C.A. Says Conviction for Careless Driving Doesn’t Allow Auto Insurer to Deny Coverage On the Basis of Intentional Act

In Savage v. Belecque, released last week, the Court of Appeal considered whether Allstate Insurance had been justified in denying coverage to a young driver and to his mother, the owner of the car, on the basis that the act that had caused the plaintiff’s injury was an intentional one. It upheld the ruling of the judge hearing a motion for summary judgment, that Allstate owed a duty to defend and to indemnify.

The injured plaintiff was a 14-year girl. She was on skates. She had spoken with a passenger in the back seat of the Belecque car and had asked for a cigarette. The car was either stationary or moving very slowly. The passenger grabbed her jacket through the window as, apparently, a bit of horseplay. The driver accelerated, dragging the plaintiff for some distance, at which time she fell. The driver decided to turn around and go back and spun the car rapidly in so doing. He did not see the plaintiff, still on the ground, and struck her in the course of this manoeuvre.

Allstate had both an auto policy covering the car and a homeowner’s policy that covered the parents of the driver. It denied coverage on the basis of late notice of the claim and also on the basis that the injury had been the result of an intentional act.

Allstate’s position had been rejected by the motions judge, Mr. Justice Gregory Ellies and Allstate appealed. No appeal was taken from the finding that adequate notice of the claim had been given, so the main issue was whether the motions judge had erred in holding that Allstate had not been entitled to deny coverage on the basis that the act giving rise to the claim was an intentional one.

It was conceded that the auto policy did not contain an exclusion for claims arising from intentional acts. However, Allstate relied on s. 118 of the Insurance Act, which provides as follows:

Unless the contract otherwise provides, a contravention of any criminal or other law in force in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage, but in the case of a contract of life insurance this section applies only to insurance undertaken as part of the contract whereby the insurer undertakes to pay insurance money or to provide other benefits in the event that the person whose life is insured becomes disabled as a result of bodily injury or disease.

The young driver had been convicted of careless driving and Allstate relied on this fact in support of its argument that the plaintiff’s injury had resulted from an intentional act. However, the Court of Appeal agreed with the motions judge, that this was not a basis for the application of s. 118:

Since that conviction only related to Michel’s [the driver’s] execution of the impugned manoeuvres, in light of the other evidence no inference could be drawn that Michel had any intention to cause damage or loss to Amy [the plaintiff].

(The “other evidence” referred to in this passage was in the form of affidavits. The Court of Appeal accepted that such evidence was properly receivable on the motion because not only Allstate’s duty to defend, but also its duty to indemnify, were in issue. The Court of Appeal agreed that none of that evidence pointed to an intention to cause harm. It also rejected the argument, that a claim for punitive damages pointed to an allegation of intentional act. The Court found both a duty to defend (based on the pleadings} and a duty to indemnify (based on the evidence).)

The motions judge, Justice Ellies, had awarded to Allstate’s insureds costs on a full indemnity basis, in the amount of $180,168.29, which had been the amount claimed. It said that “[t]here is no principle of law requiring a judge to reduce a requested costs award automatically or by a certain percentage on an unfounded assumption that the claimed amount must be inherently excessive.” It also acknowledged that the motions judge had “specifically considered and explained why counsel’s hourly rates charged to the Belecques as individual litigants might reasonably be higher than those charged by counsel to a corporate insurer”.

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