The Court of Appeal has provided further guidance on the issue of prescriptive easements in the case of Hunsinger v. Carter. The case involved one party having uninterrupted use of a shared driveway over a 40 year period for commercial purposes, facing off against a neighbor who purchased the property last year and attempted to restrict his neighbours historic use of the property. The ‘new’ neighbor was operating a daycare and wanted to erect a fence in the middle of the shard driveway for reasons of safety.
On application, the court held that the ‘new’ neighbor could erect the fence, in part relying on the finding that the historic neigbour would be able to maneuver vehicles on their portion of the driveway and that the fence would not provide an absolute impediment to doing so. The application court judge found that the historic neighbor had established a prescriptive easement over the driveway as it was the dominant tenement for over 40 years before 2007 when both properties were registered in the Land Titles system. The appellant and his family had made use of the gravel driveway “openly, continuously, and without licence over this period. However, the application court judge found that the obstruction of the easement in erecting a fence was allowable because that portion of the driveway which was obstructed was not needed to be used by the historic neighbor.
The Court of Appeal disagreed, finding that building the fence would encroach on the easement. It is interesting to note that the Court did not disagree that the proposed fence did not prevent the historic neighbor from utilizing the driveway to access the back of his property. Rather it was clear that the court accepted the argument that the fence would substantially interfere with the neighbours use. Encroachment is only permissible where the encroachment does not substantially interfere with the easement and in this instance, the fence was thought to constitute a substantial interference.
In the June 5, 2018 Divisional Court ruling in Enterprise Rent-A-Car v. Intact, 2018 ONSC 3517, Enterprise appealed the judgment of Justice Morgan of the Superior Court concerning the hierarchy of coverage provisions of s. 277(1.1) of the Insurance Act applying to the use or operation of a leased vehicle. It reads much like the overlaid simplicity of Tragically Hip lyrics belying their depth.
Arising from a June 29, 2013 accident, the driver of the rental vehicle, also listed upon her father’s policy with Intact, became a defendant in the injured plaintiff’s tort action. Enterprise ultimately contributed to settlement of that action and sought recovery from Intact by way of court application. His Honour dismissed the application finding that s. 277(1.1) did not apply.
On appeal, the Divisional Court decided the standard of review as either correctness or palpable and overriding error. Neither standard was breached presumably, as the panel of three unanimously upheld the finding of the lower court without further comment upon it. The hierarchy of priority of coverage is: lessee (which is defined in subsection (4)), followed by the driver and then the owner of the rental vehicle. Enterprise could only have excess coverage if Intact fell within the first two tiers. The panel confirmed Court of Appeal authority requiring the coverage to be ‘available’ in denying it extended to only a driver listed upon the Intact policy. It was felt clear from Intact’s OAP 1, although the language is a bit tortured, that coverage would extend to a vehicle only when rented by the named insured (the father) or his spouse and driven by either of them. Enterprise argued paramountcy of the statute over the contract of insurance believing there to be a discrepancy in paragraph 2 of the statutory provision. The panel rejected any discrepancy and found the converse was the proper interpretation in that the statute can’t create coverage; it first has to founded under the terms of the policy before the statute is engaged. Since paragraphs 1 and 2 of the statute were not triggered, coverage fell to Enterprise’s insurer considering Enterprise as owner of the vehicle. Costs were fixed and payable to Intact.
Know your coverage. Don’t let the constellations reveal themselves one star at a time when you drive back to town this morning.
Kevin is a Partner of Samis+Company. Throughout his career, he has practiced almost exclusively in the area of accident benefit and bodily injury matters arising from motor vehicle accidents. He has also defended various non-motor vehicle bodily injury claims. Kevin carries on a robust practice involving privately arbitrated disputes between insurers in both priority and loss transfer matters.
Ontario’s Court of Appeal has again addressed issues relating to commercial tenancies and the impact of lease provisions which obligate one party or the other to obtain insurance for the benefit of another. In CLLC Inc. v. 20 Eglinton , the tenant was obligated to obtain insurance throughout the period of their possession of the premises, and for the entire term, with the landlord named as an insured. The tenant did not obtain the insurance as required. Water leaks in the premises resulted in loss and damage to the tenant who brought an action against the landlord. Summary judgment dismissing the action against the landlord was granted and the tenant appealed. The Court of Appeal set aside the summary judgment, noting that the motion judge had not adequately considered and resolved factual disputes in finding that there was no genuine issue for trial.
Although not technically a subrogated claim (because no insurance was obtained so no insurance claim was advanced), the principles and arguments that were in play are relevant to subrogated claims.
One particular point of interest was the issue of when the leaks caused damage and the resulting question of whether the premises were even insurable given that the water leaks may have been pre-existing. The defendant conceded that if the premises were not insurable for whatever reason, the tenant would not be bound by the covenant to insured.
As a result the Court of Appeal set aside the summary judgment motion given that there were genuine issues in play that required a trial. This case underscores a point made in prior blogs on this site and others – read the lease or whatever underlying agreement is in play carefully and understand how the obligations of the parties fit within the factual matrix. It will be different in every case.
For those keeping score, subrogating insurers have been coming up on the short end of the stick in cases involving commercial leases. The Court of Appeal’s decision in Royal Host v. 1842259 Ontario (released May 18, 2018) goes the other way in permitting an insurer of a landlord to advance a subrogated action against an at fault tenant. On that basis alone, it is worth a close look.
The lease in issue in Royal Host contained provisions we often see in commercial leases. The landlord was required to obtain fire insurance and the tenant contributed financially to the premiums for that insurance. The lease contained a provision that the tenant was not relieved of any liability arising from or contributed by its acts, fault or negligence.
The motion judge ruled in favour of the tenant and dismissed the subrogated action commenced by the landlord’s insurer, relying on what he called the ‘general rule’ in the Supreme Court of Canada’s risk shifting trilogy (Agnew-Surpass v. Cummer-Yonge, 1975 CanLII 26 (SCC),  2 S.C.R. 221; (ii) Ross Southward Tire v. Pyrotech Products, 1975 CanLII 25 (SCC), and (iii) T. Eaton Co. v. Smith et al., 1977 CanLII 39 (SCC)) that ‘subrogation rights will be limited where a landlord covenants to pay for the insurance and agrees to look to its own insurer for any loss’. On appeal, Ontario’s Court of Appeal overturned the motion judge and permitted the matter to proceed. The appeal court relied on a number of lease provisions which in their view made it clear that the risk of loss by fire was to be borne by the tenant if they were responsible for the loss.
The Trilogy is the starting point for the analysis of commercial leases in subrogation claims in the Canadian environment and is worthy of brief review. In Surpass, the landlord covenanted to maintain fire insurance on the premises. There were no tenant repair covenants in the lease. The lease did require the tenant to take good and proper care of the leased premises, “except for reasonable wear and tear…and damage to the building caused by perils against which the lessor is obligated to insure hereunder”. The landlord’s insurer was precluded from subrogating in Surpass, and with good reason. There was a clear relationship between the tenant’s covenant to repair and the landlord’s covenant to insure. The provisions worked together harmoniously - the tenant was not required to repair if the damage was caused by a peril against which the landlord was required to insure.
In T. Eaton, the lease provisions were similar although the tenant’s covenant to repair was not tied in any way to the landlord’s covenant to insure as it had been in Surpass. Despite this distinction, the Supreme Court found in favour of the tenant and prevented the landlord’s insurer from subrogating. In effect, the covenant to insure trumped the covenant to repair.
How did the Court of Appeal reach a different result in Royal Host? The devil is in the details as they say and in this case, the details are the lease provisions. Specifically, the section of the lease that required the landlord to obtain insurance also included the following language:
Notwithstanding the Landlord’s covenant contained in this Section 7.02, and notwithstanding any contribution by the Tenant to the cost of any policies of insurance carried by the Landlord, the Tenant expressly acknowledges and agrees that
the Tenant is not relieved of any liability arising from or contributed to by its acts, fault, negligence or omissions, and
no insurance interest is conferred upon the Tenant, under any policies of insurance carried by the Landlord, and
the Tenant has no right to receive any proceeds of any policies of insurance carried by the Landlord.
The effect of using the word ‘notwithstanding’ is to provide a limited circumstance in which the benefit conferred to the tenant will not apply; namely when the tenant’s ‘acts, fault, negligence or omissions’ result in loss or damage. The parties had turned their minds to the issue of which party was to bear the risk of loss in this circumstance and despite the landlord’s covenant to insure, the lease precluded the tenant from enjoying the benefit of that insurance if the loss resulted from its negligence.
It is worth noting that the motion judge in this case repeatedly referred to the ‘general rule’ derived from the Trilogy which was to limit subrogation rights when the landlord agreed to obtain insurance. The Court of Appeal disagreed with this interpretation and clarified that the Trilogy did not pronounce a general rule of application nor did it enunciate freestanding principles. Rather, ‘the principles drawn from the trilogy are contractual in nature. They are conclusions that flow from and reflect the particular provisions of the leases that were in issue in those cases’. This underscores the first rule in analyzing subrogation rights when commercial leases are involved: try to discern the intention of the parties based on the lease language. https://bit.ly/2KCPH0p
Neil is a Partner of Samis+Company. Neil focuses exclusively on insurance-related litigation. He has handled a broad range of matters before the Ontario Superior Court of Justice and the Financial Services Commission of Ontario, as well as advocating on behalf of his clients in private arbitrations.
That is of course a subjective question and one that you won’t find an explicit answer for in the case of Konopka v. Traders. However, you will read about what is not considered to be reasonable conduct in the context of an OAP 1 policy breach. In Konopka, the elderly insured fell ill while driving to her cottage and permitted her unlicensed husband to drive her vehicle to a nearby parking lot where they intended to stop and rest until she felt better. Shortly after taking the wheel, the unlicensed husband caused an accident. There was no dispute that the insured was aware that her husband was unlicensed and as a result on the face of it she was in breach of the ‘authorized by law to drive’ provision in section 4(1) of the policy. The insurer denied coverage as a result.
The court noted that a breach of this nature was subject to a strict liability standard which required that the insured to establish that she took all reasonable steps to avoid the particular event. The reasonableness standard requires a consideration of the nature of the breach, what caused it and all of the surrounding circumstances that explain the act or omission. The court ultimately determined that it was not reasonable for the insured to allow her husband to drive. It is worth noting that the court relied in large part on the discovery transcript of the husband which betrayed a level of confusion and an inability to focus. The court ultimately concluded that the husband was someone ‘who simply cannot get his bearings’ and as a result it was not reasonable to allow him to drive, regardless of the circumstances.
This case is fact driven but provides a good counterpoint to the decision of Ontario’s Court of Appeal in Kozel v. Personal. In that case, the insured was also in breach of section 4(1) for driving while she was not authorized by law to drive. However, in that case the license suspension was the result of a failure to respond to a license renewal notice which was considered to be a ‘relatively minor breach’. In contrast, allowing an elderly individual who had an ‘inability to get his bearings’ and who had not driven in more than 20 years was something quite different and ultimately, not reasonable. https://bit.ly/2KoWLxQ
What do you do at work that is considered ‘under the direction’ of your employer?
The answers to this question are endless. A more interesting question: what do you have to be doing at work not to be ‘acting under the direction’ of your employer? That question is at the heart of the decision in Oliveira v. Aviva, a Court of Appeal decision released this week. The applicant sought coverage and a defence for claims brought against her by a hospital patient for damages as a result of applicant’s alleged accessing the hospital records of a patient who was not under her care. The crux of the case turned on whether the applicant (defendant in the lawsuit) was an insured under the policy issued by Aviva. The policy would provide coverage if the allegations in the underlying Statement of Claim alleged conduct took place while the applicant was acting under the direction of the named insured but only with respect to liability arising from the operations of the named insured.
Because the policy provided coverage for ‘invasion or violation of privacy’, also referred to as the tort of intrusion upon seclusion (which would include accessing records in an unauthorized manner) the court held that the policy was by definition intended to cover offensive conduct that would presumably not be authorized by the insurer. In that case, how can coverage be denied for conduct that on the face of it would appear to be covered?
Acting under the direction of the employer relates not to control how the work is done or actual oversight at the moment of the incident (in this case when records were improperly accessed) but rather flows from the relationship generally and ‘control’ over incidental features of the of the employment such as directing when and where to work and having the right to terminate the employment.
Whether the alleged misconduct arose out of the operations of the named insured was also in issue. The insurer argued that hospitals operations are to provide care and because the employee was not within the patient’s circle of care, her conduct did not fall within the operations of the hospital. The court rejected this argument, noting that the ‘operations’ of the hospital included creating, collecting and maintaining medical records. The underlying claim against the applicant (defendant) for which coverage was sought related to allegations about the unauthorized access to those medical records.
Ultimately however, in reading the decision, the irresistible inference is that the court accepted that because the policy covered ‘intrusion upon seclusion’, it could only be read to cover the alleged misconduct. As a result to deny coverage for the very conduct that the policy was intended to cover would be perverse. It is also consistent with the underlying interpretive imperative of insurance policies – coverage should be interpreted broadly and exclusions should be interpreted narrowly.
Neil is a Partner of Samis+Company. Neil focuses exclusively on insurance-related litigation. He has handled a broad range of matters before the Ontario Superior Court of Justice and the Financial Services Commission of Ontario, as well as advocating on behalf of his clients in private arbitrations.
The Court of Appeal for Ontario has held that a Minnesota tortfeasor with only $500,000 liability limits is an “inadequately insured motorist” under the Family Protection Endorsement (OPCF 44R) in Ontario, where the 44R limits are $1 million.
In Hartley v. Security National, the plaintiffs were injured in a motor vehicle accident while touring on a motorcycle in Minnesota. The accident occurred when the plaintiffs’ motorcycle was struck by a self-insured State of Minnesota-owned truck, operated by a state employee. The plaintiffs retained Minnesota counsel and sued the State of Minnesota for damages.
Even though Mr. Hartley’s injuries warranted damages in excess of US$500,000 dollars, he settled the action for only US$500,000, which was the maximum payable by Minnesota to a tort claimant in the circumstances. The settlement was inclusive of legal fees, including a 22 per cent contingency fee, and disbursements. After legal costs were accounted for, Mr. Hartley was left with approximately CAD$386,500.
He then claimed the difference from Security National under his Ontario policy and, more specifically, under his OPCF 44R, which provided underinsured coverage of up to $1 million. The insurer denied the claim on two grounds: Firstly, the insurer claimed that Minnesota was not an “inadequately insured motorist” within the meaning of OPCF 44R. Secondly, the insurer claimed that U.S. legal fees were not recoverable under the OPCF 44R.
The motion judge found for the plaintiffs on both issues.
The Court of Appeal agreed with the motion judge that Minnesota was an “inadequately insured motorist” but disagreed that the legal fees were recoverable.
“Inadequately insured motorist”
The evidence was that the Tort Claims Act inMinnesota provides that the State will pay compensation for property loss and personal injury caused by a state employee acting in the course of his or her employment. However, the Act contains a $500,000 cap on the amount that can be claimed by an individual and a $1,500,000 cap on the total that is payable “for any number of claims arising out of a single occurrence”. Mr. Hartley’s settlement agreement with Minnesota contained the following provision:
The parties to this Settlement Agreement agree and acknowledge that the amount paid to Plaintiff Glen Hartley and his counsel, (i.e., [US]$500,000.00) is the maximum amount Glen Hartley can recover against State Defendants pursuant to Minnesota law, including Minn. Stat. §3.736.
Security National raised three arguments for refusing Mr. Hartley’s claim for the shortfall left after his settlement agreement:
Minnesota was not underinsured, but self-insured, and therefore underinsured coverage does not apply.
The shortfall in recovery was not the result of underinsurance, but the result of a statutory immunity.
Even if a self-insured state enjoying statutory immunity can be an “inadequately insured motorist”, it is not accurate to say that Minnesota is underinsured because Minnesota offers single occurrence coverage up to US$1,500,000 that exceeds the CAD$1,000,000 coverage ceiling payable under OPCF 44R. Security National claimed that its maximum liability is zero under the terms of OPCF 44R.
The Court of Appeal rejected all three arguments.
First, the language in the OPCF 44R was clear:
“inadequately insured motorist” means
(a) the identified owner or identified driver of an automobile for which the total motor vehicle liability insurance or bonds, cash deposits or other financial guarantees as required by law in lieu of insurance, obtained by the owner or driver is less than the limit of family protection coverage … [Emphasis added.]
The Court held that the phrase “other financial guarantees as required by law in lieu of insurance” would include a legislated obligation by an uninsured state to indemnify its employees by paying compensation for tortious damage caused by those employees.
Second, the Court of Appeal held that the Tort Claims Act does not remove Minnesota’s liability: It limits the damages that can be collected from Minnesota:
Instead of assisting Security National, the cap on damages produces a shortfall between what Mr. Hartley is “legally entitled to recover” in damages, and what he is entitled to receive, thereby triggering a right of indemnity under OPCF 44R.
Finally, The Court of Appeal dismissed the insurer’s argument that the $1.5 million cap represents the “total of all limits” available to the claimant for the purpose of section 4 of the OPCF 44R:
When the words “the total of all limits of motor vehicle liability insurance, or bonds, or cash deposits, or other financial guarantee as required by law in lieu of insurance, of the inadequately insured motorist” in s. 4 are given their ordinary meaning in context, it is clear that they refer to the funds available to the claimant bringing the claim.
As Mr. Hartley’s claims were limited to $500,000, there was a shortfall within the meaning of section 4 of the OPCF 44R.
Section 3 of the OPCF 44R requires the insurer to indemnify the insured for the shortfall in “compensatory damages in respect of bodily injury to or death of an insured person arising directly or indirectly from the use or operation of an automobile” [emphasis added].
The motion judge found that the legal fees were not “compensatory damages”, but held that the fees could be recovered from the insurer as special damages. The Court of Appeal disagreed:
To use the vehicle of special damages to provide compensation for costs incurred in securing compensatory damages undermines the contractual agreement of the parties.
The Superior Court of Justice recently released an important decision finding full indemnity costs payable in a coverage case.
In the underlying action, a young boy was severely injured by a car after his father dropped him off in a parking lot. The boy (via his litigation guardian) and the boy’s mother (via the Family Law Act) sued the father for damages. The father’s insurer found a duty to defend and the insurer’s counsel represented him at trial. At trial, over $900,000.00 in damages were awarded. Following the trial, the father’s insurer denied coverage.
The mother and boy brought a claim against the father’s insurer under section 258(1) of the Insurance Act, which allows parties to bring a claim to enforce judgment against insurers. At the summary judgment motion, the court found that there was coverage.
The significance of Hoang v. The Personal Insurance Company is the court’s determination on costs. The court found costs payable to the mother and boy on a full indemnity scale, rather than the usual partial indemnity scale.
The court rationalized the full indemnity on the basis that the insurance premium is presumed to reflect the insurance company’s risk. It would be unfair and burdensome to make customers pay a premium plus legal fees in order to obtain the coverage they purchased. If the insurer chooses to attempt to reduce its risk by engaging in coverage litigation, it should be made to fully compensate the successful party if it losses. Ultimately, the court ordered the insurer to pay full indemnity costs at $72,000.00.
This decision marks a possibly new exception to the general policy of awarding partial indemnity costs to successful parties. It is something that both coverage counsel for insurers and policy holders need to keep in mind moving forward, as denying coverage under a policy now can apparently be very costly.
The License Appeal Tribunal has held that a person who tripped over stone blocks and fell into a parked Honda vehicle was involved in an “accident”, making him entitled to receive accident benefit under the Statutory Accident Benefits Schedule.
In D.S. v. TD Insurance, the applicant was running down a street in the early hours of September 28, 2015. He entered onto private property towards a low wall of stone edging blocks, which separated two private properties. As he was running, he tripped over the stone blocks, lost his balance, and fell head first towards a Honda sedan parked on the driveway. As a result of crashing into the parked car, he sustained catastrophic injuries.
DS applied to his insurer for accident benefits. The insurer denied the claim on the basis that DS was not involved in an automobile “accident”, which the policy defines as:
“…an incident in which the use or operation of an automobile directly causes an impairment …”
The LAT Adjudicator disagreed with the insurer and found that the claimant was involved in an “accident”.
One of the issues in the case was whether the claimant actually made contact with the parked vehicle. After considering the expert and other available evidence, the adjudicator found that the injuries occurred as a result of the claimant’s “contact” with the parked vehicle.
What is an “Accident”?
The meaning of the phrase “use or operation” and “(directly) causes” has been discussed at length in many cases across Canada, in all levels of tribunals and courts. It can safely be said that each case must be decided on its own facts, although some overriding principles apply.
In Ontario, the “test” for determining whether someone was involved in an “accident” for the purpose of coverage under the SABS is:
Did the accident result from the ordinary and well-known activities to which automobiles are put? (purpose test)
Was the use or operation of the vehicle a cause of the injuries? (causation test)
If the use or operation of a vehicle was a cause of the injuries, was there an intervening act or intervening acts that resulted in the injuries that cannot be said to be part of the "ordinary course of things"? In that sense, can it be said that the use or operation of the vehicle was a "direct cause" of the injuries? (direct causation test)
The Purpose Test
The adjudicator relied on the Court of Appeal’s decision in Economical Mutual Insurance Co. v. Caughy (2016) to find that parking a vehicle is an ordinary and well known activity to which automobiles are put. Accordingly, the claimant met the “Purpose Test”.
Of note, the adjudicator found in the context of the “Purpose Test” that falling into the car vs. over the car was irrelevant:
Further, does it matter that the applicant in this case collided with a parked vehicle as opposed to tripping over a parked vehicle as in Caughy? I find it does not for the purposes of the purpose test. The Court in Caughy noted that there was no ‘active use component’ to the purpose test. But I examine this in more detail in the causation aspect of the test.
The Causation Test
The adjudicator found that the injuries were caused by contact with the vehicle. The adjudicator found that the impact with the vehicle was not an intervening event that would break the chain of causation, finding that the impact with the car was part of the same chain of events. Further, the adjudicator found that the parked vehicle was a dominant feature of the accident, seeing that the impact with the vehicle caused all the injuries. The adjudicator concluded, “ I find that on a balance of probabilities that his injuries were caused by contact with the vehicle.”
The Court of Appeal decided in Caughy that parking a vehicle is part of the ordinary and well well-known activities to which automobiles are put. Therefore, it was open for the adjudicator to find that the act of parking the Honda met the Purpose Test.
However, and with the greatest of respect, I could not disagree more with the adjudicator’s findings on the Causation Test.
Firstly, the “Causation Test” asks whether “use or operation of the vehicle was a cause of the injuries”. The use or operation of the vehicle must be a cause of the injuries. Not just the vehicle itself.
It appears that the adjudicator in DS found causation because the vehicle itself caused the injuries – not its use. The adjudicator made the following finding:
This part of the causation test is met. As stated earlier, based on the evidence, the injuries could not have been caused by contact with the ground, and given that there is no other explanation before me, I find that on a balance of probabilities that his injuries were caused by contact with the vehicle. [emphasis added]
There was no finding that the parking of the vehicle (its use) was a direct cause of the injuries. There was no evidence that the vehicle was parked in a way that caused the injuries. It was the vehicle itself that caused the injuries (I assume because the vehicle was harder and more solid than DS) and not its use.
Secondly, as noted above the adjudicator found in the context of the Purpose Test that it made no difference whether the claimant feel over or fell into a parked vehicle. However, the distinction is very important under the Causation Test because tripping over a parked vehicle might have something to do with how the vehicle was parked.
For example, in Caughy, the Superior Court found that the use of the motorcycle (i.e., parking it so that it obstructed a path) was a direct cause of the fall. In other words, if whoever parked the motorcycle on the path hadn’t have done so, the fall likely would not have occurred. It was the (negligent) “use” of the parked vehicle that ultimately caused the claimant to trip over it, which caused his injuries.
This finding was not challenged on appeal.
Put another way, in Caughy the “dominant feature” of the incident was that the claimant tripped over a parked motorcycle that was obstructing his path. In DS, my opinion is that the dominant feature of the incident was that the claimant tripped over a stone block and happened to crash into a car. The car was ancillary, at best.
Following Caughy, I opined that the decision dilutes the Purpose Test to some degree. If the Purpose Test is designed only to rule out any aberrant uses of vehicles, one wonders whether there is any real purpose for the Purpose Test, especially if a parked vehicle that is not being used at all is found to be “use”.
Caughy might have been decided differently under the Causation Test if the motorcycle was not parked in a way that obstructed a pedestrian’s path.
But DS takes the cake.
If DS stands, insurers might consider charging much higher premiums if their insureds park their vehicles anywhere other than inside maximum security garages.