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Supreme Court rejects appeal applications in dispute over homeowner policy vehicle exclusion


January 10, 2014   by Canadian Underwriter


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The Supreme Court of Canada ruled this week partly in favour of The Dominion of Canada General Insurance Company over a dispute as to whether a homeowner’s policy requires The Dominion to defend a couple and their son, who are being sued over an accident involving an all-terrain vehicle resulting in traumatic brain injury.

The Supreme Court of Canada announced Thursday it had dismissed applications, from both Larry Hannam and The Dominion, for leave to appeal a May 2013 ruling by the Supreme Court of Newfoundland and Labrador (Court of Appeal).

This means the provincial appeal court’s ruling stands. The Dominion does not have a duty to defend Larry Hannam, who owns the ATV, but does owe a duty to defend his wife (Lona Hannam) and son (Jordan Hannam), who do not own the ATV.

Jordan Hannam allegedly let a teenage friend, Kayla Squires, drive Larry Hannam’s ATV on Oct. 1, 2006 at a gravel pit on the outskirts of St. John’s, Nfld. Jordan Hannam was 13 at the time. Squires is alleged to have allowed Tanya Pender to ride as a passenger. The ATV collided with a rock crushing machine. Pender suffered several injuries, including skull fracture and traumatic brain injury.

Pender sued the Hannams and the gravel pit company, plus Squires and her parents.

Court records indicate that Pender alleged Squires failed “to stop, steer or operate” the ATV “to avoid losing control.” She also alleged Squires operated the ATV “with the knowledge and consent” of Jordan Hannam. Pender claimed vicarious liability and negligent supervision on the part of Jordan Hannam’s parents.

The Dominion, which has intervener status in those lawsuits, essentially asked a Newfoundland and Labrador court to rule that it does not have a duty to defend the Hannams under their home policy.

In September 2010, Madam Justice Valerie Marshall of the Supreme Court of Newfoundland and Labrador ruled against The Dominion, finding that the carrier did owe a duty to defend all three Hannams. She ruled that although the exclusion in their homeowner policy, for motorized vehicles, applied to allegations of vicarious liability, they did not apply to claims of negligent supervision.

The Dominion appealed that decision and was partly successful.

The appeal court overturned part of Justice Marshall’s ruling, finding that Larry Hannam has “no possibility of coverage” because he owns the ATV. However, the appeal court upheld part of Justice Marshall’s decision, finding that the Hannam’s homeowner policy does “give rise to the possibility of coverage for Jordan Hannam as well as Lona Hannam regarding negligent entrustment to and supervision of Kayla Squires in the use and operation of the ATV which they did not own.”

Both Larry Hannam and The Dominion filed applications, last August, for leave to appeal to the Supreme Court of Canada. The highest court in the land announced Jan. 9, 2014 it has dismissed both applications.

The ATV was not insured under the Hannam’s auto policy. Larry Hannam’s homeower’s policy covered him for “all sums you become legally liable to pay as compensation for loss because of bodily injury or property damage.”

The policy defines “you” and “your” under the heading “Who is Insured” and includes Hannam’s wife and children.

The policy had an exclusion for “the ownership, use or operation, by you or on your behalf, of motorized vehicles.” That exclusion had an exception for vehicles, “which you do not own, provided it is designed for use principally off public roads, and it is not used for business or organized racing.”

The Dominion argued that “the ownership-use-or-operation exclusion applied because all pleaded negligent acts or omissions asserted against the Hannams arose from the ‘ownership, use and operation’ of the ATV.”

In her 2010 ruling, Justice Marshall had rejected The Dominion’s application, on the grounds that Pender’s allegation of negligent supervision against Larry Hannam “is based on responsibility or control over the acts of another person …. and not a claim based on an act of control over the ATV.

In rejecting Justice Marshall’s line of reason, the provincial appeal court judges suggested that in liability insurance cases, a court is “required to assess the substance and not the form of the pleadings when assessing whether a duty to defend exists.”


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