Broad Definition of the Term “Accident”

In the decision VanBerlo v. Aim Underwriting Ltd., 2014 ONSC 4648 (S.C.J.), the Ontario Superior Court recently considered the meaning of the term “accident”. The plaintiff crashed while attempting to take off in his twin-engine aircraft when he was aware that only one of the two engines was functioning. Although he had never done this before, it was the plaintiff’s belief that the aircraft was capable of taking off with only one engine. Additionally, he felt that it was able to safely make the six-minute flight to his destination. The plaintiff sought to recover the damages to the plane under his Aircraft Policy of Insurance. The insurer argued that this did not fall under the definition of an "accident" and the policy was not triggered.

The Court reviewed the existing case law and concluded that the term "accident" is "an unlooked for mishap or occurrence”. Applying this definition, the Court found that an accident can occur where the conduct of the insured constitutes negligence and even gross negligence. In this case, the court held:

“It cannot be said, on the facts, that the plaintiff realized the danger of his actions and deliberately assumed the risk; nor can it be said that the plaintiff’s conduct rose to a level of recklessness or culpability such that the occurrence was no longer an accident.”

The insurance was policy was required to pay the damages sought by the plaintiff.

“The Cruel World of Claims-made-and-reported Policies of Insurance”

Those are the words of Justice Quinn of the Ontario Superior Court of Justice in Certain Underwritersat Lloyd’s of London v. All Spec Home Inspections et al., 2013 ONSC 7149.

In this case the respondent was a self-employed home inspector who had a professional liability insurance policy through the Applicant which was renewed annually.

The respondent carried out an inspection in July 2010 at the Swallow residence and produced a report and photographs. On August 16, 2010 Paul Mambella was performing work in the attic of the Swallow residence when he came into contact with an exposed, energized and bare copper wire. He was electrocuted and died. A Ministry of Labour investigation ensued immediately in which the respondent was involved.

In August 2010 the respondent’s insurance policy came up for renewal. The Application contained the following questions which he answered “no” to:

22.             In the last five (5) years, has a claim ever been made against the applicant?

If YES, please provide the following details...

23.             Is the applicant aware of any situation or circumstance which may in the future result in a claim…

Below these questions the following exclusion appeared:

Without limitation of any other remedy available to the insurer, it is hereby agreed that if there be knowledge of any such fact, circumstance or situation, any claim or action subsequently emanating therefrom is excluded from coverage under the proposed insurance.

The Ministry of Labour conducted an inquest in late August 2011. On September 10, 2011 the respondent submitted a renewal Application and again answered “no” to the above questions.

In November 2011 the widow and children of Mambella commenced an action. After consulting a lawyer the respondent notified the applicant. The applicant brought this coverage Application.

The Policy is a claims-made-and-reported insurance policy.  The applicant argued that it relied on the representations made by the respondent in the application in renewing the policy. It further argued that the policy excluded coverage in the circumstances and the exclusion is clear and unambigious and thus results in there being no coverage available to the respondent.

 Citing the Ontario Court of Appeal in Fellowes, McNeil v. Kansa General International Insurance Company Ltd. et al., 2000 CanLII 22279, Justice Quinn held that the test whether a situation or circumstance should be reported to an insurer, as being one which may in the future result in a claim, is an objective test. The Ministry of Labour investigation and inquest “called out for notice” by the respondent to the applicant.

 
The court went onto consider how the existence of an exclusion affects the availability of relief from forfeiture under section 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The applicant’s argument was accepted that relief from forfeiture is unavailable where a claim falls outside of the coverage due to the operation of an exclusion.   

Justice Quinn ruled in favour of the applicant denying coverage.

Plaintiff entitled to coverage despite driving with expired licence

Sometimes even when you win, you lose.

We previously blogged on Kozel v. Personal Insurance Co.  A copy of our previous post is found here.  In that case, the respondent was in an accident while driving with an expired licence.  She claimed she received her licence renewal documents in the mail and gave them to a dealership when she took delivery of a new automobile.  The applications judge held that the insured exercised reasonable diligence and was entitled to a defence.  He also held that she was not entitled to relief from forfeiture because holding a valid licence is a condition precedent of the policy.

The Court of Appeal reversed the judge on the issue of due diligence but held that the respondent was entitled to relief from forfeiture.

The offence of driving without a valid licence is one of strict liability for which a defence of due diligence is available.  An individual can make out the defence if s/he can show a reasonable misapprehension of facts or reasonable care with respect to the offence with which she can charged.  The Court held that Ms. Kozel was not able to show she acted with reasonable care - although she had renewed her licence for 60 years on time, this time she did nothing else to inquire about or even consider her renewal.  There was no due diligence and the appeal was allowed on that issue.

However, the Court held that the plaintiff was entitled to relief from forfeiture.  The analysis looks at three factors: the applicant's conduct, the gravity of the breach and the disparity between the value of the property forfeited and the damage caused by the breach.  The Court held that Ms. Kozek acted in good faith and the breach was relatively minor.  In addition, the disparity was enormous as Kozek stood to lose $1,000,000 in insurance coverage while there was "no prejudice to the insurance company".  The Court held she was entitled to relief from forfeiture.

One has to wonder how much the specific facts of this case impacted the ultimate result: what if it wasn't a little old lady?  What if she had a history of driving with an expired licence?  What if the claim was for only $10,000?  It will be interesting to see how this case is applied to future fact situations.

Is the Insurer Always Justified in Denying Coverage On the Basis of a Breach of a Statutory Clause?

Every automobile insurance policy issued in Ontario contains statutory clause 4.1:

 

                The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.

 

Section 32 of Highway Traffic Act requires an operator of a motor vehicle to hold a valid driver’s licence. In Kozel v.Personal Insurance Co. [2013] ONSC 2670 (S.C.J), the applicant was a 77 woman year old woman who was involved in a motor vehicle accident in Florida. Her insurer denied coverage on the basis that she was in breach of the policy at the time of the accident because her driver’s license had expired. The applicant brought this application for a declaration that the insurer owed a duty to indemnify and defend her in a third party action against her.

 

Approximately five months prior to the accident, the applicant received documentation from the Ministry concerning the renewal of her driver’s licence and vehicle plate sticker. Two weeks prior to the renewal date, the applicant gave the package of documentation to her dealership where she took delivery of a new vehicle. She was unaware that this package contained her licence renewal. Until the accident occurred, she was unaware that her licence had not been renewed. She reported the accident in a timely manner and renewed her license immediately upon discovering it was expired.

 

Justice Wood cited the 2011 Court of Appeal decision Tut v. R.B.C. General Insurance Company [2011] ONCA 644 where it was held that if an offence for breaching the regulation was one of strict liability rather than absolute liability, it was open to the insured to argue that he took all reasonable care in the circumstances to see that he was not in breach of the regulation. Were he able to argue this defence successfully it would follow that he remained authorized to drive within the meaning of statutory condition 4(1).

 

Justice Wood held that since an offence of driving with an expired licence is one of strict liability, an argument that the applicant exercised due diligence was available. Justice Wood found that the applicant took active steps to ensure that she met her duty, although mistakenly, she provided a believable explanation for her lack of perfect diligence and her actions were those of a reasonable person acting upon a genuinely mistaken belief.  As such, the court found that the applicant was entitled to a defence under the policy.

 

This case shows that breaches of the insurance policy are not always clear cut and can involve the consideration by the court of many subjective factors.