Why this home insurer has a duty to defend a road rage claim

Pembridge Insurance Company of Canada has a duty to defend an insured who has liability coverage under a home insurance policy in a case in which the insured got out of his car and allegedly threatened another driver in a road rage incident.

By rejecting an appeal from the Ontario Court of Appeal, the Supreme Court of Canada recently confirmed that Pembridge must defend the insured driver in the auto bodily injury case, even though the home insurance policy contains an exclusion for claims arising from “the ownership, use or operation of any motorized vehicle.”

Dominion of Canada General Insurance Company, the driver’s auto insurer, won an appeal in 2019 against Pembridge at the Ontario Appeal Court level. The appellate court overturned the decision of a motions judge, who initially found that Pembridge did not have a duty to defend the driver, in light of the exclusion in the homeowner’s policy.

The Supreme Court of Canada recently refused to hear Pembridge’s appeal, meaning the home insurer, Pembridge, now has to defend the auto liability case along with the auto insurer, Dominion.

Among other things, the Ontario Court for Appeal found that the motions judge “inappropriately made factual findings that [the driver’s] actions after getting out of the vehicle would be deemed ‘incident to the ownership, use or operation of a vehicle’ and therefore covered by the auto insurer and not by the homeowner insurer. Factual findings are to be made at trial. The duty to defend issue is to be based on the allegations as pleaded.”

The Appeal Court decision reiterates that the duty to defend is triggered by “the mere possibility that a claim on the policy may succeed.” When the pleadings are not framed precisely, the court affirmed, “coverage clauses are construed broadly, while exclusion clauses should be interpreted narrowly.”

The case arose out of a bodily injury claim in which the facts are still in dispute.

In the underlying litigation, an Ontario driver, Tate Moran, claims that another driver, Ottavio Fabrizi, caused her injuries by driving through a red light. Fabrizi made a third-party claim against another driver, Dennis Chu, alleging, among other things, that Chu not only drove negligently but also:

• got out of his vehicle;
• threatened Fabrizi and a passenger in Fabrizi’s vehicle with violence;
• yelled at them, hit the window and other parts of the vehicle; and
• made other gestures causing Fabrizi and his passenger to fear for their lives.

Fabrizi claimed, among other things, that his flight from Dennis Chu led to the collision that caused Moran’s injuries. Dominion was Chu’s auto insurer. The question before the courts was whether Pembridge had a duty to defend the claim under the liability coverage contained in the homeowner’s policy.

Dominion, Chu’s auto insurer, conceded its own duty to defend allegations of negligent driving against him. Pembridge provides John Chu’s homeowner insurance. Dennis Chu is John Chu’s son, and was living at home at the time of loss. Pembridge therefore covers Dennis Chu under the homeowner’s policy.

The Pembridge homeowner’s policy insured the policyholder for “legal liability arising out of [their] personal actions anywhere in the world,” but excluded claims made arising from “the ownership, use or operation of any motorized vehicle.”

The motions judge held that Chu’s actions after getting out of the vehicle would be deemed “incident [i.e. linked to] the ownership, use or operation of a vehicle,” and therefore would be covered by the auto insurer and not by the homeowner insurer (which excluded claims based on “the ownership, use or operation of a vehicle”).

But the Ontario Court of Appeal held there is a great deal of legal caselaw around whether “the chain of causation” is broken when a person gets out of a vehicle; this alone means it might be possible to find coverage found in the homeowner policy, meaning that Pembridge had a duty to defend Chu.

Pembridge’s homeowner also policy excludes coverage for bodily injury “caused by any intentional or criminal acts or failure to act.”

The Appeal Court said the motions judge also erred in finding that this exclusion for “intentional or criminal acts” applied. The court referred to a Supreme Court case in which such an exclusion is narrowly triggered only in situations in which, in addition to an intentional act, there is also an intent to injure.

“Here, there is no allegation that Dennis Chu intended to harm the plaintiff, Moran,” the Ontario Appeal Court found. “There is also no allegation that Dennis Chu intended to harm Fabrizi. It is not clear that the assaults and threats attributed to Dennis Chu would be sufficient to invoke the exclusion.

“Based on Scalera, it is arguable that the intentional or criminal act exclusion has no application. Again, since the exclusion clause may be narrowly construed, and since there is a possibility that Pembridge may have to indemnify the Chus depending on what facts are ultimately found, there is a duty to defend.”

Feature image courtesy of iStock/RapidEye