Top 10 Insurance Decisions

Another year, another top ten. We have burned the midnight oil and scoured the various judicial districts of our vast country in order to identify that most elusive of creatures – the insurance coverage case.

Things were quiet at the Supreme Court of Canada this year, though the court did release its decision in Sattva Capital Corp. v. Creston Moly Corp., which raised the bar for those seeking appellate review of a judge’s interpretation of a contract. This decision is already having a significant impact on coverage appeals, making it more difficult for both insurers and insureds who lose at first instance to have that decision overturned.

Kozel v. The Personal Insurance Company (February 19, 2014, ONCA)

Auto insurance/relief from forfeiture

Kozel has dramatic implications, as it has greatly expanded a court’s ability to grant relief from forfeiture for an insured’s pre-loss conduct, a remedy previously unavailable based on the Supreme Court of Canada’s decision in Elance Steel.

Mrs. Kozel had automobile coverage with The Personal. She unintentionally failed to renew her driver’s license upon expiry. When she had an accident four months later, her insurer denied coverage. At first instance, Mrs. Kozel was successful in challenging the denial. The judge held that Ms. Kozel had acted with due diligence in failing to renew her licence. The Personal successfully appealed.

While the Court of Appeal disagreed that there had been due diligence, the court found coverage by granting relief from forfeiture. As Mrs. Kozel’s breach occurred prior to the loss, relief from forfeiture under the Insurance Act was unavailable. Instead, the Court looked to the general relief from forfeiture provision in s. 98 of the Courts of Justice Act, holding that this provision could be applied in the insurance context, and that relief could be granted for any pre-loss breach of the insured. The factors to consider when exercising this discretion were 1) the conduct of the insured 2) the gravity of the breach, and 3) the disparity between the value of the property forfeited and the damage caused by the breach. Applying this test to Mrs. Kozel’s case, the court found that 1) her breach was unintentional, 2) the gravity of the breach was minor as it did not impair Mrs. Kozel’s ability to operate a motor vehicle, and 3) there was a significant disparity between the breach and the forfeiture.

Schmitz v. Lombard General Insurance Company of Canada (February 4, 2014, ONCA)

Auto Insurance/Limitation period in OPCF 44R

Schmitz was involved in an auto accident and sued Lombard for underinsured coverage. Lombard took the position that the claim was out of time because Schmitz brought it outside the 12 month limitation period set out in s. 17 of the OPCF 44R. Schmitz argued the 2 year limitation period set out in s. 4 of the Limitations Act.

On a motion to determine the issue, the Court applied its decision in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, and that decision’s holding that an insured does not suffer a loss until after the insured seeks indemnity for an underinsured claim, and the claim is denied. Accordingly, the limitation period had not expired. The immediate impact of this decision is that there may effectively be no limitation period for underinsured motorist claims in Ontario.

Coburn v. Zorkin Insurance Brokers Inc. (February 26, 2014, BCCA)

Homeowner’s Policy/vacancy

The insurer denied coverage for a property loss as the house had been “vacant” for more than 30 days. The insured argued that he regularly visited the property to perform renovations during those 30 days. The policy defined vacancy as “[t]he occupant(s) has/have moved out with no intent to return or the dwelling does not contain furnishings or household equipment sufficient to make it habitable.” The B.C. Court of Appeal upheld the denial, holding that the insured’s regular attendance was immaterial – the property became vacant once the tenant left. The definition of vacancy was to be read disjunctively, such that if the property was vacant where the occupant had moved out with no intention to return or the dwelling did not contain furnishings or household equipment sufficient to make it habitable, it was “vacant”.

Hants Realty Ltd. v. Travelers Guarantee Co. of Canada (June 25, 2014, NSCA)

E&O Policy/Definition of “Claim”

Hants Realty sold a house, and the purchaser experienced problems getting running water to the property. The purchaser made a complaint to the Nova Scotia Real Estate Commission. Hants did not report the complaint to its errors and omissions carrier. When the realtor was sued several years later, the insurer took the position that the complaint to the commission constituted a “Claim” under the errors and omissions policy that ought to have been reported. “Claim” was defined as a “written demand for damages or non monetary relief… against an Insured for a Wrongful Act committed by the Insured.” The realtor sued and the insurer’s denial position was upheld. The Nova Scotia Court of Appeal held that substance, rather than form, was the determining factor. Though the initial claim was made to a commission which had no jurisdiction to award monetary damages, the insured was aware from the complaint itself that the purchaser would pursue a claim for damages.

Precision Plating Ltd. v. Axa Pacific Insurance Company (April 8, 2014, BCSC)

CGL Policy/Pollution Exclusion

Precision Plating was sued by a third party after a fire at its premises triggered the building’s sprinklers, resulting in an overflow of dangerous chemicals. Precision’s CGL carrier denied coverage, relying on the policy’s pollution exclusion. Precision successfully sued for coverage. The B.C. Supreme Court acknowledged that the definition of pollution in the policy included chemicals, soot and smoke. However, as damage from fire was clearly covered under the policy, and further, as virtually all damage from fire could fall within the definition of pollution, the insurer’s position ran contrary to the reasonable expectations of the parties.

Stewart v. TD General Insurance Company (March 4, 2014, Ont. Div. Ct)

Homeowner’s Policy/Marijuana Plants

Is marijuana covered under a homeowner’s insurance policy? According to the Ontario Divisional Court, the answer is no. The insureds legally kept 11 marijuana plants at their home for medicinal use. The pot had a value of $50,000. When the plants were stolen, TD agreed to pay the $1,000 per plant limit for “landscaping”, but denied that the plants qualified for the increased limit available for “personal property” as they were not “usual to the ownership or maintenance of a dwelling.” Both the motions judge and the Ontario Divisional Court sided with TD’s position. While the plants were usual to the insured’s dwelling, they were not usual to an average dwelling, as less than one third of one percent of Canadians were authorized to grow medical marijuana.

O’Byrne v. Farmers’ Mutual Insurance Co. (July 11, 2014, ONCA)

“All-risks” Policy/Pollution Exclusion