Our first case this month deals with an insurer’s duty to defend and the low threshold required to invoke the duty.
As a follow-up to the Davis v. Cooper case found in our February 2011 newsletter, our second case this month deals with a Plaintiff’s attempt to set aside a settlement agreement. In this case the Court found that the Plaintiff’s refusal to execute a Final Release was not a condition precedent to settlement and was not to be construed as a repudiation of the Agreement.
Pender v. Squires, 2011 NLTD(G) 23
This case involved three actions, all of which related to the same all-terrain vehicle (ATV) accident. At the time of the accident, the Plaintiff was a passenger on an ATV owned by the Defendant Larry Hannam and operated by the Defendant Kayla Squires. Kayla Squires lost control of the ATV causing it to collide with a rock-crushing machine owned and operated by the Defendant, City Sand and Gravel Limited. It was alleged that the ATV was in Kayla Squires’ possession and control by way of the express, or implied, consent of the Hannams.
The Dominion of Canada General Insurance Company (“Dominion”) provided homeowners’ insurance to the Hannams and was granted leave to intervene in the three actions. Subsequently, Dominion filed two applications in which it sought a determination of whether Dominion had a duty to defend Larry Hannam, Lona Hannam and/or Jordan Hannam in any of the three actions.
In reviewing the law surrounding an insurer’s duty to defend, the Court referred to the Supreme Court of Canada decision in Progressive Homes Ltd. v. Lombard General Insurance Company of Canada,  S.C.J. No. 33 where Justice Rothstein referred to the low threshold required to invoke the duty to defend; all that is required is the “mere possibility that a claim falls within the insurance policy.”
The insurance policy (“the policy”) in effect at the time of the accident was a broad homeowner’s policy issued by Dominion to Larry Hannam. As the policy included personal liability coverage for each of Larry Hannam, Jordan Hannam and Lona Hannam, Dominion acknowledged that the claims against the Hannams would be covered were it not for the exclusion clause relating to the “ownership, use or operation, by you or on your behalf, of . . . Motorized Vehicles.”
Referring to the Statement of Claim in the first action, Justice Marshall agreed with Dominion that one of the claims against Larry Hannam was based on vicarious liability resulting from his ownership of the ATV. Therefore, it was clearly excluded from coverage by virtue of the exclusion clause.
The other allegations against Larry Hannam, however, were based in negligence and his alleged consent to transfer control and possession of the ATV to Kayla Squires. In interpreting the exclusion clause, Justice Marshall held that the term “use” pertained to the activity to which the ATV was put at the time of the accident and the phrase “by you or on your behalf” narrowed the scope of the exclusion to reflect a usage which furthers the goals or objectives of the insured. As Larry Hannam did not direct the purpose or benefit from Kayla Squires use the ATV, his alleged consent could not be construed as “use” on behalf of the insured. In contrast, had Larry Hannam consented to Kayla Squires’ use of the ATV for a particular purpose which he benefitted from (e.g., driving the ATV to his home) then such use would be on behalf of the insured. As the claim did not fall within the exclusion clause, Dominion had a duty to defend Larry Hannam in the first action.
The claims against Jordan Hannam in the first action were the same as those against Larry Hannam, with the exception of the claim respecting ownership of the ATV. As such, the same reasoning for why the claims were not excluded applied to Jordan Hannam and Dominion had a duty to defend.
In the second action, the Plaintiff advanced a claim against Larry Hannam related to his ownership of the ATV and a claim against Larry Hannam and Lona Hannam for negligent supervision. Justice Marshall held that, for the same reasons outlined in the first action, the claim relating to the ownership of the ATV clearly fell within the exception. The claim of negligent supervision, however, was based upon the “responsibility or control over the acts of another person,” not the acts of control over the ATV. As such, the claims of negligent supervision against Larry Hannam and Lona Hannam did not fall within the exclusion clause of the policy and Dominion’s duty to defend was invoked.
In the third action, City Sand and Gravel Limited issued a Third Party Claim in which the claims against Jordan Hannam and Larry Hannam were, in essence, the same as the Plaintiff’s claims against them in the first and second actions. As the true nature of the claims were based in negligence, the exclusion clause in the policy did not apply for the reasons outlined in the first and second actions and Dominion had a duty to defend both Jordan Hannam and Larry Hannam in the third action.
As the allegations against the Hannams in all three actions fell within the scope of coverage under the policy, Dominion had a duty to defend in all three actions.
Langthorne v. Humphreys, 2011 NSSC 44
On June 23, 2003, the Plaintiff was involved in a rear end collision with the Defendant which resulted in serious physical injuries to the Plaintiff. By September 20, 2010, counsel for both parties had reached a full and final settlement of all outstanding claims. However, the Plaintiff refused to sign the Release forwarded by the Defendant’s counsel and refused to acknowledge that a settlement had been reached on the grounds that his counsel did not have his express authorization to settle the claim. The Defendant brought this motion for an order declaring that a settlement agreement had been reached and to enforce the agreement.
The Court stated that to create a binding settlement agreement, counsel for the Plaintiff must have had actual, implied, usual or apparent authority to enter into the agreement. Based on the language in the retainer agreement between the Plaintiff and his counsel, there was no evidence of any restrictions or qualifications being placed on counsel’s authority to attempt to settle the claim. Further, Plaintiff’s counsel testified that following the September 8, 2010 settlement conference, the Plaintiff instructed him to accept the Defendant’s offer of $320,000 on the condition that it be paid through a structured annuity. The following day, the Plaintiff instructed his counsel to make a counteroffer of $350,000 and that if that amount was rejected then to accept the Defendant’s offer of $320,000. On September 20, 2010 after being advised that a settlement was reached, the Plaintiff instructed counsel that he wanted a lump sum payment instead of an annuity; the Defendant agreed and on September 28, 2010 forwarded the settlement funds, a Release and Consent Order to Plaintiff’s counsel. The same day, the Plaintiff informed his counsel that he had changed his mind and did not want to settle the claim and that he would not sign the release. Plaintiff’s counsel had numerous meetings and conversations with the Plaintiff throughout October 2010 but the Plaintiff continued to refuse to sign the Release forwarded by the Defendant.
After hearing evidence from all parties involved, the Court accepted the Defendant’s evidence as it was well documented/corroborated and internally and externally consistent. In contrast, the Plaintiff was unable to point to any evidence to contradict the Defendant, lacked a clear memory of the events leading up to and following the settlement agreement, and had no documentation to corroborate his evidence. As such, the Court found that his evidence was not reliable, questionably truthful and therefore not credible on most material aspects.
Based on the evidence, the Court concluded that there was a valid and enforceable agreement between the parties. The execution of a Release was not a condition precedent to a settlement, but rather it was an implied, but not an essential, term of the settlement agreement. The Plaintiff’s refusal to sign the Release was not to be construed as a repudiation of the Agreement. The Defendant’s motion was granted and the Plaintiff was ordered to pay costs in the amount of $1,000.