In CUMIS General Insurance Company v. 1319273 Ontario Ltd., the Court of Appeal was dealing with a coverage question involving a CGL policy. In the underlying action, the plaintiff motorcyclist had been seriously injured when a ladder flew off a truck and struck him. He sued the owner of the truck, a numbered company carrying on business as “Done Right”, alleging that its employees had negligently loaded and stored the ladder on the truck.
Done Right tendered the defence of the action to its CGL insurer, CUMIS, which denied the claim on the basis that its policy excluded automobile-related risks.
CUMIS brought an application for a declaration that it had no duty to defend Done Right in the underlying action. It was successful before Mr. Justice David Brown. The Court of Appeal then dismissed Done Right’s appeal.
It seems fairly obvious that the claim in the underlying action was drafted with an eye to the Supreme Court of Canada’s decision in Derksen v. 539938 Ontario Limited. There, the Supreme Court of Canada had found that an accident had resulted from “concurrent causation”, triggering both an auto and a CGL policy. In particular, in the underlying action here, the plaintiff alleged that Done Right had failed to load and secure the ladder properly to its vehicle, that it had failed to supervise and train its employees and that it had failed to clean up its work site properly.
Brown J. granted CUMIS’s application for a declaration that it had no duty to defend, finding that the loading and storing of the ladder on the truck amounted to direct or indirect use or operation of the truck. The exclusion in the CUMIS policy was a two-pronged one, set out in a rider which replaced a simpler (one-pronged) automobile exclusion in the policy. The first branch of the exclusion in the rider provided that “this insurance does not apply to bodily injury or property damage arising out of the ownership, use or operation by or on behalf of any Insured of (i) any automobile”. The second branch read as follows:
This insurance does not apply to:
bodily injury or property damage with respect to which any motor vehicle liability policy:
(i) is in effect, or
(ii) would be in effect but for its termination upon exhaustion of its limits of liability, or
(iii) is required by law to be in effect.
Justice Brown applied the second branch of the exclusion in granting CUMIS’s application. He did not decide the applicability of the first branch.
In the Court of Appeal, Done Right argued (as it had not done before Justice Brown), that effect should not be given to the exclusion upon which CUMIS relied because to do so would defeat Done Right’s “reasonable expectations” with respect to coverage. It submitted that the rider, which contained the new exclusion, had purported to extend the coverage available to Done Right but had in fact done the opposite: it had narrowed it. Counsel for the insured went on to argue that if CUMIS could not rely on the “two-pronged” exclusion in its rider, it would have to fall back on its original exclusion and under that exclusion, loading and storing the ladder did not fall within the scope of “use or operation”.
Justice Laskin, on behalf of the Court, rejected all of the insured’s submissions. On the reasonable expectations issue, he said that Done Right had not led any evidence as to what its actual expectations had been nor what CUMIS had said to it and that “without any evidence on these matters Done Right’s argument that it was misled must fail”. But he went on to note that even if evidence were not required, the fact of the matter was that the CUMIS rider was not misleading. It had expanded some coverages and had narrowed others.
The Court added that even if CUMIS could not rely on the wording in its rider, coverage was also excluded by the original “use or operation” exclusion. Done Right had argued that because the watercraft and aircraft exclusions in the policy had specifically referred to “loading and unloading”, while the automobile exclusion did not, the latter should be interpreted narrowly, so as not to include loading and unloading.
But Justice Laskin made it clear that the exclusions have to be interpreted in context. In the case of the automobile exclusion, it was not necessary to spell out that loading and unloading fall within it because that is already well-established. But this is not so in the case of aircraft and watercraft exclusions; there, the meaning has to be spelled out more specifically.
Accordingly, the Court found that not only was this claim excluded by the second prong of the rider’s version of automobile exclusion, it was also excluded by the first prong and by the auto exclusion in the original policy.
Finally, Justice Laskin agreed with Justice Brown, that the statement of claim in this case did not allege concurrent causes of action, as had been found to exist in the Derksen case. There was no allegation in the statement of claim in the underlying action of “negligent clean-up of the work site” that was separate from the “use or operation” allegations. Everything that had been alleged about clean-up of the work site related, in substance, to the failure to secure the ladder.