Our second annual roundup of some recent judicial decisions with insurance insight provided by legal experts
Hector v. Piazza  O.J. No 111, 2012 ONCA 26
Commentary by Richard Bickford, Blouin Dunn LLP
The Ontario Court of Appeal considered an insurer’s duty to defend, in the context of the CGL exclusion for “property owned or occupied by…the Insured.”
The insured had purchased an apartment building in Ottawa in 2001, for the purpose of renovating and redeveloping it. He placed a CGL policy and property insurance coverage on the property. He then sold the building in 2006. The new purchaser sued the insured, after settling of the property’s basement and foundation allegedly occurred.
The insured sought coverage under his CGL policy, and the insurer denied coverage and a duty to defend.
The primary defence of the insurer was based on the CGL exclusion, which holds that the CGL policy did not apply to “property owned…by…the Insured.” The insured had indeed owned the building at one point, but not at the time that the suit against him was initiated. The insured argued that the exclusion was ambiguous because it may be interpreted to refer to both the past and present tenses of ownership.
If the word “owned” in the exclusion referred only to the past tense, the exclusion applied. If the word “owned” could refer to the past and the present tense, then the policy could not be said to “clearly and unambiguously” exclude coverage.
The motions judge found that if the exclusion was to be unambiguous (as required by law), then the exclusion clause “would refer to property that the insured ‘owns or owned.’ ” (It is, however, not worded in such a fashion.) The motions judge found “the exclusion is inherently ambiguous when read in the context of the insurance policy.” Historically, the court found that the exclusion does not appear to have been intended to apply to situations where the property was transferred to a third party. The insurer was ordered to defend. The insurer then unsuccessfully appealed.
The Court of Appeal held that because the word “owned” in the exclusion could refer to the present as well as the past tense, ambiguity was introduced, and coverage could not be excluded.
Insurance Industry Implications
1. The Ontario Court of Appeal has found that a central exclusion contained in the CGL policy has wording that is ambiguous. Insurers are required to show that exclusions do clearly and unambiguously exclude coverage.
2. Because of this decision on the wording, the reasonable expectations of the parties in the insuring agreement become even more paramount.
The Importance of Prompt Notice
Onex Corporation et al. v. American Home Assurance Company et al, 2012 ONSC 259
Commentary by Alan D’Silva and Paloma Ellard, Stikeman Elliott LLP
In this coverage dispute, the plaintiffs brought a motion for summary judgment seeking payment of their defence costs for an action commenced in Georgia (the “Georgia Action”). The plaintiffs’ claim initially sought coverage pursuant to the terms of “claims-made” 2004-2005 D&O policy issued to Onex and a Run-Off policy for one of Onex’s former subsidiaries, Magnatrax (“Magnatrax Policy”). While the plaintiffs argued that they were entitled to be indemnified under both policies, the insurers stated that the Georgia Action was only covered under the Magnatrax Policy for a number of reasons, including the specific entity/subsidiary exclusion against Magnatrax-related claims.
The insurers also brought their own cross-summary judgment motion on the basis that the Georgia Action was a claim first noticed under the 2002-2003 D&O policy and was therefore excluded from coverage under the 2004-2005 D&O policy.
The Court found that both the Onex and Magnatrax Policies provided coverage for the Georgia Action claims but also held that Onex’s broker had properly given notice of circumstances of the Georgia Action under the 2002-2003 D&O policy, thereby excluding it from coverage under the 2004-2005 D&O policy. Accordingly, the primary insurer was ordered to indemnify the plaintiffs for their defence costs in respect of the Georgia Action pursuant to the 2002-2003 policy and the Magnatrax policy. The decision has been appealed by both the insurers and the insureds.
Insurance Industry Implications
- The Court applied an objective test to determine whether the notice of circumstances of a potential claim given in 2003 met the notice requirements in the 2002-2003 D&O policy based on the wording of the policy.
- The Court read the exclusionary language of the policies narrowly and strictly finding that there was no absolute exclusion in respect of all claims against Onex’s directors and officers relating to Magnatrax.
Licence to Appeal
Tut v. RBC General Insurance Company, 2011 ONCA 644
Commentary by Michael Foulds, Theall Group LLP
In the morning, after a night of partying, the insured (son) got into an accident. He had 1.5 times the legal limit of alcohol in his body. The son, having a G2 licence, was not permitted by law to drive the car with a blood alcohol concentration greater than zero.
Pursuant to a statutory condition, the insurer denied coverage on the basis that the son was not authorized by law to drive the car, as his blood alcohol content was greater than zero.
The Ontario Court of Appeal found that if reasonable care is established then the statutory condition will not be breached. In this case, the son had a reasonable belief that his blood alcohol level was zero, as he had slept over six hours before driving. Further, the insured mother had a reasonable belief, as she saw nothing in the house or the son’s manner for her to question him regarding the amount of alcohol he consumed.
Insurance Industry Implications
- Despite what at first blush appeared to be an obvious breach, the court found coverage.
- Although there was a positive outcome for the insureds in this case, brokers should ensure their clients are fully aware that any alcohol in the blood of persons having G2 licences could result in a denial of insurance coverage.The Ontario Court of Appeal found that if reasonable care is established then the statutory condition will not be breached. In this case, the son had a reasonable belief that his blood alcohol level was zero, as he had slept over six hours before driving. Further, the insured mother had a reasonable belief, as she saw nothing in the house or the son’s manner for her to question him regarding the amount of alcohol he consumed.
- Copyright 2012 Rogers Publishing Ltd. This article first appeared in the May 2012 edition of Canadian Insurance Top Broker magazine.