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Insured Covered for Stock at Temporary Location
Published in the August 2009 issue of Litigation Notes - View Article
An endorsement extending coverage to temporary locations applied, despite the location not having been identified in the Declarations. The limit referred to in the endorsement was in addition to the limits under the policy.
The British Columbia Court of Appeal recently released an interesting decision on the interpretation of an insurance policy. The Insured, Wingtat Game Bird Packers (1993) Ltd. is in the business of slaughtering, processing, packaging and selling poultry and meat. It carried out its slaughtering operations at a plant in Surrey, British Columbia and had its office, processing, packaging and cold storage facilities at a property in Richmond, British Columbia.
The Insured obtained an insurance policy from Aviva Insurance Company of Canada (“Aviva”) which included a Commercial Building, Equipment and Stock Broad Form which provided coverage of $1,015,600 on equipment and stock at the Surrey location and $1,000,000 on equipment and stock at the Richmond location.
The Insured used off-site storage facilities including a warehouse owned by the Versa Cold Group. A fire occurred at the Versa Cold facility and the insured lost stock worth $800,000.
Section 2 A of the Insured’s policy of insurance provided coverage for stock, but “only while at the location(s) specified on the Declarations Page”. Section 2 B of the policy provided coverage for stock at temporary locations, but excluded liability for “ any location owned, rented or controlled in whole or in part by the Insured”.
There was also a Multi-Peril Extension Endorsement which read as follows:
“A. The following extensions are added without increasing the amount of insurance and only as a result of a peril insured against; they are valid only if similar coverages are not specifically provided elsewhere in this Policy.
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B. The limits applicable to the following extensions are in addition to the limits provided elsewhere.
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10 . Temporary Locations
On stock and equipment while located at temporary locations not owned, rented or controlled in whole or in party by the insured.
Limit of loss: $25,000.00 any one occurrence
This extension is void if a limit is indicated for Temporary Locations on the “Declarations Page”.”
The Insurer denied coverage on the basis that coverage for temporary locations only applied to locations which were identified on the Declarations Page of the policy. In the alternative, the Insurer argued that pursuant to the Multi-Peril Extension Endorsement, coverage should be limited to $25,000 for the stock lost at the temporary location.
The Insurer was unsuccessful at trial and appealed to the B.C. Court of Appeal, which dismissed the appeal. The trial judge found that the Versa Cold warehouse was not a location “owned, rented or controlled in whole or in part by the Insured” and this issue was not raised on the appeal.
The Court of Appeal reviewed the caselaw and summarized the principles applicable to the interpretation of insurance contracts as follows:
“(a) the factual matrix existing at the time the parties enter into the contract may be considered in interpreting the words of the contract, but the words of the contract must not be overwhelmed by a contextual analysis;
(b) the plain meaning of the words used should be given effect unless it would bring about an unrealistic or commercially unreasonable result;
(c) one must search for an interpretation from the whole of the contract that promotes the true intent of the parties at the time they entered into the contract;
(d) in the event of an ambiguity in the meaning of the words, the contra proferentem rule of interpretation will be applied in favour of the insured unless it will bring about an unfair result by way of the insured achieving an unanticipated recovery; and
(e) coverage provisions should be construed broadly, while exclusion clauses should receive a narrow interpretation.”
Clause 2 A of the policy stipulated that coverage applied only to stock “while at the location(s) specified on the Declarations Page”. The Insurer argued that this requirement should apply to coverage 2 B, which provided coverage to temporary locations. The Court of Appeal disagreed, pointing out that the wording of Clause 2 B did not explicitly require the address of a temporary location to be specified on the Declarations Page and that it could not be implied from the language of the policy as a whole. If the address of a temporary location were included on the Declarations Page, there would be coverage under Clause 2 A of the policy and it would never be necessary to resort to Clause 2 B. Furthermore, the coverage for temporary locations under Clause 2 B is stipulated to be in respect of stock “other than at a specified location”. If the location were specified in the Declarations Page, there would never be coverage under Clause 2 B.
The Court of Appeal was also of the opinion that the coverage was not limited to $25,000. stating:
“In the case at bar, it is my view that the introductory words of Clause B of the endorsement are a complete answer to the Insurer’s position. Those words plainly and clearly state that the extensions in Clause B are in addition to the limits provided elsewhere. If the coverage in paragraph 10 was in addition to the limits provided elsewhere in the policy (such as Clause 2 B, as the introductory words of Clause B state it was, then the wording in paragraph 10 cannot possibly be construed to be a reduction of those limits. The $25,000 limit in paragraph 10 is simply a limit of the additional insurance provided by the Clause. It does not purport to reduce some other limit”.
Wingtat Game Bird Packers (1993) Ltd. v Aviva Insurance Company of Canada
2009 BCCA 343 (CanLII)