Our first case this month deals with an exclusion in an insurance policy barring recovery for death resulting directly or indirectly from alcohol use/abuse.
The second case this month deals with an insurer’s duty to defend and the definition of “occurrence” under the insurance policy which triggers it.
Our last case this month is one which will have important consequences for future New Brunswick litigation. In it, the New Brunswick Court of Appeal for the first time explains that interest on litigation loans may be recoverable as a “necessary and reasonable” disbursement in a court award.
Laird v. First Canadian Insurance Corporation, 2012 NBQB 124
A widowed insured made an application for an order that the respondent insurer pay to her the insured indebtedness payable under a policy of group creditor insurance issued to her and her late husband. The couple had purchased a vehicle in September 2010, and had applied through the dealership for the insurance policy at the same time. The premium paid for the policy was included in the final purchase price and financed by their lending institution.
The fine print on the reverse of the Certificate of Insurance contained definitions and explanations which purported to outline the coverage to the insured couple, including limitations and exclusions. One exclusion in particular released the insurer from liability where an insured death resulted from or was caused or contributed to directly or indirectly by “illness, disease, or death resulting from alcohol or drug use/abuse.”
Upon the applicant’s husband’s death in April 2011 at age 63, the insurer denied the applicant’s subsequent claim for payment on the basis of the alcohol or drug use/abuse exclusion. The attending physician’s statement submitted to the insurer listed the applicant’s husband’s primary cause of death as a “possible myocardial infarction” (or heart attack). Secondary causes were given as cirrhosis and renal (kidney) failure. In answer to the question “Were drugs/alcohol a factor?”, the attending physician wrote “yes” and explained, “Newly diagnosed liver disease/cirrhosis. It was the cause of his admission [to the hospital].”
The Court was of the opinion that the attending physician’s confirmation that alcohol was a “factor” in the applicant’s husband’s death was sufficient reason for the insurer to deny liability under the alcohol or drug use/abuse exclusion clause.
As well, the Court held that the meaning of the words used in the alcohol or drug use/abuse exclusion clause were clear and unambiguous from their plain meaning. For this reason, the contra preferentem rule was not applicable in the case.
In the result, the Court found that the insurer was legally justified in concluding that the applicant’s husband’s death was caused or contributed to directly or indirectly by alcohol use/abuse. As a consequence, the insurer was justified in denying the applicant’s claim for benefits. The application was dismissed.
Co-operators General Insurance Company. v. Association of New Brunswick Cemeteries et al., 2012 NBQB 9
A fire at one of the respondent Association’s member cemeteries destroyed a building and some equipment. At the time of loss, the Association was insured under a commercial insurance policy issued by Wawanesa. Wawanesa paid out to the Association for the member cemetery’s loss up to its policy limit of $100,000. However, the cost of the damage was far in excess of the limit. In addition, it was alleged that there was no coverage for equipment under the policy.
The member cemetery commenced an action against the Association for its uninsured loss, alleging the Association failed to advise it that the Wawanesa policy did not cover equipment or that it should purchase its own coverage in that regard.
The Association’s current insurer, Co-operators, applied for a declaration that Wawanesa had a duty to defend the Association in the action commenced by the member cemetery.
The Wawanesa policy provided coverage for bodily harm or property damage as a result of an “occurrence.” Co-operators argued that the Association and its broker were negligent and had breached their duty of care to the member cemetery , amounting to an “occurrence” under the policy which Wawanesa therefore had a duty to defend. Counsel for Wawanesa countered that there were no allegations relating to bodily harm or property damage in the pleadings filed by the member cemetery.
Reviewing the pleadings, the Court found they contained clear allegations of a breach of duty against the Association for failing to obtain sufficient insurance coverage. However, it also found that these allegations did not fall within the coverage provided by the Wawanesa policy. The Court noted that failing to obtain insurance coverage was not an “occurrence” as defined in the policy, since the Association’s negligence as alleged by the member cemetery did not cause the fire. There was thus no possibility of a duty to indemnify on the part of Wawanesa, and because of this, no duty to defend.
The application was dismissed. An appeal by Co-operators of the application judge’s decision was also dismissed, at 2012 NBCA 65.
LeBlanc v. Doucet et al., 2012 NBCA 88
Following a successful trial on liability for a motor vehicle accident, the plaintiff was awarded costs of $20,000 plus his taxable disbursements to that date. The plaintiff duly filed a bill of costs as evidence of his disbursements.
In the course of the litigation, the plaintiff had taken out a high-interest loan to cover his litigation expenses due to his lack of financial means. His bill of costs therefore included a claim for reimbursement for interest on the loan.
The court’s assessing officer found the plaintiff’s claim for loan interest to be an extraordinary expense, which went beyond what he could allow as a recoverable disbursement in the absence of any direct authority to do so under the Rules of Court. At a motion hearing appealing the assessing officer’s decision, a judge of the Court of Queen’s Bench decided that the assessing officer’s decision was correct and that interest on litigation-financing loans was not closely enough connected to “disbursements,” in the strict sense of the word, for an award to be made. The plaintiff then appealed to the Court of Appeal.
The Court of Appeal allowed the appeal. Chief Justice Drapeau for the Court stated that a claim for loan interest is authorized under subparagraph 2(14) of Tariff “D” of the Rules of Court, which provides that allowable disbursements include “all other reasonable expenses necessarily incurred, when allowed by the assessing officer.” In the Court’s view, the loan was an “expense” within the meaning of the provision; the plaintiff’s lack of means meant that it was “necessarily incurred”; finally, the interest claimed was “reasonable” since the defendants offered no evidence that it was not. Thus, the interest on loans required to pay the disbursements approved by the assessing officer was itself allowable as a disbursement.
Commenting on the ramifications of the Court’s decision, Chief Justice Drapeau observed, “there is every reason for satisfaction with the resulting regime, one that contributes significantly to improving access to justice for the citizens of our province...access to justice is one of the cornerstones of the rule of law, and it behooves courts, wherever possible, to do their part in fashioning means conducive to its improvement. Courts must walk the talk.”
As a result of this decision, it can be expected that more plaintiffs will resort to high-interest loans as a means of financing their cases, potentially increasing the overall number of claims. As well, successful plaintiffs will then be able claim recovery on this loan interest in disbursements, thus raising litigation costs for unsuccessful defendants.