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Automobile Liability Exclusion Upheld
Published in the May 2008 issue of Transportation Notes - View Article
The Ontario Court of Appeal has dismissed an appeal by an insured party claiming coverage under a commercial general liability policy for an incident involving a ladder which 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 suffered 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 stowage of the ladder, as well as failure to implement and train employees in proper systems for cleaning the work site including the removal and stowage 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 and that the “work site” claims did not constitute independent and separate causes of action.
The key authority to be distinguished is Derksen v. 539938 Ontario Inc., a decision in which the Supreme Court of Canada allowed a claim against an insurer in similar circumstances. In Derksen employees engaged in the clean up of a work site failed to remove a steel plate from a tow bar attached to a supply truck. While the truck was in motion, the plate flew off, striking a school bus. One child was killed and three severely injured. The Supreme Court concluded that there were indeed two concurrent causes of action, negligent clean up of the work site and negligence in the operation of the truck. The first of these was non-automobile related negligence and was covered by the policy.
The trial judge managed to distinguish Derksen by observing that the allegations relating to clean up of the work site “all link the act of cleaning up inextricably to the act of loading the ladder onto the truck and failing to secure it.” The Court of Appeal agreed. It appears (although the reasons at this point are not extensive) that it did so on the basis that “well-established automobile insurance law recognizes that the use or operation of an automobile includes the loading or unloading of that automobile.”
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. 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 GL 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. At the very end of the decision, the court notes that if there had been an allegation of non-automobile negligence, the duty to defend would have been triggered.
Some courts, at least, will not stretch an insurance policy beyond the parties’ intent.
CUMIS General Insurance Company v. 1319273 Ontario Ltd.
(Done Right Roofing), 2008 OCA 249