Court Orders Home Insurer to Defend Claim Arising Out of ATV Accident

In Economical Insurance Group v. Fleming, Mr. Justice Keith A. Hoilett heard an application brought by Economical Mutual Insurance, for a declaration that it owed no duty to defend its insureds against a claim brought on behalf of a teenaged girl who had been injured at their cottage while driving an all-terrain vehicle (“ATV”). The policy contained an exclusion for “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” and EMI argued that the claim was excluded.

The suit against the insureds included allegations of failure to supervise the young victim. Justice Hoilett reviewed the jurisprudence and appears to have concluded that it was possible that those allegations could give rise to liability on the part of the insureds that was separate from the ownership, use or operation of a motorized vehicle and therefore, might not be caught by the exclusion. He ordered EMI to defend.

His Honour gave a second basis for his decision. EMI had originally written to the insureds and said that it would defend them. Months later, it wrote again, this time saying, “under no circumstance will Economical appoint defence counsel, or pay your own counsel for defence costs, arising from this Claim”. Counsel for the insureds argued that EMI had waived any right to rely on the “motorized vehicle” exclusion. Justice Hoilett agreed. He said, “the facts in the present case strongly support the respondents’ contention that the applicant has waived its rights and may not now repudiate that position”.


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