Newsletter > August 2006
Insurance Policy Exclusions
R.E. et al v. The Wawanesa Mutual Insurance Company et al 80 O.R. (3d) 114 (MARCH 7, 2006)
It is no doubt a cynical view that a trial judge may be inclined to interpret an insurance policy or indeed the very facts of a case to ensure a certain result thereby allowing an injured person to receive “something.” When reading such cases, one is left to muse about the dismay of counsel and clients when seemingly favourable facts and law have been interpreted in an unfavourable way in the final judgment. With each case, lessons are learned and hopefully actions are taken to remedy any future problems. R.E. et al v. The Wawanesa Mutual Insurance Company et al 80 O.R. (3d) 114 was decided on March 7, 2006 by Justice Pierce of the Ontario Superior Court of Justice. The case had facts which must have been, at one time, considered favourable to the insurer’s position.
The minor R, aged 15, was a most delightful fellow. He was in the legal custody of his mother but went to live with his father, cutting off all contact with his mother. His father failed to supervise him and R grew marijuana plants in his room and played with guns and ammunition, which were stored in an unsafe manner in his father’s home. When his father was forced to undergo alcohol dependency treatment, R lived with his aunt and uncle who expected him to be there for several weeks and assumed responsibility for him. R was “unsupervisable” and, while he was forbidden to enter his father’s home, R broke into it with his friend. While the two boys were examining a shotgun while illegally on the premises, R pointed it at his friend and the gun accidentally discharged seriously injuring the friend. R then pleaded guilty to criminal negligence causing bodily harm. The friend and family brought an action against R, R’s parents and R’s aunt and uncle in negligence and obtained judgment against R and his father. R’s father was uninsured and the friend’s family then sued R’s mother’s insurer and also the insurer of the aunt and uncle under Section 132 of the Insurance Act which allows a judgment creditor to step into the shoes of the judgment debtor to claim for unpaid available insurance. Counsel moved for a determination before trial on the question of whether (1) R was an insured under the homeowner’s policies of his mother or his aunt and uncle and (2) whether he was subject to any exclusions in the policy so that the recovery was barred in any event.
The court found that the definition of insured included relatives and any person under 21 while in their “care” and “while living in the same household”. The court found that R was a member of the household of his aunt and uncle even though it was on a temporary basis but found that he was not a member of the mother’s household as she had given up custody and did not try to supervise him. The fact that the mother had custody of R pursuant to a court order was not determinative although it was a fact to be considered. The court considered a wide variety of facts including level of guidance, discipline, companionship, provision of necessaries such as shelter, food and clothing, attention to health and education, protection and nurture. “Care” required both meaningful contact and consistency. The definition of “household” applicable to modern blended families and less traditional living arrangements is evidently ever expanding.
Pierce J. applied the reasoning in Wright v. Canadian Group Underwriters Insurance Company, 2002 BCJ No. 810  5 WWR 612 (C.A). In Wright, the Alberta Court of Appeal had concluded that membership in the household could be temporary, transitory and cyclical and could be stretched to include teenage children of divorced parents who would live part of one year in a parent’s home and the remainder of the year with another parent. This has been extended to cases involving university students as well. The intention of the members of the household is also important including an intention to return to the household or lack thereof as well as that person’s role in the household. Temporary residence including episodic use of a family cottage also would qualify a child for coverage such as in the Woods v. Creb  O.J. No. 3635, 133 A.C.W.S. (3d) 538 (C.A.).
On the exclusion question, both insurance policies excluded coverage of an insured for any “intentional or criminal acts” that produced bodily injury or property damage. The court found that, for the exclusion to apply, any intentional act had to be combined with intent to injure. Without the intent to injure the harm would be “accidental or unforeseen”. The conviction for criminal negligence was not a “criminal act” caught by the exclusion clause. As R did not intend to injure his friend, the exclusion did not apply. The insurer’s counsel attempted to argue that R’s marijuana cultivation and breaking into his father’s home were both intentional criminal offences, but the court found that the criminal behaviour did not cause harm to the friend and was, therefore, irrelevant. The court found that R was not excluded under either policy on this ground.
It is of note that Section 118 of the Insurance Act states that:
“Unless the contract otherwise provides, a contravention of any criminal or other law enforcement in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured or by another person with the consent of the insured with the intent to bring about loss or damage…. ” (emphasis added)
The court found that the original trial decision did not find that R intended to harm the friend, R had not been charged with assault and that, in a S. 132 action, the insurer could not retry the facts. The wording of the policy did not take this case out of S. 118.
This decision is interesting as the court went to great lengths to examine the reality of modern life and blended families and different “households” for the purposes of defining the scope of who is an “insured”.
More importantly though, the decision underscores the need to revisit policy wordings regarding exclusions. The court, at page 134, specifically indicated that proper drafting of the insurance policy to cover any criminal act would have effectively avoided this result.
KIM E. STOLL
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