Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398, 2001 SCC 72
539938 Ontario Limited, Roy’s Electric,
Roy Zub, Douglas Zub and Joyce Zub
Appellants
v.
Tyler Derksen, a minor, by his litigation guardian
William Derksen, Travis Derksen, a minor,
by his litigation guardian William Derksen,
the said William Derksen, Kathy Derksen,
William Derksen (Sr.), Justina Derksen,
Fred Irvine and Edith Irvine
Respondents
and
539938 Ontario Limited, Roy’s Electric, Roy Zub,
Douglas Zub and Joyce Zub (with respect to Wawanesa
Automobile Policy Number 3556895)
Respondents
and
539938 Ontario Limited, Roy’s Electric, Roy Zub,
Douglas Zub and Joyce Zub (in their uninsured capacity)
Respondents
Indexed as: Derksen v. 539938 Ontario Ltd.
Neutral citation: 2001 SCC 72.
File No.: 27524.
Hearing and judgment: April 25, 2001.
Reasons delivered: October 19, 2001.
Present: L’Heureux‑Dubé, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for ontario
Insurance – Commercial general liability insurance – Exclusions – Coverage excluded for bodily injury or property damage arising out of the ownership, use or operation of an automobile and for bodily injury or property damage with respect to which any automobile policy is in effect – Accident caused by employee’s failure to safely clean up work site and failure to ensure supply truck could be operated safely – Supply truck covered by automobile insurance policy - Whether use of supply truck was proximate cause of accident – Whether accident resulting from concurrent sources of causation – If so, whether general liability policy provides coverage where there are two concurrent causes, one of which is excluded from coverage – Whether exclusion clauses should be interpreted to exclude coverage under general liability policy – Insurance Act, R.S.O. 1990, c. I.8, s. 267.1.
During clean up of a work site, one of the contractor’s employees left a steel base plate unsecured at the rear of a supply truck. As he drove the truck on the highway, the steel base plate flew off the compressor unit and through the window of an oncoming school bus, killing one child and seriously injuring three others. As a result, a number of negligence actions were brought. The plaintiffs alleged, among other things, negligence at the work site and negligence in the operation of the truck. The truck was covered by an automobile insurance policy. The contractor also had a commercial general liability (“CGL”) policy and an excess coverage policy. The CGL policy excluded coverage for “‘[b]odily injury’ or ‘property damage’ arising out of the ownership, use or operation . . . of . . . [a]ny ‘automobile’” (clause (e)(1)) and for “‘[b]odily injury’ or ‘property damage’ with respect to which any motor vehicle liability policy is in effect . . .” (clause (e)(2)). On a motion to determine coverage, the motions judge held that all three policies provided coverage and determined the extent of coverage. He found two concurrent causes of the accident: negligent clean up of the work site, covered by the CGL policy, and negligent operation of the truck, covered by the automobile policy. Coverage under the automobile policy is limited by s. 267.1 of the Insurance Act to non-pecuniary damages. The coverage under the CGL policy is restricted by its exclusion clause and by s. 267.1. The CGL policy insures against pecuniary and non-pecuniary losses not attributable to auto-related causes. The umbrella policy will be engaged up to its limits if there is a shortfall in either of the primary policies. The motions judge’s decision was upheld by the Ontario Court of Appeal.
Held: The appeal should be dismissed.
The accident was the result of two concurrent causes: the failure to safely clean the work site up and the failure to ensure that the truck could be operated safely. Neither cause was dominant since the accident would not have occurred but for either cause. The work site negligence cannot be characterized as being part of loading the supply truck. Nor was the use of the truck an independent intervening proximate cause, interrupting the chain of causation and rendering the automobile exclusion applicable. In any event, the utility of the “proximate cause” analysis with respect to insurance policies is questionable. Furthermore, s. 267.1 of the Insurance Act recognizes that there may be concurrent causes. In such circumstances, it is undesirable to attempt to decide which of two concurrent causes was the “proximate” cause.
The general liability policy provided coverage notwithstanding that the auto-related cause was specifically excluded from coverage. Where there are concurrent causes, there is no presumption that all coverage is ousted if one of the concurrent causes is an excluded peril. If an insurer wishes to oust coverage in such cases, it must expressly state that in the insurance policy. Moreover, whether an exclusion clause applies in a particular case of concurrent causes is a matter of interpretation. Here, the words “arising out of” in exclusion clause (e)(1) do not indicate that coverage for an insured risk will be inoperative if an expressly excluded risk constitutes an additional cause. Since the loss in this case arose partly from the use or operation of an automobile, exclusion clause (e)(1) is triggered, but only as to that portion of the loss attributable to the auto-related cause. The negligent clean up of the work site was a non-auto-related cause and, absent express language to the contrary, the CGL policy should cover this risk. Exclusion clause (e)(2) does not exclude coverage for the portion of loss attributable to the non-auto-related cause. Although there is an automobile policy “in effect”, in the context of s. 267.1 of the Insurance Act, the policy cannot be said to be “in effect” with respect to pecuniary or non-pecuniary loss attributable to non-auto-related negligence. A narrow interpretation of the exclusion clauses is consistent with the general principles of interpretation of insurance policies and with the true intentions of the parties. It is also consistent with and gives effect to s. 267.1 of the Insurance Act.
Cases Cited
Followed: C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814; not followed: Wayne Tank and Pump Co. v. Employers’ Liability Assurance Corp., [1973] 3 All E.R. 825; distinguished: Law, Union & Rock Insurance Co. v. Moore’s Taxi Ltd., [1960] S.C.R. 80; Wu v. Malamas (1985), 21 D.L.R. (4th) 468; Ford Motor Co. of Canada Ltd. v. Prudential Assurance Co., [1959] S.C.R. 539; Dominion Bridge Co. v. Toronto General Insurance Co., [1963] S.C.R. 362; Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405; referred to: Walker Estate v. York Finch General Hospital, [2001] 1 S.C.R. 647, 2001 SCC 23; Charterhouse Properties Ltd. v. Laurentian Pacific Insurance Co., [1993] I.L.R. ¶1-2937; Lizotte v. Traders General Insurance Co., [1986] I.L.R. ¶1-2076; Clark’s Chick Hatchery Ltd. v. Commonwealth Insurance Co. (1982), 40 N.B.R. (2d) 87; Goodman v. Royal Insurance Co. of Canada, [1997] 8 W.W.R. 69; Pavlovic v. Economical Mutual Insurance Co. (1994), 28 C.C.L.I. (2d) 314; Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252.
Statutes and Regulations Cited
Insurance Act, R.S.O. 1990, c. I.8, s. 267.1 [ad. 1993, c. 10, s. 25].
Authors Cited
Fleming, John G. The Law of Torts, 9th ed. Sydney: LBC Information Services, 1998.
APPEAL from a judgment of the Ontario Court of Appeal (1999), 123 O.A.C. 232, 45 M.V.R. (3d) 6, [1999] O.J. No. 2743 (QL), dismissing the appellants’ appeal from a decision of the Ontario Court (General Division) (1998), 37 M.V.R. (3d) 59, [1998] O.J. No. 3723 (QL). Appeal dismissed.
Steven Stieber and Heleni Maroudas, for the appellants.
Kristopher H. Knutsen, Q.C., and Wesley Derksen, for the respondents Tyler Derksen et al.
Earl A. Cherniak, Q.C., S. Alexander Zaitzeff and Kirk F. Stevens, for the respondents 539938 Ontario Limited, Roy’s Electric, Roy Zub, Douglas Zub and Joyce Zub (with respect to Wawanesa Automobile Policy Number 3556895).
Lawrence G. Phillips, for the respondents 539938 Ontario Limited, Roy’s Electric, Roy Zub, Douglas Zub and Joyce Zub (in their uninsured capacity).
The judgment of the Court was delivered by
1 Major J. -- This appeal requires the Court to consider whether in the circumstances of this case the comprehensive general liability insurance policy involved afforded coverage. At the end of the hearing, the Court concluded that it did and dismissed the appeal, with reasons to follow.
2 Bell Canada, who is not a party, entered into a contract with numbered company 539938 Ontario Limited, which operates under the name Roy’s Electric (the “Contractor”), for the laying of cable. One of the defendants Douglas Zub filled many roles. He was a shareholder of the Contractor. He was an employee of the same company and worked as its foreman.
3 The Contractor owned a supply truck which was covered by a $1,000,000 automobile insurance policy issued by Wawanesa (“automobile policy”). As required under the contract with Bell Canada, the Contractor had two other insurance policies. One was a commercial general liability policy of $1,000,000 with General Accident (“CGL policy”), which covered liability claims against the Contractor. The other was an excess coverage policy also from General Accident for $4,000,000 (“umbrella policy”). It covered any shortfall under either the automobile policy or the CGL policy. For the purposes of this appeal, “automobile” includes the Contractor’s truck.
4 The CGL policy excluded coverage for bodily injury or property damage arising out of the ownership, use or operation of an automobile and for bodily injury or property damage with respect to which any motor vehicle policy is in effect. At the heart of this appeal is whether the claims, as described below, come within the terms of the exclusion.
5 Adverse weather conditions developed at the site where the cable was being laid the afternoon of December 5, 1994. As a result, work was halted earlier than usual. During the clean up, Mr. Zub removed a sign assembly from the ditch. It consisted of a sign, a shaft and a steel base plate. He put both the sign and shaft inside the supply truck. However, he placed the steel base plate unsecured on a cross-member of the tow bar for a compressor unit attached to the rear of the supply truck.
6 Mr. Zub then drove the supply truck along the highway. The steel base plate flew off the tow bar and through the windshield of an oncoming school bus, killing one child and seriously injuring three others.
7 As a result of the personal injuries and other loss sustained in the accident, a number of negligence actions were brought against the Contractor, its employees and other defendants. The plaintiffs in these actions (“Plaintiffs”) alleged, among other things, negligence at the work site and negligence in the operation of the truck.
8 The terms of the Insurance Act, R.S.O. 1990, c. I.8, preclude the Plaintiffs from claiming any pecuniary loss against the Contractor and Mr. Zub as owner and occupant of the truck. The Plaintiffs can however claim against the Contractor for pecuniary loss caused by negligence of its employees at the work site. It is a distinct action from that of automobile negligence.
9 The Plaintiffs’ claims gave rise to questions of which of the three insurance policies provided coverage. The Plaintiffs brought a motion before the Ontario Court (General Division) for the determination of coverage. The motions judge held that all three policies provided coverage.
10 The motions judge found that there were two concurrent causes of the accident: negligent clean up of the work site (“non-auto-related negligence”) covered by the CGL policy and negligence in the operation of the truck (“auto-related negligence”) covered by the automobile policy.
11 Although the automobile policy and CGL policy both provide primary coverage, the extent of each coverage varies. Coverage under the automobile policy is limited by s. 267.1 of the Insurance Act to non-pecuniary damages. The coverage under the CGL policy is restricted by its exclusion clause and by s. 267.1. It insures for pecuniary and non-pecuniary losses that are attributable to causes other than those that are auto-related. The umbrella policy will be engaged up to its limits if there is a shortfall in either of the primary policies. To the extent that any pecuniary losses are attributable to auto-related negligence, the Plaintiffs cannot recover for those as a result of the provisions of the Ontario Insurance Act.
12 The motions judge’s decision was upheld by the Ontario Court of Appeal.
I. The Relevant Contractual and Statutory Provisions
13 The Wawanesa Automobile Policy Coverage Clause
3.3 What We Cover
You or other insured persons may be legally responsible for the bodily injury to, or death of others, or for damage to the property of others as a result of owning, using or operating the automobile. In that case, we will make any payment on your or other insured persons’ behalf that the law requires, up to the limits of the policy.
The Commercial General Liability Cover Clause
1. Insuring Agreement
(a) We will pay those sums that the Insured becomes legally obligated to pay as compensatory damages because of “bodily injury” or “property damage” to which this insurance applies. . . .
(b) Compensatory damages because of “bodily injury” include compensatory damages claimed by any person or organization for care, loss of services or death resulting at any time from the “bodily injury”. . . .
The Commercial General Liability Exclusion Clause
2. Exclusions
This insurance does not apply to:
. . .
(e) (1) “Bodily injury” or “property damage” arising out of the ownership, use or operation by or on behalf of any Insured of:
(a) Any “automobile”; . . .
(2) “Bodily injury” or “property damage” with respect to which any motor vehicle liability policy is in effect or would be in effect but for its termination upon exhaustion of its limit of liability or is required by law to be in effect.
Insurance Act, R.S.O. 1990, c. I.8 (as amended by S.O. 1993, c. 10, s. 25)
267.1-- (1) Despite any other Act and subject to subsections (2) and (6), the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in a proceeding in Ontario for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of the automobile in Canada, the United States of America or any other country designated in the Statutory Accident Benefits Schedule.
(2) Subsection (1) does not relieve a person from liability for damages for non‑pecuniary loss, including damages for non‑pecuniary loss under clause 61(2)(e) of the Family Law Act, if as a result of the use or operation of the automobile the injured person has died or has sustained,
(a) serious disfigurement; or
(b) serious impairment of an important physical, mental or psychological function.
. . .
(6) Subsection (1) does not relieve any person from liability other than the owner of the automobile, the occupants of the automobile and the persons present at the incident.
II. Judicial History
A. Ontario Court (General Division) (1998), 37 M.V.R. (3d) 59
14 As noted earlier a motion was brought before the Ontario Court (General Division) relating to the coverage provided by the various policies. The following questions were submitted:
1. Is there coverage under Wawanesa Automobile Policy No. 3556895 for the claims for damages made in these actions arising from the injuries sustained by the Plaintiffs in the accident that occurred on December 5, 1994?
2. Regardless of the answer to question 1, is there coverage under General Accident Comprehensive General Liability Policy No. C3336483 for the claims for damages made in these actions arising from the injuries sustained by the Plaintiffs in the accident that occurred on December 5, 1994?
3. Regardless of the answers to questions 1 and 2, is there coverage under General Accident Umbrella Liability Policy No. C3336483 for the claims for damages made in these actions arising from the injuries sustained by the Plaintiffs in the accident that occurred on December 5, 1994, and if so, to what extent is there such coverage?
4. If the answer is “yes” to both questions 1 and 2, is one or the other of the two insurance policies referred to in those questions first loss or primary coverage, and how is coverage to be divided up as between those two insurance policies?
15 As a preliminary step to answering these questions, Stach J. considered the application of s. 267.1 of the Insurance Act. He concluded that while s. 267.1 protects the Contractor in its capacity as owner of the automobile from liability for pecuniary losses, the Contractor was not protected in its capacity as employer. Stach J. held (at para. 35):
. . . I hold that the statutory immunity granted to the contractor and its employee (Douglas Zub) in their capacity as owner and occupant respectively (or indeed in the case of Douglas Zub “as a person present at the incident”) does not erase either the wrongfulness of earlier acts at the original work site or the contractor’s vicarious liability for same. In the result the plaintiffs are not barred by s. 267.1 of the Act from pursuing their common law right of recovery against the contractor qua employer respecting the negligence of its crew at the original work site. Nor, for that matter, are the plaintiffs restricted from pursuing their common law right of recovery against the contractor qua employer for pecuniary loss. As noted by Logan J. [in Tutton v. Pickering (Town) (1996), 29 O.R. (3d) 539 (Gen. Div.)], the statutory immunity merely dictates the different forms of relief which may arise against the various defendants.
16 The finding that the Contractor was not protected from liability for pecuniary damages with respect to liability arising out of negligence at the work site (i.e. non-auto-related negligence) is unchallenged.
17 In response to the specific questions submitted to the court, Stach J. found that there was coverage under the automobile policy and answered yes to the first question. This finding is unchallenged.
18 Having found that the automobile policy covered certain claims for damages arising out of the accident, Stach J. considered whether the CGL policy also provided coverage. He noted that the CGL policy excluded coverage for bodily injury or property damage arising out of the ownership, use or operation of an automobile and for bodily injury or property damage with respect to which any motor vehicle policy is in effect. In light of these exclusions, he focussed on whether the claims for damages arising from the accident were excluded from the coverage of the CGL policy.
19 In determining whether the CGL exclusion clause applied, Stach J. had to decide whether the accident arose from concurrent causes. He concluded that it had, only one of which related to the operation of an automobile (at para. 50):
In my opinion, any non-auto-related negligence consists of Zub’s failure to clean-up the site properly by failing to store the base plate. By comparison, any auto-related negligence consists of Zub’s setting the vehicle in motion in those circumstances i.e. without having conducted even a cursory circle check of the unit.
20 As there were two possible causes of the accident, Stach J. concluded that both the automobile policy and the CGL policy provided coverage and answered yes to the second question (at para. 67):
In the CGL policy before me, I can find no ambiguity in the language which excludes coverage for bodily injury “arising out of the ownership, use or operation by or on behalf of any insured of any automobile”. As in [State Farm Mutual Automobile Insurance Co. v. Partridge, 10 Cal. 3d 94 (Cal. S.C. 1973)], however, the CGL policy before me gives absolutely no indication that coverage for a covered risk is to be withdrawn wherever an excluded risk constitutes an additional cause of the injury. Accordingly, I hold that, in purchasing both the automobile policy and the CGL policy, the contractor obtained coverage for liabilities arising from different sources. Under the CGL policy the insurer agreed to protect the contractor against liability arising generally from non‑auto‑related risks; under the automobile policy the insurer guaranteed indemnity arising from auto‑related risks. On the premise that the injuries here and the contractor’s liability result from both auto‑related and non‑auto‑related causes, both the automobile policy and the CGL policy offer coverage and must respond.
21 Stach J. considered how the coverage would be divided between the CGL policy and the automobile policy. This division was in accordance with s. 267.1 of the Insurance Act and is unchallenged.
22 Finally, Stach J. answered the third question in the affirmative and concluded that there was coverage under the umbrella policy. This conclusion also is unchallenged.
B. Court of Appeal for Ontario (1999), 45 M.V.R. (3d) 6
23 In its endorsement dismissing the appeal, the Ontario Court of Appeal confirmed the conclusion that the CGL policy provided coverage as the loss was the result of two concurrent operating causes, one being the operation of the motor vehicle and the other being the negligent clean up at the work site. The court stated (at para. 12):
Cases in which there are two or more concurrent causes of a plaintiff’s damages are more easily decided when multiple causation is brought about by several parties. If Roy’s Electric had put the plate on the compressor frame and another entity had transported it, there would be much less room for arguing that the loss was not brought about by two separate causes, the first work‑site related and the second automobile‑use related. The fact that one person was both loader and driver in the instant cases, should not alter the coverage consequences.
III. Analysis
24 The issues left to be decided were:
1. Did the loss arise out of one auto-related cause or two concurrent causes?
2. If the loss arose out of two concurrent causes, is coverage under the commercial general liability policy excluded by the automobile exclusion clause in that policy?
25 Both courts below held that the CGL policy provided coverage, notwithstanding the automobile exclusion clause. The appellants appealed on two bases. First, they argued that the accident resulted from a single auto-related cause, which falls within the CGL policy’s automobile exclusion. In the alternative, it was submitted if there were two concurrent causes, the CGL policy does not afford coverage as one of the causes was auto-related and thereby excluded from coverage. For the reasons given below, I disagree.
A. Issue 1: Did the Loss Arise Out of One Auto-Related Cause or Two Concurrent Causes?
26 In order to bring the negligent cause of the accident within the automobile exclusion in the CGL policy, the appellants argued that (i) loading constitutes use or operation of an automobile, or in the alternative (ii) driving was the proximate cause of the accident.
(1) Does “Loading” Constitute Use or Operation of a Motor Vehicle?
27 The appellants argued that loading constitutes “use or operation” of an automobile and that negligent loading occurred in this case.
28 However, the motions judge found that “loading” as such of the base plate was never undertaken by Mr. Zub. He inferred from the agreed statement of fact that Mr. Zub had placed the base plate on the tongue of the compressor’s frame as part of the clean-up process at the site and with no intention of leaving it there during transport, in effect he forgot to load it. What he did was, at most, a preliminary step prior to loading it on the automobile. The appellants submitted that the motions judge’s inference be overruled and replaced with the inference that Mr. Zub had in fact engaged in loading the base plate onto the automobile.
29 The agreed statement of fact allowed the trial judge to draw all reasonable inferences. On this issue he drew an inference that Mr. Zub had not loaded the plate into the automobile. This is a reasonable inference supported by the facts and this Court should not interfere with it.
(2) Driving as a Proximate Cause
30 In the alternative, the appellants claimed that the single dominant cause of the loss was driving the vehicle with an insecure load. In support of this position, they relied on the fact that Mr. Zub, the driver of the vehicle, pleaded guilty to the provincial offence of “driving with an insecure load”. Simply put, the basis of this argument is that but for the driving of the vehicle, the accident would not have occurred, therefore driving was the dominant cause.
31 However, it is equally true that the accident would not have happened had there been no negligence during the clean up of the work site. In these circumstances, Mr. Zub’s driving with an insecure load was the result of the two independent and concurrent acts of negligence identified by the motions judge (at para. 50):
...any non-auto-related negligence consists of Zub’s failure to clean-up the site properly by failing to store the base plate. By comparison, any auto-related negligence consists of Zub’s setting the vehicle in motion in those circumstances i.e. without having conducted even a cursory circle check of the unit.
32 In the further alternative, the appellants argued that Mr. Zub’s act of driving the vehicle was an independent intervening proximate cause that interrupted the “chain of causation” and rendered the automobile exclusion applicable. They relied upon Law, Union & Rock Insurance Co. v. Moore’s Taxi Ltd., [1960] S.C.R. 80, and Wu v. Malamas (1985), 21 D.L.R. (4th) 468 (B.C.C.A.). In my view, neither of these decisions supports the appellants’ position. Both of these cases were decided on the basis that there was only one act of negligence which caused the loss. In this appeal there were two acts creating two distinct duties, the duty to safely clean up the work site and the duty to ensure the automobile could be operated safely. These two separate acts of negligence, in combination, contributed to the accident.
33 In The Law of Torts (9th ed. 1998), Professor J. G. Fleming describes the modern approach to intervening causes, at p. 247:
Nowadays it is no longer open to serious question that the operation of an intervening force will not ordinarily clear a defendant from further responsibility, if it can fairly be considered a not abnormal incident of the risk created by him – if, as sometimes expressed, it is “part of the ordinary course of things”.
34 The conclusion that the use of the motor vehicle did not relieve responsibility is consistent with this modern approach on intervening causes. If the Contractor failed in its duty to adequately clean up the work site, liability will follow for damages caused by this negligence. (See Walker Estate v. York Finch General Hospital, [2001] 1 S.C.R. 647, 2001 SCC 23.)
35 As noted by the Court of Appeal, if separate companies had been responsible for site clean up and transportation, it would be clear that the failure to properly clean the site up was a cause of the accident. The fact that the same party cleaned the site and drove the vehicle does not alter this conclusion.
36 In any event, the utility of the “proximate cause” analysis with respect to insurance policies is questionable. In C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814, McLachlin J. (as she then was) stated (at p. 823):
The question of whether insurance applies to a loss should not depend on metaphysical debates as to which of various causes contributing to the accident was proximate. Apart from the apparent injustice of making indemnity dependent on such fine and contestable reasoning, such a test is calculated to produce disputed claims and litigation.
Although McLachlin J. was analysing insurance policies with respect to perils of the sea, her comments are equally applicable here. The courts below recognized that there were both auto-related and non-auto-related negligence. Furthermore, as the motions judge concluded, s. 267.1 of the Insurance Act recognizes that there may be concurrent causes. In such circumstances, it is undesirable to attempt to decide which of two concurrent causes was the “proximate” cause.
(3) Conclusion
37 The motions judge properly concluded that the accident was the result of two concurrent sources of causation. The cause of the accident was not solely the “use or operation” of the automobile. The work site negligence cannot be characterized as being part of the loading of the automobile. Nor was the use of the automobile the “proximate cause” of the accident. His conclusion in respect of causation is reasonable and supported by the law and by the agreed statement of fact, and should not be interfered with.
B. Issue 2: If the Loss Arose Out of Two Concurrent Causes, is Coverage Under the Commercial General Liability Policy Excluded by the Automobile Exclusion Clause in That Policy?
38 As there were two concurrent causes of the loss, the issue arises whether the general liability policy provided coverage notwithstanding that one of the causes (auto-related) was specifically excluded from the policy’s coverage.
39 The appellants submitted that if a loss is caused by concurrent causes, one covered by the policy and the other excluded by an exclusion clause, and the excluded peril is essential to the chain of causation leading to the loss, there is no coverage. The appellants relied on Ford Motor Co. of Canada Ltd. v. Prudential Assurance Co., [1959] S.C.R. 539, in support of this principle. In that case, Ford suffered property loss and business interruption as a result of a combination of causes, two of which were excluded from insurance coverage. The Court held that there was no coverage in that case. This conclusion was based on the interpretation of the following exclusion clause (at p. 541):
6. . . . There shall in no event be any liability hereunder in respect to
(c) Loss due to physical damage to the property insured caused by cessation of work or by interruption to process or business operations or by change in temperatures, whether liability in respect thereto is specifically assumed now or hereafter in relation to any other peril or not.
40 In my opinion, Ford does not provide a general principle of universal application as urged by the appellants. The exclusion clause in Ford expressly provided that all coverage would be excluded if liability were due to an excluded peril even if the loss was also due to another covered peril. Ford was decided on a careful analysis of the relevant facts and the wording of the exclusion clause at issue in that case. Ford says nothing more than that a properly framed exclusion clause can oust coverage. Whether a particular exclusion clause actually ousts coverage in a given case is a matter of interpretation.
41 The appellants also relied on Dominion Bridge Co. v. Toronto General Insurance Co., [1963] S.C.R. 362. Dominion Bridge is distinguishable from the case in this appeal as it dealt with one set of circumstances (negligent design) which gave rise to multiple causes of action (tort and breach of contract). Conversely, this appeal deals with a series of events that are separate causes contributing to the same loss.
42 The proposition relied upon by the appellants finds some support in a number of appellate level decisions. (See Charterhouse Properties Ltd. v. Laurentian Pacific Insurance Co., [1993] I.L.R. ¶1-2937 (B.C.C.A.); Lizotte v. Traders General Insurance Co., [1986] I.L.R. ¶1-2076 (B.C.C.A.); Clark’s Chick Hatchery Ltd. v. Commonwealth Insurance Co. (1982), 40 N.B.R. (2d) 87 (C.A.); and Goodman v. Royal Insurance Co. of Canada, [1997] 8 W.W.R. 69 (Man. C.A.), at pp. 78-79.) As I have earlier stated, the issue of exclusion is a matter of contractual interpretation. As such, each of these cases can be distinguished on its facts and are of no value to the appellants in this appeal.
43 To the extent the foregoing appellate cases were decided upon the general principle advocated by the appellants, the genesis for this principle is found in the Canadian case Ford and the English case Wayne Tank and Pump Co. v. Employers’ Liability Assurance Corp., [1973] 3 All E.R. 825 (C.A.). As already indicated, Ford does not stand for this general principle.
44 In Wayne Tank a fire was caused both by the dangerous goods used by the insured and the negligent acts of the insured’s employee. The insurance covered liability as a result of accident but excluded coverage for liability resulting from the condition of the goods. At issue before the English Court of Appeal was whether the exclusion clause in the insurance policy applied in these circumstances. The court held that the exclusion clause applied.
45 There were three sets of reasons. Lord Denning, M.R., and Roskill L.J., in separate reasons, supported the following analysis: if there are two causes of the loss, one of which is within the exclusion clause and one which is covered, the preferred analysis is to determine which cause is the effective or dominant cause. If the effective or dominant cause is within the exclusion, there will be no coverage. If there is not one dominant cause, but two equal causes, and if one of the causes is within the exception then the exclusion applies and coverage is denied. As both Lord Denning, M.R., and Roskill L.J. decided the case based on the dominant cause analysis, their comments regarding concurrent causes are clearly obiter dicta. However, Cairns L.J. decided the case based on the finding of concurrent causes and held that where there are two effective concurrent causes, if one is covered by the exclusion there is no coverage.
46 On review of the analysis in Wayne Tank, which had its roots in the field of maritime law, there is no compelling reason to favour exclusion of coverage where there are two concurrent causes, one of which is excluded from coverage. A presumption that coverage is excluded is inconsistent with the well-established principle in Canadian jurisprudence that exclusion clauses in insurance policies are to be interpreted narrowly and generally in favour of the insured in case of ambiguity in the wording (contra proferentem).
47 Separate from the shortcomings in the analysis in Wayne Tank, another compelling reason for rejecting the presumptive proposition advocated by the appellants is the fact that insurers have language available to them that would remove all ambiguity from the meaning of an exclusion clause in the event of concurrent causes. This can be accomplished by the insurer clearly specifying that if a loss is produced by an excluded peril, all coverage is ousted despite the fact that the loss may also have been caused by another, covered peril. Examples from case law indicate that insurers have in fact successfully used enforceable exculpatory language. See Ford, supra, and Pavlovic v. Economical Mutual Insurance Co. (1994), 28 C.C.L.I. (2d) 314, at p. 320, per Finch J.A. of the British Columbia Court of Appeal:
Applied to the circumstances of this case, the meaning of exclusion [clause] (12) is, at best, ambiguous. It leaves open the question whether the loss is excluded where seepage or leakage is a “contributing cause”, as opposed to the only cause. Apt language to achieve the end argued for by the insurer is seen in the policies considered in some other cases. Similar exclusion clauses have used language such as “cause directly or indirectly”, or “caused by, resulting from, contributed to or aggravated by”. One exclusion clause read:
We do not insure for such loss regardless of the cause of the excluded event, other causes of the loss, or whether other causes acted concurrently or in any sequence with the excluded event to produce the loss . . .
These examples simply show that it was possible for the insurer to choose language which would not have left the meaning of the exclusion clause open to doubt.
48 For the foregoing reasons, I decline to adopt the presumption that where there are concurrent causes, all coverage is ousted if one of the concurrent causes is an excluded peril. If an insurer wishes to oust coverage in cases where covered perils operate concurrently with excluded perils, all it has to do is expressly state it in the insurance policy.
49 Whether an exclusion clause applies in a particular case of concurrent causes is a matter of interpretation. This interpretation must be in accordance with the general principles of interpretation of insurance policies. These principles include, but are not limited to:
(1) the contra proferentem rule;
(2) the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and
(3) the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties.
(Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252, at p. 269)
50 With these principles in mind, the relevant exclusion clause in the CGL policy merits consideration. It provides:
This insurance does not apply to:
. . .
(e) (1) “Bodily injury” or “property damage” arising out of the ownership, use or operation by or on behalf of any Insured of:
(a) Any “automobile”; . . .
(2)“Bodily injury” or “property damage” with respect to which any motor vehicle liability policy is in effect or would be in effect but for its termination upon exhaustion of its limits or liability or is required by law to be in effect.
Obviously there are two distinct exclusion clauses relevant to this appeal. The first is clause (e)(1), which focusses on causation. The second is clause (e)(2), which focusses on the potential overlap of coverage by the CGL and automobile insurance policies.
(1) Exclusion Clause (e)(1)
51 In determining whether exclusion clause (e)(1) was triggered in this case, the Court should decide what is meant by the phrase “arising out of” the use or operation of a motor vehicle. The phrase “arises out of” was recently interpreted by this Court in the context of an enactment providing for statutory no-fault death and disability benefits in Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405. The decision gave a broad meaning to the phrase “arises out of” in the context of coverage.
52 It is clear however that Amos is distinguishable from the case at bar on the basis that the relevant provision in that case was a coverage clause, as opposed to an exclusion clause. It is well-established that, in the construction of insurance contracts, coverage provisions should be construed broadly and exclusion clauses narrowly. Amos is of no assistance in this appeal.
53 How then is the exclusion clause, and specifically the term “arising out of”, to be interpreted in this case? Does the term “arising out of” clearly indicate that in the event of concurrent causes, all coverage is ousted?
54 The motions judge held that there is nothing in the CGL policy to indicate that coverage for an insured risk would be rendered inoperative in the event that an expressly excluded risk constituted an additional cause of the injury. Like the Court of Appeal, I agree with this conclusion. In this regard, it can be said that the exclusion clause is ambiguous with respect to losses resulting from concurrent causes.
55 In the circumstances of this case, the loss arose partly from the use or operation of the automobile. Consequently, exclusion clause (e)(1) is triggered. However, the excluded use or operation of an automobile was not the only contributing cause. The failure to properly clean up the work site was a concurrent cause and a risk that was covered by the CGL policy. It follows that the exclusion clause is in play but only in respect to that portion of the loss that is attributable to the auto-related cause. This conclusion is consistent with the rule of construction that exclusion clauses are to be construed narrowly and the contra proferentem rule. It is also consistent with the earlier conclusion that if an insurer wishes to exclude coverage where the loss is concurrently caused by a covered peril and an excluded peril, the insurer must expressly state it.
56 The appellants argued that such an interpretation would require General Accident to cover a risk for which it did not collect a premium. That is not so. General Accident agreed to cover liability which arose from non-auto-related causes and accepted a premium for assuming this risk. The motions judge found, and I agree, that the negligent clean up of the work site was a non-auto-related cause of the injury. Absent express language to the contrary, the CGL policy should cover this risk, notwithstanding that a contributing cause (i.e. auto-related) was excluded from coverage. General Accident is being held liable only for that portion of the loss attributable to the insured risk – the insurer is not being held to provide coverage for a risk which it did not contemplate or for which no premium was received. To the contrary, if the insurer was not held liable on the wording of this clause, it would have collected a premium for a risk which it did not cover.
57 It is a principle of construction that where there are ambiguities, the reasonable expectations of the parties be given effect. This principle favours interpreting the term “arising out of the ownership, use or operation . . . of . . . [a]ny automobile” in the context of the CGL policy as applying only to that portion of the loss attributable to auto-related causes. The motions judge correctly held that while the Contractor in its capacity as owner of the automobile is immune from liability for pecuniary losses by virtue of s. 267.1 of the Insurance Act, the Contractor qua employer is not immune from liability for pecuniary losses to the extent that such losses are attributable to non-automobile-related negligence.
58 If the term “arising out of the ownership, use or operation . . . of . . . [a]ny automobile” was interpreted to exclude all coverage under the CGL policy, a gap in the Contractor’s insurance coverage would exist. In light of the circumstances in which the Contractor obtained insurance coverage in this case, it cannot be reasonably said that the Contractor expected there to be a gap in its coverage. Furthermore, General Accident agreed that the CGL policy was to be complementary with the automobile policy, which would not be so if the exclusion clause was interpreted as ousting all coverage under the CGL policy in the event of a concurrent auto-related cause of liability.
(2) Exclusion Clause (e)(2)
59 Having found that exclusion clause (e)(1) excludes only that portion of the loss attributable to the auto-related cause, we should consider whether clause (e)(2) excludes coverage for the portion of loss attributable to the non-auto-related cause. Clause (e)(2) excludes:
“Bodily injury” or “property damage” with respect to which any motor vehicle liability policy is in effect or would be in effect but for its termination upon exhaustion of its limits or liability or is required by law to be in effect.
60 It is a given that there is a motor vehicle policy “in effect”. This does not automatically mean that there is no coverage under the CGL policy. The extent to which the motor vehicle policy is “in effect” must be determined within the context of the Insurance Act and in accordance with the principle that exclusion clauses are to be given a narrow interpretation.
61 As found by the courts below, the Insurance Act allows plaintiffs to exercise an unfettered right to sue defendant owners, drivers and persons present at the scene of an accident for negligence other than that excluded by s. 267.1. Therefore, where both auto-related negligence and non-auto-related negligence of the same person contributed to the same bodily injury, there must be a percentage apportionment of fault to each type of negligence, just as there would be an apportionment if the injury were caused by two different people.
62 In these circumstances, the automobile policy cannot be said to be “in effect” with respect to pecuniary or non-pecuniary loss attributable to non-auto-related negligence. Thus, clause (e)(2) does not totally exclude coverage under the CGL policy. Rather, only that portion of the loss that is attributable to auto-related negligence is excluded by clause (e)(2).
(3) Conclusion
63 There are several reasons why the exclusion clauses should be interpreted narrowly in this case. It is consistent with the accepted principles of interpretation and a narrower interpretation is more consistent with the true intentions of the parties. As well, such an interpretation is consistent with and gives effect to s. 267.1 of the Insurance Act. For these reasons, I conclude that the CGL policy covers that portion of the loss attributable to non-auto-related negligence.
64 The motions judge outlined the manner in which the umbrella policy will cover excess loss in this case. This was not challenged and is left undisturbed.
IV. Disposition
65 At the conclusion of the hearing of this appeal, the Court dismissed the appeal with costs.
Appeal dismissed with costs.
Solicitors for the appellants: Stieber Berlach Gibbs, Toronto.
Solicitors for the respondents Tyler Derksen et al.: Carrell & Partners, Thunder Bay.
Solicitors for the respondents 539938 Ontario Limited, Roy’s Electric, Roy Zub, Douglas Zub and Joyce Zub (with respect to Wawanesa Automobile Policy Number 3556895): Lerner & Associates, Toronto.
Solicitor for the respondents 539938 Ontario Limited, Roy’s Electric, Roy Zub, Douglas Zub and Joyce Zub (in their uninsured capacity): Lawrence G. Phillips, Fort Frances.