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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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