The British Columbia Court of Appeal has just released a decision pertaining to the interpretation of the “family member exclusion” found in the typical homeowner’s policy. In Economical Mutual Insurance Company v. Gill, 2017 BCCA 351, the Court considered whether a homeowner’s insurance policy provided an insured parent with liability coverage in the face of a claim arising indirectly from a personal injury action brought by that parent’s own child.
The facts of this case are as follows. Mr. Gill had brought his infant son to a mall, where his son sustained serious injuries as a result of falling approximately 25 feet through an opening near an escalator. His son commenced a tort action against the mall’s owner as well as other defendants. The defendants thereafter issued third party notices against Mr. Gill, seeking contribution and indemnity on the basis that he was negligent in supervising his son.
Mr. Gill reported the third party claims to his insurer, Economical. Economical denied coverage, relying on the family member exclusion:
- EXCLUSIONS
COVERAGE “E”
a) PERSONAL LIABILITY: There is no coverage in this Section for claims arising from:
…
5) Bodily Injury to the Insured or to any person residing in the Insured’s household other than a Residence Employee;
[Emphasis added.]
Mr. Gill then issued his own third party notice against Economical. Economical brought the issue before the Court by way of a Rule 9-7 Summary Trial application to have Mr. Gill’s third party notice struck.
Summary Trial Decision
In a decision indexed as Gill v. Ivanhoe Cambridge et al, 2016 BCSC 252, Mr. Justice Voith refused to give effect to the family member exclusion, finding in favour of coverage of Mr. Gill. Mr. Justice Voith held that the intention of the family member exclusion was to prevent collusive claims among family members and that the claim at issue, which arose from third party proceedings, was not potentially collusive and therefore covered.
Mr. Justice Voith further examined the specific wording of the clause and the policy as a whole and found an ambiguity as to whether the exclusion was intended to apply to indirect claims, such as third party claims, or only to direct claims by one family member against another. He then resolved that ambiguity in favour of Mr. Gill.
In arriving at his decision, Voith J. considered the insurer’s argument that the words “arising from” in the exclusion were broad enough to account for both direct claims and indirect claims (i.e. third party claims) but noted that in other provisions found in the policy (e.g. the mold and terrorism exclusions) the words “arising directly or indirectly” were used to further qualify the words “arising from”. Mr. Justice Voith appeared to find that in the absence of those further qualifying words (“arising directly or indirectly”), there was no clear intent to broaden the scope of the exclusion to indirect claims such as third party proceedings.
Court of Appeal Decision
The Court of Appeal disagreed and reversed Voith J.’s decision. Mr. Justice Frankel, writing for the Court, reviewed the relevant legal principles governing the interpretation of insurance policies. He highlighted that rules of construction exist to resolve ambiguity, but do not operate to create ambiguity where there is none in the first place, and that courts must be cautious against searching for or creating ambiguity where none exists.
Addressing the clause in question, Mr. Justice Frankel found that it was not ambiguous. He agreed with Economical that the family law exclusion excluded coverage for all claims arising from bodily injury to any person residing in Mr. Gill’s household, notwithstanding the fact that the exclusion clause did not contain the modifying phrase “directly or indirectly”:
[29] The fact that the words “directly or indirectly” appear elsewhere in the policy does not give rise to uncertainty with respect to the meaning of the clause in issue.
And further:
[32] An average person reading the policy would understand the family member exclusion to mean that an insured does not have coverage for any claims arising from bodily injury to a family member who resides in the insured’s household. The absence of the words “directly or indirectly” would not cause such a person to find that clause ambiguous or to have doubts with respect to what is or is not excluded.
Mr. Justice Frankel further provided that the words “directly or indirectly” are used in insurance policies to exclude coverage when there are concurrent causes, one of which is covered, and the other of which is excluded. He distinguished the current exclusion, stating that the use of the words “directly or indirectly” found elsewhere in the policy in the mold and terrorism exclusions was readily understandable, as those were cause-based exclusions and not person-based exclusions.
Summary
The Court of Appeal confirmed that the wording of the family member exclusion as it appeared in the Economical policy is unambiguous and applies to both direct and indirect claims arising from bodily injury to members of the insured’s household. Insurers should be cautioned, however, that different wording might not lead to the same result. By way of example, where an exclusion states there is no coverage for “claims for”, as opposed to “claims arising from”, the courts may find coverage for third party claims (see Bawden v. Wawanesa Mutual Insurance Company, 2013 ONCA 717).
In what should be viewed as a further win for insurers, the Court of Appeal reaffirmed that a court should not go looking for ambiguity in insurance policies where none exists, and that ambiguity does not necessarily arise simply because the same modifying language is not employed in all sections or clauses of an insurance policy.
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