Aviva Insurance Co. of Canada v. Pizza Pizza Ltd.

91 O.R. (3d) 161

Court of Appeal for Ontario,

Feldman, MacPherson and Cronk JJ.A.

July 4, 2008

Insurance -- Insurer's obligation to defend -- Plaintiff in underlying action suing insured for damages suffered when she was struck by insured's delivery vehicle -- Plaintiff alleging that insured's negligence encompassed its business practices which encouraged fast driving by its delivery people -- Insurance policy excluding coverage for bodily injury or property damage arising out of ownership, use or operation of automobile -- "Business practices" claim in underlying action derived from and not independent of automobile claim -- Exclusion clause applying -- Insurer not having duty to defend insured.

The insured was sued for damages suffered when a pedestrian was struck by one of the insured's pizza delivery vehicles. The plaintiff in the underlying action alleged that the insured's negligence encompassed its delivery policy, which encouraged fast driving, and its failure to screen drivers' driving records. The insurer relied on an exclusion in the policy for bodily injury or property damage arising out of the ownership, use or operation of an automobile. The application judge found that the exclusion did not apply to the claims based on the insured's delivery policy and failure to screen, as they were independent of the claim that involved the use or operation of an automobile. The insurer appealed.

Held, the appeal should be allowed.

The alleged "non-automobile" components of the insured's negligence were derived from, and not independent of, the automobile claim. They fell within the scope of the exclusion clause, and the insurer did not have a duty to defend the action.

APPEAL from the judgment of B. Allen J., 2007 44948 (ON SC), [2007] O.J. No. 4127, 55 C.C.L.I. (4th) 220 (S.C.J.), declaring that the insurer had a duty to defend the insured.

Cases referred to Monenco Ltd. v. Commonwealth Insurance Co., [2001] 2 S.C.R. 699, [2001] S.C.J. No. 50, 2001 SCC 49, 204 D.L.R. (4th) 14, 274 N.R. 84, [2002] 2 W.W.R. 438, J.E. 2001-1712, 155 B.C.A.C. 161, 97 B.C.L.R. (3d) 191, 32 C.C.L.I. (3d) 165, [2001] I.L.R. I-3993, 108 A.C.W.S. (3d) 159; Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, 185 D.L.R. (4th) 1, 253 N.R. 1, [2000] 5 W.W.R. 465, J.E. 2000-935, 135 B.C.A.C. 161, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 50 C.C.L.T. (2d) 1, [2000] I.L.R. I-3810, 96 A.C.W.S. (3d) 479; Unger (Litigation Guardian of) v. Unger (2003), 2003 57446 (ON CA), 68 O.R. (3d) 257, [2003] O.J. No. 4587, 234 D.L.R. (4th) 119, 179 O.A.C. 108, 127 A.C.W.S. (3d) 542 (C.A.)

Steven Stieber, for appellant. Michael Burgar, for respondent.

[1] BY THE COURT: -- The appellant Aviva Insurance Company of Canada appeals from the judgment of Allen J. dated October 29, 2007 declaring that Aviva has a duty to defend Pizza Pizza Limited [page162] under its Commercial General Liability Policy with respect to some aspects of an action brought against Pizza Pizza by a pedestrian seriously injured when she was struck by a Pizza Pizza delivery vehicle.

[2] The plaintiff in the underlying action, Ursula Prince, alleges that Pizza Pizza's negligence encompasses (1) its business practice of providing food free if delivered more than 30 minutes after it is ordered (this allegedly encourages its drivers to drive fast since they risk paying late fees themselves), (2) its failure to have safe driving policies in place and (3) its failure to test or investigate the driving history of the driver who caused the collision for his propensity for speed.

[3] The insurance policy on which Pizza Pizza relies contains this exclusion:

2. Exclusions e.1) 'Bodily injury' or 'property damage' arising out of the ownership, use or operation by or on behalf of any insured of: a) Any 'automobile'

[4] The application judge found that the exclusion did not catch the "non-automobile" claims asserted against Pizza Pizza and that Aviva had a duty to defend those claims. She reasoned [at para. 25]:

On the facts before me, I accept Pizza Pizza's view there is a non-automobile related concurrent claim in relation to injury caused by Pizza Pizza's corporate policy. While it is the case that the Plaintiff's injuries were caused by the driver's negligent driving, I find the pleadings do give rise to the possibility that the Plaintiff's injuries were caused by Pizza Pizza's delivery policy and failure to screen drivers' driving records. I find that the claim is independent of the claim that involves the use or operation of an automobile, and for that reason, falls outside the scope of the exclusion in Aviva's CGL policy.

[5] The appellant contends that this conclusion is in error. It submits that the alleged "non-automobile" components of Pizza Pizza's negligence in the underlying action are in fact derivative of the essential core or substance of the plaintiff's claim -- she was injured as a result of the negligent operation of a motor vehicle driven "on behalf of" Pizza Pizza. The fact that the motor vehicle was driven "on behalf of" Pizza Pizza is confirmed by para. 11 of the statement of claim which reads: "The Plaintiff says that the Defendant employed Kadir or contracted his services."

[6] We agree with this submission. The proper basis for determining whether a duty to defend exists in any given situation requires an assessment of the pleadings to ascertain the substance and true nature of the claims: see Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699, [2001] S.C.J. No. 50, at para. 35. [page163] Similarly, in Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, at para. 50, the court stated that in a duty to defend analysis, "a court must look beyond the choice of labels, and examine the substance of the allegations contained in the pleadings".

[7] Applying this test, in our view the alleged "non- automobile" claims in the underlying action are in fact caught by the exclusion in Aviva's policy. The precipitating and most important cause of the plaintiff's injuries was the delivery driver's alleged negligence, not the negligence of Pizza Pizza in its corporate policies. The "30 minutes or free" policy exists and is not actionable by the world at large unless there is negligent driving by a delivery driver causing personal injury or property damage. In other words, the alleged non-automobile claims are derived from, not independent of, the automobile claim. As expressed by Doherty J.A. in a case very similar to this appeal, Unger (Litigation Guardian of) v. Unger (2003), 2003 57446 (ON CA), 68 O.R. (3d) 257, [2003] O.J. No. 4587 (C.A.), at para. 20:

The mere description of some of the acts of negligence as "negligent business practices" does not create a separate and discrete cause of action. Those allegations could assist the Ungers in establishing their claim only to the extent that they helped them demonstrate that the vehicle was being used or operated in a negligent fashion when the accident in which the Ungers were injured occurred.

[8] The appeal is allowed. The appellant is entitled to its costs of the application and the appeal on a partial indemnity scale which we fix at $5,000 and $7,500 respectively, inclusive of disbursements and GST.

Appeal allowed.