Canadian Underwriter

Supreme Court of Canada denies Scottish & York leave to appeal ruling on auto insurance family protection endorsement

March 30, 2015   by Canadian Underwriter

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Aviva Canada’s Scottish & York subsidiary was recently denied leave to appeal, to the Supreme Court of Canada, a ruling by the Newfoundland and Labrador appeal court on a dispute over coverage under an auto insurance family protection endorsement.

Insurance firm Scottish & York must cover the parents of a Newfoundland resident with a family protection endorsement, who was traveling to Florida and was involved in an accident

In 2006, Wade Drover – who had a family protection endorsement written by Scottish & York – was driving a rental vehicle in Florida when he was rear-ended.

“Injured parties included Wade Drover, his wife, their four children, and Wade Drover’s parents,” wrote Mr. Justice Leo Barry of the Supreme Court of Newfoundland and Labrador (Court of Appeal), in a ruling released Aug. 27, 2014.

 That ruling upheld a 2013 decision — by Mr. Justice Raymond Halley of the Newfoundland Supreme Court — finding that Wade Drover’s parents were covered his Scottish & York family protection endorsement.

Scottish & York applied in October for leave to appeal to the Supreme Court of Canada. The highest court announced March 26, 2015 it had denied the insurer’s leave application.

The family protection endorsement covers a parent “of the named insured … residing in the same dwelling premises and principally dependant upon the named insured … for financial support.”

Court records indicate that Scottish & York argued that in order to be considered insured persons, Wade Drover’s parents “had to be residing in the same house and be dependent upon their son for financial support,” but that prior to the trip to Florida, his parents “lived in their own house” and were financially independent.

Wade Drover’s parents – Eileen and Clement Drover – entered into an agreement to help supervise and care for Wade’s four children during the trip to Florida, while Wade agreed to look after his parents’ financial needs during the trip – including having them live in his rental house.

Justice Barry noted that at “the very least, the term ‘dependent’ is ambiguous” and therefore the provisions of the family protection endorsement “should be construed in favour of the person claiming coverage.”

The Newfoundland and Labrador appeal court cited a Supreme Court of Canada ruling, released in 2002, in the case of Pearl, Gwendolyn and Janice Somersall versus Jerry Friedman.

“The applicable principle of interpretation is that we interpret insurance contracts contra proferentem, or in favour of the insured,” Mr. Justice Frank Iacobucci wrote in 2002 in Somersall.

In that case, the Somersalls were struck and injured by Friedman, an underinsured motorist. Friedman agreed to admit liability and the Somersalls agreed they would not claim against Friedman or his insurer in excess of Friedman’s policy limit of $200,000. The Somersalls’ insurer had argued they had interfered with its subrogation rights, but a majority of judges hearing the appeal ruled that the Somersalls’ subrogation rights had not yet arisen.

In the case of Scottish & York versus Drover, the ruling in 2014 by Newfoundland’s appeal court was not unanimous. While Madam Justice Lois Hoegg concurred with Justice Barry, the third judge hearing Scottish & York’s appeal – Mr. Justice Charles White – dissented.

Related: Supreme Court denies insurer leave to appeal ruling on auto insurance family protection endorsement

Justice White contended the Drovers “were not ‘principally dependant’ on Wade ‘for financial support’ while in Newfoundland and Labrador nor while in Florida.”

In the original trial, Justice Halley “found that the nature of the financial relationship was in contract,” Justice White wrote in his dissenting opinion. “In such circumstances, there is no dependency for financial support. The Drovers entered a contract giving them an entitlement to compensation for services to be rendered under its terms.”

But on behalf of the majority, Justice Barry noted that Scottish and York, in “submitting that ‘residency’ denotes some element of ‘permanency’ …. is in essence asking the court to read into the insurance contract the adjective ‘permanently’ in front of the word ‘residing’ in a clause in the family protection endorsement. Considering the contra proferentem rule and the principle that ambiguous coverage provisions of insurance contracts should be construed in favour of coverage, the trial judge did not err in refusing to accept this submission.”

Justice Barry wrote: “The wording of the S.E.F. 44 Supplement clearly establishes that Wade Drover’s insurance policy contemplated that a person could be considered dependent for purposes of coverage although financially independent.”