In Cumis General Insurance Company v. 1319273 Ontario Ltd., Mr. Justice David Brown dealt with an interesting coverage dispute.
Cumis had applied for a ruling on whether it owed a duty to defend its insured, the numbered company, in an underlying claim for personal injuries. The insured was a roofing repair company. In the underlying action, it was alleged that upon leaving a job site, the insured’s employees negligently loaded a ladder on the insured’s truck. While driving along a county road, the ladder flew off and struck a motorcyclist, causing serious injury.
The numbered company held a CGL policy with Cumis and sought a defence against the claim by the motorcyclist. Cumis took the position that the claim was not covered and that therefore, it owed no duty to defend.
Cumis relied on two exclusions. The first said 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 provided that “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…(iii) is required by law to be in effect.”
Not surprisingly, counsel for the insured argued that this was a case of “concurrent causation” and that even if some of the allegations against the insured in the underlying lawsuit fell within the exclusions, the claim involved allegations of other causes that were covered. In the wake of the Supreme Court of Canada’s decision in Derksen v. 539938 Ontario Ltd.,  3 S.C.R. 398, the issue of “concurrent causation” often arises in coverage disputes.
Citing the Court of Appeal’s decision in Unger (Litigation Guardian of) v. Unger (2003), 68 O.R. (3d) 257 (C.A.), Justice Brown apprehended his task to be, to find the “substance and true nature” of the claim being made against the insured. He held that allegations of vicarious liability or negligent training and supervision did not give rise to separate causes of action for purposes of coverage.
His Honour also accepted the submission on behalf of Cumis, that a “reasonable reading of the claim” led to the conclusion that the “Work Site Claims” [these were allegations in the statement of claim, that the insured’s employees had negligently cleaned up their site] all related back to the loading of the ladder and that this was within the exclusion. Counsel for the insured had likened the facts in this case to those in Derksen, but Justice Brown did not agree that this was a “failure to load” case. Thus, he held that “the ‘substance and true nature’ of the claim involves the allegations of negligently loading and storing the ladder on the truck.”
The Automobile Exclusion
Counsel for the insured argued though, that even if concurrent causation was not present in this case, the wording of the automobile exclusion in this policy did not apply to the allegation, in the underlying suit, of negligent loading of the ladder. He drew to the court’s attention various other exclusions (watercraft, aircraft) which used the phrase, “ownership, maintenance, use, operation, loading or unloading” and argued that the omission of the words, “loading or unloading” from the automobile exclusion indicated that that activity was not intended to be excluded.
Justice Brown agreed that the argument had some appeal:
If the Policy only contained automobile Exclusion O(b)(1) [the “automobile” exclusion], I would find the Respondent’s argument an attractive one. There is sense to his submission that where three exclusion clauses share a common phrase – “use or operation” – that phrase should bear a common meaning in each clause. Since the watercraft and aircraft exclusion clauses include the additional terms “loading” and “unloading”, that should signify that the common phrase “use or operation” does not include those activities; otherwise the meaning of “use or operation” in the automobile exclusion would differ from that in the watercraft and aircraft exclusions.
His Honour rejected the submission of Cumis’s counsel, that each exclusion is a “watertight compartment” that must be interpreted separately. However, after reviewing some U.S. authorities, Justice Brown distilled from them “the principle that if the activity in question is captured by one exclusion clause in a policy, an insured cannot look to language in another exclusion clause to require the insurer to provide a defence.”
However, Brown J. did not have to make a final determination with respect to the application of the automobile exclusion, because he ruled that another exclusion applied.
Motor Vehicle Liability Insurance Exclusion
While Justice Brown might have ruled in favour of the insured with respect to the interpretation of the automobile exclusion, there was another exclusion that he felt unambiguously applied:
I conclude that the loading and storing of a ladder onto the truck constitute the direct or indirect use or operation of an automobile under the terms of a motor vehicle liability policy that “is in effect, or…is required by law to be in effect” for the Respondent’s truck. As a result, Exclusion O(b)(2) of the Policy [“bodily injury or property damage with respect to which any motor vehicle liability policy (i) is in effect, or…(iii) is required by law to be in effect”] excludes from coverage the negligent acts of loading and storing the ladder onto the truck which lie at the heart of the MacMillan Action [the underlying claim]. CUMIS therefore does not owe the Respondent a duty to defend the MacMillan Action.
It is common to see this type of case boil down to a fight between an auto and a non-auto insurer. The reasons of Brown J. do not indicate whether there was an automobile policy in effect here and if so, what position that insurer took on coverage. It is not necessarily the case, in these situations, that because coverage is not available under one type of policy, there must be coverage under the other. On the other hand, this was an application by Cumis, so perhaps its counsel considered it unnecessary to involve the auto insurer in the lawsuit. If that is the case, it would be interesting to see what position the auto insurer takes.