The impact of east London disaster on the P&C industry

Ten London, Ont. properties have “substantial” damage as a result of last week’s gas explosion, though it does not appear to be a major loss for Canada’s property and casualty industry as a whole.

About twelve minutes after a vehicle hit a home the night of Aug. 14, there was a massive explosion, CTV News reported earlier.

As of Aug. 21, three Old East Village homes – the one that was hit and its neighbours – had been demolished. Including those three, there are ten properties with “substantial damage,” David O’Brien, the City of London’s division manager of corporate security and emergency management, told Canadian Underwriter.

Catastrophe Indices and Quantification Inc. is not tracking the disaster as a significant event for the industry, CatIQ managing director Laura Twidle told Canadian Underwriter earlier this week.

In addition to the three demolished homes and the seven remaining with substantial damage, there are additional homes with damage such as broken windows, O’Brien said in an interview Wednesday.

The Aug. 14 disaster injured six, including a firefighter who remains in serious condition, the London Free Press reported Wednesday.

The house that was hit by the vehicle is on Woodman Ave., in the same general area as the Western Fair Raceway and what used to be the Kellogg’s breakfast cereal plant.

After the accident, the driver was arrested and later released. Published reports indicated that criminal charges included four counts of impaired driving causing bodily harm.

In a situation where a single vehicle collision causes damage to homes, the home insurers would typically pay the property owners for their claims and then the home insurers would pursue a subrogated claim against the at-fault party, said Lauren Furukawa, a litigation defence and insurance lawyer with Dolden Wallace Folick LLP.

Furukawa was commenting in general and not on the specifics of the accident in London.

After a motor vehicle accident, if it turns out the driver was intoxicated, that does not necessarily mean that auto liability coverage is denied, Furukawa noted.

Under section 118 of the Ontario Insurance Act, coverage can be denied only if an insured broke the law and intended to cause the loss or damage but coverage cannot be denied simply because the law was broken, said Furukawa.

Ontario used to have a statutory condition under OAP1 that expressly forbade use of an automobile while impaired but that has been repealed.

In its current form, Statutory Condition 4 of Ontario’s standard auto insurance policy says an insured person cannot drive a vehicle or let another person drive their vehicle unless the driver is authorized by law to drive or operate it. Statutory Condition 4 also prohibits the insured from using, or letting someone else use the vehicle in a race or speed test or for “any illicit or prohibited trade or transportation.”

What if your client owns a vehicle that crashes into property and causes damage and is sued by a victim alleging the owner is vicariously liable?

Assuming there was a breach of Statutory Condition 4, the owner is still covered so long as the owner took reasonable steps to ensure that the driver complied with the statutory conditions, said Furukawa.

This was established by the Court of Appeal for Ontario ruling in Tut v. RBC General Insurance Company, released in 2011.