Elizabeth Bawden v. Wawanesa Mutual Insurance Company; David Bawden v. Wawanesa Mutual Insurance Company, 2013 ONSC 1618

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

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

Ontario Reports

Ontario Superior Court of Justice,

Sanderson J.

March 22, 2013

116 O.R. (3d) 9 | 2013 ONSC 1618

Case Summary

Insurance — Insurer's obligation to defend — Exclusion clauses — Insured suing owner and driver of motor vehicle that struck and injured her eight-year-old daughter — Defendants issuing third party claim against insured for contribution and indemnity based on alleged failure to properly instruct and supervise daughter — Policy excluding coverage for "claims made or actions brought against you for . . . bodily injury to you or to any person in your household" — Exclusion clause not clearly and unequivocally restricting extent and scope of coverage in event of indirect claim against insured for contribution and indemnity — Insurer having duty to defend insured.

EB sued the owner and driver of a motor vehicle that struck and injured her eight-year-old daughter while the child was riding a bicycle on the sidewalk near her home. The defendants issued third party claims against EB and her husband DB for contribution and indemnity based on their alleged failure to properly instruct and supervise their daughter. EB and DB 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 other than a residence employee". EB and DB applied for a declaration that the insurer had a duty to defend the third party claim.

Held, the application should be granted.

Unlike the grant of coverage part of the policy, the exclusion clause did not expressly refer to bodily injury "arising out of your personal activities". "Arising out of" language was used in other exclusion clauses in the same policy. The exclusion did not contain the words "directly or indirectly". 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. As the exclusion clause did not clearly and unequivocally restrict the extent and scope of the coverage in the event of an indirect claim by a third party against DB and EB for contribution and indemnity, the insurer had a duty to defend the third party claim.

Desmoreaux v. Dominion of Canada General Insurance Co., [2012] O.J. No. 2433, 2012 ONSC 3199, [2012] I.L.R. I-5291, 11 C.C.L.I. (5th) 270, 216 A.C.W.S. (3d) 999 (S.C.J.); Rabas v. Claim Management Services, Inc., 556 N.W. 2d 410, 205 Wis. 2d 483 (C.A. 1996); Sheppard v. Co-Operators General Insurance Co.; Quick v. MacKenzie (1997), 1997 2230 (ON CA), 33 O.R. (3d) 362, [1997] O.J. No. 1600, 99 O.A.C. 390, 43 C.C.L.I. (2d) 262, [1997] I.L.R. I-3437, 70 A.C.W.S. (3d) 699 (C.A.); Whirlpool Corp. v. Ziebert, 539 N.W. 2d 883, 197 Wis. 2d 144 (S.C. 1995), consd [page10 ]

Other cases referred to

Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 2000 16891 (ON CA), 50 O.R. (3d) 417, [2000] O.J. No. 3807, 191 D.L.R. (4th) 221, 25 C.C.L.I. (3d) 37, [2001] I.L.R. I-3913, 100 A.C.W.S. (3d) 389, 2000 5737 (C.A.); Nichols v. American Home Insurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, 68 D.L.R. (4th) 321, 107 N.R. 321, J.E. 90-643, 39 O.A.C. 63, 45 C.C.L.I. 153, [1990] I.L.R. Â1-2583 at 10058, 20 A.C.W.S. (3d) 699; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 45, [2010] S.C.J. No. 33, 2010 SCC 33, 293 B.C.A.C. 1, [2010] I.L.R. I-5051, 406 N.R. 182, 323 D.L.R. (4th) 513, 9 B.C.L.R. (5th) 1, EYB 2010-179515, 93 C.L.R. (3d) 1, 2010EXP-3049, J.E. 2010-1683, [2010] 10 W.W.R. 573, 73 B.L.R. (4th) 163, 89 C.C.L.I. (4th) 161; Wawanesa Mutual Insurance Co. v. Hewson, [2004] S.J. No. 534, 2004 SKCA 112, [2005] 1 W.W.R. 205, 254 Sask. R. 203, 13 C.C.L.I. (4th) 189, 133 A.C.W.S. (3d) 699, 2004 CarswellSask 565

APPLICATION for a declaration that the insurer had a duty to defend the third party claim against the insured.

Andrew Suboch, for applicant Elizabeth Bawden.

A. Charles Gluek, for respondent Wawanesa Mutual Insurance Company.

Alastair J. McNish, for applicant David Bawden.

SANDERSON J.: —

Introduction

1This is an Application by David Bawden ("David") and Elizabeth Bawden ("Elizabeth") for a declaration that the respondent, Wawanesa Mutual Insurance Company ("Wawanesa"), has a duty to defend them with respect to third party claims the Wilsons have brought against them for contribution and indemnity for any damages the Wilsons are found to be liable to pay to Elizabeth and David's daughter Kelly Bawden ("Kelly") in the main action. The Bawdens seek a determination of their rights under Wawanesa Homeowners Policy 7471834 (the "Policy").

Background facts

2On August 7, 2003, while riding her bicycle along the sidewalk near her home in Toronto, eight-year-old Kelly was struck and injured by a motor vehicle owned by the defendant Randall S. Wilson and driven by the defendant Joyce Wilson.

3Elizabeth, in her capacity as Kelly's litigation guardian, sued the Wilsons in the main action, seeking damages on Kelly's behalf for her injuries.

4The Wilsons defended the main action and issued third party claims against Elizabeth and David, alleging that any damages Kelly may have suffered were caused or contributed to by Elizabeth and David's negligence in failing to properly instruct and supervise Kelly.

5Elizabeth delivered a Statement of Defence to the Wilsons' Third Party Claim. David has yet to do so.

6Wawanesa refused to provide defences to the Wilsons' Third Party Claims against David and Elizabeth on the basis that the Policy contains an exclusion of coverage for actions against them for bodily injury to any person residing in their household (e.g., Kelly).

7Both Elizabeth and David then issued Fourth Party Claims against Wawanesa, their homeowners' insurer, seeking orders requiring Wawanesa to defend the Third Party Claims the Wilsons have brought against them and to indemnify them for any amounts they may be held liable to pay to the Wilsons in the Third Party action.

The policy

8At the time of the accident, pursuant to their homeowners' Policy, Wawanesa provided liability coverage to David and Elizabeth.

9Relevant definitions in the Policy include the following:

"Insured" means the person(s) named as Insured in the Declarations and, while living in the same household:

(3) any person under the age of 21 years in their care

"You" or "Your" refers to the Insured.

10Under Section II, Liability Coverage, the relevant insuring clause reads as follows:

Coverage E -- Legal Liability

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)

11The Policy contains an exclusion clause (the family member exclusion) that reads as follows:

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.

The issues

12David and Elizabeth seek a declaration that Wawanesa has a duty to defend them, reimburse them for all legal fees they have incurred and indemnify them for any amounts they may be required to pay the Wilsons in the Third Party Action.

13Counsel for Wawanesa submitted that David and Elizabeth are not insured for claims made or actions brought against them for bodily injury to Kelly, who was admittedly residing in their household at the time of the accident.

14This court must determine whether the exclusion clause in the Policy relieves Wawanesa of (a) any obligation to defend David and Elizabeth against the Wilsons' Third Party Claim; and/or (b) to indemnify them in whole or in part in the event David and Elizabeth are held to be liable in the Third Party action the Wilsons have brought against them; and (c) to reimburse them for legal fees incurred to date.

Law and argument

15Counsel agreed and advised this court that there are no decisions in Ontario interpreting a coverage provision and exclusion in a homeowner's policy having identical wording as the coverage provision and exclusion clause contained in the Policy.

16The principles to be applied in interpreting insurance policies are clear. The focus should be on the language of the policy read as a whole.

17In Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, the Supreme Court of Canada has held that coverage provisions are to be interpreted broadly, exclusion clauses narrowly. Rothstein J. wrote at paras. 22-23:

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 [Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, 2000 SCC 24, [2000] 1 S.C.R. 551] at para. 71).

Where the language of the insurance policy is ambiguous, the courts rely on general rules of contract construction . . . For example, courts should prefer interpretations that are consistent with the reasonable expectations of the parties . . . so long as such an interpretation can be supported by the text of the policy. . . .

18Counsel for the applicants submitted that Wawanesa owes them a duty under the Policy to defend them in the Wilson's Third Party actions against them. The pleadings in this action have raised claims that could possibly be covered. An insurer will be required to defend unless the pleadings make it clear that they all fall outside the ambit of the coverage provided.

19In Nichols v. American Home Insurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, the Supreme Court held at para. 17: "it is not necessary to prove that the obligation to indemnify will in fact arise in order to trigger the duty to defend. The mere possibility that a claim within the policy may succeed suffices. In this sense . . . the duty to defend is broader than the duty to indemnify."

20In Progressive Homes, the Supreme Court of Canada held that an insured does not actually have to be found liable and the insurer does not actually have to be required to indemnify the insured for a duty to defend to exist. All that is required to trigger the duty to defend is the possibility that the claim might fall within the insurance policy.

The coverage clause

21In determining whether or not coverage must be provided, the onus is first on the insured to show that the allegations in the pleadings fall within the initial grant of coverage.

22Counsel for the applicants submitted that the liability coverage provided by the Policy clearly applies in these circumstances. David and Elizabeth are insured for claims made against them for bodily injury arising out of their personal activities anywhere in the world. (Emphasis added)

23David and Elizabeth's negligence alleged by the Wilsons in the Third Party claim against them relates to their activities in supervising and training their daughter in the operation of her bicycle. In other words, the Third Party Claim alleges that Kelly's bodily injury arose out of David and Elizabeth's personal activities. Wawanesa has conceded that but for the fact that Kelly resided in David and Elizabeth's household, the claims made against them in the Third Party Claim would have been covered under the Policy. In other words, Wawanesa has conceded the coverage provisions are broad enough to cover the claims the Wilsons are making against David and Elizabeth in the Third Party Action. In my view, the initial grant of coverage under the Policy is very broad. The Policy provides coverage to David and Elizabeth for all bodily injury arising out of their activities including direct claims against them and indirect claims arising indirectly against them, i.e., claims that they must make payments to others (indemnify others) arising out of their activities for amounts those others are being required to pay.

24David and Elizabeth's training and supervision of Kelly in the use of her bicycle clearly qualify as "personal activities".

25Therefore, Wawanesa clearly has a duty under the Policy to defend David and Elizabeth in the Third Party Action brought by the Wilsons unless the exclusion clause effectively limits the scope of that coverage.

26I am of the view that David and Elizabeth have discharged the initial onus upon them of showing that the allegations in the Third Party pleadings against them clearly fall within the initial grant of coverage in the Policy.

27Having done so, the onus shifts to Wawanesa to show that the family member exclusion clause clearly and unequivocally limits the scope of that coverage.

28Exclusion clauses are to be narrowly construed. The wording of exclusion clauses must clearly and unequivocally express the extent and scope of any limitations of coverage. To the extent that an exclusion clause fails to do so, the language of the coverage clause takes precedence. Ref: Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 50 O.R. (3d) 417, [2000] O.J. No. 3807, 2000 5737 (C.A.).

29In Sheppard v. Co-Operators General Insurance Co.; Quick v. MacKenzie (1997), 1997 2230 (ON CA), 33 O.R. (3d) 362, [1997] O.J. No. 1600 (C.A.), the Ontario Court of Appeal heard appeals of two trial decisions involving two differently worded policies/coverage and exclusion clauses in homeowners' policies. Both cases involved bodily injuries to a minor, an action brought by the minor, and counterclaims by the defendants against the minor's parents for negligence in failing to supervise and take adequate steps to protect their child.

30In Sheppard, the insurer Co-Operators denied coverage. The exclusion clause in the Co-Operators policy included the following:

You are not insured for claims arising from:

or between any person(s) insured by this policy named or not;

(Emphasis added)

31The Court of Appeal noted that the said exclusion applied only to claims "arising from or between" insured persons. Co-Operators was ordered to defend because the counterclaim was not being asserted by or on behalf of another insured, but by a third party. The exclusion was held not to apply.

32In Quick, Lumbermens' Insuring Agreement provided as follows:

You are insured for claims made against you arising from:

1. Personal liability -- legal liability arising out of your personal actions anywhere in the world.

33Lumbermens' exclusion clause read as follows:

You are not insured for claims made against you arising from:

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

34The Ontario Court of Appeal held at para. 28 that Lumbermens' exclusion clause precluded coverage for the counterclaims being asserted by the defendants against the minor plaintiff's parents:

[O]n its plain wording, the exclusion clause effectively excludes coverage in the circumstances alleged in the counterclaim. The essential words of the exclusion clause are "claims made against [the Quicks] arising from bodily injury to [Laura]". The counterclaim is a claim made against the Quicks. That claim, while expressed in terms of vicarious liability and lack of supervision, is clearly a claim "arising from" Laura's bodily injury.

(Emphasis added)

35Counsel for Wawanesa submitted that Desormeaux v. Dominion of Canada General Insurance Co., [2012] O.J. No. 2433, 2012 ONSC 3199 (S.C.J.) is supportive of Wawanesa's motion. In that case, Annis J. referred to Sheppard and Quick v. MacKenzie, supra, in examining a differently worded but similar exclusion clause in a homeowner's policy. In Desormeaux, a young boy was injured at his grandmother's house by another child. The boy, his sister, and his parents commenced an action against the grandmother, the child who caused the injury, and that child's mother. The defendants all counterclaimed against the boy's mother, alleging, among other things, negligent supervision.

36Dominion, the boy's mother's insurer, denied coverage, relying on the exclusion clause in the policy set out below. The boy's mother then brought an application against Dominion, seeking a declaration that it had a duty to defend her.

37Dominion's policy contained the following wording:

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

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.

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

38In Desormeaux, although both parties relied on Quick, Annis J. held that case was not of much assistance because the Lumbermens' and Dominion policies contained different wording.

39Annis J. compared the wording of Dominion's exclusion clause to the wording in the initial grant of coverage. He held since the exclusion specifically referred to Coverage E(1), the linkage between the exclusion provision and the coverage provision was clear. In other words, the wording was intended to mirror the wording of the initial grant of coverage and was intended to have the same scope as the initial grant of coverage. All personal liability E(1) coverage granted under the coverage clause was intended not to apply to bodily injury to any person residing in the insured's household.

40Counsel for Wawanesa also cite Rabas v. Claim Management Services, Inc., 556 N.W. 2d 410, 205 Wis. 2d 483 (C.A. 1996) and Whirlpool Corp. v. Ziebert, 539 N.W. 2d 883, 197 Wis. 2d 144 (S.C. 1995) as supportive of the relief Wawanesa was seeking.

41In Rabas, an injured insured brought an action against another who, in turn, launched a separate contribution action against the insured's daughter who resided in the insured's household, alleging negligent care.

42The exclusion in the insured's homeowner's policy provided as follows [at p. 412 N.W. 2d]:

[Personal liability coverage] does not apply to liability: 1. for bodily injury to you, and if residents of your household, your relatives, and persons under the age of 21 in your care or in the care of your resident relatives . . .

43In Rabas, the Wisconsin Court of Appeals, purporting to follow the decision in Whirlpool, held that the exclusion operated to preclude coverage and applied to both direct actions (i.e., actions brought by an insured against an insured) and indirect actions (such as a contribution and indemnity claim brought by a third party against an insured).

44Counsel for Wawanesa submitted that here the wording of the Exclusion is the same as the wording of the Grant of Coverage in the Policy and that the reasoning used by Annis J. in Desormeux should be applied.

45Counsel for David and Elizabeth submitted that Desormeux does not apply. The wording of the exclusion clause is not the same as the wording of the coverage provision. The wording of the coverage provision is broader than the wording in the exclusion. The wording of the exclusion does not clearly and unambiguously express the extent of the limitations of coverage or effectively preclude coverage. The wording of the exclusion clause does not make it clear that the exclusion was intended to extend to preclude coverage in indirect actions.

46Counsel for David and Elizabeth submitted the Ontario Court of Appeal has held that the language of exclusions clauses must clearly and unequivocally express the extent and scope of any limitations to coverage.

47Counsel for David and Elizabeth submitted the exclusion would apply to direct claims against David and Elizabeth in the main action. However, Kelly did not sue David and Elizabeth in the main action. One member of the household did not sue another member of the same household. The Third Party Action was brought against David and Elizabeth, not by Kelly or any other member of the same household but by the Wilsons, who do not and have never resided in Elizabeth's household.

48The Wilsons' Third Party claims against David and Elizabeth are for contribution and indemnity payable not directly to Kelly but to the Wilsons.

Conclusions -- application of law to the facts

49I start by saying that making this decision was not easy. The result was far from clear-cut. Both counsel made strong arguments in favour of their own positions.

50Absent ambiguity in the exclusion clause (interpreted narrowly and having regard to the Policy as a whole), contra preferentem and other doctrines governing the interpretation of ambiguous provisions do not apply. Those doctrines cannot be used to create ambiguity.

51I have considered the wording of the Co-Operators and Lumbermens' homeowner's policies and the reasoning of the Court of Appeal in Quick and Sheppard. I have also considered the wording of the Dominion policy and the reasoning of Annis J. in Desormeaux, as well as the wording of the policies and the reasoning of the courts in the U.S. cases, including Rabas and Whirlpool.

52I am of the view that none of those precedents is determinative of the issues here.

53In Quick, the Court of Appeal considered whether the parents of Laura were entitled to coverage for damages for their failure to supervise her despite an exclusion clause in their homeowners' policy: "you are not insured for claims made against you arising from: bodily injury to you or to any person residing in your household". The exclusion clause referred to claims made against the insureds arising from bodily injury to Laura. The Court of Appeal held the counterclaim was a claim arising from Laura's bodily injury within the meaning of the clause. In Quick, the words arising from were used in both the coverage provision and the exclusion clause. The scope of the wording in the exclusion was clearly as broad as the scope of the coverage provision. Arising from clearly covers indirect claims.

54In Sheppard, the wording of the exclusion in the Co-Operators policy significantly differed the wording of the Wawanesa exclusion clause being interpreted here.

55In my view, the decision in Desormeaux is not helpful, given the dissimilar language being interpreted and the wording of the exclusion clause clearly linking the scope of the exclusion clause to the extent of coverage E(1). In Annis J.'s view, mention that the policy did not apply "under Coverage E(1) Personal Liability to bodily injury to a person residing in your household" created sufficient linkage between the coverage clause and the exclusion clause, making it unnecessary for the insurer to specifically repeat the wording of the coverage clause in the exclusion clause.

56In the case at bar, there was no similar wording in the exclusion specifically and unequivocally limiting the scope of the coverage or incorporating by reference the wording of the coverage clause into the wording of the exclusion clause.

57Rabas, a decision of the Court of Appeals of Wisconsin purporting to follow the Whirlpool decision, is not binding on this court.

58I have considered the reasoning of Brown J., dissenting in Rabas, as follows [at p. 490 Wis. 2d]:

The majority effectively reads Whirlpool [Corp. v. Ziebert, 539 N.W. 2d 883 (U.S. Wis. S.C. 1995)] to say that whenever a homeowner's liability policy contains a family exclusion clause, that exclusion automatically operates to bar coverage for direct and indirect suits. If a liability policy excludes coverage for one family member when another family member is a victim of the tort, the majority believes that the contribution action arising out of the injured family member's claim is also excluded. The underlying theory is that the liability is "identical".

In my view, Whirlpool does not go that far. Even a cursory reading of the case shows that the Supreme Court did only two things. First, it decided that family exclusion clauses which apply to contribution claims do not violate public policy . . . Second, the Court determined that the exclusion clause in that case properly encompassed contribution actions.

(Emphasis added; citation omitted)

59I note that in Whirlpool [at p. 491 Wis. 2d], the language of the exclusion clause being interpreted read as follows: "We do not cover bodily injury to an insured person . . . whenever any benefit of their coverage would accrue directly or indirectly to an insured person." In his dissent in Rabas, Brown J. noted that in Whirlpool, the court specifically pointed to the phrase "directly or indirectly" in the exclusion, that the direct/indirect language was obviously intended to make it clear that contribution claims/indirect claims were intended to be excluded. He continued at p. 492 Wis 2d:

The Supreme Court's careful and lengthy attention to the language of exclusion in Whirlpool informs me that the Court held that a family exclusion must be specifically tailored to contribution claims before the exclusion may be found to apply to such claims.

[Emphasis in original]

60Brown J. noted that the exclusion being interpreted in Rabas, unlike the exclusion clause being interpreted in Whirlpool, did not include the words "directly or indirectly" [at p. 492 Wis. 2d]:

[N]othing in this policy tells the reasonable insured that the exclusion applies not only to suits directly brought by family members but that the exclusion also applies when a third party brings an action . . . [the] exclusion is flawed because it does not clearly convey what the insurer claims it is designed to do.

Although an exclusion properly aimed at contribution claims does not have to contain the word "indirect" to be viable, the exclusion must contain some language which tells the reasonable insured that contribution claims are not covered.

[Emphasis added]

61Counsel for Wawanesa conceded that, in Ontario, all family exclusion clauses cannot be assumed to automatically bar coverage. This court must look at the specific language of this exclusion clause, compare it to the specific language of the coverage clause and have regard to the wording in the Policy as a whole. It must decide whether the exclusion unequivocally and unambiguously limits the scope of the coverage.

62The onus is on the insurer to convince this court that the exclusion clearly and unambiguously precludes coverage here.

63In comparing the specific wording of the coverage provision to the specific wording of the exclusion, I disagree with the submission of counsel for Wawanesa that the language used in both is the same.

64Here, Coverage E, Legal Liability, provides: "You are insured for claims made or actions brought against you for bodily injury arising out of your personal activities anywhere in the world."

(Emphasis added)

65The wording of the exclusion clause is as follows: "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."

66The exclusion clause here does not expressly refer to "bodily injury arising out of your activities".

67It does not include words such as "claims arising from bodily injury" or "claims arising out of your personal activities" or "claims because of bodily injury".

68The Policy does not contain linkage wording such as "this policy does not apply Under Cover E(1)" upon which, like Annis J. in Desormeux, I could have concluded that reference to bodily injury arising out of the actions of David and Elizabeth in the coverage provision was intended to be interpreted as having been included in the exclusion.

69The court must take that choice of language into account in interpreting the Policy. The exclusion clause did not use the same "arising out of bodily injury" language. It reads as follows: "you are not insured for claims . . . for bodily injury to you or any person residing in your household".

70The court is also to consider the language used in the Policy as a whole.

71On a review of the Policy as a whole, this court noted that the words "arising out of" were repeatedly used in other exclusions. For instance, "You are not insured for claims made or actions brought against you for bodily injury or property damage arising out of the ownership, etc of any motor vehicle . . .;" for "bodily injury . . . arising out of your business;" for "bodily injury arising out of the rendering . . . of any professional service;" for "bodily injury . . . arising out of the ownership . . . of any aircraft;" for "bodily injury . . . arising out of the ownership . . . of an airport;" for "bodily injury à which arises out of the communication of a communicable disease by you". The daycare coverage exclusion in the Policy does include the words, "you are not insured for claims made or actions brought against you for bodily injury . . . arising out of".

72In drafting the Policy, Wawanesa was clearly aware of the subtle distinction between "arising out of . . . bodily injury" and "for bodily injury" because it made the distinction repeatedly in many of the other exclusions clauses contained in the Policy.

73Viewing 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 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.

74In 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.

75To be effective, the wording of an exclusion clause must clearly and unequivocally restrict the extent and scope of the coverage.

76In 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.

77It chose not to use words clearly extending the coverage to direct or indirect actions. Exclusions must be interpreted narrowly.

78The 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.

79I am of the view that the exclusion clause here does not clearly and unequivocally restrict the extent and scope of the coverage in the event of an indirect claim by a third party against David and Elizabeth for contribution and indemnity.

80There is precedent and there are policy reasons to warrant making a distinction between direct and indirect claims in this context.

81In Wawanesa Mutual Insurance Co. v. Hewson, 2004 SKCA 112, [2004] S.J. No. 534, 2004 CarswellSask 565 (C.A.), the Saskatchewan Court of Appeal, in considering policy language similar to the language at issue on this Application, noted [at para. 9]:

Liability insurance is usually intended to provide indemnity against claims made by third parties, that is, persons who are not parties to, or have no interest in, the contract of insurance. Exclusion clauses, such as Exclusion (3) in this case, are intended to prevent collusive claims by members of the insured's family and members of his household: Hilliker Liability Insurance Law in Canada (3d ed.) (Toronto: Butterworths, 1996) at pp. 254-57; Appel (Guardian Ad Litum of) v. Dominion of Canada General Insurance Co., (1997), 1997 4132 (BC CA), [1998] 1 W.W.R. 592 (B.C.C.A.) at paras. 45 and 46.

82For all of the reasons set out above, Wawanesa has not met the onus of proving that the exclusion clause here unequivocally restricts the extent and scope of the coverage provided in the coverage provision in the event of an indirect claim for contribution and indemnity against David and Elizabeth.

83It follows that an order should go declaring that Wawanesa has a duty to defend David and Elizabeth in the Third Party action.

Disposition

84Order to go declaring that Wawanesa has a duty to defend David and Elizabeth in the Third Party action.

85The parties may make written submissions on costs on or before April 2, 2013.