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Newsletter > September 2005

AXA Insurance v Dominion of Canada (2004) 191 O.A.C. 378 – Case Comment

This was a battle fought by insurers involving which policy should respond in a personal injury case. AXA, Dominion and Cooperators insured the defendant in the main action via an auto, boat liability and homeowner’s policies respectively. The defendant insured had pulled his boat out the water and onto a trailer, which trailer was hitched to his automobile. While adjusting a bungee cord used to secure a hinged vinyl cushion covering the boat’s motor in preparation for the trip, the cord dislodged and struck the plaintiff in the eye causing damage. An early motion was brought by the insurers to determine which policy would respond and to what extent. The trial judge found that AXA (auto insurer) must respond to its limits providing both defence and indemnity. Dominion’s policy insured both the boat and the trailer but as the policy wordings indicated only excess coverage, its policy was only triggered after the AXA limits were exhausted. Dominion was only required to pay a pro rata share of defence thereafter. Cooperator’s policy was found not to engage at all as it contained an exclusion which stated that there was no coverage for claims arising out of the ownership, use or operation of a motorized vehicle, trailer or watercraft.

AXA appealed saying that it should not respond at all and also that Dominion should not be limited to the excess or a pro-rata share. Dominion had conceded that its policy should respond but appealed the finding that Cooperators’ policy did not respond.

The Court of Appeal agreed with the trial judge on all counts .

Regarding the automobile insurance policy, the Court of Appeal applied the reasoning in Amos v Insurance Corp of British Columbia [1995] 2 S.C.R. 405 which applied a two part test being (1) did the accident result from the ordinary and well known actifities to which automobiles are put and (2) Is there some nexus or causal relationship (emphasis added) between the injuries and the ownership/use or operation of the vehicle or is that relationship merely incidental or fortuitous? The Court of Appeal found that the injury occurred at least indirectly from the defendant’s use of the bungee cord to secure the boat – the auto’s cargo – to the trailer with a view to making the cargo safe for transport. This safety activity was part of precaution necessary to prepare the boat for proper transport on a highway and so part of “ownership/use/operation”. The causal link was established. The Court of Appeal further indicated that there was no conflict between the wording of the Insurance Act and the policy given the clear and plain provision limiting Dominion’s contribution to excess and the resulting rateable share of costs applying only over and above the AXA limits. Any other conclusion, it was noted would set aside many such provisions in many cases and no gap in coverage was found. Any issue of special circumstance requiring contribution by the excess insurer to costs before the primary layer was exhausted was identified but not an issue as no submissions were made in this regard.

Oddly, counsel for Dominion argued that, even if the Court found that the auto provisions applied and that AXA’s policy was primary, Cooperator’s policy should respond because it sought to rely on an exclusion which required a narrow and strict interpretation versus the broad interpretation on a coverage clause or grant. The narrow interpretation , it argued, would not support a finding of ownership/operation/ use of an automobile. The Court found this argument to be sophistry or clever but misleading reasoning and, to allow such a conclusion, would allow for two completely opposite interpretations to the same words in two policies applying to the same accident. Will wonders never cease? The attempt to “suck and blow” has never been so blatant. Costs were awarded against the appellants.

Kim Stoll

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