Coachman Insurance Company v. Kraft et al.; McKillop Insurance Company, Intervenor
[Indexed as: Coachman Insurance Co. v. Kraft]
Ontario Reports Ontario Superior Court of Justice, Verbeem J. March 23, 2017 137 O.R. (3d) 292 | 2017 ONSC 1875
Case Summary
Insurance — Insurer's duty to defend — Driver of all-terrain vehicle suing insured passenger for damages for negligence — Driver alleging that insured interacted with ATV in manner that caused it to flip over, impeded driver's escape from ATV and was intoxicated to extent that he was a danger to others — Policy excluding coverage for claims due to motorized vehicle that insured used — That exclusion applying only when insured's negligence is founded in act or omission in which insured exercises some form of control over motorized vehicle — Exclusion applying to allegation that insured was negligent in interacting with ATV in manner that caused it to flip over but not to other allegations — Insurer having duty to defend action.
DK alleged that he was rendered a partial paraplegic as a result of a single-vehicle accident in which an all-terrain vehicle which he was driving flipped over and landed on his spine. He sued his passenger BK for damages for negligence, alleging that BK interacted with the ATV in a manner that caused it to flip over; impeded DK's escape from the ATV; and was intoxicated to the extent that he was a danger to others. BK was insured under a homeowner's insurance policy issued by Coachman. Coachman brought an application for an order declaring that it did not have a duty to defend or indemnify BK. All of the parties agreed that the allegations of negligence against BK initially fell within the policy's grant of coverage. Coachman relied on an exclusion in the policy for "claims due to a motorized vehicle" (which expressly included an ATV) that the insured "used".
Held, the application should be dismissed.
The exclusion of coverage for claims "due to" a motorized vehicle that the insured "uses" is intended to apply when the insured's negligence giving rise to liability is founded in an act or omission in which the insured exercises some form of control over a motorized vehicle and that conduct causes bodily injury or property damage. The exclusion therefore applied to the allegations that BK interacted with the ATV in a manner that caused it to roll over, but not to the allegations that BK impeded DK's escape from the ATV or that he was intoxicated to the extent that he posed a danger to others. The latter allegations were not derivative of the former allegation. Coachman had a duty to defend the action.
A determination of the duty to indemnify BK could not be made at this point.
Cella (Litigation guardian of) v. McLean (1997), 34 O.R. (3d) 327, [1997] O.J. No. 2439, 148 D.L.R. (4th) 514, 101 O.A.C. 76, 44 C.C.L.I. (2d) 214, [1997] I.L.R. I-3465, 29 M.V.R. (3d) 292, 71 A.C.W.S. (3d) 1159 (C.A.); Fraser v. Co-Operators Insurance Assn. (1986), 54 O.R. (2d) 579, [1986] O.J. No. 2999, 27 D.L.R. (4th) 480, [1986] I.L.R. 1-2106 at 8149, varg Fraser v. Co-Operators Insurance Assn. (1984), 46 O.R. (2d) 1, [1984] O.J. No. 3166, 8 D.L.R. (4th) 246, 6 C.C.L.I. 232, [1984] I.L.R. 1-1788 at 6886, 25 A.C.W.S. (2d) 331; Silverthorne v. Gore Mutual Insurance Co. (2001), 52 O.R. (3d) 560, [2001] O.J. No. 871, 200 D.L.R. (4th) 378, 144 O.A.C. 303, 28 C.C.L.I. (3d) 24, [2001] I.L.R. I-3996, 11 M.V.R. (4th) 42, 105 A.C.W.S. (3d) 937, consd
Other cases referred to
Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405, [1995] S.C.J. No. 74, 127 D.L.R. (4th) 618, 186 N.R. 150, [1995] 9 W.W.R. 305, 63 B.C.A.C. 1, 10 B.C.L.R. (3d) 1, 31 C.C.L.I. (2d) 1, [1995] I.L.R. 1-3232, 13 M.V.R. (3d) 302, 57 A.C.W.S. (3d) 640; Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. 1-1176 at 595, 1 A.C.W.S. (2d) 169; Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398, [2001] S.C.J. No. 27, 2001 SCC 72, 205 D.L.R. (4th) 1, 277 N.R. 82, 273 N.R. 356, 150 O.A.C. 1, 153 O.A.C. 310, 33 C.C.L.I. (3d) 1, [2002] I.L.R. I-4029, 15 M.V.R. (4th) 1, REJB 2001-26225, J.E. 2001-1941, 108 A.C.W.S. (3d) 893; Incerto v. Landry (2000), 47 O.R. (3d) 622, [2000] O.J. No. 861, [2000] O.T.C. 144, [2000] I.L.R. I-3827, 2 M.V.R. (4th) 264, 95 A.C.W.S. (3d) 737; Nichols v. American Home Assurance Co., [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. 1-2583 at 10058, 20 A.C.W.S. (3d) 699; Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, 185 D.L.R. (4th) 1, 253 N.R. 1, [2000] 5 W.W.R. 465, J.E. 2000-935, 135 B.C.A.C. 161, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 50 C.C.L.T. (2d) 1, [2000] I.L.R. I-3810, 96 A.C.W.S. (3d) 479; 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, 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, 193 A.C.W.S. (3d) 1292; Watts v. Centennial Insurance Co., [1967] B.C.J. No. 179, 65 D.L.R. (2d) 529 (S.C.)
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.05(3)(d)
APPLICATION by the insurer for an order declaring that it did not have a duty to defend or indemnify the insured.
Counsel: Dan Rabinowitz, for applicant. Melanie Gardin, for respondent David Kraft. No one appearing for respondent Barry Kelley, although properly served. James K. Brown, for intervenor.
VERBEEM J.: —
Nature of the Proceeding
[1] This is an application brought by Coachman Insurance Company ("Coachman") for an order pursuant to rule 14.05(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 declaring that it does not owe a duty to defend or indemnify the respondent, Barry Kelley, under the provisions of homeowner's policy number H84528163-1 with respect to the subject matter of an action numbered CV-11-17014 commenced on October 27, 2011, at the City of Windsor by the respondent David Kraft (the "action").
Contextual Overview
[2] In the action, David Kraft alleges that he was rendered a partial quadriplegic as a result of a single-vehicle accident on October 31, 2009, involving a 2000 Yamaha Kodiak 400 Ultramatic all-terrain vehicle (the "ATV"). He alleges the accident was caused by Mr. Kelley's negligent conduct. He seeks compensatory damages totalling in excess of $4 million from him.
[3] The statement of claim alleges that at the time of the accident, the ATV was owned and operated by Mr. Kraft. Mr. Kraft alleges that immediately prior to the accident, Mr. Kelley was seated on the left side of the ATV's rear rack, as it travelled along a trail through the Lambton County Heritage Forest. He alleges that as he began to execute a turn, the ATV left the trail and flipped backwards, landed on top of him and injured his spinal cord. As a result of the incident, Mr. Kraft is paralyzed from the neck down, with the exception of some limited use of his arms.
[4] Mr. Kelley has not defended the action and he has been noted in default. Similarly, Mr. Kelley has not participated in this application.
[5] At the time of the accident, Mr. Kelley was insured pursuant to the terms of a policy of "homeowner's insurance" bearing policy number H84528163-1, issued by Coachman (the "policy").
[6] Coachman asserts that it is not obliged to defend or indemnify Mr. Kelley in relation to the action because the allegations in the statement of claim fall outside of the policy's scope of coverage. Although Mr. Kelley is insured for liability for bodily injury and/or property damage fortuitously arising out of his personal actions anywhere in the world, that coverage is subject to a series of enumerated exclusions, which include "claims due to a motorized vehicle or trailer that you own or use". Pursuant to the policy, "motorized vehicle" expressly includes "all-terrain-vehicles".
[7] In opposing Coachman's remedial request, Mr. Kraft states that the allegations of liability against Mr. Kelley fall within the policy's scope of coverage and the "motorized vehicle" exclusion does not apply to them. Accordingly, he requests an order "directing" Coachman to defend and indemnify Mr. Kelley, in the context of the action.
[8] At the time of the accident, Mr. Kraft was an insured under an Ontario standard policy of automobile insurance with an associated OPCF 44R family protection endorsement (underinsurance coverage) issued by McKillop Insurance Company ("McKillop"). McKillop was granted leave to intervene in this application, on the consent of the parties appearing.
[9] Given the nature of the application, the evidentiary record before me is appropriately sparse and consists of an affidavit sworn by George Poirier, an associate of the law firm Miller Thomson LLP (solicitors for Coachman) to which copies of the policy, corresponding declaration page and the action's statement of claim are appended. No additional evidence was adduced by Mr. Kraft or McKillop.
[10] Among other things, Mr. Poirier states that in the event that the court concludes that Mr. Kelley is entitled to be defended and/or indemnified under the Coachman policy, steps will be taken to set aside Mr. Kelley's noting in default in CV-11-17014, following which Coachman will enter a defence on his behalf.
[11] Below, I will set out the relevant allegations against Mr. Kelley in the statement of claim, followed by the relevant portions of the policy.
Relevant Provisions of the Statement of Claim
[12] The following paragraphs of the statement of claim are relevant to determining the application:
- The plaintiff, David Kraft is an individual residing in Port Franks, Ontario. The plaintiff at all material times, was the driver and owner of a 2000 Yamaha Kodiak 400 Ultramatic (the "ATV").
- The defendant, Barry Kelley also resides in Port Franks, Ontario. He was a passenger on the ATV.
- In the early morning hours of October 31, 2009, the plaintiff was operating his ATV in and around the Lambton County Heritage Forest, in the municipality of Lambton Shores, Ontario (the "Heritage Forest"). The defendant and Troy Power were seated on the rear rack of the ATV as it rode down a trail in Heritage Forest.
- Troy Power was seated on the right side of the rear rack. The defendant, Barry Kelley was seated on the left side of the rear rack.
- Troy Power proceeded to get off the rear rack of the ATV. At this time the defendant stayed on the left side of the rear rack of the ATV. In the alternative, he moved positions to sit at or almost directly behind the plaintiff.
- Shortly thereafter, the plaintiff intended to turn the ATV around. The ATV commenced to turn left to make the turn. It departed the trail. While off the trail the ATV started to flip backwards.
- The defendant's presence on the ATV impeded David as they both tried to get off the ATV in a safe manner. The ATV fell on top of David before he was able to extract himself from danger.
- The gas tank of the ATV hit David's head. The ATV fell on top of him injuring his spinal cord.
- The plaintiff states that the aforesaid collision and resulting damages to the plaintiff, as herein more particularly set forth, were caused by the negligence of the defendant, which negligence consists of the following: a) Sitting on the ATV either on the rear rack or straddling the ATV behind David in a manner that caused it to flip over; b) Causing a weight imbalance while on the ATV; c) Resting his feet in the foot well area where David's left foot was, which impeded David's ability to extricate himself when the ATV flipped over; d) Improperly exiting the ATV which caused it to fall on top of David; e) Physical contact with David's body in a manner which prevented him from exiting the ATV in a safe and timely manner; f) Pushing against the rear rack of the ATV or moving the ATV itself as it flipped over causing the ATV to fall on David; g) Exiting the ATV too slowly and generally impeding David from accessing a safe exit, resulting in David being unable to extricate himself from harm's way; h) Failing to get off the ATV when he knew or ought to have known that failing to do so would cause the ATV to flip backwards; i) Being intoxicated to the point that he became a danger to others, including David; and j) Creating and perpetuating a situation of danger from which David despite all reasonable effort and precaution on his part, was unable to extricate himself.
- The plaintiff states that the defendant, as a passenger on the ATV, owed the plaintiff a duty of care not to endanger the plaintiff. This includes a duty not to obstruct, delay or prevent the plaintiff from exiting the ATV in an emergency situation. The defendant breached this duty of care by obstructing the plaintiff as he exited the ATV. These actions prevented the plaintiff from escaping the ATV in a manner to avoid injury. As a result of the defendant's actions in breaching his duty of care toward the plaintiff, David was injured as described in the following paragraph.
- The plaintiff pleads and relies upon the provisions of the Negligence Act, R.S.O. 1990, c. N.1, as amended.
[13] Paragraphs 12 through 20 of the statement of claim contain allegations related to the issue of damages.
Relevant Provisions of the Coachman Policy
[14] The relevant portions of the Coachman policy begin at p. 25 of its provisions, under the general heading "Part 2 -- Personal Liability -- Coverage E". The following terms, among others, appear under the heading "Definitions Applicable to Part 2", at p. 25:
"Bodily Injury" means bodily injury, sickness or disease or resulting death.
"Occurrence" means an accident, including continuous or repeated exposure to conditions which results in "bodily injury" or "property damage" neither expected nor intended.
"We", "Us" or "Our" in this part have the same meaning as in Part 1 [where that term is defined to mean "Coachman Insurance Company"].
"You" and "Your" in this part have the same meaning as in Part 1 [in Part 1 those terms are said to refer to the definition of "Insured". The parties agree that Mr. Kelley was an "insured" within the meaning of the policy].
[15] The terms of a general grant of third party liability coverage are set out under "Part 2 -- Personal Liability -- Coverage E", at p. 26 of the policy, as follows:
You must take reasonable care that you do not, or your property does not harm someone else or their property. If you do not, you may be negligent. People who are hurt or whose property is unintentionally damaged because of your negligence may have a legal right to be paid for their damages. A liability claim or action brought against you can come from a single event or it can come from a continuous or repeated condition. We will treat this as if all damage was from a single occurrence.
We will only pay compensatory damages for "bodily injury" or "property damage". We will pay for claims arising out of your personal actions anywhere in the world, including claims due to your actions while engaged in volunteer work for a charitable non-profit organization. We will pay for claims due to the condition or use of your premises. We will only pay claims where you are legally liable; however, there may be situations where we will pay and you are not legally liable. These are explained under "Added Features of your Part 2 -- Personal Liability Coverage" -- "Voluntary Medical Payments" or "Voluntary Property Damage Payments".
[16] The following provision is set out under the heading "Amount of Protection", at p. 26 of the policy:
We will pay up to the amount of protection shown on your Declaration Page. The amount shown is the maximum amount we will pay for all compensatory damages in respect of any one occurrence, regardless of the number of insureds against whom claim is made or action is brought. As explained later under "Defense Settlement -- Supplementary Payments", we will pay for certain related costs too, which are in addition to the amount of protection.
[17] The following terms are set out under the heading "Bodily Injury and Property Damage", at pp. 26-27 of the policy:
We will pay for "bodily injury" or "property damage" to someone else if you are legally liable. This includes:
h) Claims due to your use of motorized vehicles that are owned by someone else. These vehicles must be intended for off road use and they must not have a licence, nor be required by law to have one. For example, a go-cart at an amusement park. We will not cover claims due to your use of these vehicles in a race, speed test or business.
[18] Under the heading "Claims We Will Not Cover", a number of exclusions (which apply to all coverages in Part 2 -- Personal Liability) are set out at pp. 28-30 of the policy, including:
We will not cover:
k) claims due to a motorized vehicle or trailer that you own or use. This includes such things as cars, vans, trucks, motorcycles, all-terrain vehicles, motorized snow vehicles, dune buggies, skid steer loaders, and boat and travel trailers. We will not cover the use of them for you by others, or claims due to their use when you have entrusted them to others. However, as an exception to this, we will cover claims which arise out of the use of golf carts and motorized vehicles used by your residence employees while they are working for you[.]
[19] Under the general heading "If You Have a Claim" and the sub-heading "What We Will Do", the following provision is set out at p. 30 of the policy:
If a claim is made against you for which you are insured, we will defend you even if the claim is groundless, false or fraudulent. We reserve the right to select legal counsel, investigate, negotiate and settle any claim if we decide this is appropriate. We will only pay for legal counsel we select. We will try to settle the claim out of court if we feel that it is the best thing to do.
[20] All parties agree that the allegations of negligence against Mr. Kelley in the statement of claim fall within the general scope of "Coverage E" (under Part 2 "Personal Liability") of the policy. They dispute whether the allegations against Mr. Kelley, as pleaded, are the subject of the "motorized vehicle" exclusion set out above and consequently whether Coachman's duty to defend Mr. Kelley is engaged.
[21] Below, I will set out the legal principles that apply to the determination of an insurer's duty to defend and those that apply to the interpretation of insurance policies, generally. Following that, I will summarize the parties' positions. Finally, I will explain the reasons for my conclusion that Coachman is obligated, by the terms of the policy, to defend Mr. Kelley in the action.
Applicable Legal Principles
a) The insured's duty to defend
[22] There is no contest between the parties about the legal principles that apply to the determination of an insurer's duty to defend a liability claim advanced against its insured, which are summarized below.
[23] In 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, at paras. 19-20, the lower case court reaffirms the principle that an insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured for the claim. An insured's duty to defend (which is broader than its duty to indemnify) is triggered when a "mere possibility exists" that a pleaded claim falls within the scope of the relevant policy of insurance. Where it is clear that the pleaded claim falls outside the policy, either because it does not come within the initial grant of coverage or it is otherwise excluded by operation of an exclusion clause, the duty to defend is not engaged.
[24] The onus is on the insured to establish that the claim alleged in pleadings falls within the initial grant of coverage; the onus is on the insurer to establish that an exclusion clause precludes coverage: see Progressive Homes, at paras. 29 and 51.
[25] The widest latitude should be given to allegations in the pleadings, in determining whether they give rise to a claim within the policy: see Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, at p. 812 S.C.R.
[26] Assuming the facts alleged in the statement of claim are true, determining whether a pleaded claim could possibly trigger the insurer's duty to indemnity is a three-step process:
(1) the court must determine which of the plaintiff's legal allegations are properly pleaded. In doing so, the court is not bound to accept the legal labels chosen by the plaintiff. Instead, the court must examine the substance of the allegations contained in the pleadings. This exercise does not involve a consideration of the merit of the claims asserted but rather an evaluation of their "true nature"; (2) the court should then determine whether any of the claims are entirely derivative in nature; and (3) the court must then decide whether any of the properly pleaded non-derivative claims trigger the insurer's duty to defend.
[27] In determining whether one pleaded claim is derivative of another, the court must examine the actions of the insured that are alleged to ground each of the claims as well as the harm said to arise from each of the claims. If it is alleged that both claims arise from the same actions and cause the same harm, and one of the claims is subject to an exclusion, the other will be considered derivative of the excluded claim for the purposes of the exclusion clause analysis. However, if the elements of each claim are sufficiently disparate to render the two claims unrelated, the operation of the exclusion clause will be restricted to the specific claim to which it applies: see Scalera, at para. 85.
b) Principles of interpretation applicable to policies of insurance
[28] When interpreting a policy of insurance, primacy is given to its language. If the language of the policy is unambiguous, the court should give effect to its clear wording when reading the contract as a whole: see Scalera, at para. 71; Progressive Homes, at para. 22.
[29] Where the language of the policy is ambiguous, the court should resolve the ambiguity in accordance with "general rules of contract construction". An interpretation that is consistent with the reasonable expectations of the parties ought to be preferred, so long as such an interpretation can be supported by the language of the policy. Accordingly, where the words of the policy may support two or more constructions, the more reasonable one must be taken as the interpretation which promotes the intention of the parties. Interpretations that allow the insurer to "pocket the premium without risk" or that allow the insured to "achieve a recovery which could neither be sensibly sought or anticipated at the time of the contract" ought to be avoided: see Scalera, at para. 71; Progressive Homes, at para. 23; and Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, at pp. 901-902 S.C.R.
[30] Where the relevant policy provisions are ambiguous, other principles governing the construction of insurance contracts also apply in determining whether the pleaded claims fall within the scope of the policy's coverage; namely, the contra proferentum rule and the principle that coverage clauses should be construed broadly in favour of the insured and exclusion clauses narrowly against the insurer: see Scalera, at para. 70; Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405, [1995] S.C.J. No. 74, at para. 16; Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398, [2001] S.C.J. No. 27, 2001 SCC 72, at para. 49.
The Positions of the Parties
a) Coachman's position
[31] Coachman concedes that the homeowner's policy it issued to Mr. Kelley was valid and in force at the time of the ATV accident, as alleged in the statement of claim. It also concedes that the allegations against Mr. Kelley, in the statement of claim, initially fall within the grant of coverage provided under the terms of "Part 2 -- Personal Liability -- Coverage E" of the policy. Nonetheless, it submits there is no coverage available pursuant to the policy for the subject matter of the statement of claim because all of the allegations against Mr. Kelly are subject to the "motorized vehicle" exclusion.
[32] In clear and unambiguous language, that exclusion clause states that Coachman will not cover any claims for bodily injury that are "due to a motorized vehicle" that the insured "uses". "Use" is not dependant on the insured assuming "operational control" of the vehicle. Relying on the Ontario Court of Appeal's decision in Travelers Canada v. MacDonald (1984), 48 O.R. (2d) 714, [1984] O.J. No. 3401 (C.A.), at p. 716 O.R., Coachman submits that the act of riding on, or in, a motorized vehicle, as a passenger, constitutes "use" of that vehicle within the meaning of the exclusion. The statement of claim alleges that at the time of all of his negligent conduct, Mr. Kelley was a passenger on the ATV. Therefore, any liability on the part of Mr. Kelley for Mr. Kraft's injuries can only be found with respect to his activities as a passenger.
[33] Some of the allegations relate to Mr. Kelley's "direct use" of the ATV, for example, sitting or straddling the rear rack in a manner that caused it to flip over. Other more general claims, such as Mr. Kelley "being intoxicated" and Mr. Kelley "creating a situation of danger", only having meaning in the context of the excluded act, that is his "use of" the ATV by virtue of his status as a passenger. They do not, on their own, trigger a duty to defend because there would be no loss "but for" Mr. Kelley's use of the ATV.
[34] The underlying elements of all the claims against Mr. Kelley are entirely derivative of the excluded act of his "use" of the ATV as a passenger. Since the subject exclusion precludes coverage for the allegations in the statement of claim, Coachman has no duty to defend or indemnify Mr. Kelley against Mr. Kraft's "claims".
[35] Finally, Coachman submits that a contract of insurance is intended to transfer contingent non-expected risk from the insured to the insurer. In order to manage the risk assumed in a contract of insurance, an insurer may remove one or more sources of liability through the addition of an exclusion clause. The "motorized vehicle" exclusion is a clear indicator of Coachman's intent to manage the risk of insuring a homeowner by excluding activities, such as the use of an ATV, that are independent of the "risks of owning a home".
[36] An insurance policy must be interpreted in a manner that gives effect to the reasonable expectations of both the insured and the insurer. Had Mr. Kelley wanted to insure himself against the risks of using an ATV, he ought to have purchased a more comprehensive policy from Coachman or another insurer.
b) David Kraft's position
[37] Mr. Kraft submits that "a possibility exists" that the allegations of liability advanced against Mr. Kelley in the statement of claim are sufficient to trigger Coachman's duty to indemnify him under the terms of the policy. The "motorized vehicle" exclusion does not apply to those allegations. The exclusion seeks to exclude "claims due to a motorized vehicle (including an ATV) . . . that you own or use". Since Mr. Kraft is alleged to be the owner of the ATV, the only issue is whether all of the allegations of negligence are founded in an asserted "use" of the ATV by Mr. Kelley.
[38] Mr. Kraft states that the term "use" is not defined in the policy; its meaning, in the context of the policy, is ambiguous; and the ambiguity must be resolved by constructing the exclusion clause narrowly. Further, Travelers Canada is not helpful because it involves the interpretation of "use" (of a motor vehicle) in the context of a coverage clause not an exclusion.
[39] Mr. Kraft submits that the word "use" in the motorized vehicle exclusion should be construed as meaning "some measure of operational control over" a motorized vehicle, in this case the ATV. The allegations in the statement of claim do not assert that Mr. Kelly exercised "operational control" over the ATV and therefore they do not amount to allegations of his "use" of it.
[40] Mr. Kraft further submits that even if some of the allegations in the statement of claim are construed as allegations of Mr. Kelley's negligent "use" of the ATV, there remain other allegations of liability against him that are not predicated on his use of, or interaction with, the ATV, and to which the "motorized vehicle" exclusion does not apply. Those allegations, alone, engage Coachman's duty to defend Mr. Kelley. The "motorized vehicle" exclusion does not preclude coverage where the accident results from the concurrence of covered and excluded causes. Coverage cannot be defeated simply because a separate excluded risk constitutes an additional cause of injury.
[41] Mr. Kraft submits that Coachman has failed to discharge its onus to prove that the "motorized vehicle" exclusion applies to all of the allegations of liability made against Mr. Kelley, and as a result, it is obligated to defend Mr. Kelley, pursuant to the terms of the policy.
c) McKillop's position
[42] The intervenor, McKillop, submits that exclusions, such as the one relied on by Coachman, must be interpreted narrowly. As a result, the mere allegation that Mr. Kelley was a passenger on the ATV when the accident took place is not enough to bring Mr. Kraft's claim against him within the application of the "motorized vehicle" exclusion. To do so, the wording of the exclusion would have to be much broader and expressly state that it applied to any negligent acts by the insured that took place while the insured was a passenger on, or in, a motorized vehicle.
[43] Given the ambiguity that exists in the exclusion clause, it is not possible to say that the causes of action, as alleged, can never come within the coverage of the Coachman policy. As a result, Coachman is obligated to defend Mr. Kelley.
Reasons for Disposition
[44] After reviewing the allegations in the statement of claim, together with the relevant provisions of the policy, I am of the view that Coachman owes a duty to defend Mr. Kelley in the action. A determination of whether Coachman is obliged to provide indemnity under the policy is premature. I will explain the reasons for my findings below.
[45] To begin, I find the claims, as pleaded in negligence, against Mr. Kelley are properly pleaded. Therefore, the first stage of the analytical framework in Scalera raises no concern in the context of this proceeding. Indeed, the applicant concedes that the allegations of liability against Mr. Kelley in the statement of claim initially fall within the policy's grant of coverage in "Part 2 -- Personal Liability -- Coverage E".
[46] Through its concession that the claims against its insured fall within the grant of coverage set out at p. 26 of the policy, based on the policy's wording, Coachman impliedly accepts that if the allegations in the statement of claim are assumed to be true, Mr. Kraft's "claim" is for compensatory damages for "bodily injury arising out of Mr. Kelley's actions" and for which "Mr. Kelley is legally liable" because of his "negligence".
[47] The question remains whether Coachman has discharged its onus to demonstrate that through the application of the "motorized vehicle" exclusion there is no possibility that Mr. Kraft's claims, as pleaded, will fall within the scope of the policy's coverage. Since the statement of claim does not allege that Mr. Kelley was the owner of the ATV or that he negligently entrusted it to another, the determining issue is whether the claim against Mr. Kelley is "due to" a motorized vehicle that he "used", within the meaning of the exclusion. I will address that issue below.
Interpreting the "Motorized Vehicle" Exclusion
[48] As it relates to the circumstances of this case, on a plain reading of its language, I find the policy's "motorized vehicle" exclusion to be ambiguous in respect of two important elements, namely,
(1) the requisite causal connection between the bodily injury for which compensation is claimed and fault or negligence of the insured in the ownership and/or use of a motorized vehicle; (2) the nature and extent of the activities that constitute an insured's "use" of a motorized vehicle within the meaning of the exclusion.
[49] In my view, the first ambiguity can be resolved by reading the policy (and the terms of Part 2 -- Coverage E, in particular) as a whole. The second ambiguity cannot be so resolved and resort must be had to traditional principles of contract construction. I will further explain and resolve each of the ambiguities below.
(1) The requisite causal connection between the bodily injury for which compensation is claimed and fault or negligence of the insured in the ownership and/or use of a motorized vehicle
[50] The subject exclusion avoids coverage for a claim "due to" a motorized vehicle that the insured owns or uses, but it fails to specify whether the basis of the insured's liability must be specifically founded in his or her ownership or use of the vehicle in order for the exclusion to apply.
[51] In isolation, the wording of the exclusion affords two possible interpretations. First, the exclusion applies to any claim where the instrument of loss is a motorized vehicle owned or used by the insured, even where the asserted grounds for liability against the insured do not include negligence (or vicarious liability) in his ownership or use of same.
[52] Alternatively, the exclusion applies only to claims due to a motorized vehicle that the insured owns or uses where the asserted liability against the insured is grounded in the insured's negligence (or vicarious liability) in such ownership or use of the motorized vehicle.
[53] When reading the exclusion clause in the context of the contract as a whole, I conclude that the "motorized vehicle" exclusion in the Coachman policy is intended to apply where the insured's negligence in the ownership or use of a "motorized vehicle" is the basis of his or her alleged liability, or where the insured is found to be vicariously liable in his or her capacity as the owner of a "motorized vehicle", for its negligent use by another (excepting the residence employee qualification in the terms of the exclusion).
[54] The exclusion avoids coverage for "a claim" due to a motorized vehicle that the insured owns or uses. Although the wording of the exclusion clause does not specify that it only applies in circumstances where the insured's liability is due to his or her negligence in the use or ownership of a "motorized vehicle", the first two paragraphs at p. 26 of the policy evidence an intent that a "liability claim" against an insured, within the meaning of the policy, is a claim for compensatory damages "by people who are hurt or whose property is unintentionally damaged because of [the insured's] negligence".
[55] The language of the insuring agreement, at p. 26 of the policy, tethers the meaning of claim to the fault or negligence of the insured. Read in that context, the exclusion of "claims" due to a motorized vehicle owned or used by the insured is reasonably construed to apply only to claims for compensatory damages "by people who are hurt or whose property is unintentionally damaged" due to the insured's negligence in the use or ownership of a motorized vehicle (or his vicarious liability qua owner).
(2) The nature and extent of the activities that constitute an insured's use of a motorized vehicle within the meaning of the exclusion
[56] There is a profound difference between the parties' respective proposed interpretations of the motorized vehicle exclusion with respect to the nature and extent of the activities that constitute an insured's "use" of such a vehicle. Coachman views "use" as applying to any activity an insured engages in while a passenger of a motorized vehicle. Mr. Kraft views "use" as synonymous with the insured's "operational control" of a motorized vehicle. A reading of the terms of "Part 2 -- Personal Liability -- Coverage E", as a whole, does not assist in resolving that difference, and for the following reasons, I am unable to agree with either of those proposed interpretations.
[57] In the context of interpreting an exclusion clause, Coachman's position that an insured's passive status as a passenger of, or on, a motorized vehicle, simpliciter, ought to be construed as a "use" of that vehicle is inconsistent with the approach adopted in the jurisprudence to which the parties have referred me.
[58] In support of its position, Coachman relies almost exclusively on Travelers Canada v. MacDonald (1984), 48 O.R. (2d) 714, [1984] O.J. No. 3401 (C.A.), where Zuber J.A. states, at p. 716 O.R., "I agree with Saunders J. that riding in the van as a passenger was a use of a motor vehicle" (emphasis added). That case involved the determination of whether coverage for "no-fault benefits" was available to the occupant of a vehicle insured pursuant to an Ontario policy of automobile insurance, that was involved in an accident in the State of Michigan. Pursuant to the terms of a certificate filed by the Ontario insurer in Michigan, coverage depended on whether the occupant's injuries arose from the "use of a motor vehicle by a resident of Canada or any state of the United States of America other than Michigan". It is in that context that the occupant's status qua passenger, simpliciter, was found to constitute "a use of a motor vehicle".
[59] I accept the respondents' position that the interpretation of "use of a motor vehicle" in Travelers Canada is distinguishable from the case at bar, on the basis that the court in that case was concerned with the determination of the scope of a coverage provision not an exclusion clause. In the construction of insurance contracts, coverage provisions should be construed broadly and exclusion clauses narrowly. As a result, Travelers Canada does not assist in the interpretation of the "motorized vehicle" exclusion before me.
[60] Turning to Mr. Kraft's position, he relies heavily on the result in Cella (Litigation guardian of) v. McLean (1997), 34 O.R. (3d) 327, [1997] O.J. No. 2439 (C.A.) to support his view that "use", within the meaning of the "motorized vehicle" exclusion, is synonymous with "operational control of" the vehicle.
[61] In that case, the defendant Sole, among others, was named in an action arising from a motor vehicle accident. The plaintiff, who was a passenger in another vehicle involved in the collision, alleged that Sole, who was a passenger in a motor vehicle that he did not own, was negligent because he failed to prevent the vehicle's intoxicated driver from operating the vehicle and because he failed to take steps to prevent the driver from consuming alcohol, prior to the accident.
[62] At the time of the accident, Sole was insured pursuant to the terms of a homeowner's policy issued by Halifax Insurance Company ("Halifax"). Halifax denied that it owed a duty to defend or indemnify Sole in relation to the action because the policy terms excluded coverage for "claims arising from the ownership, use or operation of a motorized vehicle". Sole added Halifax as a third party to the proceeding.
[63] The relevant coverage provision under the Halifax policy provided:
BODILY INJURY OR PROPERTY DAMAGES We will pay all sums which you become legally liable to pay as compensatory damages because of bodily injury . . . You are insured for claims made against you arising from:
- PERSONAL LIABILIY -- legal liability arising out of your personal actions anywhere in the world.
[64] Coverage under the policy was subject to a number of exclusions, including:
You are not insured for claims made against you arising from: (a) The ownership, use or operation of any motorized vehicle . . . except those for which coverage is shown in this form[.][page308]
[65] The specified vehicles for which coverage was shown did not include an automobile.
[66] Halifax brought a motion to determine whether it was required to defend Sole, pursuant to the terms of the homeowner's policy. In answering the question affirmatively, the motion judge found that there was a continuous chain of causation between the use or operation of the motor vehicle and the injuries suffered by the plaintiff, except for the allegations that Sole failed to take steps to prevent the driver of the vehicle in which he was a passenger, from consuming alcohol before operating it. The motion judge concluded those particular allegations went beyond negligence in the "use or operation" of the motor vehicle. He therefore concluded that the homeowner's insurer had a duty to defend the claim against Sole. Halifax appealed.
[67] In affirming the motion judge's determination, the Court of Appeal observed that in the American and Canadian authorities to which it was referred, exclusion clauses similar to the one relied on by Halifax were applied in cases where the insured exercised "some element of control over the instrument which caused the injury, namely, the automobile". Consistent with that jurisprudence, the court held that the exclusion clause in the Halifax policy only applied to claims arising out of a motor vehicle over which the insured exercised some form of control, that was involved in an accident "because the words 'ownership', 'use', and 'operation' in the exclusion clause all connote some aspect of control in relation to a vehicle by the person insured" (emphasis added): see Cella, at p. 331 O.R.
[68] The court concluded that the claims against Sole related to his responsibility or control over the acts of another person (i.e., the driver) without suggesting that he had any control over the vehicle driven by that person. The liability alleged against Sole did not depend on any aspect of control in relation to a motor vehicle and, therefore, the allegations fell outside the subject exclusion clause.
[69] The result in Cella is not consistent with the interpretation of "use" that Coachman urges in its construction of the "motorized vehicle" exclusion. In my view, the result in Cella illustrates that in the absence of an allegation of liability against the insured (Sole) that was founded in an aspect of control in relation to a motor vehicle, his mere status as a passenger of a vehicle involved in a collision was not sufficient to trigger the application of the exclusion clause.
[70] However, with respect to Mr. Kraft's position, I also observe that although the court in Cella interpreted the relevant exclusion clause to apply only in circumstances where the insured exercised some degree of control over the automobile (as the instrument which caused injury), it did not specify that the nature of the requisite control by the insured is confined to "operational control". The approach in Cella is consistent with other jurisprudence on the point, as illustrated below.
[71] In arriving at its decision in Cella, the Court of Appeal relied, in part, on its previous decision in Fraser v. Co-Operators Insurance Assn. (1986), 54 O.R. (2d) 579, [1986] O.J. No. 2999, varg Fraser v. Co-Operators Insurance Assn. (1984), 46 O.R. (2d) 1, [1984] O.J. No. 3166. There, a bicyclist approaching an automobile from the rear, collided with one of its doors, which the vehicle's passenger had opened. The bicyclist commenced an action against the passenger (Fraser) and the operator of the vehicle, alleging, among other things, that the passenger was negligent in opening the door. The vehicle's automobile insurer, Co-Operators Insurance Association, refused to defend the passenger on the basis that he was not "operating" the vehicle.
[72] At the time of the accident, the passenger was insured through a homeowner's policy issued by the Abstainers Insurance Company, which provided him with comprehensive personal liability coverage. However, Abstainers refused to defend him based on an exclusion clause which read, in part:
This policy does not apply: . . . (a) To the ownership, use or operation by, or on behalf of, an insured of any automobile[.]
[73] Fraser brought an application to determine his rights under both policies.
[74] The applications judge found that the passenger's act of opening the door fell within the coverage of the automobile policy, which provided:
Section A -- Third Party Liability
The insurer agrees to indemnify the insured and in the same manner and to the same extent as if named herein as the insured, every other person who with his consent personally drives the automobile, or personally operates any part thereof, against the liability imposed by law upon the insured or upon any such other person for loss or damage arising from the ownership, use or operation of the automobile resulting from bodily injury to or death of any person or damage to property.
(Emphasis added)
[75] After reviewing a number of cases, the applications judge concluded that were it not for the inclusion of the phrase "or any part thereof" in the insuring agreement, he would have held that the passenger's act of opening of the vehicle's door was not covered under the automobile policy. However, since the insuring agreement expressly included the operation of "any part [of the automobile]", which included its door, coverage under the automobile policy was engaged.
[76] In arriving at his finding on that point, the applications judge distinguished the case before him from the British Columbia Supreme Court's decision in Watts v. Centennial Insurance Co., [1967] B.C.J. No. 179, 65 D.L.R. (2d) 529 (S.C.), another case where a passenger opened the door of an automobile, which was then struck by a car approaching from behind. An action against the passenger was successful. He then claimed indemnity from the defendant insurer under a comprehensive public liability policy which excluded coverage for "the operation or use of a vehicle".
[77] In allowing the action, the court held that the act of the passenger opening the vehicle's door was not "use of the vehicle" and, specifically (at p. 532 D.L.R.),
. . . I think, considering the exclusion clause as a whole, that the word "use" must be limited to instances in which the insured is involved in the active operation or direction of the whole vehicle, and not, as a passenger, in the incidental use of some part of it.
[78] In determining that the exclusion in the Abstainer's homeowner's policy did not apply to avoid coverage of the claim against Fraser, the applications judge adopted the reasoning in Watts and concluded that the passenger was not "using" the automobile within the meaning of the exclusion clause. He explained that the exclusion in the homeowner's policy, which was predicated on the insured's "use or operation of an automobile", did not apply because the insured, as a passenger opening a door, was engaged in the operation of a part of an automobile and not in the operation of the automobile itself.
[79] In the result, the applications judge determined that both the Co-Operators automobile policy and the Abstainers homeowner's policy were obligated to respond to the claim against Fraser. Both insurers appealed.
[80] The Court of Appeal affirmed the applications judge's determination that the passenger was covered under the automobile policy. However, it allowed the homeowner insurer's appeal, stating [at para. 1]:
As we agree with the decision of Reid J. with respect to the responsibility of Co-operators Insurance Association, it follows that in our view that the claim is made against the person who "personally operates any part [of the automobile]" for damage arising from the "ownership, use or operation of the automobile" [emphasis added]. Because it relates to the use of the automobile, it is excluded from the coverage of the Abstainer's Insurance Company policy which by its terms does not apply "to the ownership, use or operation . . . of any automobile".
[81] In its reply submissions, Coachman suggests that the result in Fraser supports its position that an insured's mere status as a passenger constitutes "use" of a motorized vehicle for the purpose of the application of the "motorized vehicle" exclusion. I disagree. Contrary to Coachman's submission, the court's finding that the passenger's actions constituted a "use" of the automobile was not the result of his mere presence, as a passenger, in the vehicle. Rather, it was his operation of a part of the automobile, specifically opening the vehicle's door, that was found to constitute his "use".
[82] In addition, in arriving at its finding in Fraser, the Court of Appeal expressly disapproved of the reasoning in Watts, a case that essentially endorsed the "operational control" interpretation of "use" advocated by Mr. Kraft.
[83] Mr. Kraft's "operational control" position is also inconsistent with the result in Silverthorne v. Gore Mutual Insurance Co. (2001), 52 O.R. (3d) 560, [2001] O.J. No. 871. In that case, Mr. Silverthorne was in consensual possession of a vehicle owned by his mother. Without his mother's permission, he permitted an allegedly at para. 9 "unlicensed, inexperienced and incompetent driver" to operate the vehicle, who was subsequently involved in a collision with another vehicle. An occupant of the other vehicle was injured as a result.
[84] The automobile policy insuring the Silverthorne vehicle did not extend third party liability coverage to the unlicensed driver because she was found to have operated the vehicle without its owner's consent. As a result, the injured party commenced an action against her own automobile insurer pursuant to the uninsured motorist provisions of her own policy. That insurer commenced a third party claim against the operator of the Silverthorne vehicle, framed in negligence, and against Mr. Silverthorne on a theory of negligent entrustment.
[85] At the time of the accident, Mr. Silverthorne was "an insured" under a homeowner's policy issued by Gore. Gore posited that it was not obligated to defend Mr. Silverthorne in the third party proceeding because the subject matter of the action against him was specifically excluded from coverage. An application was brought to determine whether Gore was obligated to defend Mr. Silverthorne. The applications judge determined that it was so obliged. Gore appealed.
[86] The relevant portions of the homeowner's policy were identified by the Court of Appeal as follows at para. 11:
You are insured for claims made against you arising from:
- Personal Liability -- legal liability arising out of your unintentional personal actions anywhere in the world . . .
You are not insured for claims made against you arising from: (a) The ownership, use or operation of any motorized vehicle, trailer or watercraft, except those for which coverage is shown in this form[.]
[87] Although the exclusion clause at issue in Silverthorne was identical to the relevant exclusion clause in Cella, the Court of Appeal identified two critical differences between the circumstances in Cella and those of the case before it. First, the claim as pled against Mr. Silverthorne specifically alleged that he had control over the Silverthorne vehicle and that he was negligent in exercising that control by permitting another individual to operate the vehicle. Second, Mr. Silverthorne had at para. 17 "possession and control of the vehicle by virtue of the consent given to him by . . . the owner" [emphasis added]. He exercised that control by permitting another individual to operate the vehicle. His actions were consistent with "putting the vehicle to a particular use".
[88] As a result of the foregoing, and applying the principles articulated in Cella, the court concluded that the allegations of liability against Mr. Silverthorne related to his "use" of the vehicle and, accordingly, any claim advanced by the plaintiff against him was not covered by the homeowner's policy. The court found no ambiguity in the word "use" as it applied to the circumstances of the case before it.
[89] There is nothing in Silverthorne that supports the view that when interpreting an exclusion clause, "use" of a motorized vehicle ought to be construed as limited to "operational control" of the vehicle.
[90] In support of his position, Mr. Kraft also relies on Incerto v. Landry (2000), 47 O.R. (3d) 622, [2000] O.J. No. 861, which involved a motion brought by the defendant Landry for an order compelling the third party, Lombard Canada Limited and/or the third party the Economical Insurance Group to defend and indemnify him in an action commenced by members of Mr. Incerto's family, arising from a single-car motor vehicle accident in which Mr. Incerto was killed.
[91] Lombard insured the vehicle involved in the collision, which was owned by Incerto, pursuant to a standard Ontario automobile insurance policy. At the time of the accident, Landry did not own his own vehicle nor was he "an insured" under any other automobile policy. He was, however, insured under a homeowner's policy issued by Economical.
[92] The motion proceeded on the basis of both the pleadings and an agreed statement of facts that indicated that at the relevant time, Landry was operating Incerto's vehicle with consent. Incerto and an individual named Heald were passengers. The vehicle became imbedded in a gravel rut at the side of a roadway, from which Landry was unable to extricate it. Landry, Incerto and Heald exited the vehicle. Heald then re-entered the vehicle and got behind the steering wheel, with the intent that Landry and Incerto would push the vehicle free. Incerto situated himself in a ditch in front of the vehicle. On Landry's instruction, Heald put the vehicle into neutral, it rolled forward, and fatally struck Incerto.
[93] In reviewing the pleadings, the motion judge observed that the allegations of negligence against Landry fell into two categories:
(1) those relating to his operation of the motor vehicle up until the time it became imbedded in the rut; and (2) those relating to his communications from outside the vehicle with both Incerto and the new driver, Heald.
[94] Each insurer denied an obligation to defend Landry.
[95] Lombard took the position that Landry was not covered under the automobile insurance policy because he was neither a driver nor an occupant of the vehicle at the time Incerto was struck.
[96] The coverage provided by the Economical homeowner's policy extended to the insured's legal liability arising out of his or her actions anywhere in the world. However, that broad grant of coverage was subject to an exclusion for "claims arising from the ownership, use or operation of a motor vehicle", among others. Economical posited that coverage for the loss was excluded and it had no duty to defend Landry because the loss resulted from the vehicle being driven into a ditch and, as a consequence, it arose from "the use or operation of a motor vehicle".
[97] Applying the two-part test set out in Amos v. Insurance Corp. of British Columbia, the court concluded that Landry was entitled to coverage pursuant to the terms of the Lombard automobile policy and, accordingly, it had a duty to defend him.
[98] With respect to the coverage under the homeowner's policy, the motion judge held, at para. 18:
It is true that the automobile was driven into the ditch and that this injury occurred during the process of attempting to extricate it. However, it is also true that the pleadings and agreed facts give rise to the possibility that Incerto's death was caused by Landry's instruction to Heald to put the car into neutral. At this time, Landry was standing outside the vehicle giving directions. The weight of authority is that this is not the kind of activity that involves the use or operation of a motor vehicle.
[99] The result in Incerto is a function of the court's view that the statement of claim sufficiently alleged concurrent causes for Incerto's death (and the plaintiffs' alleged losses and damages). The motion judge observed that Landry was "both driver and advisor", and his alleged negligent instruction of Heald constituted an additional cause of injury apart from his alleged prior negligent operation of the vehicle. The former was not excluded under the terms of the homeowner's policy. As a result, she concluded that there was a possibility that the claims against Landry might succeed on the basis of both auto-related and non-auto-related causes, and therefore each insurer had a duty to defend him.
The Impact of Prior Decided Cases on the Interpretation of the Policy's "Motorized Vehicle" Exclusion
[100] While the existence of an insurer's duty to defend must be determined in the context of the case specific policy wording, pleadings and circumstances before the court, the foregoing authorities offer guidance with respect to the construction of "the motorized vehicle" exclusion in the Coachman policy. I remain mindful that the exclusion clauses considered in the authorities referred to above differ from the specific wording of the exclusion clause relied on by Coachman, in this instance. My reference to, and consideration of, those authorities does not displace the need to interpret the Coachman policy in accordance with its specific terms. The exclusion relied on by the insurer must be interpreted in the context of the contract as a whole, by applying the general principles of interpretation to which I have previously referred.
[101] I will now consider whether there is a possibility that the allegations of liability against Mr. Kelley made in the statement of claim fall within the coverage available to him under the Coachman policy. In doing so, I will resolve the ambiguity regarding the nature and extent of the activities that constitute "use", within the meaning of the subject exclusion.
The Substance of the Allegations of Liability Against Mr. Kelley
[102] The allegations of negligence made against Mr. Kelley in the statement of claim fall into three broad categories:
(1) Allegations with respect to the negligent manner in which Mr. Kelley physically interacted with the ATV, or a part of the ATV, which caused the ATV to flip over (the "first category"). The allegations that comprise this category include paras. 10(a) (sitting on the ATV or rear rack or straddling the ATV in a manner that caused it to flip over); 10(b) (causing a weight imbalance while on the ATV); 10(d) (improperly exiting the ATV which caused it to fall on top of David); 10(f) (pushing against the rear rack of the ATV or moving the ATV itself as it flipped over causing the ATV to fall on David); and 10(h) (failing to get off the ATV when he knew or ought to have known that failing to do so would cause the ATV to flip backwards). (Emphasis added) (2) Allegations that Mr. Kelley was negligent in the manner in which he interacted with Mr. Kraft during and after the time that the ATV flipped over (the "second category"). The allegations that comprise this category include paras. 10(c) (resting his feet in the foot well area where David's left foot was which impeded David's ability to extricate himself when the ATV flipped over); 10(e) (physical contact with David's body in a manner which prevented him from exiting the ATV in a safe and timely manner); 10(g) (exiting the ATV too slowly generally impeding David from accessing a safe exit); and para. 11 (which pleads that the Mr. Kelley, qua passenger, owed the plaintiff a duty of care not to obstruct, delay or prevent him from exiting the ATV in an emergency situation and that he breached that duty by obstructing the plaintiff as the plaintiff exited the ATV). (3) General allegations of negligent conduct which may have contributed to the alleged negligent conduct that comprises the other two categories (the "third category"). The allegations that comprise this category include para. 10(i) (being intoxicated to the point he became a danger to others including David); and para. 10(j) (creating and perpetuating a situation of danger from which David, despite all reasonable effort and precaution on his part, was unable to extricate himself).
The Applicability of the Motorized Vehicle Exclusion to the Substance of the Allegations against Mr. Kelley
[103] In my view, the "motorized vehicle" exclusion applies to each of the allegations included in the first category identified above.
[104] I have previously found the scope of the "motorized vehicle" exclusion to be ambiguous as it relates to the nature of the activities that are intended to constitute an insured's "use" of a motorized vehicle. The term "use" is not defined in the policy. When reading the express language of the exclusion, in the context of the policy as a whole, I am unable to discern a clear intention that the exclusion is meant to apply to whatever acts an insured commits while a passenger on, or in, a motorized vehicle simply because of his or her status as a passenger. Similarly, I am unable to discern a clear intention that an insured's "mere presence" on or in a motorized vehicle is sufficient to render the exclusion operable. In my view, the terms of the policy do not clearly indicate that such a result is intended.
[105] In resolving this particular ambiguity, it is appropriate to narrowly construe the subject exclusion. Consistent with the approach in Cella, I find that the exclusion of coverage for claims "due to" a motorized vehicle that the insured "uses" is intended to apply when the insured's negligence giving rise to liability is founded in an act or omission in which the insured exercises "some form of control over" a motorized vehicle and that conduct causes "bodily injury" or "property damage".
[106] In my view, that is the precise nature of the allegations included in the first category. In each of those allegations, the plaintiff asserts that Mr. Kelley, while a passenger on the ATV, interacted with the ATV (or a specific part thereof) in a manner that caused the ATV to "flip over" resulting in significant bodily injury to Mr. Kraft. Each of those allegations infers or expresses that Mr. Kelley exercised "some form of control over the ATV", because his various direct negligent actions and interactions with the ATV (or a specific part thereof) are alleged to be the direct cause of it "flipping over" which, in turn, was one of the causes of Mr. Kraft's injuries. I find that the allegations included in the first category constitute "claims due to a 'motorized vehicle' . . . used by Mr. Kelley", within the meaning of the subject exclusion. Since those claims are specifically excluded from coverage the allegations related to them do not obligate Coachman to defend the action on behalf of Mr. Kelley.
[107] I find that the substance of the allegations of liability against Mr. Kelley that are included in the second category identified above, do not constitute claims due to his "use" of a motorized vehicle within the meaning of "the motorized vehicle" exclusion. Therefore, those claims are covered pursuant to the terms of the Coachman policy and Coachman owes a corresponding duty to defend Mr. Kelley as a result. I will explain.
[108] The basis for the liability asserted in the allegations included in the second category are not dependant on an allegation or finding involving the insured's "use" of the ATV, within the meaning of the exclusion. The allegations in the second category do not plead any exercise of control by the insured over any aspect of the ATV. Rather, the asserted basis for liability is founded in Mr. Kelley's alleged unreasonable conduct in physically contacting Mr. Kraft's body in a manner that prevented him from safely exiting the ATV; and Mr. Kelley's breach of a pleaded duty "not to obstruct, delay or prevent Mr. Kraft from exiting the ATV in an emergency situation". The substance of those allegations rests upon a claim that Mr. Kelley negligently interfered with Mr. Kraft's person and his activities and that his conduct, in that regard, resulted in bodily injury to Mr. Kraft.
[109] Of course, the allegations falling into the second category cannot be read in isolation. They must be read together with the statement of claim, as a whole. In doing so, I find that the allegations of negligent use of the ATV by Mr. Kelley (as set out in the allegations included in the first category) are distinct and divisible from the allegations that Mr. Kelley negligently interfered with Mr. Kraft's person and his activities (as set out in the second category).
[110] The statement of claim alleges that the injuries suffered by Mr. Kraft resulted from both Mr. Kelley's negligent interaction with the ATV and his negligence in interfering with Mr. Kraft's person and his activities. The specified "sets of conduct" alleged to found each of those aspects of Mr. Kelley's liability are temporally distinct and sequential. The acts forming the subject matter of the allegations of Mr. Kelley's negligent interaction with the ATV are said to have resulted in the vehicle flipping over. Independent of the foregoing allegations, Mr. Kelley is alleged to have engaged in additional conduct during and after, the "ATV flip" through which he is said to have exercised control over the person and activities of Mr. Kraft. Both sets of conduct are alleged to have contributed to Mr. Kraft's injuries.
[111] Mr. Kelley's alleged negligent use of the ATV is not a predicate element of the allegations of his negligent interference, obstruction and impediment of Mr. Kraft's person and activities. As pled, liability arising out of the latter does not depend on any aspect of control of the ATV, or any part of it, by Mr. Kelley. If the ATV was alleged (or ultimately found) to have flipped over for reasons other than Mr. Kelley's negligence, liability could still be found against him on the basis of his negligent conduct in "obstructing, impeding, or interfering" with Mr. Kraft's person and activities as, and after, the ATV flipped over (which is pled as conduct that contributed to Mr. Kraft's injuries).
[112] Therefore, I find that the latter allegations are not "derivative" of the former, within the meaning of Scalera. Instead, I find that the separate allegations that amount to negligent use of the ATV and negligent interference with the person and activities of Mr. Kraft should be considered distinct concurrent causes.
[113] By its terms, the "motorized vehicle" exclusion clause does not expressly indicate that it applies to claims resulting from concurrent causes. While I have found that the exclusion clause is operable in this case, it is only in respect of the portion of the loss that is "due to" the insured's "use" of a motorized vehicle. In my view, had Coachman wished to exclude coverage where the loss was concurrently caused by a covered peril and an excluded "motorized vehicle" peril, it ought to have employed specific language to achieve that result: see Derksen, at paras. 55-56.
[114] For example, had the insurer wished to exclude any and all coverage under the policy where concurrent with a covered cause, the claim was "due to" a motorized vehicle used by the insured, it ought to have employed language identical to the language it utilized in exclusion (d), on p. 28 of the policy, to exclude "all claims arising directly or indirectly, in whole or in part, out of terrorism . . .". By its terms, the "terrorism exclusion" "applies regardless of any other contributing or aggravating cause or event that contributes concurrently or in any sequence to the claim". The absence of similar language in the "motorized vehicle" exclusion relied on by Coachman fortifies my view that it does not apply to avoid coverage for claims that are caused concurrently by a motorized vehicle used by the insured and another peril that is otherwise covered pursuant to the terms of the policy.
[115] As a result of the foregoing, I find that the insurer has failed to discharge its onus to establish that the allegations of negligent interference with Mr. Kraft's person and his activities, made against Mr. Kelley in the statement of claim are subject to the "motorized vehicle" exclusion. Therefore, Coachman's duty to defend Mr. Kelley in the action is engaged by the allegations in the second category.
[116] Finally, the allegations included in the third category identified above are equally capable of applying to, and supporting, Mr. Kelley's alleged negligence in the manner in which he interacted with the vehicle and the allegations of Mr. Kelley's negligent interference with Mr. Kraft's body and activities.
[117] Paragraph 10(i) of the statement of claim broadly pleads that Mr. Kelley was negligent because he was "intoxicated to the point that he became a danger to others . . .". Paragraph 10(j) alleges that Mr. Kelley was negligent in "creating and perpetuating a situation of danger . . .". The pleading does not allege that either of those negligent acts caused bodily injury to Mr. Kraft in a manner that is independent of Mr. Kelley's alleged interaction with the ATV prior to it flipping over, or his interaction with Mr. Kraft during and after the ATV flip.
[118] On a reasonable reading of the pleading, the allegations that Mr. Kelley was negligent because of his level of intoxication and because he created and perpetuated a situation of danger can be read as elements of both Mr. Kelley's negligent "use of/interference with" the ATV and his "negligent interference" with Mr. Kraft's person and activities. Since the allegations in the third category apply to both the concurrent excluded cause and the concurrent covered cause, and in the absence of express policy wording to the contrary, I conclude that the allegations set out at paras. 10(i) and (j) also trigger Coachman's duty to defend the action on behalf of Mr. Kelley.
Reasonable Expectations
[119] Coachman submits that the policy must be interpreted in a manner that gives effect to the reasonable expectations of both the insured and the insurer. It submits that it would be an injustice to find the policy provides coverage for "an act" which is so clearly excluded. It says that the motorized vehicle exclusion clause is a clear indicator of its intent to manage the risk of insuring a homeowner by excluding activities, such as the use of an ATV, that are independent of the risks of owning a home.
[120] However, the grant of coverage under "Part 2 -- Personal Liability -- Coverage E" of the policy extends beyond risks inherent in home ownership. That coverage applies to liability claims against the insured for compensatory damages arising out of the insured's personal actions anywhere in the world together with claims due to the condition or use of the insured's premises. The insurer's position speaks only to the latter.
[121] Although the insurer narrowed the broad scope of its initial grant of coverage through a series of exclusions, had it sought to exclude "any and all" claims arising directly or indirectly, in whole or in part, out of a motorized vehicle owned or used by the insured, regardless of any other contributing or aggravating cause or event that contributes concurrently, or in any sequence to the claim, it could have done so through clear express and unambiguous language to that effect (as it did with the "terrorism" exclusion referred to above). Based on the manner in which it drafted the "motorized vehicle" exclusion, the insurer ought reasonably to have anticipated that coverage for a claim would not be avoided in circumstances of concurrent causes, where one cause is subject to the exclusion and the other is otherwise covered by the terms of the policy.
[122] Conversely, an insured, such as Mr. Kelley, could have reasonably expected that a claim otherwise falling within the initial grant of coverage would only be excluded from that coverage in accordance with the terms of the policy. Here, the policy's express terms do not indicate that the "motorized vehicle" exclusion applies in the case of concurrent causes for a claim in the circumstances described above. As a result, it is reasonable for the parties to expect that the policy affords coverage to the extent that the claim is attributable to the unexcluded and otherwise covered cause. Therefore, a finding that Coachman has a duty to defend Mr. Kelley in action numbered CV-11-17014 is consistent with the parties' reasonable expectations.
Disposition
[123] For the foregoing reasons, I find that Coachman Insurance Company has a duty to defend Barry Kelley in action numbered CV-11-17014 commenced at the City of Windsor, and a declaration will go accordingly, subject to the following.
[124] A determination of the duty to indemnify Mr. Kelley in relation to the above-referred action cannot be made at this point. There are elements of the claim that may be excluded under the terms of the Coachman policy. Accordingly, a determination of the insurer's duty to indemnify can only be made after relevant findings of fact are made in the disposition of the action. It therefore follows that my finding that the insurer is obligated to defend Mr. Kelley is without prejudice to the determination of the insurer's duty to indemnify, after all relevant factual determinations are made within the context of the action.
[125] Coachman was unsuccessful on the issue of its duty to defend. If costs are sought, the respondent Mr. Kraft and the intervenor, McKillop, may deliver written submissions on costs, of no more than five pages, on or before April 21, 2017. The applicant may deliver written submissions in response, of no more than eight pages, on or before May 19, 2017. The respondent Mr. Kraft and the intervenor may deliver reply submissions of no more than three pages, on or before June 2, 2017.
[126] Judgment will go in accordance with the foregoing terms.
Application dismissed.
End of Document