1. CRIMINAL ACTS: INTENTIONS AND EXCLUSIONS - CLARITY
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
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
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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