Insurance Case Law Updates – October 2009
IN NEW BRUNSWICK
Court of Queen’s Bench Confirms Insurer has a Duty to Defend When There is a “Mere Possibility” that the Claim Advanced is Covered by the CGL Policy – Beaverdam Pools Ltd. v. Wawanesa Mutual Insurance Company, 2009 NBQB 123
The insured, Beaverdam Pools Ltd., brought an application for a declaration that the insurer, Wawanesa Mutual Insurance Co., had a duty to defend the insured pursuant to a CGL policy. The insured was in the swimming pool business and sold and installed an above-ground pool at the home of the third party. The third party later constructed a deck around and level with the top of the pool. Some parts of the pool separated and attempts by the insured to repair the pool were unsuccessful resulting in an action for damages being brought against the insured in negligence and contract. The insurer denied that the events giving rise to the loss were covered by the policy and denied that it had a duty to defend. The Court allowed the insured’s application. Although the CGL policy would not indemnify the insured for the cost of repairing or replacing “the work” of the insured, it may result in indemnity to the insured for liability to repair or replace damage to other structures caused by the insured’s negligence in performing its work. Part of the deck had to be rebuilt as a result of the defects in the pool. The Court declared that the insurer was obligated to defend the action as there was a possibility that the loss was covered under the policy. The Court ordered the insurer to pay the reasonable costs incurred by the insured in defending the action.
Death Benefit Not Payable to Adult Daughter Under Section B of NB Auto Policy, Where Daughter Not Principally Dependent on Father and Father not Head of Household – Boyle v. United General Insurance Corporation, 2009 NBQB 37
The plaintiff sought payment of a death benefit under Section B of the New Brunswick Standard Automobile policy after her father was struck and killed by an automobile insured by the defendant insurer, United General. The plaintiff, an only child, lived with her mother and son in an apartment. The plaintiff’s mother and father had been divorced for approximately 25 years and the father had never lived in the apartment with the plaintiff. The plaintiff claimed that she was principally dependant on her father as he had no other children and he assisted her financially while she attended university. At the time of his death, the father received $700 per month disability and the plaintiff earned about $1,100 per month. The father had assisted the plaintiff with some bills and childcare. The insurer took the position the plaintiff was not entitled to the death benefit as the plaintiff resided with her mother at a different address at the time of the father’s death; and the plaintiff was not financially dependent upon her father. The Court held that the plaintiff and father were part of the same household in a family-like group with emotional attachment. To his credit, the father made financial contribution and provided childcare which was a significant part of the plaintiff’s daily life, even though they did not live together. However, the plaintiff was not principally dependent on her father and he was not the head of the plaintiff’s household as contemplated by the case law or the policy wording of Section B. The plaintiff’s claim was dismissed.
Insurer’s Action Allowed for Fire Loss Based Upon Affidavit Evidence Under NB Rule 79, Simplified Procedure – Aviva Canada Inc. v. Isolation Chaleur Insurance Ltd., 2009 NBQB 117
The plaintiff insurer, Aviva Canada Inc. brought a subrogated action against the defendant, Isolation Chaleur Insulation Ltd., for damages to the plaintiff insured’s property following a fire. The defendant was an insulation company, hired by the plaintiff insured to install additional insulation in the attic of his house. The only evidence was affidavit evidence, including expert affidavits as to the cause of the fire, filed in the Rule 79 simplified procedure. There was no oral evidence or cross-examination. Damages were agreed by the parties to be $50,000.00, so the only issue was liability, specifically, whether there was sufficient evidence to enable a reasonable inference to be drawn that the damages were caused by the defendant. The Court held that on a balance of probabilities, an inference should be drawn that the fire was caused by a breach of duty owed by the defendant. The defendant owed a duty to the plaintiff that in doing the work, all necessary precautions would be taken to ensure that the work was completed safely. Nobody but the defendant’s employees were in the attic in the hours preceding the fire and there was clear evidence that the defendant’s employees used a saw and trouble light while installing cellulose insulation. There was no evidence that the fire was caused by smoking, arson or was electrical in origin. The plaintiff’s action was allowed based upon the affidavit evidence provided.
IN NEWFOUNDLAND AND LABRADOR
Plaintiff’s Credibility Diminished by Facebook Postings, Majority of Claim Dismissed – Terry v. Mullowney and Sinclair,  NLTD 56
At the time of trial, the plaintiff (“Terry”) was a 29 year old certified mechanic who owned and operated his own garage. He brought actions with respect to injuries he sustained in separate rear-end collisions, which occurred in November of 2001 and March of 2003. Liability was admitted by both defendants, and the actions were joined for hearing for the purpose of assessing damages. At trial, Terry presented a claim in excess of $1,000,000.00. He alleged that the cumulative affect of the injuries from both accidents rendered him unable to work as a mechanic, and had caused great diminishment to his overall quality of life. While Terry alleged that he had been unable to perform the duties of a mechanic following the second accident, surveillance evidence contradicted this assertion. As well, Terry’s allegations that he led a very restricted social life due to the injuries he sustained were contradicted by several postings to his Facebook account, which postings were used to impeach Terry during cross-examination. On the basis of the surveillance and Facebook evidence, the judge found that Terry’s testimony at trial was unreliable and inconsistent. The judge acknowledged that Terry had sustained injuries in the two accidents, and awarded general damages of $40,000.00 for pain and suffering. However, all other claims were dismissed, largely due to the diminishment of the plaintiff’s credibility when his claim was viewed in light of the surveillance and Facebook evidence.
Court Dismisses Defence Position Respecting Pre-Accident Medical History and Intervening Accident, Plaintiff Awarded Substantial Damages – Allen v. Wal-Mart Canada Inc.,  NLTD 79
Allen claimed damages arising from an incident at Wal-Mart in November of 1998. She was 45 years old at the time. The store in which the incident occurred was located on two levels, and was joined by a conveyor belt which moved between the floors known as a “movator”. The movator allowed for shoppers to travel between floors with their carts. While traveling between floors, Allen’s cart became entangled in the movator mechanism, and it lurched to one side, trapping her between the cart and the side of the movator. While the mechanism continued to move, she fell, and was carried along for a short distance before the movator was stopped. Immediately following the incident, Allen was able to get up on her own, and security video showed her walking from the site without difficulty. Allen claimed that the injuries she sustained in the incident left her with a permanent partial disability, with associated economic loss due to her inability to work as a homecare provider. While Wal-Mart admitted liability for the incident, it disputed the extent of the injuries sustained by Allen. It argued that any disability suffered by Allen was the result of a pre-existing degenerative condition, and/ or the subsequent intervention of an automobile accident some three years following the incident. The Court agreed with Allen’s submissions, and rejected Wal-Mart’s arguments respecting the cause of Allen’s disability, as well as the impact of the intervening accident. In particular, the Court held that the medical opinion of Allen’s family physician was more credible than the opinions of an orthopaedic surgeon and the physiatrist retained by Wal Mart. The Court noted that Allen had a well-documented onset of symptoms immediately following the accident, and the x-rays taken shortly following the accident exhibited radiological differences that were not present on pre-accident x-rays. The Court also examined the medical evidence in detail, and noted that the post-incident symptoms could be distinguished from any pre-accident problems of which Allen complained. As Allen remained significantly symptomatic some ten years following the incident, she was awarded $90,000 in non-pecuniary general damages. The Court accepted that her inability to work as a homecare worker caused her to lose income, and awarded her $61,000 for past loss of income, as well as $36,000 for future loss of earnings. Allen was also awarded $40,000 for past and future loss of housekeeping capacity. In addition to certain special damages, the total award was approximately $230,000, plus interest and costs.
IN NOVA SCOTIA
N.S.S.C. INTERPRETS MINOR INJURY CAP LEGISLATION FOR FIRST TIME; ASSESSES NO LIABILITY AGAINST DEFENDANT WHO SLID ON ICY ROAD – Farrell v Casavant, 2009 NSSC 233
The plaintiff brought an action arising from injuries suffered in an MVA after the defendant hit an icy patch on a bridge and skidded into opposing traffic. Associate Chief Justice Smith dismissed the action, finding no liability could attach to the defendant’s conduct, but nonetheless went on to discuss the claim for damages and in particular Nova Scotia’s cap on general damages for “minor” injuries.
The accident occurred on a cold morning on the Trans Canada Highway in Cape Breton. Conditions were good and neither party had experienced any difficulty with traction prior to the collision. The defendant was travelling below the speed limit when approaching the bridge, which clearly displayed a sign reading “Bridges Freeze Before Road”. In discussing liability, the Court recognized a presumption of negligence given the defendant had crossed into the opposing lane. However, the Court found that the defendant was not required to further reduce his speed despite this sign given the driving conditions that morning. The Court also found that the defendant had no notice of icy conditions, rejecting the plaintiff’s argument that drivers should be presumed to have notice given that icy patches are not unusual during a Nova Scotia winter. Finally, the Court found that the defendant’s reaction upon starting to skid (i.e. steering into the skid, not touching the breaks) was reasonable. Therefore, the presumption of negligence had been rebutted.
The Court then went on to discuss the damage claim and assessment under the minor injury cap as set out in s. 113B of the Nova Scotia Insurance Act and the Automobile Insurance Tort Recovery Limitation Regulations. The parties did not address the constitutionality of the cap, an issue currently under appeal in Hartling v. Nova Scotia (Attorney General).
The plaintiff suffered an injury to his right chest area, a small chip fracture to his left hand, and a contusion to his right ankle, all of which healed uneventfully. He also suffered an injury to his lower back which continued to cause pain and discomfort as well as a fracture to his right wrist which resulted in an obvious deformity that also continued to cause pain and discomfort.
First, the Court asked whether the plaintiff had suffered a “personal injury”. After finding that the plaintiff’s injuries did not fall within the exclusions enumerated in s. 2(1)(d) of the Regulations, the Court concluded that he had indeed suffered a personal injury.
Second, the Court considered whether the personal injury had resulted in “permanent serious disfigurement.” The Court largely adopted the analysis set out in the leading Ontario Court of Appeal case of Meyer v. Bright et al. in defining “permanent serious disfigurement”, requiring that a Court focus on the particulars of the injured person’s life. ACJ Smith also stated that disfigurement was concerned with the appearance of the individual rather than the function of the individual. The plaintiff had clearly suffered a permanent disfigurement, but he was not bothered by its appearance and took no effort to hide it. The Court therefore concluded it was not serious.
Third, the Court considered whether the personal injury resulted in a “permanent serious impairment of an important bodily function caused by a continuing injury which was physical in nature.” The Court again relied on Meyer v. Bright et al. and adopted the analysis set out in that case. The impairment had to be of a bodily function, rather than activities normally undertaken by the injured person. As per the definition of “permanent serious impairment”, the Court also focused on whether the injury “substantially” interfered with the plaintiff’s usual daily activities. Unlike legislation in other provinces, Nova Scotia defines “usual daily activities” such that they are restricted to the injured party’s ability to provide for their “own care”. The plaintiff had suffered a permanent impairment in his wrist and back. The evidence suggested that the unimpaired use of his wrist and back was important given the activities in which he had been involved prior to the accident. ACJ Smith found that the plaintiff did suffer a permanent serious impairment, but not one that substantially interfered with his usual daily activities (as defined in the legislation as providing for one’s own care) or employment.
Finally, the Court addressed whether the plaintiff’s other injuries had resolved within twelve months of the accident. As per the legislation, “resolves” does not necessarily mean that the plaintiff is treatment or symptom free by the one year mark but, rather that the injury no longer causes serious impairment by interfering with usual daily activities or regular employment. The plaintiff had suffered initial impairment from the injuries to his chest, left wrist, and right ankle, but the Court concluded that these were no longer factors when he returned to work some four months after the accident. Accordingly, for the purposes of the legislation, the plaintiff’s injuries were deemed to have resolved within twelve months.
As a result, had the Court not dismissed the claim based on liability, it would have awarded $2,500 in general damages as required by the cap legislation.
COURT OF APPEAL SAYS INSURED’S DUTY TO DISCLOSE LIMITED BY QUESTIONS/ACTIONS OF AGENT – Fleet v. Federated Life Insurance Co. of Canada, 2009 NSCA 76
The insurer and agent appealed from a judgment ordering the insurer to pay the full benefits of a life insurance policy, and allowing a cross claim against the agent for the same amount. The insurer alleged misrepresentation and failure to disclose material facts surrounding the insured’s “heart condition”.
The evidence at trial showed that the agent made inquiries with the insured over the phone and, instead of forwarding a completed health questionnaire to the insured for review and signature, the agent sent it directly to the insurer after having forged the insured’s signature. The insurer assumed that all had been completed properly and issued the policy. The questionnaire did not report any heart-related problems, despite the insured’s history. The agent alleged that this was because he was not given any details of heart-related problems.
The insurer argued that the insured had a duty of disclosure and that simply answering the agent’s questions did not necessarily amount to full disclosure. However, the Court disagreed with this reasoning and held that the nature of the questions asked in any given case may very well delineate the scope of an insured’s corresponding duty. The agent approached the insured and solicited the insured to change insurers, thereby taking the lead in gathering the information to contract for life insurance. The agent initiated two telephone calls in which he asked vague and general questions before signing the insured’s signature and sending the information to the insurer. Given these facts, any misstatements could not be attributed to the insured, and were in fact those of the agent. While the agent’s forgery vitiated any claim against the insured for misrepresentation or non-disclosure, it did not abort the contract between the insured and insurer.
SMALL CLAIMS COURT DISMISSES CLAIM FOLLOWING FIRE LOSS, CITING MULTIPLE COVERAGE ISSUES AND APPLYING LIMITATION PERIOD – Gillis v ING  N.S.J. No. 338
The claimant owned a house which he sold, subsequently leasing one of the floors from the new owner. Prior to the sale, he relocated some of his personal possessions (many of which were older, unused goods) from the house to an abandoned school which his company planned to demolish and redevelop as condos. The school was destroyed in a fire, and the claimant sought indemnity of roughly $20,000 for the lost goods through his tenant’s policy. His insurer was notified of the claim some 21 months after the loss.
The insurer led evidence from firefighters to show that the school was in a derelict condition. The firefighters also failed to see any evidence of the goods during or after the fire. The Court accordingly found that there was no personal property at the school. If there had been, the goods were not “usual” to the insured premises (the rented floor of the house) as they had been moved prior to the tenancy with no intention of being used in the rented premises. Further, the Court concluded that moving any insured contents to the old school would have constituted a material change in risk, thereby entitling the insurer to void the policy. The evidence from an underwriter was that the insurer would never have written the risk if it had known the goods were being stored in such a location, which was vacant and at risk of fire and vandalism.
Finally, the Court concluded that the claimant had not properly reported the claim forthwith or brought the claim within the one-year limitation period prescribed by the statutory conditions. Specifically, the Court rejected the claimant’s contention that he was not aware of the policy, pointing to the fact that he was paying for the tenant’s coverage by monthly debit and was annually sent a copy of the policy with renewal documents. The Court declined to disallow the limitation defence, noting that there was significant prejudice to the insurer in that it was unable to properly investigate the fire so as to confirm the actual loss of the goods.
ALSO OF INTEREST
The Significance of the Recent Alberta Cap Decision for the East Coast
In Morrow v. Zhang ( A.J. No. 621), the Alberta Court of Appeal recently overturned a trial level decision that found the imposition of a $4,000 cap for damages for pain and suffering for minor injuries resulting from motor-vehicle accidents unconstitutional. Like Alberta, Nova Scotia, New Brunswick and Prince Edward Island have adopted similar threshold legislation. By reviewing the legislative schemes in each of these three provinces, this article will examine the implications the Alberta decision may have for these jurisdictions.
In Alberta, a “minor injury” is defined in s. 1(h) of the Minor Injury Regulation (Alta. REg. 123/2004) as a sprain, a strain or a whiplash-associated disorder – thus limiting the scope of the cap to soft-tissue injuries. In her decision, Justice Rowbotham, with the concurrence of her Alberta Court of Appeal colleagues, found that by considering the “whole of the scheme” and the “package of insurance reforms”, the legislative objectives did not discriminate against victims of soft-tissue injuries. Although the cap did limit the amount available for non-pecuniary damages, the legislative scheme also included provisions for victims of soft-tissue injuries including treatment sessions, protocols that educate victims with respect to their injuries and an increase in Section B coverage. As Justice Rowbotham states: “[i]f the legislation did nothing more than place a cap on non-pecuniary damages, it might perpetuate the stereotype of soft-tissue injury claimants. But this legislation recognizes that those who suffer soft-tissue injuries require early, affordable treatment… This is the antithesis of the perpetuation of the stereotypic soft-tissue victim who fakes or malingers his or her injury.”
On the Atlantic Coast, three provinces have adopted a similar $2,500 threshold for recovery from non-pecuniary losses that are tied to varying definitions of personal injury. Nova Scotia and Prince Edward Island have nearly identical language in their related legislation, instituting the cap for “minor injuries” and “minor personal injuries” respectively. These minor injuries are defined as any injury that does not result in a permanent serious disfigurement or impairment of an important bodily function. One of the key differences between Alberta’s and Nova Scotia and Prince Edward Island’s legislative schemes is that the latter apply to a broader scope of minor injuries. This was clarified in a recent judgment entitled Hartling v. Nova Scotia( N.S.J. No. 8) upholding the Nova Scotia cap whereby Justice Goodfellow found that the legislative scheme in s. 113(b)(1)(a) of Nova Scotia’s Insurance Act is “broader than the Alberta provision… The cap applies to all minor injuries and not restricted solely to ‘soft tissue injuries’”.
New Brunswick provides a similar legislative scheme as its Maritime neighbours, although like Alberta, it also includes a “soft tissue injury” component in its legislative framework. New Brunswick’s Insurance Act limits the recovery for damages for non-pecuniary loss for “soft tissue injury” in s. 265.21(2) and “minor personal injury” in s. 265.21(3), with the threshold amount to be determined by the regulations. The Injury Regulations however, only include a cap for the “minor personal injury” portion of the Act, which is defined in a near identical manner to Nova Scotia and Prince Edward Island, and which sets the threshold limit at $2,500. The “soft tissue injury” portion of the Act thus remains inoperative, at least for the time being.
The province that stands in greatest contrast to Alberta and its East Coast neighbours is Newfoundland and Labrador. It provides a different legal framework altogether, opting for a deduction of $2,500 for non-pecuniary loss or damage relating to “bodily injury or death”. Unlike the other provinces, this deduction applies to the full scope of loss or damages and is not tied to minor injuries or any definition thereof. Morrow may therefore have the least relevance for Newfoundland and Labrador, as the two provinces have opted for considerably different legislative schemes.
Each legislative scheme varies considerably in the “package of reforms” which accompanied the enactment of each threshold. In Alberta, unlike the Maritime provinces, victims of soft tissue injuries were provided with treatment, education and an increase in Section B coverage alongside the cap, as part of the “whole of the scheme” of insurance reform. The Morrow decision relied heavily on the “package of reforms”, citing it as a comprehensive plan to aid victims of soft-tissue injuries. In the Maritime provinces however, the “package[s] of reforms” do not provide victims of minor injuries with any specific aid that does not already fall within the general framework, and this may be a distinguishable point when it comes to using Morrowin support of any “cap” challenge in the Maritimes. There is also the question of whether the language of “minor injuries” rather than the focus on “soft-tissue” injuries will alter the constitutional analysis.
After one failed challenge at the Nova Scotia Supreme Court, prior to the latest Morrow decision, all “cap” legislation in the Maritime provinces remains intact. The question may be answered by the Nova Scotia Court of Appeal, as the recent Hartlingdecision is being appealed.
Leanne O’Leary is a partner in Cox & Palmer’s St. John’s office whose practice focuses on insurance defence and general litigation. A significant part of her work involves providing counsel to national and local insurers for auto, home, and general commercial liability. She has made trial appearances before the Supreme Court, Provincial Court and the Court of Appeal. Leanne represents a range of clients at mediations and encourages the use of this tool for alternative dispute resolution where appropriate. Leanne also provides clients with updates on topics relevant to the insurance industry through both local and regional seminars.
Leanne is a volunteer board member with the Public Legal Information Association of Newfoundland (PLIAN), a non-profit organization that provides public legal education and information services with the intent of increasing access to justice.
In her spare time, Leanne enjoys hiking, running and most recently, doing anything with her 15 month-old daughter.
Joseph F. Burke | firstname.lastname@example.org | (902) 491 4123
A proud native of St. Peter’s, Cape Breton, Joe Burke is an associate in Cox & Palmer’s Halifax office. Joe has been practicing insurance litigation since 2002 and has worked for major insurers in the region, including a year working as in-house counsel with Aviva Insurance. Joe’s practice focuses on auto, property, and subrogated claims. He also provides opinions to clients on a variety of coverage issues and has given presentations on the implications of Nova Scotia’s new Civil Procedure Rules and Insurance Act reforms. Joe appears regularly before the Supreme Court of Nova Scotia, frequently deals with contested matters in Nova Scotia’s Small Claims Court, and has successfully negotiated settlements in numerous cases, both informally and using mediation.
A resident of Halifax, Joe is active in his community. He serves on the Halifax Community Learning Network Board of Directors, is a member of the Coverdale Centre Board of Directors (an organization that offers support to women in contact with the law) and takes an active interest in politics, the arts and environmental issues.
Joe is an avid traveller and fan of the outdoors. A couple of his favourite destinations include California and the UK. This past summer he was lucky to attend weekend bachelor parties in Boston and Iceland.
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