A court of appeal decision has ruled that a carrier must defend a homeowner’s insurance client involving a traffic accident, despite a clause in the policy excluding claims for bodily injury to others in the household.
Wawanesa Mutual Insurance Company lost a ruling before the Court of Appeal for Ontario, upholding an earlier ruling that Wawanesa has a duty to defend a homeowner's insurance client being sued in a third party claim over a traffic accident that injured their daughter.
In arguing it did not have a duty to defend, Wawanesa had relied on an exclusion that states: “You are not insured for claims made or actions brought against you for... bodily injury to you or to any person residing in your household other than a residence employee.”
The claim had its origins back in August of 2003, when 8-year-old Kelly Bawden was struck and injured by a vehicle while riding her bicycle along a sidewalk in Toronto.
The vehicle – owned by Randall Wilson – was driven by Joyce Wilson. Kelly Bawden's parents, David and Elizabeth Bawden, sued the Wilsons. (continued.)
#pb#
The Wilsons “issued third party claims against Elizabeth and David, alleging that any damages Kelly may have suffered were caused or contributed to by Elizabeth and David's negligence in failing to properly instruct and supervise Kelly,” according to background information attached to a March 2013 decision by Madam Justice Mary Sanderson of the Ontario Superior Court of Justice.
The Bawdens' homeowner carrier, Wawanesa, had refused to provide a defence to the Wilsons' third-party claim against the Bawdens. The Bawdens sought a court order requiring Wawanesa to defend the claim “and to indemnify them for any amounts they may be held liable to pay to the Wilsons in the Third Party action.”
Wawanesa contended that exclusion “removes all claims for bodily injury by the insured and those residing in their household from the general coverage for claims against the insured for bodily injury,” the Court of Appeal noted.
But the use of the wording "arising out of" was missing from that exclusion clause, Justice Sanderson noted earlier this year.
“I have noted the repeated use of 'arising out of' language in other exclusion clauses in the same Policy,” wrote Justice Sanderson. “The exclusion did not contain the words ‘directly or indirectly.’ It appears from its use of differing wording in the coverage provision and exclusion clause that Wawanesa may not have intended the words in the exclusion to have the same scope and meaning as the words used in the grant of coverage.” (continued.)
#pb#
The three judges who heard the appeal noted they could not “improve upon” Justice Sanderson's analysis.
The original ruling in March had cited the landmark Supreme Court of Canada decision in Progressive Homes vs Lombard General Insurance over the duty to defend liability policyholders.
Progressive Homes had been sued by the British Columbia Housing Management Commission, which alleged negligence and breach of contract after some buildings were damaged by water leakage. In 2007, a B.C. Supreme Court judge had ruled that Lombard did not have a duty to defend.
That ruling was upheld by the B.C. Court of Appeal in 2009 but overturned in 2010 by the Supreme Court of Canada.
In the Bawden case, Justice Sanderson noted that in Progressive Holmes, “the Supreme Court of Canada held that an insured does not actually have to be found liable and the insurer does not actually have to be required to indemnify the insured for a duty to defend to exist. All that is required to trigger the duty to defend is the possibility that the claim might fall within the insurance policy.”
