Our first case this month deals with the interpretation of a watercraft exclusion under a homeowner’s policy. The Court held that the language of the exclusion was clear and the claim resulting from the boat’s use did not trigger a duty to defend.
Our second case this month deals with a slip and fall and whether the wording of the policy in place, in conjunction with the pleadings, trigger a duty to defend.
Our third case this month deals with an insurer’s duty to defend in the context of a CGL policy. Here, the Supreme Court of Canada held that the mere possibility of coverage was enough to trigger the insurer’s duty to defend.
Foster & Company is pleased to announce that Katherine Toner-Muzey has joined our team as a litigation associate.
Originally from Grand Falls, New Brunswick, and fluently bilingual, Katherine completed her Bachelor of Arts degree with a major in criminology and a minor in forensic Anthropology through St. Thomas University. She received her Bachelor of Laws degree in 2009 from the Université de Moncton.
Katherine was admitted to the New Brunswick Bar in 2010 and practices primarily in civil litigation and insurance law. She is a member of the Law Society of New Brunswick, the York Sunbury Law Society, the Canadian Bar Association and the Association des juristes d’expression francaise du Nouveau-Brunswick.
Katherine is looking forward to working with you and can be reached by:
Telephone: (506) 462-4012
Fax: (506) 462-4001
Woodbury v. State Farm, 2010 ONSC 4202
The insured was towing his son on an inner tube behind his motorboat when the tube struck another boat, resulting in injuries to his son. The insured notified his insurer and requested they defend the claim under his homeowners policy. The insurer denied coverage on the ground that the motorboat was not covered under the policy. The insured brought an application to the Ontario Superior Court of Justice for a declaration that the insurer was obliged to defend him.
The homeowners insurance policy contained a coverage exclusion for watercraft, with two exceptions: (1) watercraft equipped with an outboard motor of 25 horsepower or less, or an inboard or inboard/outboard motor of 50 horsepower or less; (2) other watercraft, if it is 26 feet or less in length.
The insured’s motorboat had a 175-horsepower inboard motor, but was less than 26 feet long. In concluding that the insured’s boat was not covered under the policy, the court stated that the exclusion of watercraft from the policy was clear and unambiguous and extended to all watercraft. The exception in issue operates to restore coverage to certain types of watercraft where the inboard motor is less than 50 h.p. On the plain wording, the insured’s boat, having an inboard motor of greater than 50 h.p., is excluded from the watercraft described in the first paragraph of the exception and therefore the insurer is under no duty to defend; to hold otherwise would cause “a nonsensical result that was never intended by the parties.”
Cadillac Fairview Corp. v. Oakridge Landscape Contractors and Lombard Canada, 2010 ONSC 4535
In this case, a third party slipped and fell at a shopping mall owned by the applicant, Cadillac Fairview. The applicant had contracted with Oakridge to carry out snow removal. Lombard Canada was Oakridge’s insurer.
The third party alleged Oakridge was negligent in failing to clear snow and ice properly and that Cadillac Fairview failed to ensure that the surface of the sidewalk was safe. Cadillac Fairview brought an Application asking for a declaration that Lombard had a duty to defend.
Oakridge’s insurance policy with Lombard listed Oakridge as a named insured and also stated that Cadillac Fairview was added as an additional insured, but only with respect to liability arising out of the operations of the named insured. Lombard argued that Cadillac Fairview’s maintenance of the sidewalk had nothing to do with the operations of Oakridge as snow remover.
Referring to the pleadings, the Judge decided the key context of the case was that the third party alleged she slipped on ice and that her injuries were a result of that fall. Thus, the ice build-up, if through negligence, would be a contributing cause to the loss, whether the sidewalk underneath was properly maintained or not. The true nature of the claim was negligence in the removal of ice. As well, the pleadings raised the possibility that Cadillac Fairview could be found liable because of the operations of Oakridge. In the Judge’s view, this was enough to trigger the duty to defend.
Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33
Progressive Homes Ltd (“Progressive”) was hired as a general contractor by the British Columbia Housing Management Commission (“BC Housing”) to build several housing complexes. After completion, BC Housing initiated four actions against Progressive alleging significant damage caused by water leading into each of the four buildings.
Progressive had secured five successive commercial general liability insurance policies (“CGL Policies”) with Lombard General Insurance (“Lombard”) between 1987 and 2005. Initially Lombard defended Progressive, but later withdrew in part because of the BC Supreme Court’s decision in Swagger Construction Ltd. v. ING Insurance Co of Canada, 2005 BCSC 1269. Progressive then brought this action to determine whether Lombard did in fact have a duty to defend.
The BC Supreme Court, citing the decision in Swagger, held that Lombard did not owe a duty to defend because defective construction is not an “accident” unless it causes damage to the property of a third party. The Court of Appeal upheld the decision and Progressive appealed to the Supreme Court of Canada.
In concluding that Lombard did have a duty to defend, the Supreme Court looked to each of the CGL policies issued by Lombard, and more specifically the proper interpretation of “property damage”, “accident” and the “work performed” exclusion found in each policy. With respect to the interpretation of “property damage”, Lombard argued that under the CGL policy, property damage was limited to third party property damage. The SCC rejected this argument and held that the definition of “property damage” under the policy was clear and unambiguous and included damage to any tangible property. To restrict the meaning in the manner suggested by Lombard would essentially negate the need for the “work performed” exclusion.
The Court held that the determination of whether defective workmanship is an accident is case- specific, dependent on the circumstances of the defective workmanship alleged in the pleadings and the manner in which “accident” is defined in the policy. In this case, the pleadings sufficiently alleged an accident as defined in the policy and therefore there was a possibility of coverage.
As the SCC found the claims against Progressive could potentially fall within the proper interpretation of “property damage caused by an accident”, the onus shifted to Lombard to show that the “work performed” exclusion clearly and unambiguously applied. After reviewing the language of the exclusion, the SCC held that Lombard had not discharged its burden and there was a possibility of coverage under each version of the policy. Therefore, the duty to defend was triggered.