TD General Insurance Company v. Intact Insurance Company

[Indexed as: TD General Insurance Co. v. Intact Insurance Co.]

Ontario Reports Court of Appeal for Ontario Juriansz, D.M. Brown and L.B. Roberts JJ.A. January 9, 2019

144 O.R. (3d) 342 | 2019 ONCA 5

Case Summary

Insurance — Other insurance — Boat passenger injured when boat struck shoreline — Driver of boat being covered under owner's policy with TD and under his own policy with Intact — Both policies providing primary coverage to driver and both policies providing that they were excess to other insurance that covered loss — Conflict irreconcilable — Both insurers required to share equally in defence and indemnification of driver.

A passenger in a boat was allegedly injured when the boat struck the shoreline. She sued both the driver and the owner of the boat. The driver was covered under the owner's policy with TD and under his own policy with Intact. The two policies contained identical "other insurance" clauses that provided as follows: "If you have other insurance which applies to a loss or claim, or would have applied if this policy did not exist, this policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance is used up". TD brought an application for an order that both insurers had to share equally in the defence and indemnification of the driver. The application was dismissed. TD appealed.

Held, the appeal should be allowed.

The application judge erred in law by applying the "closeness of the risk" approach. Both policies, by their terms, provided primary coverage to the driver for the claim, and both policies provided that they were excess to other insurance that covered the loss. The conflict was irreconcilable. The two insurers were required to share equally in the defence and indemnification of the driver.

Family Insurance Corp. v. Lombard Canada Ltd., [2002] 2 S.C.R. 695, [2002] S.C.J. No. 49, 2002 SCC 48, apld

Lawyers' Professional Indemnity Co. v. Lloyd's Underwriters, [2017] O.J. No. 5790, 2017 ONCA 858, distd

APPEAL from the judgment of R.D. Cornell J., [2018] O.J. No. 1868, 2018 ONSC 2352 (S.C.J.).

Counsel: Marc D. Isaacs and Arie Odinocki, for appellant. Gary J. Marcuccio, for respondent.

The judgment of the court was delivered by

Judgment

JURIANSZ J.A.:

[1] The passenger of a boat, specifically a 17 1/2 foot Aluma with a 135-horsepower outboard motor, claims she was injured when the boat struck the shoreline. The passenger sued both the driver and the owner of the boat.

[2] The driver was covered by two policies of insurance. The owner of the boat held a TD insurance policy that covered the driver, who was driving the boat with the owner's permission. The driver was also covered by his own homeowner's policy, issued by Intact.

[3] The two policies have identical "other insurance clauses" that provide:

If you have other insurance which applies to a loss or claim, or would have applied if this policy did not exist, this policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance is used up.

[4] TD brought an application seeking an order that both insurance companies were on an equal footing and had to share equally in the defence and indemnity of the driver stemming from the passenger's claim.

[5] The application judge dismissed the application. TD appeals. I would allow the appeal.

A. Reasons of the Application Judge

(a) Family Insurance Corp. v. Lombard Canada Ltd.

[6] The application judge began his analysis by noting the governing authority was the Supreme Court's decision in Family Insurance Corp. v. Lombard Canada Ltd., [2002] 2 S.C.R. 695, [2002] S.C.J. No. 49, 2002 SCC 48. He succinctly set out the facts and conclusion in that case.

[7] He noted that in Family Insurance, the insured was covered under a homeowner policy issued by Family Insurance with a maximum benefit of $1 million. The insured also had coverage issued by Lombard Canada Ltd. under a commercial general liability policy for claims up to $5 million. Both policies contained "other insurance clauses" that declared the policies to be "excess insurance" to any other insurance coverage. Each insurer relied on its "other insurance clause" to shield itself from primary liability. The Supreme Court concluded that because the two "other insurance clauses" were irreconcilable, the insurers were required to share their obligations.

[8] The application judge also correctly noted in Family Insurance the Supreme Court held the insurance policies themselves must be construed to determine the liability of each insurer, and the court should not refer to surrounding circumstances or look outside the policies.

(b) The provisions of the policies

[9] The application judge noted the TD Home Insurance Policy contained a personal liability extension that insured liability arising from the specific boat involved in the accident. Section II -- Liability of the TD Policy's Declarations section states: "Personal liability extension(s): WATERCRAFT LOC.01 OUTBOARD 101HP-150HP 1". The policy's Appendix contains a Schedule of Personal Property Watercraft Insurance that provides coverage for the following:

2008 ALUMA CRAFT 171/2 FT SERIAL #ACBJ9501A808 $17000 MOTOR IS OB MOTOR 2006 135 HP OPTIMAX MERCURY SERIAL #1B427575 $3000 TRAILER EASY HAULER SINGLE AXEL $1000

[10] The application judge noted the TD policy charged an additional premium of $516 for the personal liability extension.

[11] The driver of the boat was covered by the TD policy because he was operating it with the owner's consent. The TD policy states that "'[y]ou' or 'your' refers to the Insured", which is defined by the TD policy as including "any person or organization legally liable for damages caused by a watercraft or animal owned by you, and to which this insurance applies".

[12] The application judge then turned his attention to the Intact policy. He noted the Intact policy provides coverage for liability for unintentional bodily injury arising out of the policy holder's personal actions anywhere in the world including "claims arising out of [his] use or operation of any type of watercraft".

[13] He goes on to observe that the Intact policy limited coverage for watercraft owned by the policyholder to "watercraft . . . equipped with an outboard motor or motors of not more than 19kW (25H.P.)". He also observed that in a similar fashion the TD policy limited coverage to watercraft with an outboard motor of not more than 16 h.p. unless "specifically mentioned in the Declarations Page".

[14] The application judge reasoned that the "Personal liability extension(s)" demonstrated an intention on the part of TD to cover a different type of risk than that covered by the basic watercraft coverage in each policy. He found it was clear "that TD intended to provide the primary insurance coverage for the watercraft". He added that Intact had conceded "that it is an excess insurer to the claim that has been presented should such claim exceed the limits of the TD policy".

[15] Since the TD policy provided the "primary insurance for the watercraft in question" and Intact conceded it provided excess insurance, the application judge dismissed TD's application for an order that the two companies had to share equally in the defence and indemnity of the driver.

B. Analysis

[16] The application judge erred in law by applying the "closeness to the risk" approach characterizing the "Minnesota approach", which the Supreme Court expressly rejected, at paras. 22-28 of Family Insurance. In para. 22, Bastarache J. described the modern manifestation of the Minnesota approach to overlapping coverage as having "evolved into an analysis of the competing policies in an effort to determine each insurer's intention to cover the particular loss". In assessing each of the insurers' "closeness to the risk", courts that employ the Minnesota approach look to the following non-exclusive factors:

(1) Which policy specifically described the accident-causing instrumentality?

(2) Which premium is reflective of the greater contemplated exposure?

(3) Does one policy contemplate the risk and use of the accident-causing instrumentality with greater specificity than the other policy -- that is, is coverage of the risk primary in one policy and incidental to the other?

[17] These are factors that the application judge employed in this case. In Family Insurance, the Supreme Court rejected this approach to overlapping coverage. It adopted a different approach to overlapping coverage. Where there is overlapping coverage "the focus of the examination is to determine whether the insurers intended to limit their obligation to contribute, by what method, and in what circumstances vis-à-vis the insured": at para. 28. Where there are no limiting intentions or where those intentions cannot be reconciled, the insurers must share the burden equally under a coordinate obligation to make good the loss.

[18] In my view, the analysis may be boiled down to two questions.

[19] The first question is whether there is overlapping coverage. The answer in this case is yes. The TD policy covered the driver's liability, as the application judge found, by virtue of the personal liability extension. The Intact policy covered the driver's liability from the accident in the 135 h.p. Aluma watercraft because he, as the policy holder, did not own it. The clause limiting coverage to watercraft equipped with an outboard motor of not more than 25 h.p. applied only to watercraft owned by the policy holder.

[20] The second question is whether the insurers intended to limit their obligation to contribute, by what method, and in what circumstances vis-à-vis the insured. The focus in answering the second question is on the excess insurance clauses. The application judge found it significant that Intact would be an excess insurer should the claim exceed the limits of the TD policy. However, as noted in para. 3, above, both policies had identical "other insurance clauses". So, in the same way, should the claim exceed the limits of the Intact policy, TD would be an excess insurer should. The limiting obligations in the two policies were irreconcilable.

[21] The proper application of Family Insurance leads to the result that the two insurers must share the burden equally under a coordinate obligation to make good the loss.

[22] The application judge found support for his conclusion in the decision of this court in Lawyers' Professional Indemnity Co. v. Lloyd's Underwriters, [2017] O.J. No. 5790, 2017 ONCA 858. The case is distinguishable on its facts. In Lloyd's Underwriters, the LPIC policy expressly acknowledged that other policies, specifically arranged to apply as excess insurance to LPIC's policy, were to be treated as being excess policies. In these circumstances, the application judge correctly found the Lloyd's policy was excess to the LPIC policy, a conclusion upheld on appeal. In the present case, both policies, by their terms, afforded primary coverage to the driver for the claim, and both policies provide that they are excess to other insurance that covers the loss. The conflict is irreconcilable.

[23] The appeal is allowed. The application judge's order is set aside and replaced with an order granting the relief requested in paras. (a)-(d) of TD's notice of appeal. TD is granted costs of the appeal fixed in the amount of $10,000, inclusive, and costs of the application fixed in the amount of $2,000, inclusive.

Appeal allowed.

End of Document