August 17, 2012 by Canadian Underwriter
A British Columbia court has dismissed an appeal by Royal & Sun Alliance Insurance Company of Canada that a homeowner’s insurance policy excludes a bodily injury claim, ruling the insurer has a duty to defend and indemnify several claimants for any and all claims made by a co-defendant.
In Royal & Sun Alliance Insurance Company of Canada v. Araujo, Justice Barbara Fisher of the Supreme Court of British Columbia concluded that Royal is obligated to defend and indemnify Alfredo Araujo, Fernanda Araujo, Fernando Araujo and Alfredo Jr. Araujo for any and all claims made by Matthew Araujo.
The decision follows an incident at the home of Alfredo and Fernanda Araujo, the grandparents of Matthew, in the summer of 2004. Alfredo, Fernanda, Fernando (Matthew’s father) and Alfredo Jr. (Matthew’s uncle) live in the home, while Matthew sometimes stayed in the home (his parents were divorced, but had joint custody).
On Aug. 14, 2004, the home was fire bombed by arsonists. Matthew, then 15, was sleeping on the living room sofa and suffered serious burns. Matthew commenced an action against a number of defendants, including his grandparents, his father and his uncle, based in negligence and statutory duties under the Occupiers Liability Act.
The grandparents sought coverage under their homeowner’s insurance policy, which would require Royal to defend them in Matthew’s action.
The policy states Royal does not insure claims made against the policyholder from “bodily injury to you or to any person residing in your household other than a residence employee.” The “you” and “your” is defined as the person(s) named as insured on the coverage summary page and, while living in the same household, including the relatives of either.
Royal submitted that Matthew was an unnamed insured under the policy because he fits within the definition of “you” and “your” as a relative of the named insureds.
Justice Fisher notes Matthew was not residing at his grandparents’ house, but rather regularly visited the home. Among other things, he did not have a room of his own, did not keep any belongings there and did not have a key to the house.
“Matthew is not a ‘you’ under the exclusion clause, nor is he a person residing in the household. He is a true third party who was in no position to assess the risk of a fire-bombing incident taking place. This is the interpretation that, in my opinion, gives effect to the reasonable expectations of the parties,” the ruling notes.