Insurance Coverage for Negligent Parenting?

A new case has just come down that should be of interest where claims are made by infants or others under a disability and there is a third party claim against a family member for their alleged negligence relating to the incident, usually inadequate supervision.

Homeowner’s policies invariably contain an exclusion clause that is intended by the insurer to prevent such claims from falling within coverage for the allegedly negligent family member.  In the recent decision of Gill v Ivanhoe Cambridge, 2016 BCSC 252, Mr. Justice Voith refused to give effect to such an exclusion and has granted coverage to a father whose two year old son was injured at Metrotown when he found his way through a gap in the glass adjacent to an escalator, resulting in a fall to the level below and a significant injury.  He held that the intention of the exclusion was to prevent collusive claims among family members and that the claim at issue was not collusive.

Justice Voith examined the specific wording of the clause, found an ambiguity as to whether it was intended to apply to third party claims or only to direct claims by one family member against another, and resolved that ambiguity in favour of the insured father. Various entities were sued by the son through his litigation guardian, with those defendants making third party claims against the father based on negligent supervision.  With coverage now available to the father, one can see how that action may be more easily resolved with an insurer standing behind the father, as compared to the advancement of a third party claim where the father has no insurance coverage. The defendants would likely be forced to take the matter to judgment and then seek to enforce against the father (which may or may not bear results, depending on financial circumstances). This case supports a decision to issue third party proceedings where there may be negligence on the part of a plaintiff’s family member and it also makes clear that the third partying-defendant should encourage the third party family member to report the claim to their homeowner’s insurer and to list and disclose policy documents so that a remedy to enforce judgment against the insurer under section 25 of the Insurance Act can be pursued if necessary.

It is important to note that this decision turns on the specific wording of the exclusion clause in question and that different insurers will have different wordings for these exclusions. Some wordings may be found to be unambiguous and therefore would not be vulnerable to the precedential value of this decision.

The following excerpts from the decision set out the specific policy terms at issue and the key aspects of Justice Voith’s reasoning:

[9]  The Policy includes comprehensive personal liability coverage and contains policy limits of $1 million. In particular, the Policy includes the following relevant coverage and exclusion provisions:

Section II – Comprehensive Personal Liability

1.   Description of Coverages

. . .

1)   PERSONAL LIABILITY: To pay as compensatory damages on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured arising out of Bodily Injury or Property Damage anywhere in the world.

. . .

2.   Exclusions

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, [the “Family Exclusion”]

[10]  The Policy defines “Insured” to include the following:

The unqualified word Insured within the meaning of this Insurance is defined as:

a) the Named Insured;

b) if residents of the household, the spouse, the relatives of either, and any other person under the age of twenty-one (21) in the care, custody or control of the Insured;

The Purpose of the Family Exclusion

[53]  In instances where a court is faced with ambiguity about the meaning or ambit of an exclusion, the court can and will seek to ascertain the purpose or object of that exclusion and endeavour to interpret the wording of the provision in a manner that is consistent with its object; see Appel (Guardian ad litem of) v. Dominion of Canada General Insurance Co. (1997), 39 B.C.L.R. (3d) 113 at para. 44 (C.A.), relying on Wawanesa Mutual Insurance Company v. Bell, [1957] S.C.R. 581 at 583.

[54]  In this case, the purpose of the Family Exclusion is clear. That purpose has been considered on numerous occasions.

[55]  Many insurance policies that provide personal liability coverage contain an exclusion for claims between members of the insured’s household. The wording of these exclusions is not, as has been seen, uniform, but the unifying theme or element is language that excludes claims that arise among or between members of the same household. Various courts have commented on the purpose or policy reason for such exclusions.

[56]  In Appel, the Court of Appeal dealt with an exclusion which stated:

This policy does not apply to:

under Coverage E(1)

Personal Liability

1.   Bodily injury to you, or any person residing in your household, other than residence employees.

[57]  The Court, in addressing the purpose of the exclusion, said:

[46]  … the purpose of the exclusion clause in this Policy is to prevent named insured and family members “residing in the household” from making claims against each other. The perceived need for such protection may be the potential for collusive claims being advanced by such individuals.

[58]  Other courts have commented on the rationale for the Family Exclusion to similar effect. In Wawanesa Mutual Insurance Co. v. Hewson, 2004 SKCA 112 the Saskatchewan Court of Appeal examined an exclusion for “claims brought against you for: … bodily injury to you or to any person in your household other than an employee” and said:

[9]  Liability insurance is usually intended to provide indemnity against claims made by third parties, that is, persons who are not parties to, or have no interest in, the contract of insurance. Exclusion clauses, such as Exclusion (3) in this case, are intended to prevent collusive claims by members of the insured’s family and members of his household: Hilliker Liability Insurance Law in Canada (3d ed.) (Toronto: Butterworths, 1996) at pp. 254-57, Appel (Public Trustee of) v. Dominion of Canada General Insurance Co., [1998] 1 W.W.R. 592 (B.C.C.A.) at paras. 45 and 46, and Whirlpool Corp. v. Ziebert, 539 N.W. 2d 883 (U.S. Wis. S.C. 1995.)

[59]  In Bawden, the Court referred to, and relied on, the foregoing passage from Wawanesa; and concluded:

[82]  For all of the reasons set out above, Wawanesa has not met the onus of proving that the exclusion clause here unequivocally restricts the extent and scope of the coverage provided in the coverage provision in the event of an indirect claim for contribution and indemnity against David and Elizabeth.
[Emphasis in original.]

[60]  The Ontario Court of Appeal, in affirming the decision in Bawden, endorsed the purpose of the exclusion as framed by the motions judge at para. 10 of the judgment.

[61]  Economical seeks to extend the Family Exclusion to circumstances that have nothing to do with the intended object of such clauses. There is no prospect, in the present circumstances, of a “collusive claim” being raised by either Mr. Gill or his son. The claim that is being advanced against Mr. Gill is not a claim that was brought by his family or any member of his household.

[62]  The practical consequence of the Family Exclusion advanced by Economical would mean that if Mr. Gill, on the day his son was injured, was caring for both his son and his brother’s son, and both boys fell through the gap in the glass railing, the Policy would provide him with coverage against third party claims for failing to supervise his nephew, but not for an identical claim for failing to supervise his son.

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