Newsletter > May 2007
1. CRIMINAL ACTS: INTENTIONS AND EXCLUSIONS – CLARITY AT LAST
Case Comment: R.E. v. Wawanesa Mutual Insurance Company 2007 ONCA 92
The Ontario Court of Appeal has ruled definitively that “intent” has no bearing on criminal act exclusion clauses in insurance policies. This precedent setting decision will have significant impact on insurers in the way in which they draft exclusion clauses within their policies and on lawyers litigating such exclusions.
The case involved two teenage boys, Ryan Prystay and Ryan Eichmanis. The boys were playing and Prystay pointed his father’s loaded gun at Eichmanis while boasting he could kill him right then and there. The gun went off suddenly and seriousl wounded Eichmanis in the abdomen.
At the time in question Prystay was living with his aunt and uncle as his father was in a facility for substance-abuse rehabilitation. Prystay had been told to stay away from his father’s house during this time. On the day in question Prystay broke into his father’s house to “play” with his father’s guns.
Prystay subsequently pleaded guilty to a charge of criminal negligence causing bodily harm contrary to s. 219 of the Criminal Code of Canada and was convicted.
Eichmanis sued Prystay as well as his father, aunt and uncle. In 2006 the Ontario Superior Court awarded damages against Prystay and his father in the amount of $800,000 Canadian. See (2006), 80 O.R. (3d) 114. As the judgment was unsatisfied, pursuant to s. 132 of the Insurance Act, R.S.O. 1990, c. I.8, Eichmanis commenced proceedings against The Wawanesa Mutual Insurance Company (“Wawanesa”) the insurers of Prystay’s aunt and uncle.
Wawanesa denied the claim on the basis that Prystay was not living in his aunt and uncle’s household and secondly, that the policy did not cover injury caused by an intentional or criminal act. The Ontario Superior Court found that Prystay was in fact “living” with his aunt and uncle and that the quasi-parental nature of his temporary residence with them was sufficient to render him an “insured” under the Wawanesa policy of insurance. The Court also held that the exclusion did not help Wawanesa since Prystay did not intend to shoot Eichmanis. The pointing of the gun was intentional but the discharge was accidental. The decision was appealed to the Ontario Court of Appeal.
The Wawanesa policy contained the following exclusion:
You are not insured for claims made or actions brought
against you for:
(9) bodily injury or property damage caused by any
intentional or criminal act or failure to act by:
any person insured by this policy; or
any person at the direction of any person insured by
this policy. [Emphasis added.]
The Ontario Court of Appeal overturned the decision of the Ontario Superior Court. It held that the exclusion did apply. The claimant had argued on appeal that section 118 of the Insurance Act of Ontario prevented Wawanesa from being able to rely on the exclusion. Section 118 provides:
“Unless the contract otherwise provides, a contravention of any criminal or other law in force in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except here the contravention is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage…”
The Court of Appeal held that in fact the Wawanesa policy did “otherwise provide”. The Court found that the Wawanesa policy wording was clear and where the language of the contract is unambiguous, courts should not give it a meaning different from that expressed in clear language, unless the contract is unreasonable or is contrary to the intention of the parties.
The Court of Appeal found that the language of the exclusion is disjunctive. An act of the insured that causes injury is excluded when it is either an intentional act, or a criminal act. The exclusionary clause in the policy is not to be read as if “criminal act” applies only to criminal offences carried out with the intent of causing the loss. An interpretation of “criminal act” as applying only to criminal acts intended to cause injury renders the phrase “criminal act” in the policy superfluous. The Court stated: “An insurer intending to exclude only criminal acts where the insured intends to cause injury could achieve the same result by merely excluding intentionally caused injuries.”
The Court of Appeal held that as harsh as the result was to the victim, Prystay was not an insured under the Wawanesa policy.
Rui M. Fernandes
2. TO TELL OR NOT TO TELL – TIMEBAR APPROACHING
Case Comment: CAA Insurance Co. (Ontario) v. Botsis, 82 O. R. (3d) 379
To tell or not to tell, that is the question. The impulse may be not to tell the insured and let him or her deal with it. In fact, in reality that is the law but, in practical terms, it makes much more sense to advise of timebar at the beginning of negotiations even though you may not have to.
The Botsis matter involved a rare appeal from the Ontario Small Claims Court to the Ontario Superior Court. Such appeals are unusual given the expense for small matters. The fact that this one went to appeal is simply because the insurer had to ensure that there was no precedent set by what seemed a bad decision – the stuff of future headaches. The Small Claims Court will decide cases based on perceived fairness as opposed to what may be right in law. This is primarily because, more often than not, the court is perceived as a court of equity and the limited monetary jurisdiction restricts the use of counsel and provision of legal precedent. The increase in the monetary jurisdiction to $10,000.00 some years ago certainly provided for more counsel in Small Claims Court but still, to a great extent, litigants are self represented. Appeals are costly (including ordering of expensive transcripts upfront) and are left primarily to those with funds; that is, insurers for the most part.
The plaintiff in Botsis had obtained a judgment for $8,075.00 against CAA Insurance. The Ontario Small Claims Court had found that CAA could not rely on the one-year limitation period in its policy because CAA did not inform its insured about that limitation period. The court further found that the insurer had waived the limitation period by allowing its file to remain “open” after the expiry of the limitation period.
Loukidelis J., sitting on appeal, found that the one-year limitation period had indeed expired and that the insurer had not, in fact, made representations regarding the limitation period which were relied upon by the insured thereby waiving the insurer’s right to rely on the limitation period. The decision as overturned.
The plaintiff had alleged that the insurer was required to advise of the existence of a limitation period under the policy, Loukidelis J. relied upon the Ontario Court of Appeal case in Maddix v. White  O. J. 230 and quoted therefrom: “there is no legal duty upon an insurer to advise an insured that there is a limitation period contained in the policy”. The court in that case found that the insurer was under no legal obligation to inform the insured of the one-year limitation period and its failure to do so did not prevent the insurer from relying on the limitation period. Loukidelis J. specifically found in Botsis that there had been no “promissory estoppel”; that is, there was no assurance by the insurer that was intended to affect the legal relationship between insurer and insured and that was to be acted upon. In fact, the insured did not even know that there was a limitation period and therefore could not rely on any representations by the insurer nor could she then change her position as a result of those representations. Indeed, the insurer had made no representation either by word or deed regarding the limitation period. The only mention of the limitation period was in internal documentation (which could not be construed as a “representation” since such documents were not shared with the insured). In fact, the court went on to quote from Gillis v. Bourgard (1983) O. R. (2d) 107  O. J. No. 2960 (C.A.). The court in that case stated that ongoing negotiations were not considered a waiver of the limitation period where there are “no more than normal dealings between the parties attempting to resolve an insurance claim”.
Therefore, the law continues to be that the insurer is not under an obligation to advise of the expiry of the limitation period. On the practical side, notice of a limitation period is a recommended practice. Without such notice and if a limitation period is missed, it is a fact that all correspondence and conduct by the insurer will face severe scrutiny and there may be allegations that the insurer said or did something that led the insured to believe that there was no reliance by the insurer on the limitation period. A more practical perspective requires insurers to advise insureds (most appropriately for all concerned at the very beginning of the correspondence) so that there will be no issue. However, as the timebar approaches, special attention must be paid to both conduct and representations made both in acts and correspondence with a view that the insured may rely upon or allege reliance upon same. It is to be remembered that a court in the future may very well find that such representation were indeed relied upon and amounted to a change in the insured’s conduct and the insurer’s ability to rely on the limitation period contained in a policy may be lost.
Kim E. Stoll
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