January 11, 2019 by Greg Meckbach
A court decision released this past Wednesday clarifies what should happen if your client is sued and covered by more than one insurance company.
Melissa Shawbonquit filed a lawsuit after she was injured in a boating accident in July 2016. Matthew Latendre was driving the boat, which was owned by Lawrence Latendre, whose home insurer was TD.
Boat operator Matthew Latendre’s home insurer was Intact.
Home insurance policies normally cover liability, but TD had an extension in its homeowners policy covering the boat owner. Specifically that policy, for which Lawrence Latendre paid $516 a year, refers to the 17.5-foot Aluma boat with a 135-horsepower Mercury outboard motor that was involved in accident.
TD took Intact to court, arguing that Intact and TD should share equally in defending and covering the lawsuit against Matthew Latendre.
Intact countered that its policy covering should be considered excess and that the TD policy bought by the boat owner should be considered primary.
Initially, TD lost, but was successful on appeal.
In TD General Insurance Company v. Intact Insurance Company, released Mar. 29, 2018, Judge Dan Cornell of the Ontario Superior Court of Justice ruled that Intact should be considered the excess insurer. This would mean that the Intact coverage would only kick in if the loss was greater that the TD policy limit.
But the ruling in favour of Intact was overturned by the Court of Appeal for Ontario, in a ruling released Jan. 9. 2019.
Superior Court judge Cornell was incorrect in applying a “closeness to the risk” approach, appeal court judge Russell Juriansz wrote.
Judge Cornell accounted for the fact that TD specifically insured the boat that was involved in the accident. But a 2002 Supreme Court of Canada ruling, Family Insurance Corp. v. Lombard Canada Ltd., stipulates how courts deal with overlapping coverage. In such cases, the court must determine whether the insurers intended to limit their obligation to contribute and, if so, by what method, Juriansz wrote in TD v. Intact.
Both Intact and TD had the following wording in their policies covering Matthew and Lawrence respectively:
“If you have other insurance which applies to a loss or claim, or would have applied if this policy did not exist, this policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance is used up.”
In disputes between insurers with overlapping coverage, courts in Minnesota have looked at factors such as whether one policy “specifically described the accident-causing instrumentality” and which insurer’s premium “is reflective of the greater contemplated exposure,” Supreme Court of Canada judge Michel Bastarache wrote in Family Insurance.
In that ruling, the Supreme Court of Canada specially rejected the “Minnesota” approach. This, Judge Bastarache wrote, is because where two different policies give excess coverage, this can lead to no primary coverage, which is an “absurd” result.
Canadian courts should instead find that the excess coverages are both inoperative, Judge Bastarache ruled.
In such cases, “each insurer is independently liable to the insured for the full loss, as if the other insurer did not exist,” Judge Bastarache added.
“Insurers most certainly are aware that the insured may obtain coverage for the same risk elsewhere and that, in such a case, the law of equitable contribution will necessarily arise.”