Elizabeth Bawden v. Wawanesa Mutual Insurance Company David Bawden v. Wawanesa Mutual Insurance Company

[Indexed as: Bawden v. Wawanesa Mutual Insurance Co.]

Ontario Reports

Court of Appeal for Ontario,

Doherty, Goudge and Lauwers JJ.A.

November 26, 2013

118 O.R. (3d) 189 | 2013 ONCA 717

Case Summary

Insurance — Insurer's obligation to defend — Exclusion clauses — Defendants issuing third party claim against parents of injured minor plaintiff claiming contribution and indemnity because of their negligence in failing to properly instruct and supervise plaintiff — Parents' insurance policy covering claims against them for bodily injury "arising out of" their personal activities — Policy excluding claims "for . . . bodily injury to you or any person residing in your household" — Terms "arising out of" and "for" not interchangeable — Exclusion clause excluding only direct claims between or among family members — Claim for contribution and indemnity not excluded.

The defendants in a personal injury action issued a third party claim against the parents of the minor plaintiff for contribution and indemnity based on their alleged failure to properly instruct and supervise their daughter. The parents were insured under a homeowners' policy. The insurer refused to defend the third party claim, relying on an exclusion clause in the policy that excluded coverage for "claims made or actions brought against you for . . . bodily injury to you or to any person in your household". The parents applied successfully for a declaration that the insurer had a duty to defend the third party claim. The insurer appealed.

Held, the appeal should be dismissed.

The policy covered claims against the insured for bodily injury "arising out of" their personal activities. The exclusion clause did not expressly refer to bodily injury "arising out of your personal activities". The term "arising out of" and the term "for" in the exclusion clause were not interchangeable. The wording of the exclusion clause, when compared to the wording of the grant of coverage and in the context of the policy wording as a whole, was consistent with an intent to exclude only direct claims between or among family members and to leave coverage for indirect claims by third parties against household members intact. The insurer had a duty to defend the third party claim.

APPEAL from the order of Sanderson J. (2013), 116 O.R. (3d) 9, [2013] O.J. No. 2647, 2013 ONSC 1618 (S.C.J.) declaring that [page190] the insurer had a duty to defend the third party claim against the insured.

A. Charles Gluek and Troy E. Asselin, for appellant.

Todd J. McCarthy, Andrew Suboch and Tessa E. Warmelink, for respondent Elizabeth Bawden.

Alastair J. McNish and Gargi Chopra, for respondent David Bawden.

[1] BY THE COURT: -- On August 7, 2003, eight-year-old Kelly Bawden was struck and injured by a motor vehicle owned by Randal Wilson and driven by Joyce Wilson. Kelly's mother, Elizabeth Bawden, in her capacity as Kelly's litigation guardian, sued the Wilsons, seeking damages on Kelly's behalf for her injuries. The Wilsons defended the action. They also issued a third party claim against Elizabeth and David Bawden, Kelly's father, claiming contribution and indemnity because of their negligence in failing to properly instruct and supervise their daughter Kelly.

[2] The respondents Elizabeth and David Bawden held a homeowners' insurance policy issued by the appellant Wawanesa Mutual Insurance Company. When the appellant declined to defend them on the third party claim, they commenced an application seeking a declaration that the appellant was obliged to do so.

[3] The application judge found that the applicable coverage provision in the Wawanesa policy encompassed the Wilsons' third party claim against the respondents, and that it was not excluded by the applicable exclusion provision. She therefore granted the order sought by the Bawdens. This is the appeal from that order.

[4] The critical coverage provision in the Wawanesa policy is as follows:

You are insured for claims made or actions brought against you for:

(1) Personal Liability: bodily injury or property damage arising out of your personal activities anywhere in the world.

(Emphasis added)

[5] The critical exclusion provision is the following:

Exclusions: you are not insured for claims made or actions brought against you for: . . .

(3) bodily injury to you or to any person residing in your household other than a residence employee.

(Emphasis added)

[6] The appellant's argument is that the exclusion clause removes all claims for bodily injury by the insured and those residing in their household from the general coverage for claims [page191] against the insured for bodily injury. In other words, claims for bodily injury by anyone against the insured are covered, except for those by family members. The appellant says that the coverage provision and the exemption provision differ only in the identity of the claimants. As the appellant acknowledged in argument, this requires equating "arising out of" in the coverage provision with "for" in the exclusion provision.

[7] In our view, this argument fails. The coverage provision must be interpreted broadly. Read this way, it clearly encompasses the Wilsons' third party claim for contribution and indemnity which arises out of the insureds' personal activities in negligently failing to supervise their daughter, thus resulting in her bodily injury. Indeed, the application judge found that the appellant conceded that the coverage provision is broad enough to encompass the third party claim.

[8] On the other hand, the exclusion clause must be read narrowly. Read that way, it cannot encompass the third party claim in this case, which is not a claim on behalf of Kelly for her bodily injury, but a claim by the Wilsons against the Bawdens for contribution and indemnity for negligent supervision.

[9] Put another way, we do not view "arising out of" and "for" as interchangeable terms in these two provisions. Indeed, it appears that the appellant did not do so either. Looking at the entirety of the exclusion clause, the appellant appears to have deliberately used the term "for" in the exclusion clause at issue, but the term "arising out of" in a number of other specific exclusion provisions. There appears to be a careful differentiation on the part of the appellant in the use of those two terms.

[10] There is also a sound policy explanation for differentiating the two terms. By reading them differently as we have decided, the exclusion clause serves the policy objective, which is reflected in the authorities, of removing from coverage those claims that raise a risk of collusion between the claimant and the insured. The exclusion provision only catches claims by a family member directly against the insured. Such claims among family members clearly raise a risk of collusion that is simply not present in this third party claim by the Wilsons against the respondents.

[11] In the end, we cannot improve on the application judge's analysis [at paras. 73-78]:

Viewing the Policy as a whole, I have noted the absence of "arising out of" language in this exclusion clause, and contrasted it to the specific language in the grant of coverage that does include "arising out of your personal activities." I have noted the repeated use of "arising out of" language in other exclusion clauses in the same Policy. The exclusion did not contain the words "directly or indirectly". It appears from its use of differing wording in [page192] the coverage provision and exclusion clause that Wawanesa may not have intended the words in the exclusion to have the same scope and meaning as the words used in the grant of coverage.

In the exclusion clause here, it was open to Wawanesa to have used the broader wording it used in the grant of coverage, the "arising out of" language.

To be effective, the wording of an exclusion clause must clearly and unequivocally restrict the extent and scope of the coverage.

In the exclusion Wawanesa chose not to track the broad "arising out of" language it used in the broad Grant of Coverage and repeatedly in other exclusions in the Policy.

It chose not to use words clearly extending the coverage to direct or indirect actions. Exclusions must be interpreted narrowly.

The wording of the exclusion clause, when compared to the wording of the grant of coverage and in the context of the Policy wording as a whole, is consistent with an intent to exclude only direct claims between or among family members and to leave coverage for indirect claims by third parties against household members intact. Such an interpretation would recognize an insurer's apparent intent to protect against collusion between and among family members, but would not in the absence of wording evidencing such a clear intent to exclude indirect claims, not deprive family members of insurance protection for indirect claims for bodily injury arising from their actions brought against them by third parties.

(Emphasis in original)

[12] The appeal must therefore be dismissed. The parties will have three weeks to file written costs submissions of no more than five pages each.

Appeal dismissed.

End of Document