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Insurers Spar Over Overlapping Coverage
Published in the September 2007 issue of Litigation Notes - View Article
Synopsis: Common sense has finally prevailed. The Supreme Court of Canada has ruled that where an automobile has been used to carry rocks to a highway overpass, from whence they were dropped on an innocent motorist, the resulting injury did not arise from the “use or operation of an automobile.” Similarly, when a motorist stops his car, pulls his gun out of the trunk and shoots what he thinks is a deer, but is in fact a human being, the resulting injury did not arise from the “use or operation of an automobile.”
October 19, 2007, saw the release of two related decisions which will be welcome to all who take seriously the idea that the reasonable expectations of an insurer should have something to do with the interpretation of a policy of insurance. The Supreme Court of Canada has reversed decisions of the Ontario Court of Appeal which took the “relaxed causation” test adopted by the Supreme Court in an earlier decision to extreme conclusions. Each case was decided unanimously by the full Court.
The question posed was whether certain injuries arose “directly or indirectly from the use or operation of an automobile.” The first of the two decisions (Citadel v. Vytlingam) involved an Ontario resident who was injured in North Carolina when two drunken fools dropped a large rock from an overpass onto his vehicle. The assailants had used a motor vehicle to bring rocks to the scene and also used the vehicle to make their escape. The second (Lumbermens v. Herbison) involved a hunter who was shot by his friend. The friend fired the shot while standing outside his vehicle, with the engine running and the headlights on. The Ontario Court of Appeal found that the “use” made of the motor vehicle, in each case, was sufficient to trigger coverage. There was a strong dissent in each case at the Court of Appeal level and those dissents have now been vindicated by the Supreme Court.
The controlling authority cited in each case, by the Court of Appeal, was the case of Amos v. Insurance Corp. of British Columbia, a decision released by the Supreme Court of Canada in 1995. The Vytlingam court takes pains to make it clear that it is not casting doubt on Amos. That earlier case involved a claim made by an insured against its own insurer for no-fault benefits in respect of injuries caused by an accident “that arises out of the ownership, use or operation of a vehicle.” This test was satisfied when the insured was injured by a gang of street-toughs who assailed him on an urban street. The insured was in his vehicle at the time and it appears the assailants intended to steal the vehicle. This was enough to satisfy the court that his injuries arose from the operation of a vehicle. The case has been widely cited and extended since its release some 12 years ago. Notwithstanding the court’s care to protect the authority of Amos, one might wonder whether that case would have been decided in the same way by the Vytlingam court. A consideration of that possibility would take us well beyond the confines of this article.
Assuming that Amos was decided correctly, it appears that it can and should be distinguished. The Ontario Court of Appeal failed to pay sufficient attention to the fact that Amos involved first-party insurance whereas both Vytlingam and Herbison involved indemnity policies. In the first-party context it does perhaps make sense to focus on what the first party insured was doing at the time of the injury. In Amos, he was driving his vehicle. His vehicle was the target of criminal activity. Thus it is possibly not stretching things overly much to say his injury arose out of the use of an automobile, although the Amos court did recognize it was applying a form of “relaxed causation”. There is however an important shift in focus when we move from first party to indemnity coverage. In the case of Vytlingam, the focus is on the drunks who dropped the rock. Now there are two criteria to be met if coverage is to be found. Those responsible must be “underinsured motorists” and the injury must arise directly or indirectly from the use of the motor vehicle. The decision says important things about both elements, but it appears to us that the fundamental fact is that the drunks were not “motorists” at the time they committed their criminal act. As the Court states the point, the coverage in question attaches only if the tortfeasor is “at fault as a motorist.” The Court also points out that, implicit in the decision of the Court of Appeal, is the notion that the “but for” test of causation is adequate. The drunks could not have carried the rocks to the overpass but for their vehicle. This however is a notoriously faulty causation analysis. The drunks were not responsible as motorists and the connection between their automobile and the injuries caused was fortuitous and insufficient to support a finding of coverage.
In the Herbison case the question was whether the negligent shooter should be entitled to an indemnity from his automobile insurer. The key to the decision is again causation and most of the factors considered in Vytlingam are applicable. The Court adverts to the personal dimension of the case, recognizes that it is “tempting to look to an insurer’s deep pockets” as a source of compensation and resists that temptation. The truck did no more that create “an opportunity in time and space for the damage to be inflicted”. There was no “unbroken chain of causation linking the Herbison injuries to the use and operation” of a vehicle. The only link was fortuitous. The Court underlined that it is not sufficient, as the Ontario Court of Appeal had thought, to conclude that the use of the tortfeasor’s motor vehicle “in some manner contributes to or adds to the injury”.
Both cases were dismissed. In the circumstances, each party bore its own costs.
Citadel General Assurance Co. v. Vytlingam, 2007 SCC 46
Lumbermens Mutual Casualty Co. v. Herbison, 2007 SCC 47