Michael Girard: e-Lawg - Insurance

Material Misrepresentation Voids Insurance Coverage

Wed, 12 Jan 2005 01:52:22 GMT

In W.H Stuart Mutuals Ltd. v. London Guarantee Insurance Co. the Ontario Court of Appeal held that a fidelity insurance policy covering theft by employees through electronic transfer was void for misrepresentation in the insurance application.

The insured had stated that the principals of the company signed each cheque. The company had in fact changed to a computerized cheque generating system which created a computerized facsimile of the principals signature. The Court held this was a material misrepresentation.

The Court also commented that the trial judge was in error in applying a subjective test to the issue of the insured's duty to disclose. The Court stated that there must be an objective element to the test.

The material misrepresentation voided the policy and the insured was not entitled to indemnity under the policy.

Claims Made Policy, Not Surprisingly, Requires a Claim to be Made

Thu, 18 Nov 2004 01:58:07 GMT

In The Jesuits Fathers of Upper Canada v. Guardian Insurance of Canada, the Ontario Court of Appeal considered the issue of the duty to defend under a claims made policy. The policies provided coverage for claims that were "first made against the insuted during the policy period".

The Court adopted the statement of the motions judge:

"A general understanding of a problem, in the absence of sufficient detail, will not constitute a 'claim' within the policy."

Automobile, Boat and Homeowner Policies: Coverage Issues

Fri, 05 Nov 2004 03:14:06 GMT

The Ontario Court of Appeal addressed the issue of coverage between an automobile, boat and homeowner's policy in Axa Insurance v. Dominion.The insured was attaching a bungee cord to fasten down seat cushions on the boat which was on the trailer, attached to the car. The bungee cord let go, striking another individual in the eye.

At issue was which of three policies owed a duty to indemnify or a duty to defend.

In considering the auto policy, the court followed Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405, wherein Major J. formulated a two‑part test:

"1. Did the accident result from the ordinary and well‑known activities to which automobiles are put?

2. Is there some nexus or causal relationship (not necessarily a direct or proximate causal relationship) between the appellant’s injuries and the ownership, use or operation of his vehicle, or is the connection between the injuries and the ownership, use or operation of the vehicle merely incidental or fortuitous?"

The Court answered yes to both questions and held the auto policy had the obligation to defend and indemnify.

The boat insurer conceded that there was coverage under the policy, but relied on the Other Insurance clause in its policy:

"If you have other insurance not insured with us which applies to a loss or claim … our policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance is used up."

The Court held that the boat insurer had no obligation to defend or indemnify, until the underlying auto policy limits were used up.

The homeowner's policy had an exclusion for "damage arising from the ownership, use or operation of any motorized vehicle, trailer or watercraft ….". As such, it had no obligation to defend or indemnify.

Mon, 01 Nov 2004 03:03:26 GMT

Insurance Securities Class Actions Rolling In..... According to the SCAS Database, in the two weeks since NY AG Eliot Spitzer filed his complaint against Marsh & McLennan Companies, Inc. and its subsidiary, Marsh Inc., seven companies have been named as defendants in insurance-related securities class actions.... [SECURITIES LITIGATION WATCH]

Recovery From Umbrella Policy Not Deductible From Under Family Protection Endorsement

Fri, 29 Oct 2004 03:15:34 GMT

In Heuvelman v. White the Ontario Court of Appeal concluded that a personal umbrella policy was bit a motor vehicle liability policy. As such, any monies recovered under the umbrella policy did not reduce the amount recoverable under the Family Protection Endorsement.

Ontario Court of Appeal Considers Duty to Defend Issues

Fri, 29 Oct 2004 03:07:08 GMT

In Halifax Insurance Company v. Innopex Limited, the Ontario Court of Appeal confirmed that the duty to defend will be determined based on the policy wording and the allegations in the claim. Extrinsic evidence should not be considered.

The Court reiterated that reference to and reliance on U.S. insurance decisions, where there is little or no Canadian authority, is appropriate in order to "ensure uniformity in the construction of insurance contracts in use in both countries". While a laudable goal, there does not seem to be uniformity within the U.S. on troublesome coverage issues.

The Court also had some strong words for the insurer:

"I return to the procedure employed by Halifax to bring the duty to defend issue to the court for its determination. It is unfortunate that Halifax adopted a proactive, preemptive strike tactic that resulted in the creation of a substantial record containing considerable extrinsic evidence that diverted the motion judge from deciding the duty to defend issue expeditiously on the basis of the legal principles and test explained by the Supreme Court of Canada in Nichols, Scalera and Monenco. Moreover, it is very disturbing that Halifax followed this procedure in what appears to be a deliberate effort to divert the court from deciding the real issue of whether it had a duty to defend, a result which its own expert believed to be virtually inevitable. When an insured person is sued for a claim that may fall within a risk that is insured, it is essential that he or she know at a very early stage whether or not the claim falls within the coverage, thereby creating a duty to defend, as it is necessary that prompt steps be taken to defend the lawsuit and to forestall default judgment. No doubt this underlies the principle that the duty to defend issue is to be decided expeditiously as a preliminary matter on the basis of the allegations in the underlying litigation read with the insurance coverage. The insurer’s procedure in this case did not result in either an early, or an economical resolution of the issue. Indeed, it has now been more than four years since Halifax commenced its action claiming a declaration that it was not under a duty to defend."

Passenger in Stolen Vehicle Not Covered

Thu, 07 Oct 2004 03:03:22 GMT

In Simison v.Catlyn, the Ontario Court of Appeal held that a passenger in a stolen vehicle is not entitled to claim under the uninsured provisions of the passenger's mother's policy of insurance.

Proposed ISO Changes to Additional Insured Wording

Fri, 27 Aug 2004 02:18:58 GMT

The ISO is proposing changes to the Additional Insured wording. The intent is to exclude coverage to Additional Insureds for liability arising out of their sold negligence.

Insurer Can Subrogate in its Own Name

Tue, 27 Apr 2004 02:19:32 GMT

In Freudmann-Cohen v. Tran, the Ontario Court of Appeal considered the issue of subrogation in the context of Third Party Claims. The Insurer was named as a defendant in an action by its own insured under the underinsured coverage (OEF 44) of its policy. The tortfeasor was a codefendant.

The insurer discovered that the tortfeasor had been delivering pizza at the time of the accident. The limitation period for the plaintiff had expired by this time. The insurer sought to add the employer as a Third Party to the action. The employer moved to strike the Third Party Claim, arguing that this was a subrogated claim which the insurer was attempting to pursue in its own name.

The Court of Appeal concluded that the requirement for an insurer to sue in the name of its insured was a procedural rule. When balanced against the procedural rule for Third Party Claims, the objectives expressed in the rule, "namely, more effective and less costly litigation, and the avoidance of multiplicity of proceedings, should carry the day".

The Insurer was permited to bring the subrogated action in its own name.

Defective Manufacture is Not an Accident or Occurrence Under General Liability Policy

Wed, 14 Apr 2004 04:28:50 GMT

The Supreme Court of Canada dismissed a motion for leave to appeal in Celestica Inc. v. ACE INA Insurance.

"Commercial law - Insurance - Comprehensive general liability policy - Defective components being installed by insured in power modules of photocopiers - Insured taking corrective action - Definition of "occurrence" - Whether the manufacture and sale of a defective item by the insured, where the insured does not know that the item is defective, may be an occurrence within the definition of occurrence in the policy - Whether the Court of Appeal erred in finding that the loss sustained by the Applicant was not caused by an occurrence, as defined in the insurance policy issued to the Applicant by the Respondent."

At the Ontario Court of Appeal, the Court held:

"[31] There are good policy reasons for refusing to find that defective design or manufacture can constitute an accident. In Privest Properties Ltd. v. Foundation Co. of Canada (1991), 6 C.C.L.I. (2d) 23 at 72 (B.C.S.C.), Drost J. stated:

There is a policy reason for this. If the insurance proceeds could be used to pay for the repairing or replacing of defective work and products, a contractor or subcontractor could receive initial payment for its work and then receive further payment from the insurer to repair or replace it. Equally repugnant on policy grounds is the notion that the presence of insurance obviates the obligation to perform the job initially in a good and workmanlike manner."

(Michael Girard was counsel for the successful respondent on the leave to appeal application)

Tue, 13 Apr 2004 23:12:29 GMT

Fourth Circuit Holds That Virginia Would Follow General Rule That Indemnity Agreement Between Insureds May Shift Entire Loss To A Particular Insurer, Notwithstanding 'Other Insurance' Clauses. In St. Paul Fire & Marine Ins. Co. v. American International Specialty Lines Insurance Co. (AISLIC), Nos. 02-2360 and 02-2361, dated April 9, 2004, the Fourth Circuit decided the allocation of loss between four insurers, St. Paul, TIG, CNA and... [Insurance Defense Blog]

Unidentified Driver Coverage Can Deduct Disability Insurance

Sun, 28 Mar 2004 22:42:04 GMT

In Kosanovic v. Wawanesa Mutual Insurance Company, the Ontario Court of Appeal held that disability benefits are deductible from monies owing by an automobile insurer under the Unidentified Driver Coverage.

One Negligent Act, Two Heads of Damages Means Separate Causes of Action

Thu, 04 Mar 2004 03:25:04 GMT

In Chenderovitch v. Doe, the Ontario Court of Appeal held that the discoverability principle from Peixeiro v. Haberman, [1997] 3 S.C.R. 549, applies to personal injury claims under the Bill 59 insurance regime. The Insurer had argued that, as the plaintiff had economic claims arising out of the motor vehicle accident, the limitation period of two years applied from the date of the accident.

The Court of Appeal disagreed, holding that Bill 59 was intended to create separate causes of action for separate heads of damages arising out of the same act of negligence. Therefore, there was one limitation period for the economic losses and another limitation period for the general damages. Discoverability applied to the general damages claim.

Age and Racial Discrimination is not Fortuitous

Thu, 04 Mar 2004 03:01:33 GMT

In Liberty Mutual Insurance Company v. Hollinger Inc., the Ontario Court of Appeal considered coverage for age discrimination under a Commercial General Liability Policy. Hollinger was sued by a former employee who included claims that Hollinger engaged in intentional racial and age discrimination.

At issue was whether the CGL issued by Liberty covered these claims. The coverage grant included coverage for discrimination under the personal injury coverage. There was an exclusion for "claims arising out of [t]he wilful violation of a penal statute." The insurer argued that discrimination was contrary to the applicable human rights legislation which provided for fines and imprisonment. The Court dismissed this argument adopting the application judge’s reasons that the statutes were remedial as well as penal. When relied upon to support a civil cause of action, they were classed as remedial. As such, they did not fall withing the penal statute exclusion.

The Court of Appeal went on to consider the general issue of fortuity. "Where an insured intends to cause the very harm that gives rise to the claim, the insured cannot look to a liability policy for indemnity." The Court held that the alleged intentional racial and age discrimination was not "fortuitous". As such, it was not covered under the CGL policy.

Defence Counsel and the Tripartite Relationship

Sat, 29 Nov 2003 02:45:47 GMT

Danny Howell does a good review of Defence Counsel and Coverage Inplications of the Tripartite Relationship.

Sat, 29 Nov 2003 02:22:12 GMT

Mold Class Action Results in Multimillion-Dollar Settlement [Law.com]

Thu, 20 Nov 2003 04:15:31 GMT

Your Insurance Policy: Choice of Counsel Matters. By Peter Goss and Diana Young Morrissey Insurance defense lawyers generally are guided by a single mission: Get the case resolved for the least money, and don't spend a lot to do so. But this mission may not always run... [Law Firm Management News]

Fri, 14 Nov 2003 00:48:37 GMT

Sperm Bank Insurer Not Liable for Destroyed Samples [Law.com]

Thu, 13 Nov 2003 02:58:02 GMT

Another Mold Litigation Article. The FDCC Quarterly has published another mold litigation article, "Mold Litigation: The Defense Perspective", by Douglas G. Houser and Linda M. Bolduan, both from the rainy State of Oregon. They give a broad overview, including insurance issues, causation issues, review... [Insurance Defense Blog]

Tue, 14 Oct 2003 13:41:31 GMT

No Duty To Defend Under Homeowners Policy Based On Negligent Defense of Another. In Standard Fire Insurance Co. v. Proctor, Judge Alexander Williams of the U.S. District Court for the District of Maryland awarded summary judgment to an insurer in a declaratory judgment action, finding that it had no duty to defend because... [Insurance Defense Blog]

Wed, 24 Sep 2003 13:48:34 GMT

Tort and Insurance Portal Now Online. Bob Ambrogi reports that the ABA's Tort & Insurance Practice Section has launched e-DICTA, furnishing law and insurance resources to its members and the general public. This page and the Inter Alia]

Thu, 18 Sep 2003 18:07:41 GMT

Mold and the Pollution Exclusion. A good article on this topic, Mold and Pollution: When Is a Contaminant Not a Contaminant?, by Jacqueline M. Jauregui, is available at the FDCC website. Ms. Jauregui concludes that: Courts may be hesitant to apply the standard pollution exclusion... [Insurance Defense Blog]

Tue, 16 Sep 2003 13:29:33 GMT

Statistics on Cost of Litigiousness. The Insurance Information Institute has published a summary of statistics concerning the costs of litigiousness. Interestingly, in 2001 defense costs as a percentage of losses incurred increased in terms of the dollar amount spent but decreased as a percentage of... [Insurance Defense Blog]

Mon, 15 Sep 2003 17:46:44 GMT

ABA's Tort Trial and Insurance Practice Section Megasite. The TIPS megasite, www.edicta.org, now incorporates a blog aggregator powered by the Daily Whirl. TIPS also has a great Law and Insurance portal.... [Insurance Defense Blog]

Fri, 12 Sep 2003 13:45:50 GMT

Harsh Words. It doesn't get much harsher than this statement from the SEC, taken from its announcement of the settlement of proceedings against Brightpoint, Inc., AIG and certain individuals related to alleged accounting fraud: AIG played an indispensable part in the fraudulent... [SECURITIES LITIGATION WATCH]