Cooperators General Insurance Company et al. v. Martin et al., 2022 NBCA 15
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By: Sarah Richard (Articled Clerk)
On December 1, 2014, Bernadette Martin was injured in a motor vehicle accident caused by Pierrette Landry, who deliberately crossed into oncoming traffic in an apparent suicide attempt. The attempt failed resulting in Landry being charged with crimes related to the accident. She later passed away. Ms. Martin applied to the Court of King’s Bench seeking either an order that the insurer for the Estate of Pierrette Landry (Pembridge Insurance) provide the Estate with coverage up to the policy limit of one million dollars, or alternatively a determination of the maximum coverage available, for claims made by Ms. Martin and others who were injured in the accident.
Pembridge denied coverage to the Estate, citing section 2 of the Insurance Act, R.S.N.B. 1973, c. I-12 (the “Act”), which reads: “Unless the contract otherwise provides, a violation of any criminal or other law in force in the Province or elsewhere does not, ipso facto, render unenforceable a claim for indemnity under a contract of insurance except where the violation is committed by the insured […] with intent to bring about loss or damage”.
This has been interpreted as insurance claims are not automatically voided by illegal acts unless those acts were committed with the intent to cause damage. The court ruled that Pembridge could use any defense it had against Landry, including this one, for claims above the statutory minimum of $200,000.
Martin’s insurer, Cooperators General Insurance Company, appealed the decision, arguing that the court had incorrectly interpreted the law:
- That Pembridge’s liability should not be limited to $200,000.
- That Pembridge should not be entitled to use the defense based on Landry’s illegal actions.
- That if the defense is applicable, it should not apply due to the specific terms of the Standard Auto Policy.
The Standard Auto Policy primarily covers damages up to the policy limit for the insured with limits of a minimum $200,000.00. The NBEF 44 endorsement allows claimants to recover from their own insurer damages provided that their Section A coverage exceeds the at-fault party’s liability limit. Section 250 of the Insurance Act outlines the rights of third-party claimants to recover from the at-fault party’s insurer, limited by the policy’s coverage.
The court agreed with Pembridge Insurance’s position, ruling that section 2 of the Insurance Act allows Pembridge to deny coverage amounts above $200,000 if it can use defenses against the insured, including those based on illegal actions. The court confirmed that section 2 is a public policy rule, not just a guideline for interpreting the insurance policy.
In summary, an insurer can deny coverage for amounts exceeding the statutory minimum if it has available defenses against its insured, including those based on illegal acts committed by the insured with the intent to cause damage. In this instance, Pembridge argued that it could limit its liability to $200,000.00 despite the wrongful conduct of the insured, as the court upheld the application of Section 2 of the Insurance Act.
