Canadian automobile insurance companies won key business reassurances on Oct. 19 when the Supreme Court of Canada issued rulings on two closely watched cases.
The decisions overturn Ontario Court of Appeal rulings made in 2005. Both SCC decisions clearly limit insurers\u2019 exposure to liability in the form of civil damages owed by parties at fault in automobile-based damages claims, insurance industry officials say.
\u201cHad this gone the other way, it would have created almost endless exposure for auto insurers,\u201d says Mark Yakabuski, president of the Insurance Bureau of Canada<\/b> in Toronto. \u201cThis suggests that when we have key cases on the line, we need to litigate. The court has shown a good degree of common sense. That should be reassuring to money managers.\u201d
The IBC acted as intervener in one of the appeals, which was argued by Citadel General Assurance Co. <\/b>, which is now part of Paris-based AXA, Europe\u2019s second-biggest insurer.
One case involved the tragic experience of the Vytlingham family from Toronto, attacked from a bridge on Interstate 95 in North Carolina. In March 1999, two intoxicated men drove a car loaded with boulders onto a bridge over the interstate, then dropped a rock onto the Vytlinghams\u2019 car as it passed beneath them. The attack left the 17-year-old driver of the car, Michael Vytlingham, with severe brain damage; his mother and sister suffered psychological stress. The two men who dropped the boulder are in jail.
Although the SCC ruled that Citadel \u2014 which insured the Vytlinghams\u2019 vehicle \u2014 is not liable for civil damages owed by the underinsured attackers, the Vytlinghams have already received $1.4 million in no-fault statutory benefits.
CLAUSE ADDRESSED<\/b>
The court\u2019s decision did not question the Vytlinghams\u2019 entitlement to these benefits under Ontario\u2019s no-fault insurance system. Instead, it addressed a clause in their insurance policy that allowed them to seek another $1 million from Citadel if \u201can inadequately insured motorist\u201d caused injury. The OCA had ruled in 2005 that they were entitled to this further compensation.
The SCC, however, in a decision written by Justice Ian Binnie, concluded that Citadel should not be required \u201cto stand in the shoes\u201d of the criminals and pay the amount the offenders \u201cought to pay by way of civil damages.\u201d
In the second case, an Ontario hunter named Fred Wolfe mistakenly shot fellow hunter Harold Herbison in the leg in 1999, after mistaking him for a deer illuminated in Wolfe\u2019s truck headlights as he walked across a field before dawn.
Herbison\u2019s insurance claim centred on Wolfe\u2019s use of his vehicle headlights as a hunting aid. Wolfe\u2019s vehicle insurance policy offered coverage for third-party damage \u201carising from the ownership or directly or indirectly from the operation\u201d of a vehicle he owned.
Herbison sued Wolfe\u2019s insurance provider, Lumbermens Mutual Casualty Co. <\/b>, for compensation. On the same day in 2005 that the OCA released its decision against Citadel, the OCA ordered Lumbermens to pay Herbison $832,272.
These rulings surprised many legal analysts at the time, including some who argue personal injury cases against insurance companies.
In a commentary written shortly after the Lumbermens and Citadel<\/i> decisions were released by the OCA, Joseph Griffiths, an insurance lawyer with Nelligan O\u2019Brien Payne LLP<\/b> in Ottawa, suggested that \u201cthe court has eviscerated the burden of proving a causal connection between the use or operation of an automobile and the injuries suffered by a plaintiff.\u201d
Griffiths went on to suggest that the plaintiffs in these cases may have secured \u201chollow judgements.\u201d It was \u201cunreasonable,\u201d he wrote, \u201cthat the automobile insurer should always be made the \u2018go to\u2019 when money is required to satisfy a claim.\u201d
USE OF CAR AT QUESTION<\/b>
Colin Dubeau, a colleague of Griffiths who helped win Lumbermens\u2019 SCC appeal, says that the case turned on the linkage between the injury and the use of the car.
\u201cEffectively, what it comes down to is a broken chain of causation,\u201d he says. \u201cThe test, in order for there to be automobile coverage, is whether the incident arises out of direct or indirect use of the automobile.
\u201cIf you read the decision of the Court of Appeal,\u201d he continues, \u201cit takes that to mean that indirect means you don\u2019t need that causal link directly. But the test has to be something more than incidental or fortuitous. [The SCC] has clarified this to say that there still has to be a direct causal link.\u201d
@page_break@In the Lumbermens <\/i>ruling, Justice Binnie notes that Wolfe \u201cinterrupted his motoring to start hunting, thereby breaking the chain of causation. The injury cannot be said to have arisen \u2018directly or indirectly from the use or operation\u2019 of the insured truck.\u201d
In his reasoning for the Citadel <\/i>decision, Justice Binnie notes that both cases resulted from the same error on the part of the OCA, which overlooked legal requirements that the wrongdoer \u201cwhose conduct is the subject matter of the indemnity claim be at fault as a motorist.\u201d
After suggesting that the OCA \u201cwith the greatest of respect, did not focus\u201d on the issue, Justice Binnie ruled that for coverage to exist: \u201cThere must be an unbroken chain of causation linking the conduct of the motorist, as a motorist, to the injuries in respect of which the claim is made.\u201d
Dubeau says the SCC\u2019s decisions place an \u201cinteresting\u201d weight on the \u201creasonable expectations\u201d of the parties involved in insurance contracts.
\u201cJustice Binnie asks whether one would expect that a guy out deer hunting would reasonably be covered by an auto policy,\u201d Dubeau adds.
\u201cIt is now clear,\u201d Justice Binnie affirmed in his decision, \u201cauto policies cannot be used as a pool of funding to cover losses unrelated to auto use, including criminal acts, simply because an automobile was used to get to the scene. The standard statutory indemnity language used in various provinces was never intended to cover these types of losses.\u201d\tIE<\/b>
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