Insurance Case Law Updates – May 2009
IN NEW BRUNSWICK
Court of Appeal Rejects Insurer’s Reliance on “Criminal Act” Exclusion and Upholds Insurer’s Duty to Defend – Optimum Insurance Company Inc. v. Donovan, 2008 NBCA 182
The insurer appealed a motion Judge’s declaration that it was required to defend the Respondent in an accidental death action. While his parents were away on holiday, the Respondent hosted a party during which he unintentionally shot and killed a guest and friend. When an action was commenced against the Respondent and his parents, the insurer refused to defend relying on the “criminal act” exclusion. The pleadings alleged that the Respondent and his parents were negligent but did not raise any allegations of criminal conduct. The duty to defend issue was brought before the Court under Rule 23 which limits the focus to the pleadings only and does not permit the Court to consider other evidence such as discovery evidence. The insurer bore the burden of establishing the applicability of the criminal act exclusion. Although the insurer alleged through an Affidavit that the Respondent admitted at the examination for discovery that he pleaded guilty to a criminal charge of manslaughter, the transcript could not be entered as evidence. The insurer also admitted that: the Respondent did not intend to injure, let alone kill; and “but for” the criminal act exclusion, its duty to defend would apply. The Court of Appeal upheld the motion Judge’s decision not to consider the affidavit submitted by the insurer relating to the guilty plea on the manslaughter charge. When the true nature of the claim advanced in the Statement of Claim was examined, it related only to acts of negligence. Therefore, the appellant insurer had failed to meet the onus of bringing the claim within the criminal act exclusion and was therefore required to defend.
Court of Appeal conﬁrms that Defendant Responsible for Full Cost of Treatment for Preexisting but Asymptomatic Condition; Future Loss of Housekeeping award capped at age 65 – Wallace v. Thibodeau, 2008 NBCA 78
The Plaintiff was injured in a motor vehicle accident for which the Defendant admitted liability. Prior to the accident the Plaintiff had poor jaw alignment and abnormal curvature of the spine, both of which were asymptomatic. Both conditions became symptomatic following the accident.
The Court of Appeal held that the trial Judge erred in failing to allow the Plaintiff’s claim for dental care for his TMJ disorder. There was no evidentiary basis for the defendant’s argument that the dental work would have been required in the future had the accident not occurred. At law, the Defendant was responsible for the full cost of the TMJ treatment. The Court of Appeal also conﬁrmed that the trial Judge could properly quantify and award damages for loss of housekeeping capacity on the basis of testimonial evidence establishing the frequency and cost of the services without documentary veriﬁcation of that testimony. The trial Judge did err, however, when awarding damages for loss of housekeeping by failing to consider some reduction for the risk of disability unrelated to the accident and in awarding damages for future loss of housekeeping past the “limiting” age of 65. The damage awards for past and future housekeeping services were therefore reduced. Finally, the Plaintiff’s claim for future loss of income was properly dismissed as the trial Judge had rejected as unfounded the assumption of a real and substantial possibility that the Plaintiff’s accident related injuries would compel his employment of an additional boat helper.
IN NEWFOUNDLAND AND LABRADOR
Use of Interrogatories Shifts Practical Burden of Disclosure to Plaintiffs – Szeto v. Field,  NLTD 8
In an action for damages arising from a motor vehicle accident, the defendants served interrogatories (written discovery questions) on the plaintiffs pursuant to the relevant procedural rule. The interrogatories sought varied information from the plaintiffs, including information respecting pre-accident medical treatment, treatment providers, dates of visits, relevant complaints, prescriptions, as well as employment and income information. Counsel for the plaintiffs argued that the interrogatories were not proper and that they were oppressive to the plaintiffs in that the requested information should be pursued by the defendants either through requests for document production or oral discovery. In particular, counsel for the plaintiffs argued that there was a hierarchy within the procedural rules respecting document production and discovery, and that the rule relating to written interrogatories is the least broad in scope. Counsel for the plaintiffs further argued that interrogatories are not a substitute for oral discovery, and that answering the interrogatories as posed would be time consuming and expensive for the plaintiffs. The chambers judge, in ﬁnding for the defendants, held that there was no hierarchy within the disclosure rules as asserted by the plaintiffs. As well, the chambers judge found that there was no support in the plain wording of the disclosure rules for the contention that the scope of interrogatories is narrower than that of oral discovery. The chambers judge further noted that the process chosen by the defendants may obviate the need for oral discovery and thus save expense. This decision is currently under appeal.
Section B Beneﬁts Not Available to Individual Able to Work at Reduced Capacity – Brophy v. Primmum Insurance Company/Primmum Compagnie D’Assurance, 2008 NLTD 190
The Plaintiff was seriously injured in an automobile accident in 2001 and claimed loss of income beneﬁts under Section B coverage of an automobile insurance policy. At the time of the accident the Plaintiff was working fulltime. Post accident, she worked only four days a week, ﬁve hours per day. At issue was her capacity to work more than twenty hours per week.
In 2005 the insurer stopped paying wage loss beneﬁts on the basis that the Plaintiff was not “continuously prevented from engaging in any occupation or employment for which she is reasonably suited by education, training or experience.”
The Plaintiff argued that the pain and related fatigue from her injuries prevented her from working more. Were she to work more, her quality of life would be destroyed. Two occupational therapists testiﬁed. The ﬁrst agreed with the Plantiff’s position. The second testiﬁed that with appropriate accommodation the Plaintiff had the capacity to work fulltime.
The Defendant’s position was that the contract insured against a loss of working capacity due to disability; it was not a “peace of mind” policy, nor one that insured income loss when that loss was brought about by choices made by the insured.
Orsborn J. dismissed the action and found that the Plaintiff did not discharge the onus to establish her entitlement to beneﬁts. He stated that a choice to exercise one’s capacity to work, or to seek other employment does not affect or enhance one’s contractual entitlement to wage-loss beneﬁts.
Occupier’s Liability Claim Fails on Causation – Lane v. Alcock Enterprises Limited and Pynn, 2009 NLCA 2
This matter involved a Plaintiff’s claim against an owner and occupier for damages suffered as a result of a fall on stairs leading to the building. The building’s occupier operated a used furniture business from that site. The Plaintiff alleged that the deﬁciencies in the stair geometry, an absence of hand rails, and a lack of tread grip on the steps all contributed to his injuries. The trial judge held that the occupier owed a duty of care and that the owner maintained suffcient control over and responsibility for the stairs to warrant ﬁnding it too owed a duty of care. The trial judge held that the lack of hand rails and the poor stair geometry on the main stairs to a business constituted negligence, but was not satisﬁed that the Defendants’ failure to have tread grip constituted negligence. Ultimately, the trial judge concluded that the Plaintiff failed to establish that he fell due to the Defendants’ negligence. The trial judge applied the “but for” test for determining causation and was not convinced that “but for” the suspect stair geometry and lack of hand rails, the Plaintiff would not have sustained his injury.
The Plaintiff appealed the trial judge’s ﬁnding that the negligence of the Defendants was not the cause of his fall and the trial judge’s ﬁnding that the lack of tread grip on the stairs did not constitute negligence. The owner cross-appealed the trial judge’s ﬁnding that the owner of the premises owed a duty of care. In dismissing the appeal, the Court held that the Plaintiff had failed to show that the injury would not have occurred but for the Defendants’ negligence. While there was conﬂicting evidence regarding whether tread grip was required on stairs by the National Building Code, the Court of Appeal followed the Supreme Court of Canada’s decision in Ryan v. Victoria (City) in holding that a statutory breach does not automatically give rise to civil liability. As the appeal was dismissed, the Court stated that it was not necessary to deal with the cross-appeal.
IN NOVA SCOTIA
NSSC Dismisses Constitutional Challenge to Nova Scotia CAP – Hartling v. Nova Scotia (Attorney General), 2009 NSSC 2
Justice Goodfellow of the Supreme Court of Nova Scotia dismissed an application on various issues with respect to the constitutionality of the Nova Scotia cap legislation.
First, the Court considered whether the deﬁnition of “minor injury” in s. 113(B)(1)(a) of the Nova Scotia Insurance Act is discriminatory based on physical disability as deﬁned in s. 15(1) of the Charter. The Applicants argued that accident victims with a physical disability who do not meet the minor injury threshold suffer a negative stigmatization compared to accident victims who meet the threshold. The Court held that the evidence failed to established an infringement of rights on a balance of probabilities, and that the evidence overwhelmingly established that there is no stigmatization or marginalization resulting from the legislation. What limited stigmatization and marginalization might be said to exist is an ever-diminishing by-product of the adversarial system, which pre-dates the legislation. In short, the evidence of the Applicants fell markedly short of supporting the suggestion that persons with soft tissue injuries are stereotyped, stigmatized or disadvantaged by society.
Second, the Court considered whether s. 113(B)(1)(a) of the Act violates s. 15 of the Charter by discriminating on the basis of gender. The female Applicants presented expert evidence, largely based on an analysis of American jury awards, suggesting that the cap disproportionately affects women by depriving them of a greater amount of their overall award. The Applicants argued that women typically recover more from nonpecuniary damages, whereas men recover more under awards for economic loss. The Court found that the legislation did not discriminate on the basis of sex, noting that the effect of the cap was to treat women and men in an identical fashion in terms of their ability to recover both pecuniary and non-pecuniary damages. The Court further commented that the Applicants’ expert evidence was “totally unreliable” and that they fell markedly short of the balance of probabilities.
Next, the Court considered whether s. 2(1)(d)(ii) of the Regulations (the “chronic pain Regulation”) violated s. 15 of the Charter on the basis of physical disability. In rejecting the Applicants’ arguments, the Court noted that a person who meets the deﬁnition of chronic pain outlined in the Regulation is deemed not to suffer a “minor injury” and can sue for damages for pain and suffering. Beyond this, for the same reasons articulated in its analysis of the ﬁrst issue, the court found that the Regulation does not result in stigmatization and stereotyping of persons suffering from chronic pain. What limited stigmatization and stereotypes do exist are a result of the adversarial system.
Fourth, the Court considered the Applicants’ position that s. 2(1)(f) [deﬁnition of “resolves”], (g) [deﬁnition of “substantial interference”] and (h) [deﬁnition of “usual daily activities”] of the Regulations were ultra vires the Insurance Act because they were inconsistent with the spirit and purpose of the Act. In rejecting this argument, the Court concluded that the deﬁnitions are consistent with the objectives of controlling claim costs, reducing automobile insurance premiums and strengthening the consumer protection provisions of the Act. The Court concluded that it was within the power of the Legislature to permit the Governor in Council to make Regulations deﬁning words used in the legislation given that the deﬁnitions were anticipated and considered to be necessary and advisable to accomplish the objectives of the legislation. The suggestion from Applicants’ counsel that the objective of the legislation was to “protect accident victims” was expressly rejected.
Finally, the Court considered whether one of the Applicants, a minor with alleged PTSD, had been discriminated against on the basis of mental disability. In considering this issue, the Court accepted the Respondents’ expert evidence that PTSD is, at least in part, physical in nature. The applicant led no evidence to the contrary. The Court accordingly concluded that the brain is part of the body and that PTSD is therefore an injury “physical in nature”. The Court further noted that if the applicant had a permanent, serious impairment of an important bodily function caused by a continuing injury or an injury which had not resolved within 12 months, then she would not be restricted by the cap given that her injuries were indeed “physical in nature”. On the evidence, the Court found as a fact that the Applicant had failed to establish any distinction to her injury on the basis of mental disability.
The determination of the issue relating to s. 1 of the Charter will be addressed at a later date after Justice Goodfellow takes a “short break” from the matter.
Bank not negligent for failing to provide mortgage insurance prior to plaintiff’s wife becoming uninsurable – Connolly v. Royal Bank of Canada,  NSSC 375
In February of 2001 Connolly approached RBC seeking to join his wife to his mortgage and obtain insurance. The next month, Connolly and his wife met with the bank’s employee, Hebb, to make their annual RRSP contribution, and also inquired about the joint mortgage and insurance application. In June 2001, Connolly met with Hebb in connection with his daughter’s ﬁnancial affairs, and again inquired about the joint mortgage and insurance for his wife. In September 2001, Connolly and Hebb met in the lobby or mall entrance of the bank, where Connolly raised the issue again. In December of 2001, Connolly left a voice mail message with Hebb inquiring further about mortgage insurance. Hebb then called Connolly back several times with no answer. No mortgage insurance was ever provided.
Connolly’s wife was subsequently diagnosed with a fatal brain tumor, thus becoming uninsurable. Connolly advanced a claim on several grounds. The court determined that the claim of negligence was an inappropriate cause of action as the claim was for pure economic loss. On the Hedley Byrne analysis, the court determined that Hebb had not made any untrue, inaccurate, or misleading statements in his dealings with Connolly. Hebb’s only representations were that he would “look into” the joint mortgage and insurance. No clear demand for the mortgage insurance was made.
The court found that RBC could have also been liable for compensable economic loss due to negligent performance of services. This cause of action would have been established had the bank voluntarily undertaken to perform services and done so in a negligent manner. However, the court held that no formal instructions to obtain mortgage insurance were given, nor did Connolly ever indicate a deadline or establish any urgency for the insurance. The inquiries were preliminary and the bank was not negligent.
IN PRINCE EDWARD ISLAND
The PEI Court of Appeal denies additional discoveries as part of the terms of allowing an amendment to a Statement of Defence after additional facts brought to light at discovery – Peardon v. Long and WTH Funding, 2008 PESCAD 13 (CanLII)
On motion by the Defendant for leave to amend the Statement of Defence to claim contributory negligence on the part of the Plaintiff as a result of additional information brought to light in discovery, the motions judge would not entertain the Plaintiff’s request to allow additional discoveries at the cost of the Defendant as a term of the leave to amend. The Plaintiff appealed the motion judge’s ﬁnding in this regard. In dismissing the appeal, the Court of Appeal held that the assessment by the motions judge that: (1) the matters of contributory negligence raised by the Defendant at discovery were within the scope of the issue of liability; and (2) the Plaintiff had an opportunity to and did examine on those matters at discovery, were not unreasonable. The Court of Appeal further stated that the motions judge left the door open by not ruling on whether another discovery should occur and also ordering that the costs of any further discovery would be in the cause.
Following the Court of Appeal decision in 2008 PESCAD13 (CanLII), the Plaintiff in Peardon v. Long and WTH Funding (unreported) December 11, 2008, brought a subsequent motion requesting answers to a number of questions not answered at the discovery of the Defendant and a further discovery of the Defendant speciﬁcally limited to questions surrounding the issue of contributory negligence that were referenced in the prior motion. The motions judge ordered the additional questions set out to be answered and held that the Plaintiff was entitled to a further discovery, although he directed that the parties should attempt the further discovery by written questions and answers, with reasonable follow up questions if necessary, and if that failed, then they could attend in person. The motions judge ordered that the parties would bear their own costs of attending the second discovery.
PEI Court of Appeal Clariﬁes Scope of Oral Discovery – Llewellyn v. Carter et al, 2008 PESCAD
The Plaintiff appealed the decision of a motions judge who denied her motion requesting the following relief: particulars of surveillance evidence; disclosure of the names of witnesses who had knowledge of the accident and the Plaintiff’s injuries; particulars of the refusal to take treatment; the nature of any pre-existing conditions and intervening or subsequent causes of her disability; and a statement from the insurance adjuster and insurer’s representative that the affidavit of documents contained a complete copy of their ﬁles.
The Court allowed the appeal, with the exception of one item, being a statement from the adjuster and insurer’s representative that the affidavit of documents contained their complete ﬁle. In allowing the appeal, the Court comprehensively reviewed the difference between documentary discovery and oral discovery and between solicitor/client privilege and litigation privilege. The court held that although there is no obligation to provide the requested particulars of surveillance in the affidavit of documents, there was an obligation to provide those particulars on oral discovery. With regards to questions surrounding the evidence of any pre-existing conditions and intervening or subsequent causes of her disability, the motions judge erred when he denied the request for this information and held that this information would be in the possession of the Plaintiff and not the Defendant. The Court of Appeal held that it did not meet the informational disclosure requirements of Rule 31 for the Defendant to state she was relying on the medical records in the affidavit of documents, but rather that she “should be prepared to disclose the evidence which will be adduced to support the factual allegations made in the statement of defence.” In regards to the request for statements from the adjuster and insurer’s representative that the affidavit of documents contained their complete ﬁles, the Court was not prepared to order this and held that the appropriate remedy would be to conduct a nonparty discovery examination in accordance with Rule 31.10(2).
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