Savage v. Belecque et al.; Allstate Insurance Company of Canada, Third Party Belecque et al. v. Allstate Insurance Company of Canada et al. [Indexed as: Savage v. Belecque]
111 O.R. (3d) 309
2012 ONCA 426
Court of Appeal for Ontario,
R.P. Armstrong, Blair and Lang JJ.A.
June 21, 2012
Insurance -- Automobile insurance -- Exclusions -- Plaintiff injured when she was dragged by defendant's car and then struck by car when defendant reversed -- Defendant's insurer denying coverage on basis of exclusion in s. 118 of Insurance Act for conduct that contravenes any criminal or other law committed "with intent to bring about loss or damage" -- Motion judge not erring in finding that there was no genuine issue for trial with respect to defendant's intention and that insurer had duty to indemnify him -- Defendant's conviction for careless driving not giving rise to inference that he intended to harm plaintiff -- Insurance Act, R.S.O. 1990, c. I.8, s. 118. [page310]
Insurance -- Insurer's obligation to defend -- Plaintiff injured when she was dragged by B's car and then struck by car when B reversed -- Plaintiff suing B and also suing his parents for negligent supervision of B -- Insurer denying that it had duty to defend B and his mother under mother's automobile insurance policy because B intended to harm plaintiff -- Insurer denying that it had duty to defend B's father under homeowner's policy because policy excluded coverage for matters arising from ownership, use or operation of vehicle and also excluded intentional acts -- Motion judge correctly finding that insurer had duty to defend B and his parents -- Statement of claim in main action not alleging intention on part of B to hurt plaintiff -- Pleaded allegation against B's father having nothing to do with ownership, use or operation of vehicle -- Motion judge not erring in granting B's family's claim for compensation for their litigation costs.
A was injured when she was dragged for some distance by a car driven by B and owned by B's mother and then struck by the car when B reversed sharply. A sued B and P (a passenger in the car). She also sued their parents for negligent supervision of their children and her own parents' insurer, CGU. B and his parents sued their insurer, Allstate, which had denied them coverage on the basis that B acted deliberately when he struck A. Allstate relied on s. 118 of the Insurance Act, which excludes coverage for conduct that contravenes any criminal or other law committed "with intent to bring about loss or damage". It denied that it had a duty to defend B and his mother under the mother's automobile insurance policy based on the same issue of B's intention at the time of the accident, and denied that it had a duty to defend B's father under a homeowner's policy because that policy excluded coverage for matters arising from the ownership, use or operation of a vehicle and for intentional acts. The parties settled the main action; the only remaining question was which insurer should pay the damages. CGU, which was potentially liable as an excess insurer, moved for summary judgment, seeking a declaration that Allstate's policy covered B and P and an order dismissing A's claims against CGU. The B family sought a declaration that Allstate owned them a duty to defend and a duty to indemnify. The motion judge found that Allstate had a duty to defend as well as a duty to indemnify B, a duty to defend his mother under the automobile policy and a duty to defend his father under the homeowner's policy. He declined to make a ruling regarding coverage for the defence and indemnification of P. He dismissed the claims against CGU. He awarded the litigation costs requested by the B family and CGU. Allstate appealed. CGU cross-appealed, arguing that the motion judge erred in declining to decide Allstate's obligations to P.
Held, the appeal and the cross-appeal should be dismissed.
CGU successfully established that there was no genuine issue requiring a trial of B's intention and his consequent coverage under the Allstate automobile policy. B's unshaken testimony was that he had absolutely no intention to harm A. All of the participants testified that there was no animosity between any of them and no reason why either B or P would cause harm to A. No inference could be drawn from B's conviction for careless driving under the Highway Traffic Act, R.S.O. 1990, c. H.8 that he intended to cause damage or loss to A. A's pleading for punitive damages did not allege that B intended to cause her any harm, and none of the evidence supported a conclusion of intentional harm.
The motion judge correctly decided the duty to defend issue vis-à-vis B and his mother on the basis of the pleading in the main action. While that pleading included a claim for punitive damages, at its highest, it alleged "deliberate" acts [page311] on the part of B and P. Nowhere did it allege an intention on the part of either boy to cause A any damage. The pleaded allegation against B's father had nothing to do with the ownership, use or operation of the vehicle, but rather with the allegation of negligent supervision of B. There was no allegation of intentional acts on the part of B's father, only of negligence.
The motion judge did not err in awarding litigation costs.
In light of the paucity of information before him, the motion judge did not err in concluding that it was neither appropriate nor possible to determine Allstate's duty to defend and indemnify P.
APPEAL AND CROSS-APPEAL from the orders of Ellies J. on a motion for summary judgment, [2011] O.J. No. 2558, 2011 ONSC 2330, 1 C.C.L.I. (5th) 112 (S.C.J.) and a motion for a declaration that the insurer had duty to defend and indemnify the insured, [2011] O.J. No. 4586, 2011 ONSC 5771, 1 C.C.L.I. (5th) 139 (S.C.J.).
Cases referred to Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 211 A.C.W.S. (3d) 845, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17
Statutes referred to Highway Traffic Act, R.S.O. 1990, c. H.8 [as am.] Insurance Act, R.S.O. 1990, c. I.8, ss. 118 [as am.], 258(14)
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20.01, 57.01(1)
Ian D. Kirby, for appellant/respondent by way of cross-appeal, Allstate Insurance Company of Canada.
Kevin S. Adams, for respondents/appellants by way of cross-appeal, CGU Insurance Company of Canada and Aviva Insurance Company of Canada.
Tara M. Sweeney, for respondents Michel Belecque, Lynn Belecque, Gilles Belecque.
The judgment of the court was delivered by
1LANG J.A.: -- This appeal arises from a summary judgment decision granted by the motion judge. The appellant insurer argues that there was no genuine issue requiring a trial concerning the insurer's obligation to indemnify because coverage was statutorily excluded on the basis that the harm or loss sustained was caused intentionally. Additional challenges relate to the insurer's duty to defend, as well as the litigation costs awarded. [page312]
Background
2Amy Savage was injured on January 4, 2001 when she was hit by a car in the parking lot of a skating rink. Michel Belecque was driving the car, which was owned by his mother. The accident occurred after Amy spoke to Shayne Poitras, a back-seat passenger in the car, apparently to ask him for a cigarette. At the time, the car was either stopped or was moving very slowly. Shayne held on to Amy's jacket. The car advanced with Amy on her skates alongside. She was released and fell. Michel stopped the car, looked back, did not see Amy and reversed the car sharply. The car hit Amy, who was still on the ground trying to get up.
3Several actions were launched following the accident. Amy sued both Michel and Shayne. Allstate applied and was added as a statutory third party to that action pursuant to the Insurance Act, R.S.O. 1990, c. I.8, s. 258(14).
4In addition, Amy sued the Belecque and Poitras parents for negligent supervision of their children. This claim, together with the cross-claims brought by the parents, were later dismissed on consent without costs.
5Finally, Amy sued her parents' insurer, CGU Insurance Company of Canada and Aviva Insurance Company of Canada, collectively referred to as CGU. CGU provided uninsured and inadequately insured motorist coverage to Amy Savage's family.
6In turn, the Belecques sued their insurer, Allstate Insurance Company of Canada ("Allstate"), which denied them coverage for the accident (the "coverage action"). The Belecques sought a declaration that Allstate was obliged to provide coverage under their automobile and homeowner's policies. Allstate denied coverage under the automobile policy on two bases: first, "that Michel Belecque acted deliberately when he struck Ms. Savage while operating the vehicle", and second, that the Belecques failed to report the accident in accordance with the notification requirements of the policy.
7The parties settled the main action at $450,000 for Amy's compensatory damages, plus costs. Effectively, the only remaining question was which insurer would pay those damages. The answer turned largely on whether Michel's conduct was negligent (in which case he would be covered by Allstate up to $1 million) or whether his conduct was intended to cause Amy's loss (in which case coverage would be excluded except for the $200,000 statutory minimum). CGU, which was potentially liable as the excess insurer, moved for summary judgment pursuant to rule 20.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It sought a declaration that Allstate's policy covered one or both of [page313] Michel and Shayne, as well as an order dismissing Amy's claims against CGU. CGU filed affidavit and transcript evidence in support of its motion.
8CGU argued that Allstate's defences of lack of timely notice and of deliberate loss did not raise genuine issues requiring trial. Alternatively, CGU took the position that Allstate was liable to indemnify Amy for her losses up to the minimum limits of the policy, which CGU argued would be $200,000 for Michel as driver, as well as $200,000 for Shayne as passenger. CGU sought costs of the action against Allstate in the approximate amount of $79,220.84 on a partial indemnity basis.
9Returnable at the same time, the Belecques sought a declaration that Allstate owed them a duty to defend and a duty to indemnify. They sought approximately $180,168.29 in litigation costs against Allstate for the expenses they incurred arising from the main action coverage action and motion for summary judgment.
10The motion judge carefully considered the primary issue before him: whether the Belecques had provided timely notice of their claim to Allstate. He decided they did so. His decision was supported by an abundance of evidence that the Belecques had notified their insurance agent of the accident on multiple occasions. Turning to the remaining issues, the motion judge concluded that Allstate had both a duty to defend as well as a duty to indemnify Michel Belecque, a duty to defend his mother under the automobile policy and a duty to defend Michel's father under the homeowner's policy. He declined to make a ruling regarding coverage for the defence and indemnification of Shayne Poitras. He dismissed the claims against CGU. Finally, the motion judge awarded the litigation costs requested by the Belecques and CGU.
11Allstate appeals the motion judge's determination of indemnification coverage, his decision of a duty to defend under the automobile and homeowner's policies, and his disposition of the litigation costs. CGU cross-appeals, arguing that the motion judge erred in declining to decide Allstate's obligations to Shayne Poitras.
12As I will explain, in my view, Michel was entitled to coverage and Allstate owed all the Belecques a duty to defend. I would not interfere with the litigation costs awarded by the motion judge. Accordingly, I would dismiss the appeal. I would also dismiss the cross-appeal since I am not persuaded that the motion judge made any error in declining to decide the issue involving Shayne. [page314]
Issues
13There is no appeal from the motion judge's decision that there was no genuine issue requiring a trial concerning Allstate's position that the Belecques had failed to comply with the notice requirements of their automobile policy.
14Rather, the appellant argues that the motion judge erred in concluding (1) there was no genuine issue requiring a trial with respect to Michel's intention and Allstate's duty to indemnify; (2) Allstate owed a duty to defend Michel and his mother under the automobile policy and his father under their homeowner's policy; and (3) that the Belecques and CGU were entitled to the litigation costs awarded.
15The cross-appeal raises a fourth issue. It challenges the motion judge's decision dismissing the CGU's motion for a declaration that Allstate was obliged to defend and indemnify Shayne under the Belecque car insurance policy. I will first deal with the issues concerning the Belecques and then with the issue concerning Shayne Poitras.
(1) The duty to indemnify Michel Belecque
16Whether the insurer was obliged to indemnify depended on whether the accident was excluded from coverage as the result of Michel's intention at the time of the accident. On the summary judgment motion, CGU had the onus of establishing that there was no genuine issue requiring a trial of this issue.
17The interpretation of the rule amending the test for summary judgment is the decision of this court in Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764. Under Combined Air, a motion judge must achieve a "full appreciation" of the evidence and the issues before concluding that the moving party has established that there is no genuine issue requiring a trial.
18The decision of a motion judge on a summary judgment motion is reviewed on a standard of correctness on the applicable principles of law and is entitled to deference on findings of fact and the inferences drawn from those facts: see Combined Air, at paras. 70-71.
19In the course of argument, counsel informed the motion judge of the damages settlement, which was reached after the [page315] motion was filed, but before it was heard. In particular, counsel advised the motion judge that the settlement provided Amy with compensatory, not punitive damages. While counsel did not argue that the terms of the settlement were relevant to the question of Michel's intent, they apparently also did not clearly explain their position that the settlement terms were irrelevant to whether Michel was covered under the automobile policy. In the end, the motion judge relied on the terms of the parties' damages settlement in the main action as the foundation to decide that the issues raised in the coverage action did not require a trial.
20In his view, the terms of the settlement were determinative because their provision for compensatory damages amounted to an admission that Michel's impugned conduct, while negligent, were not intentional. The motion judge concluded that the claim for punitive damages was "no longer alive". On this basis, he found there to be "no genuine issue requiring a trial". Allstate owed a duty to indemnify Michel Belecque.
21On appeal, counsel essentially agreed in argument that the motion judge erred in basing his indemnification decision on the terms of the settlement of the liability action. However, counsel also agreed that it is unnecessary to return this issue for a rehearing because the record provides ample foundation for this court to decide the issue.
22That decision must be based not on the terms of settlement, but on the applicable exclusion. In this case, the Belecque automobile insurance policy contained no exclusion for intentional acts. However, Allstate invoked s. 118 of the Insurance Act, which excludes coverage for conduct that contravenes any criminal or other law committed "with intent to bring about loss or damage". In arguing that a trial was required to determine Michel's intention, Allstate relied on his conviction for careless driving under the Highway Traffic Act, R.S.O. 1990, c. H.8. Allstate also relied on Amy's claim for punitive damages, as well as its argument that Michel's driving was so reckless that it amounted to intentional misconduct.
23To consider these arguments, it is necessary to review in more detail the evidence about the incident that was before the motion judge. In doing so, it is important to be mindful, since this evidence goes to the question of Allstate's coverage obligations for indemnification purposes (as opposed to its duty to defend), that the motion judge was required to consider the numerous affidavits and the discovery excerpts filed on the motion.
24The evidence showed that Amy, Michel and Shayne were all teenagers: Amy was 14, Shayne 16 and Michel 17 years of age. They all knew each other as members of the community, [page316] including through each other's siblings. Amy testified at discovery that, on the night the accident occurred, she had been skating at the rink with friends. Still wearing skates, Amy and a friend left the rink for the parking lot so that Amy could find someone who would give her a smoke.
25Michel and Shayne had been at the local rink playing hockey. They had returned to Michel's family car in the parking lot. Shayne sat in the right rear passenger seat. Shayne's window was rolled down. Michel drove the car slowly between Amy and her friend. While there were inconsistent recollections on whether Michel stopped or just slowed the car to a crawl, it was going sufficiently slowly that Amy apparently was able to ask Shayne for a smoke through his open window. According to both Amy and Shayne, Shayne reached out his back-seat window and, in "horseplay", grabbed Amy by her jacket. The Belecque car moved forward and accelerated. According to Amy, she was dragged alongside for some distance upright on her skates. She screamed. A will-say statement from a Marc Bourdon provided his version of what happened. According to that statement, when Amy was released, her momentum carried her forward a further 15 feet before she fell to the ground.
26Michel then remembered he had forgotten an item at the rink. He decided to return and retrieve it. He stopped the car, looked behind him and did not see Amy, who was still on the ground trying to get up. He executed what was called a "high-speed doughnut" or sharp reverse turn that caused the car to spin. According to the evidence, Michel repeated this manoeuvre at least one more time. In the course of doing so, the Belecque car struck and injured Amy.
27All the parties who were questioned under oath, including Amy, testified about Michel's intention. Michel's unshaken testimony was that he had absolutely no intention to harm Amy. He was not aware that she had been grabbed by Shayne and was towed beside the car or that she had fallen. He testified that, before reversing the car, he looked behind and believed his path was clear. Shayne testified to the same effect: that he did not believe Michel had an intention of hurting Amy. Amy testified that she did not know Michel's intention and did not know whether he knew Shayne had forcibly towed her alongside the car. All the participants testified that there was no animosity between any of them and there was no reason why either Michel or Shayne would cause harm to Amy.
28The only evidence relied on by Allstate was the affidavit of its solicitor. That affidavit referred to the potential evidence of Marc Bourdon. Since no affidavit was filed from Mr. Bourdon, [page317] his version could not be tested. Counsel simply read the will-say in at Amy's discovery. In any event, Mr. Bourdon's potential evidence did not assist with the core question of Michel's intention because the statement was restricted to what Mr. Bourdon witnessed concerning the mechanics of the accident, and his perception of the number of manoeuvres. He could not and did not give evidence about Michel's intention in carrying out those manoeuvres.
29Allstate also relied on Michel's conviction for careless driving under the Highway Traffic Act as evidence of his allegedly intentional conduct. Since that conviction only related to Michel's execution of the impugned manoeuvres, in light of the other evidence no inference could be drawn that Michel had any intention to cause damage or loss to Amy.
30While there was also some conflicting evidence among those present concerning the speed and acceleration of the vehicle, the number of reverse manoeuvres and other details, the resolution of those issues would not reasonably have affected the question of Michel's intention to bring about loss or damage to Amy.
31Finally, Allstate relied in part on Amy's pleading for punitive damages. However, that pleading did not allege that Michel intended to cause Amy any harm. Moreover, none of the evidence reviewed above supported a conclusion of intentional harm.
32The motion record is sufficient to allow for a full appreciation of the evidence and the issues surrounding Michel's intent. In my view, CGU successfully established that there was no genuine [issue] requiring a trial of Michel's intention and his consequent coverage under the automobile policy. For these reasons, I agree with the result arrived at by the motion judge. Under the Belecque automobile insurance policy, Allstate was required to indemnify Michel as the driver.
(2) The duty to defend
33Allstate argued that it had no duty to defend Michel and his mother on the basis of the same issue of Michel's intention at the time of the accident. Allstate also argued that it had no duty to defend Michel's father under the homeowner's policy because that policy excluded coverage both for matters arising from the ownership, use of operation of a vehicle as well as for intentional acts.
34Counsel agree that an insurer's duty to defend is broader than its duty to indemnify. The existence of a duty to defend is discerned by consideration of the provisions of the policy, [page318] the pleading and the documents incorporated by reference in the pleading.
35In my view, the motion judge correctly decided the duty to defend issue vis-à-vis Michel and his mother on the basis of the pleading in the main action. While that pleading included a claim for punitive damages, at its highest, it alleged "deliberate" acts on the part of Michel and Shayne. Nowhere did the pleading allege an intention on the part of either Michel or Shayne to cause Amy any damage.
36Allstate challenges its duty to defend Michel's father under the homeowner's policy, which excluded claims arising from the "ownership, use or operation" of the vehicle. However, the pleaded allegation against Michel's father had nothing to do with the ownership, use or operation of the vehicle, but rather with the allegation of negligent supervision of Michel. Accordingly, I would not give effect to this argument.
37In addition, I agree with the motion judge's rejection of Allstate's alternative argument based on the homeowner's policy exclusion of intentional acts. There was no allegation of intentional acts on the part of Michel's father, only of negligence. Finally, in my view, Michel's mother was also owed a duty to defend, whether under the automobile or the homeowner's policy.
(3) The costs of the actions
38After addressing Allstate's duty both to defend and indemnify the Belecque defendants, and dismissing the action against CGU for excess coverage, the motion judge turned to the Belecques' claim for compensation for their litigation costs of the main action, the coverage action and the summary judgment proceedings. In all these proceedings, the Belecques were required to retain their own counsel in light of Allstate's denial of coverage.
39The motion judge concluded that the Belecques were entitled to compensation for their resulting legal expenses on a full indemnity basis. Even so, he recognized that the amount of costs must be reasonable.
40The motion judge gave careful consideration to the question of the appropriate award for the Belecques' litigation costs. He "reviewed in detail the bill of costs submitted", examined and compared hourly rates for counsel involved, and considered the time spent in connection with the three proceedings, including the main action, the coverage action and the motion for summary judgment. He specifically considered and explained why counsel's hourly rates charged to the Belecques as individual litigants might reasonably be higher than those charged by counsel to a corporate insurer. He gave cogent reasons for [page319] refusing to reduce the amount of the Belecques' compensation on the basis of a comparison to CGU's costs. In his view, the lower amount of CGU's costs reflected the different issues and the importance of those issues to the different parties. He also properly rejected the Belecques' argument that the amount of costs should be increased as some kind of sanction against Allstate for its conduct in refusing coverage.
41Allstate argues that the motion judge simply accepted an accounting of the bill of costs without considering the overall amount of the bill. However, this is not so. After reviewing the particulars of the costs, the motion judge specifically considered the claimed costs "on the whole" and concluded they were "not unreasonable". There is no principle of law requiring a judge to reduce a requested costs award automatically or by a certain percentage on an unfounded assumption that the claimed amount must be inherently excessive.
42In my view, this is not a case where the motion judge simply acceded to a particular number put forward by counsel without giving any consideration to the relevant factors. I see no basis to interfere with the motion judge's exercise of his discretion in awarding the Belecques $180,168.29 for litigation costs.
43The motion judge awarded CGU its costs on the appropriate partial indemnity basis. In fixing the amount of those costs, the motion judge was alert to the factors in rule 57.01(1), including the importance of the issue to insurers. He rejected the argument that costs should be increased as a result of Allstate's conduct. He observed that Allstate's conduct in the litigation was "unfortunate", but not "unreasonable". He also noted he had no information about the amount charged by counsel to Allstate. After taking into account the proper considerations, the motion judge concluded that CGU should be awarded the claimed amount of $79,220.84. In his view, this amount was both fair and reasonable.
44Allstate argues simply that CGU's costs award was "excessive". There is no explanation to support that position. The costs awarded by the motion judge are entitled to a high degree of deference. In the absence of any error in principle, a misapprehension of the facts or an award that is clearly wrong, there is no basis to interfere with his exercise of discretion.
45Accordingly, I would dismiss the appeal of the award for litigation costs.
(4) The cross-appeal by CGU
46I turn to the final issue of the cross-appeal, in which CGU argues that the motion judge ought to have declared that [page320] Shayne was entitled to coverage as a passenger in the Belecque vehicle. While Shayne delivered a statement of defence in the main action, he did not bring a coverage action against Allstate and did not respond to the motions. There was no evidence about whether Shayne had been denied coverage under the Belecque policy. In its motion, CGU sought a declaration that "one or both" of Michel and Shayne were covered under the policy, Shayne as an occupant. In particular, CGU argued that, absent full coverage, Allstate was still required to pay the $200,000 statutory minimum for each of Michel and Shayne. Allstate resisted on the basis that Shayne did not have any coverage under the Belecque policy, even though he was an occupant of the vehicle, because his conduct in towing Amy alongside the car disentitled him to coverage.
47The motion judge concluded that it was not "either appropriate or possible" to determine Allstate's duty to defend and indemnify Shayne Poitras. He specifically declined to make any ruling on this issue.
48I see no error in this conclusion, particularly in light of the paucity of information before the motion judge. The lack of information was compounded on appeal by Allstate's failure to file a responding factum and failure to respond to the issues raised by CGU's cross-appeal.
49Moreover, in light of the result of the appeal upholding the motion judge's decision that Allstate must indemnify the Belecques, there does not appear to be any need to address the question of Shayne's coverage under the Belecque automobile policy. Nonetheless, out of an abundance of caution, the dismissal of CGU's cross-appeal is made without prejudice to its right to bring a fresh motion for summary judgment on this point if so advised.
Result
50In the result, the appeal and cross-appeal are dismissed.
Costs of the Appeal
51Allstate has been unsuccessful on the appeal. As well, the cross-appeal turned in part on Allstate's failure to file a responding factum. In these circumstances, I would award the Belecques and CGU their costs of the appeal. I would fix the Belecques' costs at $20,000 and the CGU costs at $15,000, both inclusive of disbursements and applicable taxes.
Appeal and cross-appeal dismissed.
