SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 12-53821
DATE: 2012/05/30

RE: Sophie Desormeaux, Applicant

AND

The Dominion of Canada General Insurance Company, Respondent

BEFORE: Mr. Justice Peter Annis

COUNSEL:
Thomas P. Connolly, for the Applicant
Pasquale Santini, for the Respondent

HEARD: May 22, 2012

ENDORSEMENT

Introduction

[ 1 ] This is an application for a declaration that The Dominion of Canada General Insurance Company (“Dominion”) is obligated to provide the applicant with a defence to counterclaims advanced against her in Court file No. 10-49924 at Ottawa.

[ 2 ] Dominion denies any duty to defend because the facts alleged in the counterclaims do not fall within the coverage provided by the policy of insurance. In particular, it alleges that the applicable homeowners’ policy of insurance excludes coverage for the claims brought against the applicant.

[ 3 ] The applicant also raised, but did not argue, a supplementary issue whether Dominion is entitled to control the defence, including choosing instructing counsel in defence to the counterclaim. As this issue was not followed up in argument, it is not considered in the reasons that follow.

[ 4 ] I conclude that Dominion does not owe the applicant a duty to defend the counterclaims inasmuch as coverage is excluded by the wording in the home owners’ policy of the applicant. My reasons in support of this conclusion follow.

Facts

[ 5 ] The applicant, Sophie Desormeaux (“Ms. Desormeaux”) lives in the Town of Hammond with her husband Roy Desormeaux and their two children Xavier and Zoe Desormeaux.

[ 6 ] Dominion issued a Homeowner’s Policy of Insurance to Sophie and Roy Desormeaux for their property in the Town of Hammond. This policy of insurance provided coverage to the applicant in accordance with its terms and conditions as of September 16, 2009, the date of the alleged loss.

[ 7 ] The mother of Roy Desormeaux, Margaret Desormeaux, provided daycare services for her grandchildren Xavier and Zoe on weekdays. On or about September 16, 2009 Xavier was injured in Margaret Desormeaux’s yard when, it is alleged, another child, Gabby Asselin, threw something that struck Xavier’s right eye.

[ 8 ] The Desormeaux family comprised of Sophie, Roy, Xavier and Zoe commenced an action claiming damages arising from the bodily injury suffered by Xavier as against Margaret Desormeaux, Gabby Asselin and Gabby’s mother, Anita Asselin (the “defendants”).

[ 9 ] The defendants filed counterclaims against Sophie Desormeaux for contribution and indemnity towards her son’s injuries. The defendants allege that Sophie Desormeaux was negligent in the supervision of a child, and at that time, Xavier was under her care.

[ 10 ] Dominion denies that it has an obligation to defend the applicant against the counterclaims because coverage is excluded for obligations to pay claims for bodily injury to the named insured, the children of the named insured where the children are permanent residents of the same household, or any person under the age of 21 under the named insured’s care.

The Policy Provisions

[ 11 ] The relevant provisions of the insured’s Homeowner’s Policy of Insurance include:

Definition of “You”

By the terms “you” and “your” used in this policy we mean the person(s) named as Insured on the Declaration Page, and if a permanent resident of the same household, his or her spouse, the children of either, relatives of either, any person under age 21 in their care.

Coverage E - Personal Liability

Coverage E applies separately, as follows:

1. Personal liability

We will pay on your behalf all sums you become liable to pay as compensation for loss because of bodily injury or property damage.

Defence

If there is a suit against you, not otherwise excluded, and insurance is provided by Coverage E, we will defend you even if the suit is groundless, false or fraudulent. We reserve the right to investigate, negotiate and settle any claims or suit if we decide this is appropriate.

Exclusions

This policy does not apply to

Under Coverage E(1) Personal Liability

1. Bodily injury to you, or any person residing in your household, other than residence employees

Issue

[ 12 ] Whether coverage of the insured applicant is excluded by the wording of the Homeowner’s policy issued by Dominion?

Analysis

Principles of Interpretation

[ 13 ] There is no disagreement between the parties over the contents of the duty to defend; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R.245, SCC 33 being the authority cited by both parties in this regard. In this regard see also Non‑Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, SCC 24.

[ 14 ] I summarize these principles only as they relate to the interpretation of insurance contracts and exemption clauses as the narrow focus of this matter involves the interpretation of an exemption clause.

• The focus of insurance policy interpretation should first and foremost be on the language of the policy at issue. General principles of tort law are no substitute for the language of the policy.

• The primary interpretive principle is that when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole.

• It is axiomatic that the rules of construction are applied to resolve ambiguity; they do not operate to create ambiguity where none exists.

• Where the language of the insurance policy is ambiguous the courts rely on general rules of contract construction: for example supportable interpretations that are consistent with the reasonable expectations of parties; avoidance of interpretations giving rise to unrealistic results or beyond the contemplation of parties when the policy was concluded; striving to ensure similar insurance policies are construed consistently.

• However, in respect of the interpretation of exclusions from coverage, because the threshold for the duty to defend is only the possibility of coverage, the insurer must show that exclusion clearly and unambiguously excludes coverage.

Quick v. McKenzie and Lumbermens Mutual

[ 15 ] There was considerable debate concerning the application of the Ontario Court of Appeal decision in Quick v. MacKenzie (1995), 23 O.R. (3d) 117 (hereinafter “ Quick ” or the “ Quick decision”). Both parties argued that it supported their position.

[ 16 ] The Quicks were insured by a homeowner’s policy issued by Lumbermens Mutual Casualty Company. Laura Quick, the six-year-old daughter of the insureds was playing with other children when a dog belonging to the defendants bit her. An action was commenced by the Quicks against the owners of the dog.

[ 17 ] As in this matter, the owners of the dog advanced a counterclaim against Laura Quick’s parents alleging that they failed to supervise her children (and in vicarious liability for the alleged failure to supervise by their nanny).

[ 18 ] The Quicks made an application for coverage under their homeowner’s policy. Lumbermens refused to defend them based upon the exclusionary clause in their policy, which the Court of Appeal upheld, overturning the decision of the Trial Judge.

[ 19 ] The exclusionary clause in Quick reads as follows: You are not insured for claims made against you arising from: bodily injury to you or any person residing in your household other than a residence employee .

[ 20 ] Dominion submits that the Quick decision should be applied to this case. It claims that there is no meaningful distinction between the alleged facts of the two situations, or the language of the coverage and exclusion clauses.

[ 21 ] Both parties acknowledged that the application of an exclusion clause depends upon its wording. This was clearly demonstrated in the Quick decision inasmuch as the case of Sheppard v. The Co‑operators General Insurance Company (1997), 33 O.R. (3d) 362 considered and reported together with Quick and concerning similar facts, rejected the exclusionary clause employed because it was “almost meaninglessly broad”.

[ 22 ] Catzman J.A., writing for the Court of Appeal summarized his conclusions in Q uick as follows:

… the language of this exclusion clause (“claims made against you arising from… bodily injury to you or to any person residing in your household other than a residence employee”) is precisely focused. The claim against the Quicks is one “arising from” the bodily injury to Laura within the meaning of this clause.

[ 23 ] I disagree with the respondent that the Quick decision is of much utility in upholding the exclusion clause used by Dominion. The specific words (“claim arising from”), focused on extensively in various passages by the Court of Appeal appear nowhere in Dominion’s exclusionary clause or in its coverage clause.

[ 24 ] Instead, Dominion employed language and indeed a structure that is markedly different from that used in the Quick decision. While both exclusionary clauses share identical end‑of‑clause wording (“bodily injury to you, or any person residing in your household other than residence employees”), as shall be seen below, the introductory words of the clauses are entirely different.

[ 25 ] Were the Quick decision to have application, I think a better case could be made by the applicant. She argued that Dominion’s exclusion clause is ambiguous because it “does not refer to claims made against you for bodily injury nor to claims arising from bodily injury”.

[ 26 ] However, because I find the wording, and indeed design of Dominion’s exculpatory clause so dissimilar to that in Quick , I do not find the case to be of great assistance to either party in resolving this matter.

Reference to the Coverage Clause

[ 27 ] I turn therefore to the crux of the respondent’s submission which directs the court to consider the exclusion clause in light of the initial grant of coverage. I consider this approach to be different from that in Quick , where the exculpatory clause is what I would describe as a “stand alone” clause in the sense that the exemption is largely self-contained in the clause.

[ 28 ] To better analyze Dominion’s submission, the relevant provisions of the coverage and exclusion sections are restated together with my emphasis added to the salient wording in both provisions:

COVERAGE

Coverage E applies separately, as follows:

1. Personal liability

We will pay on your behalf all sums you become liable to pay as compensation for loss because of bodily injury or property damage

EXCLUSION

This policy does not apply to

Under Coverage E(1) Personal Liability

1. Bodily injury to you , or any person residing in your household, other than residence employees

[ 29 ] Dominion argues that “the exclusion clearly applies to compensation for which the insured becomes liable to pay for bodily injury to an insured person, which would encompass both ‘claims made against’ the insured for bodily injury and ‘claims arising from’ bodily injury”.

[ 30 ] By referring specifically to “Coverage E(1) Personal Liability”, I accept that the linkage between the exclusion provision and the coverage provision is clearly described, bearing in mind that in any event, the court is required to read the policy as a whole when interpreting provisions of an insurance policy.

[ 31 ] I also agree that in framing coverage based on “liability to pay as compensation for loss for bodily injury”, the reference in the exemption to “bodily injury” is sufficiently focused in the sense that it encompasses “claims arising from” bodily injury.

[ 32 ] In other words, I do not interpret the Quick decision as prescribing a formulaic requirement to speak to “claims arising” (i.e. not limiting other expressions of how losses may arise from bodily injury) in exculpatory clauses. I also do not read the decision as requiring that an exemption clause should be self-contained to be effective.

Policy Not Applying

[ 33 ] The second issue concerning Dominion’s exculpatory clause is whether the introductory words “ This policy does not apply …” conveys unambiguously that no coverage is provided for losses involving bodily injury.

[ 34 ] I am satisfied that stating that a “policy” does not apply is tantamount to saying that no coverage under the policy will be provided. While at first blush the phrasing appears overly large in scope, I cannot think of any other interpretation to give the wording in the context of an exclusionary clause which might render it ambiguous.

Direct Claims against the Insured

[ 35 ] As a final note, the applicant argued that the policy was intended to prevent Xavier from suing his mother directly; but would not exclude a duty to defend when the claim was made indirectly, by a third party via counterclaim.

[ 36 ] I cannot make out such a distinction from the wording of the Dominion exclusion. The liability coverage is very wide and as pointed out, the exclusion is framed with reference to the coverage clause. If no exemption applies for indirect claims involving bodily loss to one of the insureds, there is no basis to conclude that direct claims by Xavier against his mother would be otherwise excluded from coverage.

[ 37 ] In summary, I conclude that the Dominion exclusionary clause clearly indicates that the policy by which the insurer provides personal liability coverage for sums it would otherwise be liable to pay on behalf of the insured as compensation for loss because of bodily injury without limitation, will not apply to bodily injury occurring to the insured (which by the extended definition of “you” includes Xavier).

Costs

[ 38 ] As is the practice in Ottawa, the parties provided sealed envelopes containing their Cost outlines to be considered after disposition of the substantive decision.

[ 39 ] I award the respondent partial indemnity costs in the amount claimed. They are less than the amounts requested by the applicant, while the hours worked and tariffs proposed by the respondent are reasonable in the circumstances.

Disposition

[ 40 ] The application is dismissed with costs payable on a partial indemnity basis to the respondent in the all in amount of $7,959.45, inclusive of HST.

Annis J.

Date: May 30, 2012

COURT FILE NO.: 12-53821
DATE: 2012/05/30

ONTARIO SUPERIOR COURT OF JUSTICE
RE: Sophie Desormeaux, Applicant
AND The Dominion of Canada General Insurance Company, Respondent

BEFORE: Mr. Justice Peter Annis

COUNSEL:
Thomas P. Connolly, for the Applicant
Pasquale Santini, for the Respondent

ENDORSEMENT

Annis J.

Released: May 30, 2012