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CGL Policy Doesn’t Respond to Auto Claim
Published in the April 2008 issue of Litigation Notes - View Article
Synopsis: A motorist was injured by a ladder which flew off a truck. The truck owner sought coverage under its CGL policy, but an exclusion relating to ownership, maintenance, use or operation of an automobile applied. Readers may want to compare this case to the Pizza Pizza case analyzed in the November, 2007 edition of Litigation Notes, which is available in the Library section of our website
On April 7, 2008, the Ontario Court of Appeal dismissed an appeal by an insured party claiming coverage under a commercial general liability policy for an incident where the plaintiff was struck by a ladder that fell off the defendant’s truck as it was being driven along a country road. The plaintiff was driving a motorcycle when struck by the ladder, and incurred serious injuries as a result. The appellant, a roofing repair company Done Right Roofing (“Done Right”) asked its insurer CUMIS General Insurance Company (CUMIS) to defend the claim. CUMIS refused, relying on an exclusion clause in its policy with respect to automobile-related claims.
The exclusion clause at issue, set out in the General Liability Coverage Rider (GL Rider), was initially formulated as applying to bodily injury or property damage arising out of the ownership, maintenance, use or operation of any automobile by or on behalf of the insured. The clause was later amended to include a further exclusion for bodily injury or property damage with respect to which any motor vehicle liability policy was, or was required by law to be, in effect.
The trial judge found Done Right’s claim was unsuccessful on two grounds. Done Right first argued that the claims against it could be separated between those pertaining to negligence at the work site and those with respect to loading, securing and driving the vehicle. The plaintiff’s “work site” claims consisted of allegations of negligence in clean up resulting in improper storage of the ladder into the truck, as well as failure to implement and train employees in proper systems for cleaning the work site including the removal and storage of equipment. The trial judge applied the principle that the “substance and true nature” of the pleading should determine the scope of a viable insurance claim. In this case, the “work site” claims did not constitute independent and separate causes of action. Unlike in Derksen v. 539938 Ontario Inc., [2001] 3 S.C.R. 398, a case decided by the Supreme Court where the Court found that a similar accident was caused by the failure to load certain equipment in its proper place in the vehicle, in this case the trial judge found that the loading had been accomplished at the work site.
Done Right further argued that the exclusion clause did not apply to loading of the ladder based on the fact that another exclusion clause in the policy (applying to watercraft) mentioned loading explicitly while the automobile clause did not. The trial judge held that, while this seemed like an attractive argument, it ultimately failed in this case. The trial judge favoured the argument of the insurance company that the intention behind the policy was to exclude from coverage any automobile-related claims. In particular, the trial judge referred to section 239 of the Insurance Act which prescribes that mandatory insurance must be obtained with respect to claims arising out of the use or operation of such an automobile. Case law interpreting this provision has held that it covers situations of “loading or unloading”. Therefore, the exclusion clause in CUMIS’ policy referring to automobile claims with respect to which insurance had to be obtained encompassed this provision and its accompanying case-law.
The Court of Appeal upheld the trial decision and addressed a set of additional arguments raised by the claimant. These arguments were also ultimately found to be unsuccessful. The Court of Appeal first considered an argument that the exclusion clause should not apply because reliance on it would defeat the reasonable expectations of the insured. In this respect, Done Right argued that the policy’s initial General Liability Coverage Rider purported to extend coverage, whereas the amendment to the exclusion clause actually reduced the coverage provided. The Court rejected this argument for three reasons: first, Done Right did not provide any evidence as to its expectations; second, reasonable expectations could only be relied on in cases of ambiguity; and third, the Rider had several clauses, some of which extended coverage, and others which reduced coverage. It would be unreasonable for Done Right to reap the benefits of the extensions, but to be allowed to repudiate the restrictions.
The Court further held that, even if the amendment was not considered, the effect of the initial policy was also to exclude coverage. The Court endorsed the findings of the trial judge with respect to the applicability of section 239 of the Insurance Act and underlined that it was an established principle in automobile insurance law that loading and unloading would be considered part of use and operation of a vehicle. Unlike the watercraft provisions, the automobile provision was subject to a specific statutory regime that was relevant to interpreting the policy.
Finally, the Court of Appeal endorsed the trial judge’s conclusion that the entire claim of the plaintiff was centered on the use and operation of an automobile. There was no concurrent cause of action in non-automobile-related negligence.
This case illustrates the importance of relevant statutory context in interpreting the provisions of an insurance policy. It is also an indication that the courts will not stretch an insurance policy beyond its general intent where the extent of its exclusion clauses is clear.
CUMIS General Insurance Company v. 1319273 Ontario Ltd.
(Done Right Roofing), 2008 OCA 249