Our first case this month is a decision of the New Brunswick Court of Queen’s Bench. In this case, the Court held that the installation of a supplemental heat source in the Plaintiff’s home did not constitute a material change in risk.
Our second case this month is a decision of the Ontario Supreme Court which deals with the interpretation of “rental” under the Ontario Insurance Act. The Court also stresses the importance of written agreements between parties.
Thomas v. Aviva Insurance Company, 2011 NBQB 26
The Plaintiff had insured his home against fire with the Defendant insurer in 2000. At that time, his home was heated primarily with electric heat; no solid fuel heating unit was used until 2001 when the Plaintiff installed a wood stove on the porch of his home. In December 2007, a fire occurred in the Plaintiff’s home and the insurer voided the policy and denied coverage on basis that the Plaintiff installation of the wood stove constituted a material change in risk. The Plaintiff brought an action against the insurer for damages stemming from a breach of contract.
At the time of trial, the Plaintiff was 74 years old with a grade seven education. He had not read the insurance policy when he signed the original application and the Court held that even if he had it would not have alerted him of an obligation to notify the insurer of the addition of a supplemental heating source in his home. Further, as the house continued to be heated primarily with electric heat, the installation of a supplemental heating source in the porch of the Plaintiff’s home was not material change of risk. The insurer was found to have breached the contract of insurance and was ordered to pay $23,662 in damages plus costs.
This decision is currently under appeal, however, as of the date of publication, the appeal has not yet been heard.
Coachman v. Lombard, 2011 ONSC 1655
The insured, George Jenkins (“Jenkins”), purchased a vehicle from Edwards Mazda in September 2007. The vehicle required maintenance work in November 2007. While the car was being repaired, Edwards Mazda loaned Jenkins a vehicle to use ‘around town’. Edwards Mazda did not require its customers to sign a written agreement when a loaner vehicle was provided, therefore Jenkins did not sign one. Edwards Mazda had only intended Jenkins to use the vehicle for one day, however, the repairs took longer than expected and Jenkins kept possession of the vehicle overnight. The following day Jenkins was involved in an accident.
An action was started between Coachman Insurance Company , Jenkins’s insurer, and Lombard General Insurance, Edwards Mazda’s insurer, concerning the priority of the policies. In determining which policy was first in priority, the primary issue to be resolved was whether the loaner vehicle provided by Edwards Mazda to Jenkins constituted a rental or not. If the loaner vehicle was determined to be a rental, then Jenkins’ policy would be primary due to the recent amendments in the Ontario Insurance Act.
Based upon the facts presented at trial, Justice Quigley noted that: there was no written agreement between Edwards Mazda and Jenkins pertaining to the use of the loaner vehicle; there were no real terms for the use of the vehicle; there was no specific return date for the vehicle, and; Edwards Mazda had not considered the vehicle to be a ‘rental’. Based on these facts, Justice Quigley held that the loaner vehicle was not a rental within the terms of s.277(1) of the Insurance Act and therefore the Coachman’s policy was primary, with Lombard acting as the excess insurer.
Justice Quigley further stated that the mere fact that both parties may derive some benefit or convenience as a result of the loan of the vehicle does not result in a rental situation. The test to determine whether something is a ‘rental’ ought to require more than simply deriving mutual benefit.