Defence & Indemnity - June 2017 : I. INSURANCE ISSUES A. Haraba v. Wawanesa Mutual Insurance Company (The), 2017 ABQB 190, per Shelley, J. [4225]

by Field Law
Contact

Field Law

I. INSURANCE ISSUES A. Insurance policies are to be interpreted how an ordinary person would understand them such that, absent clear policy wording to the contrary, the interests of co-insureds are to be considered several such that the misrepresentation of one co-insured will not render the coverage of an innocent co-insured voidable.

Haraba v. Wawanesa Mutual Insurance Company (The), 2017 ABQB 190, per Shelley, J. [4225]

I. FACTS AND ISSUES
Haraba was the primary driver of a vehicle and the sole insured under an auto policy issued by Wawanesa. When her live-in boyfriend Gardiner could not obtain a loan because of poor credit, she purchased a truck for him in her name. She insured the truck under her policy, listing him as a co-insured and the primary driver of the truck. She had seen Gardiner driving vehicles at his work site and he told her that he had a valid Nova Scotia driver’s licence. In fact, his driver’s licence was suspended at the time. As part of the application to add him as an insured under the policy, he provided a Nova Scotia Identification Card which both the Wawanesa agent and Haraba mistook to be a driver’s licence. The deal between Haraba and Gardiner was that she would make the monthly payments on the truck loan but he would reimburse her. 
 
Gardiner got into an accident with the truck. Wawanesa claimed that the policy was void as against both Haraba and Gardiner because of his misrepresentation. The issues were as to: (1) whether or not Gardiner’s misrepresentation invalidated Haraba’s coverage as a co-insured; and (2) whether Haraba had breached Statutory Condition 2(2) which requires insureds to permit others to drive the vehicle only if they are legally authorized to do so. It was not in dispute that Gardiner’s coverage was voidable because of his misrepresentation.  
II. HELD: For the insured Haraba; her coverage held not to have been invalidated.

1. Madam Justice Shelley reviewed the statutory provisions and case law regarding the position of an innocent insured where that person’s co-insured has been guilty of fraud or breach of policy.
 
(a) She noted that in Scott v. Wawanesa Mutual Insurance Co., [1989], 1 SCR 445, the majority of the Supreme Court of Canada held that the parents of their son were precluded from recovering for a fire loss under their fire policy because he was covered under the definition of “insured” and the policy excluded coverage for “loss or damage caused by a criminal or willful act or remission of the Insured or of any person whose property is insured thereunder” [emphasis ours]. This was held to be so notwithstanding that the parents were found not to have had any knowledge or complicity in the son’s deliberate arson. In dissent, Mr. Justice La Forest held that insurance policies should be interpreted under the “modern approach,” i.e. as to how a reasonable member of the public would understand the policy provisions in question. He had also held that a reasonable member of the public would understand the interests of multiple co-insureds to be several unless there is clear policy wording to the contrary.
(b) The Court further held that notwithstanding that Scott was a case involving the intentional act of a co-insured causing the loss, as opposed to having made a misrepresentation on the policy application, the minority decision of La Forest was found to be helpful in passing upon the situation where one co-insured misrepresents the facts in a policy application and the co-insured is innocent of participation of that misrepresentation: National Bank of Greece (Canada) v. Katsikonouris [1990] 2 SCR 1029. In that case, the owner of property had misrepresented his fire history in an application for fire insurance. His mortgage company was covered pursuant to a standard mortgage clause which provided that the mortgage company’s coverage “shall be enforced notwithstanding any act, neglect, omission or misrepresentation attributable” to the owner of the property. The Court followed the minority decision of La Forest, J. in Scott, and concluded that the mortgage company could claim the benefit of a standard mortgage clause notwithstanding the owner’s misrepresentation because there was an “absence of clear and explicit language pointing to a different meaning in the policy itself.” 
 
(c) The Court held that if the interests of co-insureds are joint, then the misrepresentation of one will invalidate the claim of the other (innocent) co-insured but not if their interests are several:
 
[32] The specific wording of the Statutory Condition or insurance contract determines if the interests of multiple co-insureds are joint or several. If their interests are joint, then the misrepresentations of one may allow the insurance company to disclaim recovery by other innocent co-insureds. If the interests are several, then the misrepresentations of one co-insured will not prevent innocent co-insureds from collecting under the same policy. 

(d) The Court reiterated that insurance policies and Statutory Conditions are to be interpreted on how an ordinary person would understand them:

[33] Insurance contracts and Statutory Conditions should be interpreted based on how an ordinary person would understand them (Scott, Wigmore, Katsikonouris). The Supreme Court decisions in Scott (particularly, the dissent by La Forest J) and Katsikonouris suggest that the ordinary person would reasonably assume that the interests of multiple co-insureds are several, and not joint, unless express language to the contrary is included in the Statutory Condition or insurance contract to the contrary (e.g. Charles). Furthermore, where one co-insured makes a misrepresentation that affects the coverage of other innocent co-insureds, it is unlikely that co-insured will be considered the “agent” of the innocent co-insureds unless the innocent co-insureds authorized the changes to the coverage (McKay).

[34] Section 554 of the Insurance Act indicates “a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited” if “an applicant ... knowingly misrepresents or fails to disclose in the application any fact required to be stated in the application.” The Statutory Condition does not contain express language indicating misrepresentations made by one applicant will invalidate the policy as against innocent co-insureds.

[35] Using the modern approach to interpreting insurance contracts set by La Forest J in Scott and Katsikonouris, s 554 should be interpreted based on how an ordinary person would understand it. Following Scott, the ordinary person will generally believe that the interests of multiple co-insureds under the same policy are several and not joint, and that the misrepresentations of one co-insured will not affect the other co-insureds’ interests. Following this interpretation, Mr. Gardiner’s misrepresentations do not affect Ms. Haraba’s ability to claim under the policy because the statute and the insurance contract do not contain express language indicating that the policy will be void against innocent co-insureds if another co-insured makes a material misrepresentation.

2. The Court held that Ms. Haraba had not breached Statutory Condition 2(2) because she had a reasonable basis to believe that Gardiner was legally qualified to drive:

[42] Ms. Haraba had a duty pursuant to Statutory Condition 2(2) under s 556 of the Insurance Act to ensure that anyone she authorized to drive vehicles insured under her policy was legally qualified to drive. She authorized Mr. Gardiner to drive the truck insured under her policy despite his misrepresentation (such as in Bremner, and consistent with McClure). I conclude that she did not breach the Statutory Condition, as she had a reasonable basis to believe that Mr. Gardiner was legally qualified to drive (i.e. she observed him driving at his job site, and she believed his identification card was a driver’s licence).  Further, she made inquiries to ascertain that this was the case.

[44] I conclude that Ms. Haraba’s claim in respect of the truck was not invalidated, nor her right to recover indemnity forfeited, under the Insurance Act because she did not knowingly misrepresent or fail to disclose any required fact when she submitted the application to add Mr. Gardiner to the Policy. She was an innocent co-insured who remained entitled to recover under the Policy, notwithstanding Mr. Gardiner’s misrepresentation.

 

Written by:

Field Law
Contact
more
less

Field Law on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.