This month’s first case addresses the issue of relief from forfeiture.
Our second case this month deals with interim payments on Automobile Insurance.
This month’s third case deals with a claim for coverage for damages incurred prior to the inception of an insurance contract. This was an unsuccessful application by the insured for an order that the insurer was in breach of its obligation to defend and indemnify the insured. The third party claim against the insured did not trigger coverage and nonetheless would have been excluded on the basis the claim occurred well before the inception of the policy.
Keizer v Portage LaPrairie Mutual Insurance Co. 2013 NSSC 118
The plaintiff was an insured with the defendant who obtained a home insurance policy through a broker. The insurer was aware that the insured heated his garage with a wood stove. The insured eventually set up a woodworking shop in his garage for post-retirement work, and arranged additional insurance coverage through the same broker. The broker only noted the work as a contractor for a building supply company and not as a woodworking shop. The garage continued to be covered under the home policy while the business aspects of the insured’s work were covered under a commercial policy.
The insured was heating his garage with his wood stove while applying varnish to chairs that he repaired for a customer. A fire broke out. The insurer denied the claim on the basis of material change in risk. The action was dismissed. The insured was denied relief from forfeiture under s. 171 of the Insurance Act RSNS 1989, c 231. Section 171 deals with the relief granted by a court, and stipulates that where exclusions within an insurance contract are reasonable, they will be upheld by the court. Because the material change in risk was not disclosed to the insurer, the insurance provided did not cover the loss.
W hile the insured was not in any way at fault for deficiencies in his coverage, compelling factors weighed heavily against granting equitable relief. First, there had been no rectification of the breach of a statutory condition before the loss. Second, there was a nexus between the fire loss and the increased risk of fire presented by the use of a wood stove in a woodworking shop. Third, granting equitable remedy would significantly prejudice the insurer as the insurer never would have accepted the risk if it was made aware that the woodworking shop was heated by a wood stove.
McDonald v Martin (June 12, 2013 NBQB); 229 ACWS (3d) 544
The plaintiff was a passenger on a motorcycle and sustained serious injuries after being thrown from the vehicle. After the disability period ended, the defendant stopped making payments for loss of income compensation. Alleging that the filing of the action was the reason the payments were stopped, the plaintiff brought a motion for an advance payment of $49,224. The issue to be determined was whether the plaintiff was entitled to an advance payment for loss of income under s. 256.6 of the Insurance Act, RSNB 1973, c I-12. Section 265.6 (1) of the Insurance Act stipulates that any time after an action for damages is commenced, a plaintiff may apply to the Court for an order requiring the defendant to make an advance payment of special damages.
The defendant’s counsel stated that payments were made during the time frame of the plaintiff’s disability following the accident, and stopped once the disability period ended. Evidence was presented suggesting injuries sustained by the plaintiff in the accident had been resolved, and that her ongoing problems were due to her recurrent back problems. The court was not satisfied that the plaintiff has established causation, and refused to allow the motion for advance payment. It was held that any issues of past lost of income would have to be determined by the trial judge.
Bathurst (City) v. Lloyd's Underwriters, 2012 NBQB 282
The insured, the City of Bathurst, undertook to install water and sewer services in a subdivision. The installation required re-alignment of the roads and the insured allegedly undertook to pay the cost to move cottages if the water plan caused title problems between any of the property owners. A property dispute arose between two adjacent property owners and an action was commenced.
The insured was added as a third party by the defendants. The third party claim against the insured alleged the insured revoked its offer to move the plaintiffs' cottage, and that the insured breached its fiduciary duty by refusing to pay to move the plaintiffs' cottage.
The insured notified its insurer of the action when it was served with the third party claim. The insurer denied it owed a duty to defend or indemnify. The insurer took the position there was no coverage for the claim because there was no claim resulting from any negligent acts by the insured. The policy of insurance only covered claims arising from "any acts of negligence". In addition, the insurer took the position the claim was excluded because the insured had prior knowledge of the claim before the policy of insurance commenced. Also, the facts giving rise to the claim occurred before the date of the inception of the policy.
The insured argued that from a plain reading of the pleadings the insurer had a duty to defend the third party claim. The insured also argued that the basis for the third party claim arose at the examination for discovery in the main action, which discovery took place well within the policy period.
The Court found that none of the allegations in the third party notice would trigger coverage under the policy. The policy was therefore not engaged. On the issue of alleged breach of fiduciary duty, the Court found the claim as alleged could not be interpreted as a "negligent act" on the part of the insured. The Court further held that the claim was excluded as the facts and circumstances of the claim were clearly known to the insured prior to the inception of the policy. The Court found that "any reasonable insured in the [insured's] position would interpret the demand made by the defendant, as a claim which was clearly known to the [insured] prior to the period of coverage of the policy". As a result, the insured's application was dismissed.