COURT OF QUEEN S BENCH OF MANITOBA

Transcription

1 Date: Docket: CI (Winnipeg Centre Indexed as: Triple C Enterprises Ltd. v. Wynward Insurance Group Cited as: 2018 MBQB 163 B E T W E E N: COURT OF QUEEN S BENCH OF MANITOBA TRIPLE C ENTERPRISES LTD., applicant, - and - WYNWARD INSURANCE GROUP, respondent. Richard S. Literovich & Eric N. Blouw for the applicant Anthony C. Fletcher & Aaron W.K. Challis for the respondent JUDGMENT DELIVERED: October 17, 2018 GREENBERG J. [1] This is an application by Triple C Enterprises Ltd. ( Triple C for a declaration that Wynward Insurance Group ( Wynward has a duty to defend Triple C, and to indemnify it should it be found liable, with respect to a snowmobile accident for which Triple C is being sued. At the time of the accident, Triple C was insured under a commercial general liability ( CGL policy provided by Wynward. [2] Triple C owns and operates rental cabins on Stevenson Island in Manitoba. It also owns snowmobiles that it uses to provide a taxi service within the community. In October

2 2016, a statement of claim was filed against Triple C by Celine Harper. In the claim, Ms Harper alleges that, on November 23, 2014, she was injured while a passenger on a snowmobile that was in a collision with a snowmobile owned by Triple C and driven by Scott Morham, an employee of Triple C. [3] Triple C has filed a defence to the claim stating that Morham had taken the snowmobile without permission and was not operating it within the scope of his employment. There is no dispute that Wynward has a duty to defend Triple C, even if the claim cannot be proven against it, if the CGL policy provides indemnity for loss arising out of the use and operation of the snowmobile. The CGL policy in this case is a standard Insurance Bureau of Canada policy. Wynward says that snowmobile coverage is excluded by the following clause of the policy: 2. Exclusions This insurance does not apply to: f. Automobile Bodily injury or property damage arising directly or indirectly, in whole or in part, out of the ownership, maintenance, use or entrustment to others of any automobile owned or operated by or on behalf of or rented or loaned to any insured. Use includes operation and loading or unloading. This exclusion also applies to any motorized snow vehicle or its trailers and any vehicle being used in any speed or demolition contest or in any stunting activity or in practice or preparation for any such contest or activity. This exclusion also applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the occurrence which caused the bodily injury or property damage involved the ownership, maintenance, use or entrustment to others of any automobile that is owned or operated by, or on behalf of, or rented or loaned to any insured.

3 [4] So, the narrow issue in this application is the interpretation of the above clause of the policy, in particular, the first two paragraphs of clause 2.f. [5] The principles that apply to the interpretation of insurance policies were summarized by Rothstein J. in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245: [22] The primary interpretive principle is that when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole. [23] Where the language of the insurance policy is ambiguous, the courts rely on general rules of contract construction. For example, courts should prefer interpretations that are consistent with the reasonable expectations of the parties, so long as such an interpretation can be supported by the text of the policy. Courts should avoid interpretations that would give rise to an unrealistic result or that would not have been in the contemplation of the parties at the time the policy was concluded. Courts should also strive to ensure that similar insurance policies are construed consistently. These rules of construction are applied to resolve ambiguity. They do not operate to create ambiguity where there is none in the first place. [24] When these rules of construction fail to resolve the ambiguity, courts will construe the policy contra proferentem -- against the insurer... One corollary of the contra proferentem rule is that coverage provisions are interpreted broadly, and exclusion clauses narrow. [case references omitted] [6] Wynward says that Triple C s snowmobiles are excluded from coverage by the clear wording of the first and second paragraphs of clause 2.f. of the policy. [7] The first paragraph of clause 2.f. excludes personal injury caused by the use of any automobile owned by the insured. Triple C says that its snowmobiles do not fall within that exclusion because they are not automobiles as defined in the policy. The policy defines automobile as follows:

4 Automobile means a land motor vehicle, trailer or semitrailer that is required by law to be insured under a contract evidenced by a motor vehicle liability policy, or any vehicle insured under such a contract, including any attached machinery or equipment. [8] I agree with Triple C. Even assuming that a snowmobile is a land motor vehicle, Triple C s snowmobiles do not fall within the definition of automobile because they are not required by law to be insured nor were they in fact insured under a motor vehicle liability policy. Manitoba legislation, which requires snowmobiles to be insured, exempts snowmobiles that are operated in remote communities, including Stevenson Island (The Off-Road Vehicles Act, C.C.S.M., c. O31 ( ORV, The Drivers and Vehicles Act, C.C.S.M., c. D104. Although insurance for snowmobiles used in remote communities is available from Manitoba Public Insurance Corporation, Triple C did not have that insurance. [9] The automobile exclusion found in standard CGL policies is explained in Brown & Donnelly, Insurance Law in Canada (Toronto: Carswell, 2002 (loose-leaf updated 2007, release 1, ch. 18 at 77: The purpose of this exclusion is to prevent double coverage for risks which are, or should be, covered under other insurance. Commercial general liability policies and automobile policies are complimentary, and the coverage of the former commences where the coverage of the latter ceases. [10] In my view, there is no ambiguity in the definition of automobile in the CGL policy. The snowmobiles owned by Triple C did not fall within that definition and, therefore, are not excluded by the first paragraph of clause 2.f. Nor would the underlying purpose of the automobile exclusion support the conclusion that the exclusion was

5 intended to apply to Triple C s snowmobiles as there is no risk of double recovery in this case. [11] Alternatively, Wynward says that Triple C s snowmobiles are excluded from coverage by the second paragraph of clause 2.f. For ease of reference, I repeat that paragraph here: This exclusion also applies to any motorized snow vehicle or its trailers and any vehicle being used in any speed or demolition contest or in any stunting activity or in practice or preparation for any such contest or activity. [emphasis added] [12] Wynward says that snowmobiles are motorized snow vehicles and, therefore, excluded from coverage by the above paragraph. [13] Triple C argues that the paragraph is ambiguous and, therefore, should be interpreted narrowly, having regard to the reasonable expectations of the parties. They say it is not clear whether the exclusion applies to all motorized snow vehicles or only to those being used in any speed or demolition contest or in any stunting activity or in practice or preparation for any such contest or activity. That is to say, they argue that the stunt phrase in the second part of the paragraph modifies both any motorized snow vehicle and any vehicle. [14] In my view, the paragraph is meant to exclude all motorized snow vehicles as well as all stunt vehicles. If the exclusion was meant to apply only to motorized snow vehicles used in stunts, there would be no reason to mention motorized snow vehicles at all since a motorized snow vehicle is clearly a vehicle and, therefore, motorized snow vehicles used in stunts would be captured by the second part of the paragraph.

6 [15] That the paragraph excludes two classes of vehicles motorized snow vehicles and stunt vehicles - is supported by the authors of Insurance Law in Canada who explain the automobile exclusion in the standard form CGL policy as follows (ch. 18 at 76 to 77: This exclusion in the IBC 2100 is divided into two parts. First, it excludes bodily injury or property damage arising out of the ownership, use or operation of automobiles, motorized snow machines, vehicles used for stunts or speed contests, and vehicles required by law to have liability insurance. An exception exists for the ownership, use or operation of machinery or equipment mounted on or attached to a vehicle while at the site of the use or operation of the equipment. Second, it excludes bodily injury or property damage to which a motor vehicle liability policy is in effect (even of the limits are exhausted or which is required to be in effect. The exclusion does not apply to bodily injury to an employee of the insured on whose behalf workers compensation contributions are made or are required to be made. [emphasis added] [16] Triple C argues that, even if the exclusion in the second paragraph of clause 2.f. is not limited to stunt vehicles, the term motorized snow vehicle in the exclusion does not include snowmobiles. They say that that term should be interpreted in light of the following definitions in the ORV which differentiate between snow vehicles and snowmobiles : "snowmobile" means a vehicle that has a gross vehicle weight not exceeding 454 kilograms and (a is not equipped with wheels, but in place thereof is equipped with tractor treads alone or with tractor treads and skis, or with skis and a propeller, or is a toboggan equipped with tractor treads or a propeller, (b is designed primarily for operating over snow or ice, and is used primarily for that purpose, and (c is designed to be self-propelled; "snow vehicle" means a vehicle that has a gross vehicle weight exceeding 454 kilograms and

7 (a is not equipped with wheels, but in place thereof is equipped with tractor treads alone or with tractor treads and skis, or with skis and a propeller, or is a toboggan equipped with tractor treads or a propeller, (b is designed primarily for operating over snow or ice, and is used primarily for that purpose, and (c is designed to be self-propelled; [17] The ORV definitions distinguish the two machines on the basis of weight. The snowmobile that is the subject of this application would fall within the definition of snowmobile, not snow vehicle, in the ORV. Triple C argues that snow vehicle in the policy should be interpreted in the same way so that the exclusion would not include snowmobiles. The difficulty with this argument is that the policy does not refer to snow vehicles ; it refers to motorized snow vehicles. If the policy meant to exclude only snow vehicles as defined in the ORV, it would likely have used the same term. In any event, counsel did not explain why the fact that the ORV creates two categories of snow machines is relevant to interpreting the exclusions under an insurance policy. [18] To be sure, there are cases where courts have looked to definitions under legislation, in particular The Insurance Act, C.C.S.M., c. 140, to interpret a term in an insurance policy (see e.g. Morton v. Rabito; Jevco Insurance Co. v. Commercial Union Assurance Co., [1998] O.J. No (C.A., applications for leave to appeal dismissed [1999] S.C.C.A. No. 50 (QL, [1999] S.C.C.A. No. 51 (QL. But insurance policies are governed by The Insurance Act. In fact, that legislation mandates the terms of certain policies. So one might assume that insurance policies are drafted with the governing legislation in mind. But the applicant has provided no authority for considering definitions in other legislation to interpret the provisions of an insurance

8 policy where the policy does not itself refer to or incorporate the terms of that other legislation. [19] In Red River Valley Mutual Insurance Co. v. Rockola, [1993] M.J. No. 543 (MBQB (QL, the issue was whether a dirt bike was covered under an insurance policy which excluded vehicles that were subject to motor vehicle registration. The insured argued that the ordinary meaning of the words "motor vehicle registration" refers to motor vehicles registered under The Highway Traffic Act and does not refer to off-road vehicles (like the dirt bike that are registered under The Off-Road Vehicles Act. The court rejected that argument. Jewers J. explained: 30 I do not think [Laurence v. Davies] really assists the respondent. As I read it, it is authority only for the proposition that words in an insurance policy must be construed in accordance with statutory definition where the context requires. "Motor vehicle registration" is not defined in the statutes. The term "motor vehicle" is defined in The Highway Traffic Act, but there is nothing in the context of the case demanding that the words "motor vehicle" in the policy be given a similar meaning. Both "motor vehicles" and "off-road vehicles" are subject to registration in essentially the same way and for the same purposes and there is nothing in the policy to denote that the registration referred to must only be under The Highway Traffic Act. Unlike the policy in Laurence v. Davies, the policy is not essentially a policy devoted to the insuring of vehicles normally driven on a highway, but is a multipurpose policy insuring against general liability essentially excluding motorized vehicles. [emphasis added] [20] The context here does not require the CGL policy to be interpreted in accordance with definitions in the ORV. The reasons for the distinctions in the ORV (e.g. one must be at least 16 years of age to drive the larger snow vehicles, whereas that age restriction does not apply to snowmobiles (s. 26 are not relevant to coverage provided by the CGL policy. In my view, the language of the policy is clear. The ordinary meaning of motorized snow vehicle would include a snowmobile.

9 [21] There is no ambiguity in the exclusions in clause 2.f. But even if there were ambiguity, I would not find that the reasonable expectation of the parties supports coverage for Triple C s snowmobiles. [22] Dwayne Chornoby, one of the directors of Triple C, was the person who negotiated the policy on Triple C s behalf. His evidence was that he thought that the snowmobiles were covered under the policy. Before looking more closely at his evidence, I should say that, while Mr. Chornoby s understanding of the contract may be relevant to interpreting the specific declarations in the contract or specific endorsements negotiated by him, I am not sure how relevant it is to interpreting the clauses of a standard form contract. As explained in Insurance Law in Canada (ch. 18 at 42: For all its apparent simplicity and bareness, the Declarations Page plays a crucial role in an insurance contract. This is the only portion of the policy that is specific to the particular contract between insurer and insured, the balance of the policy being standard CGL wording and endorsements. In summary form, it names the insured, specifies the insured business risks, declares the insurable interest of the insured in the insured business, gives the location of all premises owned, rented or occupied by the insured, limits the policy period, and establishes the monetary limits payable under the policy. The Declarations Page typically sets out information based on representations made by the insured or its agent when it applied for insurance coverage. [23] And at ch. 8, at 3: That the parties intention is the first point of reference in interpreting insurance contracts is well settled. The Supreme Court of Canada said so in the often cited case, Consolidated Bathurst Ltd. V. Mutual Boiler & Machinery Insurance Co. But practice and theory often diverge. Basic auto insurance, for example, is compulsory for auto owners and most of the terms are mandated by statute or regulation. Fire insurance contracts also contain conditions inserted by statute rather than the parties. To seek the meaning of provisions such as these in terms of the parties intention is to pursue a fiction. Even where statute has not intruded, it is often inaccurate to speak of a common intention in relation to many of the terms of an insurance contract. Consider the negotiations for

10 most contracts in the personal lines of insurance. The customer has one or two conversations with a broker or agent. Usually only the basic terms premium, deductible and, perhaps, one or two matters of coverage, such as a specific peril to be included or excluded are discussed. The balance of the policy, which the customer typically sees for the first time after the contract has come into force, is the insurer s standard form the details of which, like claims deadlines, definitions or even conditions of cover, were never in the customer s mind. [24] In any event, the evidence does not support Mr. Chornoby s assertion that he believed that he was covered. Mr. Chornoby first obtained insurance coverage for Triple C some time in That policy was renewed and still in place at the time of the accident. The policy is a standard form policy with certain declarations specific to the insured. The business description in the declarations is 8 rental cabins. The schedule of properties lists nine buildings. There is no mention in the declarations of snowmobiles or of the taxi service operated by Triple C. [25] Chornoby acknowledged that when he spoke to his broker, Jason Thompson, in 2012 about insurance for his business, he did not specifically mention snowmobile coverage. In fact, he could not remember whether Triple C acquired the machines before or after he spoke to Thompson and, at his cross-examination, refused to undertake to determine when the machines were purchased. [26] Jason Thompson s evidence was that there was no discussion about snowmobiles. He said that Chornoby first asked him about snowmobile coverage in February 2015, after the accident that is the subject of the claim against Triple C. At that time, Thompson told Chornoby that he did not handle auto insurance but that his autopac colleagues could look after this.

11 [27] Triple C did not make an insurance claim with Wynward until two years after the accident for which Celine Harper has filed a claim, and several months after filing a defence to that claim. This is not consistent with Chornoby s claim that he believed Triple C s snowmobiles were covered by the policy. [28] I conclude that coverage for snowmobiles was not contemplated by the parties at the time the CGL policy was negotiated. Nor is there any evidence that they were added to the policy in subsequent years. To find that the snowmobiles are covered by the policy would be to create a windfall for Triple C (Jesuit Fathers of Upper Canada v. Guardian Insurance Company of Canada, 2006 SCC 21, [2996] S.C.R. 744 at para. 29. [29] For these reasons, the application is dismissed. Costs may be spoken to if they cannot be agreed upon. J.