apply to s.103 limitations.
LITGATION ISSUES
Corbette-McBride v. ICBC – tort and part 7 must be tried separately.
Collins v. ICBC – insured does not have to appeal WCB decision to terminate benefits in order to be
eligible for ICBC benefits.
Crees v. ICBC – action for future Part 7 bennies not struck even though no benefits currently payable.
Bulic v. ICBC – plaintiffs recover judgment for unpaid bennies on summary judgment and special
costs against ICBC for conduct deserving rebuke (refusal to consider entitlement because of
minimal/no damage policy)
Wilby v. ICBC – a part 7 writ was not premature because it was issued prior to denial of claim, nor
should it be dismissed without proof of prejudice against ICBC.
Drewv. Jevco – part 7 limitation period runs from last part 7 payment by any insurer, not necessarily
the auto insurer ultimately found responsible for part 7 payments.
DISENTITLEMENT ISSUE
Halbauer v. ICBC (MAJOR CASE) – ratio: to continue receiving part 7 benefits after an accident, you
must show that you are incapable of working ANY job (ie: TOTAL disability), not just your original
job. Once prima facie case made by insured, onus shifts to ICBC to prove otherwise.
Isaacson v. ICBC – benefits not payable where mini-bike could not be licensed
Mawji v. ICBC – Part 7 benefits not payable because of Reg 96 (caused by disease) where MVA made
symptomatic pre-existing osteoarthritis.
Huber v. ICBC – application of attempted suicide excluded under s.96.
Deductions of Part 7 benefits – IVA s. 83(1) – see the ACT for full text
Summary
-claim is released to extent of benefits paid (ie: benefits paid are deducted)
-but any part 7 benefits paid cannot be disclosed to the Court until part 6 award is assessed.
-after that, Court must estimate benefits paid if exact amount not ascertained.
-this applies EVEN IF SOMEONE DOESN’T APPLY FOR PART 7 BENEFITS. Plaintiff must take action to get Part 7 benefits.
Baart v. Kumar – part 7 deducted even if not
Hasselbach v. Mudri – mandatory deduction of
previously paid
estimated future part 7 entitlement
Price v. Williams – no deduction where no fault
Ruckheim v. Robinson – no deductions where
benefits in Oregon paid by loan scheme.
defendant not insured under auto policy.
Schmitt v. Thomson – in assessing benefit to be
Rager v. Marwick – no deduction where
deducted, may consider ICBC discretion available California insurer obliged to pay BC level Part 7
Matilda v. Macleod – out of province insurer paid
no fault to its insured cannot recover those
benefits from tortfeasors in BC action due to
Insurance MV Act bar in s.25(2)
Reilly v. Lynn – deduction made of full present
value of future disability benefits to age 65
where no reason to believe ICBC would
improperly deprive claimant of future
entitlement.
Girardol v. Greyeyes – the s.25 deduction does not
apply to settlement as opposed to a judgment.
Wong v. Luong – OOP liability insurer is entitled
to s.25 deduction assessment even if plaintiff had
released part 7 claim vs. ICBC.
Vhrovic v. Masjhuri – deductions of only $1000
allowed against cost of future care award of
$140k because future care not falling in scope of
Part 7.
Kibsey v. Wielki – no deduction where preexisting disease contributing to disability.
Benefits.
Brennan v. Singh – s.25 deduction of no-fault
benefits paid to Ps by own Ontario no-fault
insurer deductable only by auto insured
tortfeasor, maintenance or repair is ‘use or
operation’
Sovani v. Jin -deduction is entitlement of
tortfeasor. Offer by P to release future Part 7
claim not reason to make a deduction. ICBC
refusing bennies irrelevant. Is the P a person
who is or would’ve been entitled to Part 7
benefits = test.
Gurniak v Norquist – death bennies payable
under Quebec no-fault are deductable. No
matching req’d.
Hansen v. ICBC – insured settled claim and then
died from MVA injuries. Dependants not entitled
to death benefits because al claims released
prior.
McCreight v. Currie – not proper for court to rely
on counsel’s opinions of what ICBC might do re:
payment of futures.
Sauer v. Scales – deduction to be made even
though ICBC was allegedly overly restrictive in
denying Part 7 benefits.
Kirk v. Kloosterrman – deductions to be made
even though driver is unlicensed and thus not
entitled to Part 7.
HIT AND RUN – s.24 (SEE INSURANCE VEHICLE ACT FOR FULL TEXT BECAUSE ITS LONG) – must take reasonable
steps to ID driver
Leggett v. ICBC (1992) – ICBC’s exposure to hit and run claims are limited to when claimant cannot
reasonably be expected to figure out identity of person responsible, not for those who simply failed to
take reasonable care to do so.
Jamt v. Schurman – time for giving notice runs from date victim knew or ought to have known alleged
involvement of unidentified motorist.
Goltzman v. McKenzie – statement given to adjuster 3 wk after accident indicating UM involved but
not expressly making any claim is sufficient.
Hecker v. Thomson – statement to ICBC estimator 4 days after accident = sufficient
Waddington v. Richards – attempting to add ICBC as nominal defendant where P knew from outset of
hit and run vehicle failed because of limitation.
Smoluk v. ICBC – reasonable steps taken by writing down (incorrectly) a license plate number and
where accident reported to police the next day and ad for a witness was placed. No onus to be highly
speculative – just reasonable.
Lock v. ICBC – ped got hit and taken to hospital by offending motorist who promised to stay but
didn’t. No name, license obtained – reasonable effort.
Linhares v. ICBC – offending motorist gave particulars to P’s spouse who lost note. Claim dismissed –
motorist ascertainable.
Ingram v. ICBC – reasonable effort made where P unable to leave vehicle because of injuries, and
police and offending motorist were at scene.
Skingsley v. ICBC – reasonable effort not made where it ‘just didn’t come to mind’ to ask the other
guys name.
Ratsanen v. ICBC – reasonable steps = logical, sensible, fair. Don’t need absurd or whimsical lengths.
Gibson v. ICBC – limitation for suing iCBC under s.24 = 2 years
Walker v. Farnel – injured passenger took down LP number wrong because at fault driver drove off –
reasonable steps taken.
Etter v. ICBC – claim allowed although close to the line where taxi drove over foot of an exiting
passenger, called for ambulance, and drove the claimant to a friends home. Claimant never got
driver’s name.
Slamak v. ICBC – allowed where drivers were at scene for 30 min waiting for police but once they
were unlocked, other driver suddenly drove off.
McMahon v. ICBC – injured cyclist confused and upset and failed to get particulars of car or driver
when driver drove her to clinic but drove away. – reasonable steps taken
Sawchuk v. ICBC – appeal allowed from judgment dismissing no evidence motion where only
evidence was P’s ‘usual’ practice of crossing at an intersection.
Rivest v. ICBC – limitation of infant claim postponed by s.6 of Limitation Act
Emerson v. ICBC - once motorist is ID’s, shall be substituted for defendant for ICBC.
Nelson v. ICBC – reasonable steps not taken where insured spoke to other motorists but did not get
name/LP number, told ICBC within 1-2 days but not police, no steps taken to ID motorist until lawyer
retained 9 months post accident.
Tesster v. Vancouver – rarely enough to rely on report to police
Becker v. ICBC – distinction between steps taken at scene (reasonable) and steps post accident (not
reasonable) – first notice to ICBC a year later – dismissed.
Nicholls v. ICBC - reasonable effort is subjective which requires position and condition of the P to be
considered in determining what efforts are to be taken. Not reasonable to expect P to post signs at
scene where accident is on a remote highway.
UNINSURED MOTORIST CLAIMS s.20
SEE S.20 OF THE INSURANCE VEHICLE ACT FOR FULL TEXT BECAUSE ITS LONG
While against the law, there are some drivers who operate motor vehicle without any insurance
-
If a claimant suffers damage from an uninsured motorist, he can make a claim to ICBC for compensation
“uninsured motorist” is defined as someone who operates a MV without third party liability coverage of at least
$100,000
When ICBC receives a claim under s.20 and it pays out, it can subrogate the rights of the claimant and maintain an
action against the person liable
Once ICBC has given notice to the owner of the uninsured vehicle, it has control over the case
o Is deemed to be the agent of the defendant for service of notice
Jove v. Patalunga – passenger who grabs wheel causing car to ditch is not a motorist.
Ducker v. ICBC – failure to follow procedure in s.20(6) upon uninsured motorist failing to appear is
fatal to claim against ICBC.
Ozdoba v. ICBC – onus is on ICBC to establish that D motorist is insured.
Patterson v. Rankel – ICBC can elect for trial by jury under s.20(8).
Shihadi v. Oppersma – P must bring a separate action for recovery of $$ from ICBC in which action
ICBC may raise and prove s.106.
Reynolds v. Nelson – ICBC not proper party to be named as defendant. Where iCBC is given notice of
intent to take default judgment and does nothing, may not be added as a defendant to contest
liability.
HIGHWAY DEFINITION – a ‘road, street, lane or right of way used by the general public for the passage of vehicles.”
ICBC v. Routley – abandoned railway bed = highway under the Act
ICBC v. Bruneau – hill used regularly by snowmobilers is no different from defined trails and
therefore is a highway under the Act.
Pierre v. Miller – a forest service road is not a highway because a highway does not include an
industrial road and an industrial road includes a forest service road.
FORFEITURE, INSURANCE VEHICLE ACT s.75 AND RELIEF FROM FORFITURE s.19(2)+(3)
SEE IVA FOR FULL TEXT – DON’T LIE TO ICBC IS THE MAIN IDEA
Inland Kenworth Co v. Commonwealth Insurance Co – wilfully false statement disentitles claim.
Gilchuk v. ICBC – false statement to adjuster re consumption of alcohol = dismissed
Sienema v. ICBC – discussion of wilfully false statement re: proof of loss under homeowner claim.
ICBC v. Siemens – ICBC recovers punative damages in addition to claims paid against owner, driver
and claimant who lied re: identity of driver.
Rogozinsky v. ICBC – false statements to police at scene re: ID of driver are not made ‘with respect to a
claim’ and are prejudicial to ICBC.
Skuratow v. Commonwealth Insurance Co. – statement made without any knowledge of its truth that
stolen truck lease payments were up to date was wilfully blind and false.
Doetzel v. ICBC – statement that stolen truck was in repair shop for approx 320 hours aws material
because it implied the truck was more valuable. Statement of value in proof of loss was not wilfully
false despite being 2x the actual value.
Bolen v. ICBC – stolen truck, issues of PO/use of vehicle/value claimed –discussion
Chahal v. ICBC – stolen sports car. Statements made re: keys both material and false. Claim dismissed.
Gosnell v. ICBC – false statement re: extent of alcohol consumption – claim dismissed
BROWN V ICBC – it doesn’t matter if ICBC relied on the false statement so long as it was capable of
affecting its decision as to the management and payment of the claim.
PETERSEN V. BANNON – award may be reduced by the amount of the loss that should have been
awarded if plaintiff had taken reasonable steps to mitigate. A WILLFUL STATEMENT is one made
intentionally, knowingly and purposely, without justifiable excuse. Should be distinguished dfrom a
statement made carelessly or thoughtlessly.
IVA s. 76-78 – Third Party Rights
-a statutory cause of action that happens when insured is in breach or doesn’t have enough insurance or is unknown
-third party may have no contract with ICBC, but if ICBC pays or a judgment is rendered, ICBC can sue to get its money back.
-SEE IVA FOR FULL TEXT
ICBC v. Joseph – recovery by ICBC is against any insured in breach, including unnamed insured.
Bliefernich v. Freeman – issue of breach (reimbursement) must be determined in separate
proceedings.
ICBC v. Wolford – ICBC cannot claim reimbursement from an insured who is not personally in breach.
Stobbe v. Allwood Estate – ICBC must pay in full policy limits in order to take benefit of s.20(1)
limitation.
ICBC v. Hosseini – ICBC estopped from claiming reimbursement from uninsured motorist where it did
not give immediate notice, where it defended the tort as a third party and settled it contrary to
s.20(10).
ICBC v. Schmidt – if ICBC makes settlement that is reasonable and in good faith it can claim
reimbursements from the breached motorist.
ICBC v. Murdoch – recovery action not appropriate for resolution under Rule 18A because of
conflicting evidence re: liability and damages.
UMP (Underinsured Motorist Protection) PART 10 DIVISION 2
-Mandatory coverage as part of an owner/driver certificate.
-Statutory form of first party insurance offered by ICBC to protect an insured in the event that an at fault motorist has
insufficient insurance or assets to pay a judgment.
-Reduced from $2m to $1m.
-An additional $1m of UMP coverage made available on payment of a small premium.
-Payable to:
-an insured (occupant/owner of a vehicle described in owner’s cert/named in a driver’s cert or their household
members, or a person entitled to bring a wrongful death claim)
-against a shortfall where tortfeasor can’t pay full damages for an accident in Canada or USA
-for up to $1m per insured.
NOT COVERED if you don’t own a car, don’t have a DL, don’t live in a household where anyone else does, AND are injured as
pedestrians (not occupants of an insured BC motor vehicle).
EXCLUSIONS – breaches, occupant of unlicensed car without reasonable belief or consent, or a hit and run in USA or Yukon
without physical contact.
Dahl v. Whitehill – must be a judgment against tortfeasor before there can be underinsured motorist
Beauchamp v. ICBC - until judgment, CIBC cannot be compelled to arbitrate.
Lougheed v. Cooperators General Insurance Co. – limit for family comp claims is global, not per person.