DATE: 20060113
DOCKET: C43185, C43225
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B E T W E E N : |
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MIJO DJEPIC
and MIRJANA DJEPIC |
Joel Freedman, for Mijo and Mirjana Djepic |
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MILENKO KUBUROVIC and THE DOMINION OF CANADA GENERAL
INSURANCE COMPANY |
Zoran Samac, for Milenko Kuburovic |
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BELAIR DIRECT and THE DOMINION
OF CANADA GENERAL INSURANCE COMPANY |
Thomas H. Clemenhagen
for Belair Direct |
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Heard: November 08, 2005 |
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On appeal from the judgment of Justice Gertrude F. Speigel of the Superior Court of Justice dated February 7, 2005.
[1] The appellant Mijo Djepic was blinded in the right eye while he and Milenko Kuburovic were attempting to secure a mattress to the roof of Djepic’s mini-van. Mijo Djepic and his wife Mirjana Djepic brought an action against Kuburovic. Kuburovic then brought a motion seeking an order that either or both the Dominion of Canada General Insurance Company (“Dominion”) or Belair Direct (“Belair”) have a duty to defend the action and must indemnify him. Dominion insured Djepic’s car and Belair underwrote Kuburovic’s homeowners’ policy. At the hearing, there was an agreement among the parties to deal with indemnification at a later date and as such, only the issue of the duty to defend was before the motion judge. The motion was dismissed on the basis that Kuburovic was not insured under the Dominion policy and that the Belair policy did not have to respond as the accident fell within an exclusion in that policy for claims arising from the use of a motorized vehicle. Milo Djepic, Mirjana Djepic and Milenko Kuburovic appeal from this decision.
[2] On July 6, 2000, Djepic’s mini-van was parked in Kuburovic’s driveway. The two men had placed a mattress on the roof of the van and were about to secure the mattress to the van using bungee cords when one of the cords came loose striking Djepic and blinding him in the right eye.
[3] The statement of claim issued by Djepic alleges that Kuburovic was negligent. The particulars of this negligence, as set out in the statement of claim, are as follows:
(a) he failed to take adequate precautions, if any, for the safety of the plaintiff;
(b) he failed to adequately secure the cord or secure it at all;
(c) he did not provide proper warning to the plaintiff of the likelihood that the cord would come loose;
(d) he did not provide proper warning to the plaintiff of the state and condition of the cord;
(e) he failed to secure the cord when he knew or ought to have known that it presented a danger to the plaintiff;
(f) he failed to place proper or adequate safeguards around the cord to ensure that it would not come off the hook;
(g) he failed to test the strength of the cord to ensure that it would not come loose.
[4] Both insurers declined coverage to Kuburovic and refused to defend him. Kuburovic’s motion under rule 21.01(a) for an order that either Belair or Dominion or both of them have a duty to defend the action was dismissed.
[5] Djepic and Kuburovic appealed the motion judge’s decision. The issues on this appeal are as follows:
1) Is Kuburovic an insured under Djepic’s auto policy either because he was an occupant or because he was in possession of the van; and
2) Does the claim fall within the exclusion in Kuburovic’s homeowners’ policy for injury arising from the use of a motorized vehicle?
[6] In considering these issues, several principles relating to the duty to defend must be kept in mind. This action is only at the pleading stage and, for purposes of determining whether there is a duty to defend, this court is only to consider the allegations contained in the pleadings. (Monenco Ltd. v. Commonwealth Insurance Co., [2001] 2 S.C.R. 699).
[7] In carrying out the analysis, this court must compare the allegations in the statement of claim with the coverage provided by the insurance policy and “[t]he mere possibility that a claim within the policy may succeed suffices. In this sense, … the duty to defend is broader than the duty to indemnify”. (Nichols v. American Home Insurance Co., [1990] 1 S.C.R. 801 at 810).
[8] Kuburovic did not have his own automobile insurance but sought coverage as an “insured person” under the Dominion automobile policy issued to Djepic. Kuburovic argued that the definition of insured person in the policy included a person in possession and, pursuant to the definition in the Insurance Act R.S.O. 1990 c. I.8, also included an occupant. The motion judge found that Kuburovic was not an insured person and that Dominion did not have a duty to defend Kuburovic.
[9] Section 239(1) of the Insurance Act stipulates that an automobile insurance policy is to cover the named insured, those that drive with consent as well as any occupant of the vehicle. An occupant is defined in s. 224(1) of the Insurance Act as follows:
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“occupant”, in respect of an automobile, means, (a) the driver, (b) a passenger whether being carried in or on the automobile, (c) a person getting into or on or getting out of or off the automobile; (« personne transportée ») |
« personne transportée » à l’égard d’une automobile, s’entend : (b) du conducteur; (c) du passager transporté dans ou sur l’automobile; (d) d’une personne qui monte ou qui descend de l’automobile. («occupant ») |
[10] Since Kuburovic was not a driver, a passenger or a person getting into or out of or getting onto or off Djepic’s van, the motion judge concluded that Kuburovic was not an “occupant” of the van at the time of the accident and did not come within the definition of an “insured person”. I agree with this conclusion.
[11] The appellants argue that the motion judge erred and that the allegation in the pleading to the effect that “Kuburovic stood on the driver’s side of the van” should be read as meaning that Kuburovic, as he was loading the mattress, was in fact physically standing on the running board or in the open door way of the van. On such a reading the appellants submit that Kuburovic comes within the definition of occupant as he was “being carried in or on the automobile” or was “getting into or on” the automobile.
[12] As stated earlier, the duty to defend is triggered where, on a reasonable reading of the pleadings, a claim within coverage can be inferred. This obligation to defend does not, however, extend to “a fanciful reading of the statement of claim merely for the purpose of requiring the insured to defend” [1] .
[13] In my view, it cannot reasonably be inferred from the pleading that Kuburovic was physically on the vehicle as opposed to standing next to the vehicle, on the driver’s side. In any event, Kuburovic would not have become an occupant simply because he had stepped onto a running board or other part of the van solely for the purpose of attaching the mattress to the roof. The definition of occupant of a vehicle focuses on persons who are, are about to or have been transported in the vehicle. It is not intended to cover someone who simply steps onto a part of the vehicle when that action is not connected in any way with being transported by that vehicle.
[14] The appellants’ interpretation of occupant would stretch the definition in the English version of the statute and cannot be reconciled with the French version of the statute. In that version occupant is “une personne transportée”. Even on the appellants’ interpretation of the pleadings, this phrase and the definition that follows in s. 224(1) cannot reasonably be read so as to apply to Kuburovic.
[15] Djepic’s auto policy provides a definition of “insured” that is different than the Insurance Act and encompasses persons who are in possession of a vehicle with the consent of the named insured. Section 3.2 of Dominion’s auto policy indicates who is covered by that policy and states: “You are covered when you, or anyone else in possession of a described automobile with your consent, uses or operates it. We will consider these other people insured persons”. For clarification, the word “you” in the above section refers to the named insured – in this case, Mr. Djepic. The motion judge rejected Kuburovic’s suggestion that he had possession of and was using the van jointly with Djepic for the purpose of loading the mattress onto the roof and was therefore an insured person under Djepic’s policy. She found that “merely because Kuburovic was standing next to the vehicle hooking a bungee cord to the roof” did not suggest that Kuburovic possessed the van either alone or together with Djepic. The motion judge reasoned that, in order to have possession, Kuburovic would have to have had some measure of control over the van. Since the pleadings made no allegation in that regard, Kuburovic could not be found to be in possession of the van and was therefore not an insured.
[16] In reaching her conclusion, the motion judge relied on this court’s decision in Thompson v. Bourchier, [1933] O.R. 525 (C.A.). Thompson v. Bourchier involved the renter of the vehicle who allowed a third party to drive the vehicle. In Thompson, the court had to decide whether the car was “without the owner’s consent in the possession of some person other than the owner or his chauffeur” within the meaning of s. 41(a) of the Highway Traffic Act as amended by 1930, 20 Geo. V., ch. 48, sec. 10. Because the renter remained in the vehicle while the third party was driving and because the third party did not have the car rental agency’s permission to drive, the court concluded that the third party was never in possession of the vehicle.
[17] The appellants maintain that the motion judge erred in relying on Thompson v. Bourchier. They submit that the preferred approach is that taken by Masten J.A. in dissent, to the effect that “possession” is dependent on context for its meaning. Because Kuburovic was securing the mattress to the van with Djepic’s permission and help, this, the appellants say, is sufficient to constitute joint possession of the van for that limited purpose.
[18] I agree with the motion judge’s conclusion that Kuburovic was not in possession of the van but do not, however, consider Thompson v. Bourchier of much assistance in reaching that conclusion. In Thompson v. Bourchier the court was interpreting a section in the Highway Traffic Act in a context very different from our fact situation.
[19] I prefer to start with the definition of possession in the Shorter Oxford Dictionary which is, in part, as follows:
· The action or fact of possessing; the holding of something as one’s own; actual occupancy, as distinguished from ownership;
· The visible possibility of exercising over a thing such control as attaches to lawful ownership; the detention or enjoyment of a thing by a person himself or by another in his name; the relation of a person to a thing over which he may at his pleasure exercise such control as the character of the thing admits, to the exclusion of other persons.
[20] Black’s Law Dictionary includes similar phrasing within the definition of “possession”: “having control over a thing with the intent to have and to exercise such control.”
[21] Possession therefore implies more than an authorized touching or contact with the vehicle; it requires the exercise of some element of dominion, control or occupancy. Even a generous reading of the pleading does not suggest that Kuburovic was occupying or exercising any dominion or control over the vehicle.
[22] In conclusion, therefore, I agree with the motion judge on this point and would dismiss the appeal as against Dominion.
[23] While Kuburovic did not have an auto policy, he did have a homeowners’ policy with Belair under which he sought coverage. Pursuant to this homeowners’ policy, Kuburovic was insured for claims arising from “personal liability – legal liability arising out of your personal actions anywhere in the world”. Excluded from coverage were “claims made against you arising from: the ownership, use or operation of any motorized vehicle, trailer or watercraft, except those for which coverage is shown in this form …”.
[24] It was conceded that Kuburovic would have coverage and Belair would have a duty to defend Kuburovic, unless the allegations of negligence against Kuburovic fall within the express exclusion under the Policy for claims arising out of the ownership, use or operation of any motorized vehicle. Belair asserts, and the motion judge agreed, that it is clear that all of the allegations against Kuburovic fall with the exclusion clause and thus, Belair has no duty to defend. I disagree.
[25] In considering the exclusion clause, the motion judge determined that the test set out by the Supreme Court of Canada in Amos v. Insurance Corporation of British Columbia, [1995] 3 S.C.R. 405 for interpreting the phrase “arising out of the ownership, use or operation of a vehicle”, was of no assistance. That case involved the interpretation of that phrase in a coverage as opposed to an exclusion provision in an insurance policy. As she correctly noted, the interpretation of exclusion clauses is governed by different principles, some of which were outlined by Major J. in Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398 as follows:
1) the contra proferentem rule;
2) the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and
3) the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties. [2]
[26] The motion judge also noted that all counsel conceded that five of the seven allegations contained in the statement of claim clearly involved the use of Djepic’s van and said that the dispute centered on whether the remaining two allegations constituted “use of a motor vehicle for the purpose of applying the exception contained in Belair’s insurance coverage”. The two allegations were that Kuburovic:
… did not provide proper warning to the plaintiff of the state and condition of the cord; and
… failed to test the strength of the cord to ensure that it would not come loose.
[27] The motion judge appears to have accepted that these two allegations of negligence “arose out of the use of a motor vehicle” and the focus of her analysis is on whether the negligence alleged also involved non-auto related causes which were concurrent with the auto related cause. In other words, given the premise that the injury arose out of negligence in loading the van, loading being a recognized “use of a motor vehicle”, did the negligence in failing to warn and test the bungee cord constitute additional independent non-auto related causes of the injury? If so, according to Dersken, the exclusion clause in the policy would not apply.
[28] The motion judge reviewed the case law and concluded that these two allegations did not make out concurrent non-auto related bases of negligence because negligence would only be made out once the unsafe bungee cord was used along with the van and injury resulted.
[29] In my view, the motion judge erred in dismissing the motion against Belair. Before proceeding further, it should be noted that, on appeal, counsel for Kuburovic maintained that there had been no concession regarding these five allegations. Little turns on whether the concession was or was not made. In reaching my conclusion, I need only focus on the two allegations noted above.
[30] Significantly, this case is at the very early stages and the decision on the duty to defend is to be made solely on the pleadings. Based on the pleadings, we cannot yet determine specifically how or why the accident occurred. It may be that the bungee cord supplied and used broke as it was defective and not fit for the purpose. It may be that Kuburovic let the cord go before hooking it onto the van or that Kuburovic had hooked it onto the van and it then came loose. It is also possible that the injury occurred as a result of more than one of these causes. For Belair to succeed, it must demonstrate two things. First that all of the possible scenarios pursuant to which the injury may have occurred are “claims arising from the use of an automobile” and second, that none of these scenarios also involved a concurrent non-auto related cause.
[31] The test to be applied is whether on a reasonable reading of the pleadings, a claim within coverage can be inferred. Dealing only with the allegations that Kuburovic did not provide proper warning of the state and condition of the cord and failed to test the strength of the cord, these amount, in effect, to a claim that Kuburovic supplied or used a defective or damaged bungee cord or a bungee cord that he knew was not fit for the purpose. Based on the pleadings, it may well be that the injury occurred as a result of the cord breaking or coming loose before Kuburovic secured it to the van and we can also assume that Kuburovic had no intention of entering or himself using Djepic’s van. On that scenario, it is at best ambiguous as to whether the claim would “arise from the use of a motorized vehicle”. In those circumstances it is appropriate to consider the insured’s reasonable expectation and, in that regard, it is not unreasonable to conclude that an insured might expect that his homeowners’ policy covers him for negligence occurring while he is on his property helping someone move and load a mattress onto that person’s car.
[32] Applying the interpretative principle set out in Dersken, whereby exclusion clauses are to be read narrowly and, in the case of ambiguity effect is to be given to the reasonable expectation of the parties, I conclude that it is possible at least in the one scenario set out above, that a claim encompassed by the pleadings does not “arise from the use of a motorized vehicle”.
[33] However, even assuming all scenarios encompass a claim arising from the use of a motorized vehicle, some may also involve an independent act of alleged negligence by Kuburovic that constitutes a concurrent non-auto related cause. Specifically, it is possible that the claim against Kuburovic may succeed on the basis of a scenario that has both auto related claims involving the negligent loading of the mattress on the van and non-auto related claims involving the negligent supply or use of a defective bungee cord. I find little to distinguish this case from the Dersken decision.
[34] Derksen was a claim by children injured when a steel plate, which had been accidentally left unsecured on a trailer being towed by the defendant, flew off the trailer and smashed into an oncoming school bus in which the children were travelling. The defendant’s commercial general liability policy excluded coverage for injuries arising from the ownership, use or operation of any vehicle. The court held that there was nothing in the insurance policy to indicate that coverage for an insured risk was rendered inoperative in the event that an expressly excluded risk constituted an additional cause of the injury. The court held that the accident had two concurrent causes: the failure to safely cleanup the worksite and the failure to safely operate the truck. Major J. stated that:
The excluded use or operation of an automobile was not the only contributing cause. The failure to properly cleanup the worksite was a concurrent cause and a risk that was covered by the [commercial general liability] policy. It follows that the exclusion clause is in play but only in respect to that portion of the loss that is attributable to the auto-related cause. This conclusion is consistent with the rule of construction that exclusions clause are to be construed narrowly and the contra proferentem rule. [3]
[35] Assuming that, in the case at bar, a court concludes that the injury arose out of the use of the van, it is also possible, applying Major J.’s reasoning, to identify acts of alleged negligence outlined in the pleading that potentially constitute non-auto related concurrent causes of the accident.
[36] To illustrate, this let us assume, for example, that the injury in this case had occurred, in part, as a result of a defective bungee cord and that the claim had been brought not only against Kuburovic but also against the manufacturer of the cord. In that case, it would be open to a court to find the manufacturer liable if it concluded that the defective manufacture and supply was a concurrent cause of the injury. To the extent that Kuburovic may have supplied the cord and is alleged to have failed to test the strength of the cord or warn of the state of the cord, the situation is quite similar. Kuburovic may be liable on the basis of negligent supply, a non-auto related cause, as well as his negligence in loading the van.
[37] I conclude, therefore, that on these pleadings a claim within coverage of the Belair policy can be inferred. As agreed by the parties, the issue of duty to indemnify is left open to be determined at a later date.
[38] The position of the respondent Belair is, in effect, that the phrase “arising from the use of a motorized vehicle” commonly appears in insurance policies and has consistently been interpreted broadly (see, for example, Vytlingam v. Farmer (2005), 76 O.R. (3d) 1 (C.A.); Herbison v. Lumbermens Mutual Casualty Co. (2005) 76 O.R. (3d) 81 (C.A.); Lefor (Litigation Guardian of) v. McClure (2000) 49 O.R. (3d) 557 (C.A.) and Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405). Belair recognizes that in all of these cases the phrase being interpreted by the court was contained in a coverage clause which, according to case law, must be construed broadly. Belair also acknowledges that exclusion clauses should be interpreted narrowly but, submits that the Axa decision of this court stands for the proposition that once a phrase has been interpreted broadly in a coverage provision, the rules of the interpretation cannot result in that same phrase being interpreted differently when used in an exclusion clause.
[39] Based on the case law, Belair submits that injury occurring while an automobile is being loaded clearly constitutes injury “arising from the use of a motorized vehicle” for purposes of coverage. It follows, therefore, that the same activity must be considered “arising from the use of a motorized vehicle” where that same phrase is used in an exclusion provision of an insurance policy. This, Belair submits, was the reasoning used in Axa Insurance v. Dominion of Canada General Insurance Co. in a virtually identical fact situation.
[40] For the reasons that follow, I disagree. Axa is factually quite different and does not stand for the broad proposition suggested.
[41] I note, at the outset, that in virtually all of the cases cited by Belair, the court gave a broad interpretation to the phrase “arising from the use of a motorized vehicle” either because the policy stipulated “arising, directly or indirectly” or because the words “directly or indirectly” were to be read into the coverage provision by virtue of s. 239(1) of the Insurance Act. Although the word “arising” is broad, adding “directly or indirectly” broadens it further. These cases can, therefore, be distinguished from the present case because “directly or indirectly” does not appear in the Belair policy nor are these words to be read into the policy by virtue s. 239(1) of the Insurance Act since that section does not apply to homeowners’ insurance policies.
[42] I turn now to a comparison of Axa and the case at bar. In Axa, the plaintiff and defendant had spent a day together using the defendant’s boat. Prior to leaving for home, the defendant loaded the boat on to his trailer and placed a vinyl protective cushion over the shaft of the boat’s motor. The plaintiff and defendant were standing immediately adjacent to the outboard motor. After fastening the protective cushion to the motor, using a bungee cord, the defendant checked the cord and it suddenly came loose and injured the plaintiff in the eye. After determining that the defendant’s motor vehicle policy provided coverage to the defendant on the basis that the damages arose “indirectly at least (per s. 239(1)(b) of the Act) from the ownership, use and operation of [the defendant’s] automobile and attached trailer” [5] , the court considered whether the incident fell within an exclusion clause in the defendant’s homeowners’ policy. After recognizing the general proposition that coverage clauses should be interpreted generously and exclusion clauses strictly, the court stated that “the distinction cannot be stretched to provide two completely opposite interpretations to the same words in two insurance policies applying to the same accident”. [6]
[43] This statement must be viewed and understood in light of the peculiar facts of the case. Appearing in the reasons just before the above-noted statement is a recognition by the court that a different methodology and approach is to be used when interpreting coverage as opposed to exclusion clauses. Although not specifically stated in their reasons, the necessary inference to be drawn from this is that the court recognized that, in the appropriate case, an identical phrase may be interpreted differently depending on whether it is used in a coverage or an exclusion clause. I take from their conclusion, therefore, that, on the specific facts they had before them, the different approaches to interpretation could not lead to opposite or different interpretations of the two similarly worded clauses being considered.
[44] It is useful now to outline some of the significant differences that serve to distinguish Axa from the case at bar. In Axa, the court had before it an agreed statement of facts on which to base its decision. In the present case, the facts have not been established nor is the precise cause of the accident known.
[45] In Axa, the defendant was using his car to tow his boat and the defendant (or his spouse) was the owner of and had insured the car, boat and trailer. He also owned the bungee cord involved in the incident. The bungee cord had been attached to the defendant’s trailer and the injury occurred when it came loose. On the facts as pleaded in the case at bar, Kuburovic was not the owner of the car and it is reasonable to conclude that he was not using or about to use the plaintiff’s automobile. Kuburovic was simply helping the plaintiff load a mattress onto the plaintiff’s van which was parked in the defendant’s driveway. Further, it is unclear who in fact owned the bungee cord and whether it came loose before or after being attached to the van.
[46] Applying Derksen, a court should, at least where the policy is ambiguous, seek to give effect to the reasonable expectation of the parties. In the present case, it appears that the insured’s alleged negligence did not involve his own vehicle or a vehicle he was using or was about to use and occurred in his driveway. These circumstances are very different from Axa and may well lead a court to conclude that the insured would reasonably have expected that the exclusion clause in his home policy would not apply.
[47] I would dismiss the appeal against Dominion and allow the appeal against Belair. I would vary the motion judge’s order dismissing Kuburovic’s motion so as to provide for an order requiring Belair to defend Kuburovic in the present action.
[48] The motion judge issued a declaration that Belair has no duty under Insurance Policy No. 2384746 to defend or indemnify Kuburovic in the present action. That declaration flowed from her finding that there was no duty to defend. I would also set aside that declaration. Pursuant to the parties’ understanding, I would adjourn the portion of the defendant’s motion seeking to have Belair indemnify him sine die on four days notice.
[49] I would award Dominion its costs against both appellants, jointly, fixed in the all inclusive amount of $6,000. Given my conclusion that Belair has the duty to defend Kuburovic in the present action, Kuburovic is entitled to his costs as against Belair on a substantial indemnity basis. Taking into account the fact that part of the costs claimed by Kuburovic relate to the unsuccessful appeal against Dominion, I would award Kuburovic costs against Belair fixed at $10,000, inclusive of GST and disbursements. Djepic is entitled to partial indemnity costs against Belair fixed at $5,000, inclusive of GST and disbursements. With respect to the costs below, counsel had reached an agreement on costs. Accordingly, I would vary the costs of the motion to award Kuburovic substantial indemnity costs against Belair fixed at $5,000 and award Dominion partial indemnity costs against Kuburovic fixed at $2,500. As agreed, Djepic would neither receive nor pay costs in respect of the motion.
[1] G. Hilliker, Liability Insurance Law in Canada, 3rd ed. (Toronto: Buttersworth, 2001) at p. 72. cited with approval in Monenco Ltd. v. Commonwealth Insurance Co., supra, at para. 32
[2] Dersken v. 539938 Ontario Ltd., supra, at para. 49
[3] Derksen at para. 55
[4] Axa Insurance v. Dominion of Canada General Insurance Co. (2004), 73 O.R. (3d) 391 (C.A.)
[5] Axa Insurance v. Dominion at para. 18
[6] Axa Insurance v. Dominion at para. 32