Traders General Insurance Company v. Gibson

[Indexed as: Traders General Insurance Co. v. Gibson]

Ontario Reports

Court of Appeal for Ontario

van Rensburg, Paciocco and Thorburn JJ.A.

December 13, 2019

148 O.R. (3d) 460 | 2019 ONCA 985

Case Summary

Insurance — Insurance contract — Interpretation — Coverage provisions and exclusion clauses

Appeal by insurer from decision of application judge finding that insured's daughter was covered under her home insurance policy allowed. Daughter resided with mother and paid rent. Daughter injured when she fell from porch. Policy excluded coverage for persons residing in household other than a residence employee. Daughter was a member of household and not a resident employee. She did not perform services for her mother and was not remunerated for doing specific tasks. Once it was established daughter was person residing in household, she could not be covered as a tenant.

Insurance — Liability insurance — Household or homeowner's policies

Appeal by insurer from decision of application judge finding that insured's daughter was covered under her home insurance policy. Daughter resided with mother and paid rent. Daughter injured when she fell from porch. Policy excluded coverage for persons residing in household other than a residence employee. Daughter a member of household and not a resident employee. She did not perform services for her mother and was not remunerated for doing specific tasks. Once it was established daughter was person residing in household, she could not be covered as a tenant.

Overview

Appeal by the insurer and cross-appeal by the insured from a decision of an application judge finding that the insured's daughter was covered under her home insurance policy. The daughter was injured after she fell from a porch of her mother's house. The policy excluded coverage for persons residing in the household other than a residence employee. The application judge held that the daughter was a member of the household but that she was a tenant and was thus covered by the policy. The daughter had lived in the house with her mother for 60 years and paid rent. The mother argued the application judge erred in not finding that the daughter was a resident employee. The daughter was not paid for work she did at the house.

Held: The appeal should be allowed; the cross-appeal should be dismissed.

The application judge made no error in interpreting the words "person residing in your household" or "residence employee" in the policy and applied those definitions to the agreed facts. The daughter was not a resident employee. She regularly performed domestic services in the house she shared with her mother, but she did not perform the services for her mother, who did not direct the daughter to do work and was not remunerated for doing specific tasks. The tasks she performed were for their mutual benefit. The daughter was a member of the mother's household. Once it was established that the daughter was a person residing in the household, coverage could not be extended for her claim based on her status as a tenant.

Cases Referred To

• Allstate Insurance Co. of Canada v. Aftab, 2015 ONCA 349
• Duquette v. Kent & Essex Mutual Insurance Co.
• Ferro v. Weiner Estate, 2019 ONCA 55
• Lombard Canada Ltd. v. Zurich Insurance Co., 2010 ONCA 292
• Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24
• Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33
• Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co.
• Wawanesa Mutual Insurance Co. v. Bell
• Wawanesa Mutual Insurance Co. v. Hewson, 2003 SKQB 116, affirmed 2004 SKCA 112
• Wright v. Canadian Group Underwriters Insurance Co., 2002 BCCA 254

Counsel

Alan L. Rachlin, for appellant

Nancy J. Tourgis and Rajiv Joshi, for respondent

Judgment

The judgment of the court was delivered by THORBURN J.A.:

Overview

[1] Elizabeth Gibson ("Elizabeth") had a Homeowner's Insurance Policy (the "policy") with Traders General Insurance Company ("Traders").

[2] Elizabeth's daughter, Elizabeth Thompson Gibson ("Betty"), commenced an action against Elizabeth for damages resulting from injuries after Betty fell from the porch of Elizabeth's house and the railing came down with her. Betty and Elizabeth were tidying the porch while waiting for a taxi to take them to medical appointments, which they were both attending.

[3] Elizabeth's policy contains an exclusion of coverage for claims made against Elizabeth arising from "bodily injury to . . . any person residing in your household other than a residence employee".

[4] The issue on this appeal and cross-appeal is whether Elizabeth is entitled to a defence and indemnity against her daughter Betty's claim, either as a residence employee or as a tenant. The essence of the dispute between the parties on this appeal is the interpretation of the policy provisions.

[5] The application judge held that Elizabeth was entitled to coverage for Betty's claim because Betty was a tenant. Had she not been a tenant, Betty's claim would have been excluded on the basis that Betty was a member of the household and there was no exemption from exclusion, as Betty was not a residence employee.

[6] Traders claims the application judge correctly interpreted the words in the policy to conclude that Betty was not a "residence employee" but erred in holding that Betty was a tenant and the claim was therefore covered under Elizabeth's insurance policy.

[7] Elizabeth claims Betty was either a "residence employee" and/or a "tenant" within the meaning of the policy and the claim is therefore covered under the insurance policy.

[8] Traders appeals the decision that Elizabeth was entitled to a defence and indemnity because she was a tenant. Elizabeth cross-appeals the decision that she was not entitled to a defence and indemnity on the basis that Betty was not a residence employee within the meaning of the policy.

[9] For the reasons that follow, I would allow Traders' appeal and dismiss Elizabeth's cross-appeal.

The Issues

[10] The question on this appeal is whether the application judge erred in deciding that Betty's claim was covered under Elizabeth's policy.

[11] The issues to be determined are as follows:

1. Did the application judge err in her interpretation of the words "person residing in your household" in the policy exclusion?

2. Did the application judge err in her interpretation of the words "residence employee" contained in the exemption from the policy exclusion?

3. Did the application judge err in concluding that Betty was covered under the policy as a tenant?

The Terms of the Homeowner's Insurance Policy

[12] Elizabeth's homeowner's policy defines "Insured" as "the person(s) named as insured in the Certificate of Property Insurance and, while living in the same household: 1) his or her spouse; 2) the relatives of either; and 3) any person under the age of 21 in their care". It is agreed that Elizabeth is the insured.

[13] The policy provides coverage for the following:

We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional bodily injury or property damage arising out of:

1. your personal actions anywhere in the world;

2. your ownership, use or occupancy of the premises defined in Section II.

[14] The policy includes the following exclusion:

We do not insure claims made against you arising from:

5. bodily injury to you or any person residing in your household other than a residence employee[.]

[15] The policy defines "Residence Employee":

"Residence Employee" means a person employed by you to perform duties in connection with the maintenance or use of the premises. This includes persons who perform household or domestic services or duties of a similar nature for you. This does not include contractors or sub-contractors. It also does not cover persons while performing duties in connection with your business.

[16] The policy also limits coverage for residence employees in the following way:

We will not pay benefits:

1. unless your employee was actually performing duties for you when the accident happened[.]

[17] There is no reference in the policy to tenants.

The Nature of the Relationship Between Elizabeth and Betty

[18] The facts are not in dispute.

[19] As of the time of Betty's fall, Betty had been living with Elizabeth for over 60 years, save for a ten-month period when she was living in Kingston.

[20] For many years prior to her fall, Betty received disability benefits.

[21] Elizabeth and Betty occupied the home together and shared household chores such as vacuuming, dusting, laundry and grocery shopping. They shared a washroom and they prepared and ate meals together. They both contributed to the cost of home renovations for their mutual benefit.

[22] Betty paid Elizabeth rent (at first $200 per month and then $400 per month) though she had no written rental agreement. Elizabeth assumed responsibility for utilities and property taxes.

[23] Elizabeth never had a specific list of duties for Betty. Elizabeth testified that Betty could do what she wished at any given time and when Betty's health was poor, she did not do any tasks at all, although her rent was not increased during that time.

[24] There was no written contract between Elizabeth and Betty, nor was there a schedule for doing specific work. Betty was not paid for the work she did at the house.

[25] Elizabeth testified in her examination for discovery that all of her children were required to help around the house when they lived at home.

The Application Judge's Decision

[26] The application judge held that Betty was not a "residence employee" within the meaning of the policy. She held that:

While the background facts indicate that Betty was residing in the house, paying a low rent and performing household tasks, I am not of the view that those circumstances alone would make Betty a residence employee.

There was no written contract between Elizabeth and Betty concerning work that Betty was to do. There was never a schedule propounded for doing specific work. Betty was not paid for the work she did at the house. She was not issued a T4. Elizabeth never submitted any documentation relating to Betty with respect to Employment Insurance, Canada Pension Plan benefits, or Workplace Safety and Insurance Board premiums. Betty could do as much or as little as she wished at any time, according to Elizabeth. She had discretion to perform the household tasks she wanted to. She did not report to Elizabeth as regards the work that she did, nor was she supervised by Elizabeth. During some periods of her illness, Betty could not work at all or perform any household tasks. When this occurred, she did not pay more rent.

. . . [T]here was no "family business" and no "employer and employee" relationship between Elizabeth and Betty.

For all of the above reasons, I do not find that Betty can be considered a "residence employee". I am of the view that the policy does not provide coverage for Betty as a "residence employee".

[27] However, the application judge concluded that Betty was a tenant and was therefore covered by the insurance policy. Although the agreement did not define "tenancy", the application judge concluded that a tenancy has two components: (1) the tenant occupies the property in question; and (2) the tenant is permitted to do so by the landlord in exchange for consideration, which need not be in writing or for a fixed time. Betty was residing with Elizabeth at the time of the accident and they had an agreement about their living arrangement, although it was not in writing.

[28] The application judge held that:

. . . [I]t had to have been in the reasonable contemplation of the parties that the owner may have rented a room to a tenant for remuneration, and that the owner may call upon that policy if a tenant were injured on the property, as the policy was obtained for the express purpose of providing liability coverage in respect of the ownership, use and occupancy of the property. I find that it would have been in the mind of Elizabeth when she first purchased the policy of insurance that she would be covered for liability for accidents occurring in the home for tenants. The opposite conclusion would be contrary to the reasonable expectations of Elizabeth and to the ordinary person as to the coverage purchased.

Analysis and Conclusion

A. The Standard of Review

[29] The interpretation of the terms of an insurance policy are reviewed on a standard of correctness: Ferro v. Weiner Estate (2019), 144 O.R. (3d) 414, 2019 ONCA 55, at para. 12; Lombard Canada Ltd. v. Zurich Insurance Co. (2010), 101 O.R. (3d) 371, 2010 ONCA 292, at para. 25.

[30] In this appeal, there is no dispute as to the facts: The dispute between the parties is the interpretation of the words in the policy "any person residing in your household", "residence employee", and whether and in what circumstances the policy covers a "tenant". The standard of review on these questions of the interpretation of the policy is correctness.

B. Principles for Interpreting Insurance Policies

[31] When interpreting an insurance policy, coverage provisions should be construed broadly, exclusion clauses should be construed narrowly, and ambiguities should be construed against the insurer: Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, at paras. 70-71; Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., at p. 271 S.C.R.

[32] The court must attempt to ascertain the purpose of the clause: Wawanesa Mutual Insurance Co. v. Bell, at p. 583 S.C.R.

C. Issue One: Did the Application Judge Err in Her Interpretation of the Words "Person Residing in Your Household" in the Policy Exclusion?

[33] The policy excludes claims arising from "[b]odily injury to you or any person residing in your household" except a "residence employee".

[34] It is agreed that Betty was residing in Elizabeth's house at the time of the injury.

[35] A "household" is defined in Black's Law Dictionary, 9th ed. (Minn.: West, 2009) as "belonging to the house and family".

[36] The Supreme Court of Canada defined a household as "a collective group living in a home, acknowledging the authority of a head, the members of which, with few exceptions, are bound by marriage, blood, affinity or other bond, between whom there is an intimacy and by whom there is felt a concern with and an interest in the life of all that gives it a unity": Bell, at p. 584 S.C.R.

[37] In Ferro, at paras. 17, 25, Miller J.A. for the court defines "household" as a place where

. . . its members share the intimacy, stability, and common purpose characteristic of a functioning family unit.

A person's membership in a household is not established by a restricted inquiry limited to interactions surrounding the use and management of one particular residence . . . [M]embership in a household is assessed holistically, based on the totality of the parties' relations and intentions towards each other.

[38] What is essential in determining whether a person is part of the household is not how the household is structured, but the degree to which the choices and actions of all members are motivated by the collective interest of the household as distinct from their individual interests: Ferro, at para. 17.

[39] This involves consideration of whether

(a) the person contributes to the household in a meaningful way through time and/or resources for the benefit of the collective good of the household;

(b) the person shares common space with other members of the household; and

(c) the person is motivated by an interest in the life of all members of the household.

[40] The application judge defined the correct test in interpreting the words "person residing in your household". She then applied the test to the agreed facts.

[41] She appreciated that when Betty fell from the porch, she had been residing in her mother Elizabeth's home for many years, sharing responsibility for household chores, doing groceries, eating meals together, taking care of one another and sharing an emotional bond. They shared common areas such as the kitchen and washroom. While Betty paid some rent to Elizabeth, she also spent money on home renovations for the benefit of the household.

[42] Betty and Elizabeth's actions and living arrangements were clearly indicative of Betty being a "person residing in your household", as the application judge correctly defined it. This was a family collective living together in a home with a common bond and concern for one another. These circumstances were sufficient to conclude that Betty was a member of Elizabeth's household at the time of her injury.

[43] Bearing in mind that exclusion clauses should be construed narrowly, it is nonetheless clear that the application judge invoked the correct definition of "person residing in your household" and therefore concluded that Betty was a member of the household who shared the common purpose of contributing to the wellbeing of the members of the household, sharing space, and motivated by an interest in her and her mother.

D. Issue Two: Did the Application Judge Err in Her Interpretation of the Words "Residence Employee" Contained in the Exemption from the Policy Exclusion?

[44] The interpretation of the words "residence employee" within the meaning of the policy is also a question of law to which the correctness test applies.

[45] Elizabeth's policy does not cover claims for bodily injury for members of the household (as Betty was) unless they are "residence employees". If Betty is a "residence employee", she is excepted from the policy exclusion.

[46] Under the policy, a "Residence Employee" is "a person employed by you to perform duties in connection with the maintenance or use of the premises . . . who perform household or domestic services or duties of a similar nature for you [the homeowner]".

[47] There are few cases that consider whether an individual is covered by a policy as a residence employee.

[48] In Wawanesa Mutual Insurance Co. v. Hewson, the son of a farmer who lived on the family farm was injured while lifting a barrel of hay and sued his father. The court held that the son was "an employee" of his father, although the son worked on the family farm, the compensation was inadequate and it was not fixed or paid systematically. He was an employee in the circumstances because his work went beyond chores and it was significant to the operation of the farm. Specifically, the court reasoned as follows, at paras. 40-42:

The issue of whether a person is an employee is a factual one which must be determined upon a consideration of the particular circumstances.

I make particular reference to these circumstances. Dayton Hewson did almost all the work involved in the cattle operation. The amount of work was significant, necessary and well beyond what is considered to be chores. It was performed on a daily basis. Yet while he did this work, it was done under the direction and control of Larry Hewson who also sometimes helped. While Larry Hewson would have acted in the capacity of Dayton's father, a role which never ceased, this did not preclude him from also acting as an employer. He was the owner of the cattle operation and he engaged his son to keep it functioning. Yet any profit or loss flowing from the cattle operation was that of the father. In short, the working arrangement was that of any business.

Dayton Hewson obtained compensation which was over and above normal care provided to a child by parents.

[49] In Duquette v. Kent & Essex Mutual Insurance Co. (1992), two brothers worked on one another's nearby farms. One was returning a combine that his brother had rented when he made an improper left turn and caused damage to a tractor-trailer. The issue was whether the brother involved in the accident was covered by the other brother's "Homeowners and Composite Farm policy" as a "residence employee" or "farm employee".

[50] The court in Duquette held that the ordinary meaning of "employee" was "one who works for another for wages or some other valuable consideration": at p. 442 O.R. The court found that the brother involved in the accident was receiving "valuable consideration" and was working under the direction and control of his brother as an employee. In other words, he was working in an "employer and employee" situation.

[51] In this case, the terms of the policy indicate that the "residence employee" must be performing duties "for you" (emphasis added), referring to the insured person, in this case, Elizabeth. Unlike the cases referred to above, Betty regularly performed domestic services in the house she shared with Elizabeth, but she did not perform the services for Elizabeth. Elizabeth said she did not direct Betty to do work. Betty was not remunerated for doing specific tasks, and the tasks she performed were for their mutual benefit.

[52] Moreover, as noted by the court in Hewson, doing routine chores for the benefit of the household, as Betty did, is not enough to be considered an "employee". The duties must extend beyond chores to constitute a workplace arrangement.

[53] For these reasons, the application judge correctly interpreted the words "residence employee" in the policy. She applied this interpretation to the agreed facts to conclude that the relationship between Betty and Elizabeth was not in essence a workplace arrangement, and it did not go beyond performing household chores for their mutual benefit. As such, Betty was not a "residence employee" excepted from the policy exclusion.

E. Issue Three: Did the Application Judge Err in Concluding That Betty Was Covered Under the Policy as a Tenant?

[54] The clear language of the policy excludes all claims for bodily injury to anyone residing in the household except a residence employee. There is no exception to the exclusion for members of the household who are also tenants. The absence of a specific exclusion does not create coverage where an exclusion applies.

[55] Thus, once it is established that Betty was a person residing in Elizabeth's household, coverage cannot be extended for her claim against Elizabeth based on her status as a "tenant". If the essence of the relationship between Elizabeth and Betty had been that of landlord and tenant, rather than member of the household sharing the intimacy, stability, and common purpose of the household, then Betty's claim would have been entitled to succeed. This was the case in Wright v. Canadian Group Underwriters Insurance Co., relied on by the application judge.

[56] In Wright, the claimant was "a stranger who had no family connection to either owner, and who moved into the insured premises as a rent-paying tenant": at para. 25. Unlike Betty, she was a tenant with no family ties to the owners and was not a member of the household in the sense that she shared the intimacy, stability, and common purpose characteristic of a household, as Betty and her mother Elizabeth did.

[57] The essence of the relationship in Wright was that of landlord and tenant. The tenant in Wright was not a member of the household who contributed to and enjoyed the fruits of being a member of the household, while paying some rent. Because the tenant was not a "member of the household", the exclusion did not apply. By contrast, Betty resided in the residence of the insured, Elizabeth, as a member of the household. Although she paid some rent, the essence of their relationship was as a member of the household, contributing to and enjoying the fruits of membership in the household.

[58] Once she had determined that the exception applied, that is, that Betty was a member of Elizabeth's household, the application judge erred by considering the "reasonable expectations" of the parties to the insurance policy and concluding that Elizabeth would be entitled to coverage as a "tenant". The "primary interpretative principle in the construction of insurance policies is that, where the policy is unambiguous, the court should give effect to its clear language, reading the policy as a whole": Allstate Insurance Co. of Canada v. Aftab, 2015 ONCA 349, at para. 17; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, at para. 22; and Scalera, at para. 71.

Conclusion

[59] The application judge made no error in interpreting the words "person residing in your household" or "residence employee" in the policy and she applied those definitions to the agreed facts. She therefore concluded that Betty resided in the household but was not a residence employee.

[60] However, the application judge erred in her interpretation of the policy by holding that Elizabeth's claim was covered under the policy on the basis that Betty was a tenant. Whether or not Betty paid rent, she was a member of Elizabeth's household and was not a residence employee. The policy is clear that all persons residing in the insured's household are excluded from coverage unless they are residence employees. This is so regardless of whether they pay rent.

[61] The application judge therefore erred in concluding that Elizabeth is entitled to a defence and indemnity against her daughter Betty's claim on the basis that she found Betty was a tenant.

[62] For these reasons, I would grant the Traders appeal and dismiss Elizabeth's cross-appeal. I would award costs to Traders in the amount of $11,000 all inclusive, as agreed by the parties, and given the result, reverse the costs in the court below.

Appeal allowed; cross-appeal dismissed.

End of Document