The recent decision of McLean v. Canadian Premier Life Insurance Company 2012 BCSC 163 affirms the importance of well defined policy terms. That action arose out of a claim under a life insurance policy issued by Canadian Premier Life Insurance Company through Sears Canada Inc. (the “Policy”).  The Plaintiff’s husband, Mark McLean, was tragically killed in a plane crash and a claim was made for accidental death benefits of $1,000,000.00 under the Policy.  The Insurer denied coverage stating that the circumstances of Mr. McLean’s death did not fall within coverage available under the accidental death benefit rider.

The accidental death benefit rider provided coverage if:

.. a Covered Person suffers a Loss as a direct result of a collision, crash or sinking of a duly licensed Common Carrier while riding as a fare paying passenger inside such Common Carrier, we will pay the applicable benefit stated on the Summary of Coverage page.

The issue to be determined at trial was whether Mr. McLean was indeed a passenger of a “common carrier” at the time of the accident.  The Policy defined “common carrier” as follows:

COMMON CARRIER means a public conveyance which is:

1.         licensed to transport passengers for hire; and

2.         provided and operated (a) for regular passenger service by land, water or air, and (b) on a regular passenger route with a definite regular schedule of departures and arrivals between established and recognized points of departure and arrival; and

3.         provided and operated under a Common Carrier license at the time of the Loss.

At the time of the accident Mr. McLean was on a Pacific Coastal Airlines (“Pacific Coastal”) plane which had been chartered by his employer to transport 6 employees to a remote logging location.  The flight had been arranged for and paid for by Mr. McLean’s employer, it was only carrying employees and was not available to any member of the public.  The employer had given instructions to Pacific Coastal as to the destination, the departure time and the names of the employees who were to travel on the flight.  The flight’s destination was not a regular destination of Pacific Coastal and they would only fly there when specifically chartered to do so.

Pacific Coastal was licensed to operate aircraft as “a domestic air carrier” under the Canada Transportation Act and the Aeronautics Act.  In addition all of its aircrafts were registered and had been assigned identification numbers under the Aeronautics Act.

The Plaintiff argued that the license to operate as a “domestic air carrier” under the Canada Transportation Act and the Aeronautics Act had essentially the same meaning as the phrase “common carrier” as the phrase is defined in the Policy.  The Plaintiff also argued that:

• The language in the Policy was ambiguous.  In particular, the use of the term “common carrier” in the Policy was confusing as it applied to both the operating company and the aircraft itself;
• The words “common carrier” as defined in the accidental death benefit rider must refer to the Pacific Coastal as the company providing the carriage and not to the aircraft itself;
• Further, Pacific Coastal itself by virtue of operating regularly scheduled passenger services met the definition of “common carrier” under the Policy as it was a commercial enterprise holding itself out of the public as willing to transport goods or passengers for a fee.
• The words “fare paying passenger” in the coverage provisions must be taken to mean that the Plaintiff’s fare was paid even though he did not pay for it himself.

The Defendant argued that a proper interpretation of the Policy did not reveal any ambiguity and that the terms of the Policy clearly provide that the meaning of the words “common carrier” to be a public conveyance rather than a business entity of some type.  The Defendant argued that this interpretation was supported by reviewing the coverage terms as a whole.  For instance:

• The Policy provides for a benefit to be paid if a loss is suffered “… while riding as a fare paying passenger inside a common carrier”.  The Defendant argued that in this provisions that the words “common carrier” clearly refer to a means of conveyance in this case, the aircraft.
• The Policy also referred to the “collision, crash or sinking” of a duly licensed common carrier which again would suggest the common carrier was a means of conveyance.

The Court accepted the Defendants argument holding that:

[37]         In my view, the definition of “common carrier” under the accidental death benefit rider means the aircraft utilized for the charter flight.  And even though that aircraft was available at times should Pacific Coastal so direct, to operate within the definition of “common carrier” and to be within terms of the accidental death benefit rider, it was not operating within that definition at the time of the accident.

[38]         In the result, I find that the words of the contract are clear and unambiguous.  By the terms of the accidental death benefit rider the words “common carrier” mean a public conveyance such as an aircraft, provided at the time of the accident it was operating on a regular scheduled passenger service between defined points and available to members of the public.

[39]         In this case, the aircraft was not operating as a regularly scheduled airline and was instead under a charter restricted to employees or contractors of Seaspan.  It was a flight where Seaspan determined who the passengers were, the time of the flight and its destination.  Thus, it did not fit within the definition of “common carrier” under the accidental death benefit rider.

Ultimately the Court dismissed the action in its entirety finding the death of Mr. McLean did not occur within the terms of the accidental death benefit rider.

This case is a good example about how clearly worded definitions can affect the outcome of a coverage dispute.  Where the Court does not have to resort to unnecessary interpretations and stretching the meaning of words they are able to reach a common sense interpretation of the policy involved.

The recent decision from the Ontario Court of Appeal in Jones v Tsige  has generated much attention from the media and legal observers heralding a new basis for recovery of damages for invasion of privacy. The Court of Appeal  has recognized under the common law in Ontario the  tort of  ”intrusion upon  seclusion” which includes breach of an individual’s informational privacy.  Whether or not this decision will be followed in other provinces will depend on the statutory privacy protections in place in the province and the existence of a statutory right of recovery for damages for breach of privacy.  In B.C., both the Privacy Act and the Personal Information Protection Act create statutory causes of action for breach of privacy and therefore the B.C. courts may be reluctant to adopt the common law tort recognized in Ontario. Read the rest of this entry »

At long last the Lieutenant Governor in Council has provided Regulations enacting the changes to the Insurance Act (the “Act”). Executive Council orders were announced on December 2, 2011 formally enacting the Insurance Amendment Act. The new Act contains significant amendments and the new Regulations contain provisions implementing the reforms which, subject to some transitional provisions, will come into force on July 1, 2012.

The reformed Act and these Regulations have been a long time coming. In 2003 the Supreme Court of Canada in KP Pacific v. Guardian Insurance declared British Columbia’s Insurance Act to be “outmoded” leading to “unproductive, wasteful litigation about technicalities” and urged the legislatures to “rectify this situation by amending the Insurance Acts”.

In October 2009 the British Columbia legislature passed the Insurance Amendment Act 2009 which was the first comprehensive review and revision of the Insurance Act in more than 40 years. Highlights of the new Act include:

•  Eliminating the Fire Part of the previous Act;
•  The limitation period for claims against insurers under the general provisions of the Act, now being 2 years from the date the insured knew or ought to have known of a loss or from the date the cause of action against the insurer arose;
•  The limitation period under Accident and Sickness and Life Insurance Polices to be, in actions involving insurance proceeds payable upon a person’s death, the earlier of either 2 years from the furnishing of a proof of claim or 6 years from the date of death. For other actions, not later than 2 years after the date the claimant knew or ought to have known of the first instance of the loss or occurrence giving rise to the claim. In regards to insurance monies payable on a periodic basis, 2 years after the date the next payment would have been payable;
• Allowing a 30 day grace period for payment of overdue premiums in life and health insurance contracts;
• Improved dispute resolution mechanisms including a requirement that insurers put in place an internal complaint resolution procedure;
• Requiring insurers to become members of an ombudsman service organization for the purpose of resolving disputes.

The Regulations implementing the Act contain several key components in terms of implementing the above key changes as well as transitional provisions. The substantive provisions of the Regulations provide:

Electronic Communications

While the Act allows the service of documents under the Electronic Transaction Act, the Regulations provide that the Electronic Transaction Act does not apply in respect to an insurer’s notice terminating a contract under either a statutory condition or for non-payment of premiums. In those circumstances service of documents has to be done in accordance with the Act, i.e. personally or by registered mail.

Notification of Dispute Resolution Processes

In general, the dispute resolution processes set out in the Act and Regulations are those formerly referred to as the appraisal process.

The Regulations require an insurer to give written notice to an insured of the availability of the dispute resolution process applicable to disagreements over the value of the insured property, the value of the property saved, the nature and extent of the repairs or replacements required, or if made, their adequacy or the amount of loss or damage or any other condition of the Policy.

The Regulations require an insurer to give written notice to an insured of the availability of the dispute resolution process at one of two points in time. The first, within 10 days after the insurer determines that there is a dispute between themselves and the insured over matters to which the dispute resolution process would apply. The second, within 70 days after the insured submits a proof of loss if at the time the insurer has not yet made a decision in respect of a matter which would be subject to the dispute resolution process.

Notification of Limitation Periods

The Regulations provide that notification of the statutory limitation periods must be given at two points in time: (a) at the time or within 5 business days after the insurer denies liability for all or part of the claim; and (b) at or within 10 business days after the first anniversary of the date the insurer receives a claim.

However, the requirement for notification does not apply if the insurer has already adjusted the loss acceptably to the claimant or settled the claim. Further, an insurer is not required to give notices to a claimant who is represented by legal counsel.

The Regulations do not require an insurer to advise as to the date of the limitation period will expire, but rather just what the applicable statutory limitation period provides.

If an insurer fails to give the required notice the running of time with respect to the applicable limitation date is suspended. The limitation date only starts running on the date notice is given or a date that would cause the limitation period to exceed 6 years after the date the cause of action against the insurer arose. There is no provision for discretion on the part of a trial judge in regards to the suspension of the limitation period.

Exclusion of Statutory Conditions

The Regulations define a number of classes of insurance to which the Statutory Conditions set out in the General Provisions of the Act do not apply, namely; aircraft insurance, boiler and machinery insurance, credit insurance, credit protection insurance, hail insurance, mortgage insurance, product warranty insurance, title insurance, travel insurance, and vehicle warranty insurance.

Permitted Exclusions

The Regulations also set out the permissible fire exclusions as:

(a) Generally those related to an intentional criminal act or omission of an insured; and,

(b) Riot, civil commotion, war, invasion, act of a foreign enemy, hostilities, civil war, rebellion, revolution, insurrection or military power.

As expected, the permitted exclusions do not include fire following earthquake. However, they do include terrorism, albeit only for policies applicable to property that is not used for a residential purpose, i.e. commercial policies.

In addition the Regulations provide that a policy must not contain an exclusion for loss or damage by fire that occurs when the insured property is vacant for a period of less than 30 days.

Recovery by Innocent Persons

The provisions relating to the rights of innocent co-insured individuals to recover damages under a policy was brought into force in June 2011. However, for greater cohesion, the Regulations re-enact these provisions.

The Regulations provide that the protection for innocent co-insureds only extend to natural persons. In addition, in order to avail themselves of this protection, innocent co-insureds must cooperate with the insurer in respect of the investigation of the loss including submitting to an examination under oath and producing relevant documents.

Cooling off Period

The Regulations provide for a cooling off period in terms of life and accident and sickness contracts. In this regard a person who purchases a contract of life or accident and sickness insurance may rescind it within 10 days after receiving the policy or within a longer period specified within the policy.

Transitional Regulations for Part 2 General Provisions

The Regulations provide for the Act to come into force on July 1, 2012 so as to be coordinated with the implementation of Alberta’s new Insurance Act. A further 6 month transitional period until January 1, 2013 is provided to insurers to allow them to continue to use their existing license insurance classes for reporting and business authorization purposes.

In addition the transition sections of the Act state that certain sections of the Act do not come in force in regards to a contract which is in effect on July 1, 2012 and only come into force the date the contract is renewed or replaced. These sections include requirements for certain policy wordings, time for payment of claims, statutory conditions, limitation of liability clauses, exclusions from coverage and fire peril exclusions.

The dispute resolution portions of the Act do not apply to a contract in respect of the claim if an insurer has already given notice under the appraisal process before July 1, 2012.

Under the Regulations certain provisions of the Act do not apply to a contract in respect of loss or damage covered by the contract if the loss or damage occurs before July 1, 2012, namely, postponement of the limitation period, new 2 year limitation periods and the recovery by innocent persons provisions.

Conclusion

It has taken the British Columbia Legislature until now to rectify the “outmoded paradigm incapable of coherently addressing the modern multi-peril policy“ [KP Pacific] but with these Regulations and an enactment date of July 1, 2012 for the new Act, the insurance industry in British Columbia is, at long last, close to having a modern legal framework regulating contracts of insurance.

In the recent decision of British Columbia Medical Association v. Aviva Insurance Company of Canada 2011 BCSC 1399 the Court addressed the duty to defend in the context of coverage for a defamation claim under a CGL policy and the right of an insurer to appoint and instruct defence counsel.

COVERAGE

The British Columbia Medical Association (“BCMA”) is a voluntary association of British Columbia doctors, residents and students and acts as a negotiating body for various issues related to physician compensation. BCMA had been insured with Aviva Insurance Company of Canada (“Aviva”) since 2002 under 3 separate CGL policies (collectively the “Policy”). The Policy was a standard form which contained coverage for claims alleging libel slander or disparagement. In addition it had exclusions for knowingly violating the rights of another and publication with knowledge of falsity.

The BCMA sought coverage for an action brought by a Dr. Caroline Wang against the BCMA and various individual directors (who were also insured under the policies) in which she alleged that the defendants had defamed her as part of a “campaign of vilification” with the direct intent to injure her and with full knowledge of the falsity of their statements.

Aviva took the position that, given the allegations of intentional falsehood, there was no coverage under the Policy. BCMA argued that the pleadings supported a claim against them in defamation even absent a finding of intentional wrongdoing. In regards to the tort of defamation the Court noted that:

[48] Defamation is a tort of strict liability, and in a defamation case, unless there is a plea of privilege or fair comment, the law looks at the tendency and consequences of the publication, rather than the motive or intention of the publisher. The court is not concerned with “what the motive of the person publishing the libel was, or whether he intended it to have libellous meaning or not” [cites omitted]

There was no dispute as to the general principles concerning the interpretation of insurance polices, and the Court noted that:

• The pleadings govern the duty to provide a defence;
•  An insurer, under a liability policy stating a duty to defend, is required to provide for a defence where facts alleged in the pleadings, if proven to be true, could require the insurer to indemnify the insured for the claim. The duty is triggered by the mere possibility that a claim within the policy may succeed; and,
•  In this regard, it is the true nature of the substance of the claim that is to be determined, not the particular labels used by the pleader.

The Court referred to the Supreme Court of Canada in Non-Marine Underwriters v. Scalera 2000 SCC 24 (“Scalera”) which outlined the following 3-step approach to be applied in determining whether a duty to defend arises in the context of an intentional act:

1.  The Court is to determine if the plaintiff’s legal allegations are properly pleaded and in doing so the Court is to look beyond the choice of labels and examine the substance of the allegations;
2. The Court must determine if any of the claims are entirely derivative in nature. Where the pleadings are found to contain properly pleaded allegations of both intentional and non-intentional torts, the Court must decide whether the harm allegedly inflicted by the negligent conduct is derivative of that cause by the intentional conduct; and,
3.  The Court must determine whether there are any properly pleaded, non-derivative claims that could fall under the policy’s coverage.

Aviva argued that all of the pleadings must be taken as true and that the gravamen of the plaintiff’s complaint was that the individual intentional actions to injure her were part of an organized effort to cause her harm. Aviva placed great emphasis on the fact that in the underlying pleadings there were no alternative allegations as to negligence. Aviva went on to argue that in determining coverage a Court could not pick and choose what factual assumptions in the underlying pleadings were assumed to be true. The Court rejected this argument and went on to hold that:

[60] In my view, Aviva’s contention that, for purposes of the present analysis, the court must proceed on the assumption that all the facts in the alleged underlying Claim will be made out is overly restrictive. To my mind, it is also inconsistent with the principle reiterated by the court in Progressive that a duty to defend exists if there is a possibility that the claims could fall within the insurance coverage. I think that it is implicit in that test that in considering the issue, the court should address possible outcomes at trial based upon the claims alleged in the statement of claim. In other words, in order to determine if there is a possibility of coverage, the court should consider the possibility that some but not all of the plaintiff’s allegations will succeed at trial.

Applying the Scalera test, the Court focused on whether the defamation claims are derivative and ultimately held that “in the present case it cannot be said that the plea of defamation is in any way subservient to the allegations of intentional misconduct. Rather, those allegations can be seen as aggravating factors with respect to the defamation.” The Court went on to note that the elements of a defamation claim do not require proof of conduct that proves intent to injure. As such, the Court stated that the allegations of intentional falsehood, while related, were sufficiently disparate such that it cannot be said that the defamation was derivative of the alleged intentional act. Importantly the Court noted that if the allegations of intent to injure and knowing publication of falsehood were removed, sufficient facts remained to support a pleading of defamation as a plaintiff alleging defamation does not have to establish that the defendant had any level of knowledge or blameworthy mental state.

Therefore the Court held that the defamation plea was a properly plead non-derivative claim that could potentially trigger indemnity if it were to succeed at trial. Accordingly the Court held that Aviva had a duty to defend in the underlying action.

CONDUCT OF DEFENCE

With regards to the conduct of the defence the Court noted that in general when an insurer defends against a claim it has a right to control the defence including the right to appoint and instruct counsel. However the right of the insurer to control the defence is not absolute. In particular, in circumstances where a reasonable apprehension of a conflict of interest arise it is possible that the right to appoint and instruct counsel does not rest with the insurer.  However, it was noted that the mere fact that an insurer had reserved their rights is not, in and of itself, sufficient to give rise to such a perceived conflict of interest.

The conflict in this action involved the fact that coverage questions would depend on aspects of BCMA’s conduct at issue in the litigation and in particular the intention, knowledge, and purpose of the defendants.  Given that their knowledge, purpose and intention would be a central issue at the trial of the underlying action the conflict presented between the interest of Aviva and BCMA was “too substantial to ignore”. As such, the Court held that Aviva was not entitled to exercise any right to control the defence of the BCMA and ordered that the BCMA were permitted to conduct the defence to this action with legal counsel of their choosing, to be paid for by Aviva , and that counsel chosen by BCMA was not required to report to Aviva with respect to any matters bearing on the issue of liability.

SUMMARY

While it will be rare that a pleading does not contain alternative pleas of negligence and advances only an intentional act,  this decision illustrates how a Court can use the Scalera analysis to find coverage for such a clearly plead intentional act where, by the nature of the alleged underlying tort, it is possible to have liability absent the intentional act.

Further commentary on this decision and on defamation issues generally can be found in Alexander Holburn’s Defamation Law Blog: www.bcdefamationlaw.com

John Newton owned and operated a website in British Columbia in which he commented about various issues including free speech and the internet.  One of the articles he posted was titled “Free Speech in Canada” and within this article were hyperlinks to other websites which contained allegedly defamatory information about Mr. Wayne Crookes.  Mr. Crookes sued Mr. Newton arguing that by that putting hyperlinks on his website connecting to defamatory material he in turn had “published” the defamatory material.  At the time of the lawsuit Mr. Newton’s website containing the hyperlinks had been “viewed” 1,788 times although there was no evidence as to whether, or how often the hyperlinks themselves had been used.

It is well established that a claim for defamation requires that a plaintiff prove publication of defamatory words.   Both the British Columbia Supreme Court and Court of Appeal had held that the hyperlinks themselves did not constitute republication of the defamation and dismissed the lawsuit against Mr. Newton.

The Supreme Court of Canada framed the issue to be decided as simply “whether hyperlinks that connect to allegedly defamatory material can be said to ‘publish’ that material”.  In writing for the majority Madam Justice Abella ultimately concluded that “hyperlinking is not, “in and of itself, publication.”

Madam Justice Abella discussed in some detail the varied nature of a hyperlink.  She commented that hyperlinks are merely a reference, and that referencing on its own does not involve exerting control over the content to which is linked.  She stated that, although a person choosing to insert a hyperlink might facilitate the transfer of information (which she noted was a traditional hallmark of publication), when a person follows a link they are leaving one source and moving on to the other.  Accordingly, in her view, it was the actual creator or poster of the defamatory words in the secondary material who is “publishing” when a person follows a hyperlink to that content.  She commented that the ease by which with the referenced content can be accessed does not change the fact that, by hyperlinking, an individual is referring the reader to other, separate content.  She noted that, by their nature, hyperlinks are content neutral:

[30]  Hyperlinks thus share the same relationship with the content to which they refer as do references.  Both communicate that something exists, but do not, by themselves, communicate its content.  And they both require some act on the part of a third party before he or she gains access to the content.  The fact that access to that content is far easier with hyperlinks than with footnotes does not change the reality that a hyperlink, by itself, is content neutral — it expresses no opinion, nor does it have any control over, the content to which it refers.

Madame Justice Abella also commented upon the importance of hyperlinks to the internet as a whole and noted it has been stated that without hyperlinks “the web would be a library without a catalogue: full of information, but with no sure means of finding it” and accordingly  hyperlinks are critical to the internet’s capacity to disseminate information.  Further, that limiting hyperlinks usefulness by subjecting them to a traditional publication rule would have the effect of seriously restricting the flow of information on the internet.  Given the core significance the role of hyperlinking has to the internet, Madam Justice Abella stated a decision that a hyperlink constitutes publication risked impairing its whole functioning and that  “[s]trict application of the publication rule in these circumstances would be like trying to fit a square archaic peg into the hexagonal hole of modernity.”

As such she ultimately held that making reference to the existence and/or location of content by a hyperlink or otherwise, without more, is not publication of that content.  She went on to hold that only when a hyperlinker presents content from the hyperlinked material in a way that actually repeats the defamatory content should that content be considered to be “published” by the hyperlinker.

In concurring reasons Chief Justice McLachlin and Mr. Justice Fish agreed with the principle that a mere general reference to a website by way of a hyperlink was not enough to find publication.  However, they would go further than Madam Justice Abella with regards to when a hyperlink would constitute publication.  Madam Justice Abella’s reasons were that hyperlinking is only publication if the actual content of the defamatory material is reproduced.  Chief Justice McLachlin and Mr. Justice Fish would consider a hyperlink to constitute publication if, read contextually the text that includes the hyperlink constitutes adoption or endorsement of the specific content it links to.

Alternate concurring reasons were written by Madam Justice Deschamps who disagreed with the majority opinion that a mere hyperlink does not constitutes publication.  She would prefer a more nuanced approach in which reference to defamatory content in a hyperlink could be publication if the poster “deliberately”, by playing more than a passive role,  makes the defamatory information “readily available” in a comprehensible form.  In determining whether hyperlinked information is readily available, a court would have to consider a number of factors, including whether the hyperlink is user-activated or automatic, whether it is a direct or indirect link, and whether the linked information is available to the general public.

The Supreme Court of Canada decision of Crookes v. Newton  illustrates the court striking  a balance between the protection of individuals reputations and the use of the internet as a medium for public discourse and brings much needed clarity given the role the internet can play in disseminating defamatory material

The last thing Surinder Rattan expected for a birthday gift was a lawsuit. Unfortunately that is exactly what he received. In celebration of his 50th birthday, Surinder Rattan’s family threw a party and invited some of his former schoolmates, including Mr. Hiebert and Mr. Braun. Mr. Heibert and Mr. Braun arrived together, some hours after the party had started and the evidence is conflicted on how much and what kind of alcohol Mr. Heibert consumed at the party, in whose presence he consumed it and who knew of his resulting condition.

Mr. Heibert and Mr. Braun subsequently left the party together and shortly thereafter Mr. Heibert drove his truck through a stop sign, hitting a vehicle in which the three Plaintiffs were riding as passengers. Mr. Heibert’s blood alcohol level was ultimately calculated to be more than three times the legal limit for driving.

Mr. Rattan, among others, was named in the subsequent lawsuit with the allegations being that he was negligent in failing to supervise the amount of alcohol Mr. Hiebert was served and consumed at the gathering, and in failing  to take steps to ensure that upon leaving the gathering Mr. Hiebert would not operate a motor vehicle.

Mr. Rattan brought a summary trial application to have the claim against him dismissed, arguing that he could have no liability to the Plaintiffs arising out of the fact that Mr. Hiebert had consumed alcohol at his home. Mr. Rattan argued that the effect of the Supreme Court of Canada decision in Childs v. Desormeaux, [2006] I.S.C.R. 643 was that he owed no duty to monitor Mr. Hiebert’s alcohol intake while at his house, or to take any steps to protect other users of the highways when Mr. Hiebert proposed to drive away from his house.

In Childs, the Supreme Court of Canada did not find a duty of care between a social host and a third party who had been injured in a motor vehicle accident involving a party guest.  However, despite Mr. Rattan’s argument, the Court  did not go so far as to say that a social host categorically could not have a duty of care to third parties. What the Supreme Court decided was that as a matter of foreseeability and proximity, just hosting a social party where alcohol is served does not entail a duty of care between the social host and a third party injured by a party guest. There has to be “something more” to engender a duty of care, as Madam Justice McLachlin stated:

“I conclude that hosting a party at which alcohol is served does not, without more, establish the degree of proximity required to give rise to a duty of care on the hosts to third-party highway users who may be injured by an intoxicated guest.”

Contrary to Mr. Rattan’s argument, the Childs decision does not eliminate the possibility that a duty of care might arise out of social host circumstances but rather, notes that “something more” than merely hosting a party at which alcohol is served is required to create a duty of care on the host to members of the public who might be affected by a guest’s conduct.

In addressing the “something more” requirement the Court in Rattan noted that the Childs decision summarized three situations where courts have in the past imposed positive duties to act: where a defendant has intentionally attracted and invited third parties to inherent and obvious risks created or controlled by the defendant; where there is a paternalistic, supervisory or controlling relationship between defendant and plaintiff; and where the defendant is engaged in a public function or commercial enterprise that implies responsibility to the public.

While the Court accepted that Mr. Rattan’s situation did not fit comfortably into any of those three situations, it went on to state that these were not strict legal categories but rather served to elucidate factors which could lead to a positive duty to act. The Court noted that a common factor in each of those factors was the social host’s “material role in the creation or management of the risk” and further a “reasonable reliance” on the social host to monitor guests’ alcohol intake or prevent intoxicated guests from driving.

In the circumstance of the Rattan party the Court stated that there was a great deal of conflicting evidence on what Mr. Rattan knew or ought to have known about Mr. Heibert’s level of sobriety when he drove way from the party. Accordingly the Court held that this was a case where the “findings of fact necessary to determine if a duty of care arose in the circumstances should not be made on affidavits, but rather should be made by a trier of fact who has had the advantage of observing and weighing the evidence of the witnesses in direct as well as cross-examination” and dismissed Mr. Rattan’s summary trial application.

Mr. Rattan had commenced third party proceedings against Mr. Braun, alleging that if a duty of care arose for him then it too arose for Mr. Braun. Mr. Braun brought a summary trial application to have the third party action against him dismissed. The Court considered the threshold question of whether a duty of care between Mr. Braun and the Plaintiff arose in the circumstances. The Court ultimately dismissed the third party action against the Plaintiff, holding that:

[66] The language in Childs that might allow a court to conclude that a social host owes a duty of care to highway users injured by a driver who becomes impaired as a guest of the host does not go so far as to admit the possibility of a duty on a companion or fellow traveler who does no more than observe the risky behavior of the drinking guest, and perhaps acquiesce to an extent in the risk by drinking with and then accepting a ride home from the party with the drunken guest.

[67] If the categories of negligence are not closed, then neither are the possibilities that someone might be found to owe a duty of care to another on the basis that he or she somehow assisted in the creation of the circumstances giving rise to a duty of care, or encouraged a principal tortfeasor to engage in conduct that would give rise to a duty of care.

[68] I have examined the evidence for something that would support an argument that such a duty could arise here, without success.

[69] The defendant Rattan seeks to sustain his claims against Mr. Braun by arguing that if he had a duty to monitor Mr. Hiebert’s alcohol intake at the party, or to intervene to prevent Mr. Hiebert from driving drunk, then so too did Mr. Braun. That argument seems to me to go more to the standard of care if duty were established, and not to the existence of the duty.

[70] On the evidence presented, I can see no basis on which a duty of care can be imposed on Mr. Braun. Allowing for evidence that might be available at trial, but not on summary trial (the evidence of Baljinder Rattan), I see no basis on which a duty of care can be imposed on Mr. Braun.

This decision is a good reminder that the door to social host liability is not entirely closed. If  a social host were to personally undertake to monitor alcohol consumption or prevent intoxicated guests from driving, it remains possible that the host could incur liability to third parties injured by the guests. Whether the events which took place at  Mr. Rattan’s 50th birthday party constitute sufficient circumstances to warrant the imposition of such a duty of care remain to be decided at the full trial of this matter.

The Court of Appeal, in the recent decision of Saanich (District) v. Aviva Insurance Company of Canada 2011 BCCA 391, addresses the test for finding whether an additional named insured’s liability “arises out of the named insured’s operations or activities”.

The District of Saanich operated a recreation centre and entered into a rental contract with the Pacific Rim Field Lacrosse Association (Lacrosse Association) to allow them use of a specified area of the recreation centre for lacrosse practice. On November 6, 2007 Mr. Wright attended at recreation centre for a dog obedience class and while on the premises was hit in the head with a lacrosse ball. Mr. Wright brought an action against the Lacrosse Association and Saanich.  This lawsuit plead that the Lacrosse Association and Saanich were occupier’s of the recreation centre within the meaning of the Occupier’s Liability Act and also alleges negligence against both of them.

Aviva insured the Pacific Lacrosse Association for bodily injury and property damage arising out of lacrosse activities (the “Policy”). Saanich was an additional named insured under the policy but “solely with respect to the liability which arises out of the activities of the named insured”.

Saanich sought coverage under the Policy but was denied. At trial the court held that Aviva had a duty to defend Saanich holding that:

[46] … The claim brought by Mr. Wright does not allege that his injuries were caused by anything other than the errant lacrosse ball. The pleadings do not disclose a cause of injury independent of the lacrosse activities. Mr. Wright does not assert that his fall and resultant injuries may have been caused by, say, debris from the vending machines or water on the floor, or that his injuries in any way result from Saanich’s failure to generally maintain its premises in a safe manner for its patrons. But for the lacrosse activity, there would have been no obligation on Saanich to provide alternate access to the patrons of the dog obedience class. The only reason the usual source of access to the dog obedience class allegedly became unsafe was because lacrosse was being played at the centre at the time the dog obedience class took place.
…
[50] In the present case, there is a clear nexus or causal connection between the possible liability of Saanich and the activities of the named insured.
[emphasis added]

On appeal Aviva argued that the trial judge misconceived the causal test applicable to Mr. Wright’s claim as evidence by the use of the her words, “but for” and by focusing on the alleged cause of the injury (the lacrosse ball).

The Court of Appeal stated that the essence of the issue was that there must be “an unbroken chain of causation to engage the potential liability of the insurer.” [para. 24]

The Court went onto note that, although the trial judge did refer to the alleged cause of the injuries being the lacrosse activities, she demonstrated in the balance of her reasons an appreciation of the need for such an unbroken chain of causation. Thus, they held that she had not misunderstood or misapplied the test for determining coverage.

In the circumstance of the case, the Court of Appeal held that there was a direct  causal link between lacrosse activities and Saanich’s potential liability:

[32] I conclude there is, in the pleadings, a causation link between the alleged delict of Saanich and the injury to Mr. Wright; the unbroken chain of causation, alleged in the pleadings encompasses both the actions of the unknown lacrosse player and the actions of Saanich that placed Mr. Wright in a position to be struck by the lacrosse ball. The true nature of the substance of the claim is a claim arising from the lacrosse associations’ activities, in the context of Saanich’s role in facilitating them, whether or not liability attaches to the lacrosse associations. In other words, the pleadings contain allegations of the requisite unbroken chain of causation; there is no independent fault alleged against Saanich which would support an action in negligence absent the activities of the lacrosse associations. Consideration of the “errant” aspect of the lacrosse ball intimately implicates the actions of Saanich.

The Court of Appeal distinguished the Ontario Supreme Court decision of Atlific Hotels and Resorts Ltd. v. Aviva [2009 CanLii 24634 (ONSC)] upon which Aviva had relied.  There  Atlific was an additional insured with respect to liability arising out of a snow removal contractor’s activities on its behalf.  An action was commenced for injuries a guest sustained in a slip and fall on a snowy /icy path.  The Ontario court held that the insurer did not have a duty to defend a claim in negligence against Atlific for its manner of operations, which allegedly included inadequate lighting, lack of non-slip matting and failing to organize activities so that guests did not have to navigate snowy / icy paths.  The Court there held that, while the insurer was required to defend Atlific on a complaint of negligent snow removal, the broader claims relating to the manner in which it organized guest activities or designed safety features were not matters arising from the activities of the snow removal contractor and were thus outside of coverage.

The Court of Appeal distinguished Atilfic in that it involved three separate complaints against the resort (inadequate lighting, lack of non-slip matting, failure to ensure guests did not have to navigate hazardous paths). The Court noted that those three separate complaints, could support a claim independent of the adequacy of snow removal.  Here the Court of Appeal stated that the case against Saanich could not stand absent the errant lacrosse ball.

This decision confirms that coverage for an additional named insured which only  ”arises out of the activities of the named insured” requires a direct causal link, or unbroken chain of causation, from these activities to the potential liability of the unnamed insured.

The implication of settlement offers and their ability to trigger cost awards was substantially changed by the introduction of the new Rules of Court on July 1, 2008.  Former Rule 37(23) provided a relatively straightforward method for determining costs when would be assessed as double from the date of a settlement offer:

If the plaintiff has made an offer to settle a claim for money, and it has not expired or been withdrawn or been accepted, and if the plaintiff obtains a judgment for the amount of money specified in the offer or a greater amount, the plaintiff is entitled to costs assessed to the date the offer was delivered and to double costs assessed from that date.

On July 1, 2008, the Court was given a great deal of discretion pursuant to Rule 37B.  Now, the Court “may consider an offer to settle when exercising the court’s discretion in relation to costs.”  Under Rule 37B, the Court “may” now consider the following:

(a)        whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or on any later date;

(b)        the relationship between the terms of settlement offered and the final judgment of the court;

(c)        the relative financial circumstances of the parties;

(d)        any other factor the court considers appropriate.

The change from a “hard and fast rule” in former Rule 37(23) has caused concern for all counsel, and particularly for defence counsel who are often advising clients that have significantly greater financial circumstance than the other parties.  The factor of relative financial circumstances of the parties has caused us to wonder whether insurance companies will even receive double costs if they “beat” their offers to settle.

A recent ICBC case, Garcha v. Gill, 2011 BCSC 1125, gives insurers and defence counsel cause for optimism, and sends a clear message to plaintiffs about the possible consequences for refusing settlement offers.

This recent decision followed the trial decision Garcha v. Gill 2008 BCSC 1156.  At trial, the Honourable Mr. Justice Cohen found that the defendant was soley responsible for the car accident and was 100% liable for the plaintiff’s personal injuries.  The Court awarded damages of $30,212.98 ($25,000 for non-pecuniary damages, $1,712.98 for special damages and $3,500 for past income loss).

The Plaintiff subsequently applied for double costs based on a settlement offer made 8 days before trial for $22,499.

The chronology of the litigation and the settlement negotiations was as follows:

1. The motor vehicle accident was on March 25, 2005.
2. In July 2006 the plaintiff submitted an income loss to ICBC claiming a loss of $7,461. This was not accepted, and he retained counsel in December 2006.  The Action was commenced in 2007.
3. The defendant delivered an offer to settle in the amount of $19,000 to the plaintiff on November 22, 2007 pursuant to former Rule 37.
4. It would be an understatement to say that obtaining the business records from the plaintiff was tortuous.  Defence counsel were required to bring 3 motions to compel production of documents that should have been produced by the plaintiff in accordance with the Rules of Court.  Defence counsel did not succeed in persuading the Court to dismiss the Plaintiff’s action on this basis alone.  ICBC was awarded costs in any event of the cause from the various motions.
5. On May 20, 2008, 8 days before trial the plaintiff delivered an offer to settle to the defendant pursuant to Rule 37 in the amount of $22,499.

The plaintiff argued that they had beaten the May 20, 2008 offer, and the defendant ought to have accepted it.  The plaintiff further submitted that Rule 37B should operate as did former Rule 37(23) in order to promote settlement of disputes before trial.

The Court found that ICBC not accepting the May 20, 2008 offer was reasonable.  They two key factors were the lateness of the offer, and that it would mean that the costs awarded by the Court to ICBC following the interlocutory motions would be abandoned.

The Court also commented that the November 22, 2007 offer from the defendant was only “marginally” less than the plaintiff’s pre-trial offer, but that between those two offers, the plaintiff had caused “unnecessary” litigation costs to be incurred by the defendant.

The Honourable Mr. Justice Cohen concluded with pity comments on the purpose of Rule 37 and the conduct of the plaintiff in this action:

 As aptly stated by the defendant, “Would awarding double costs to the plaintiff for his ongoing and sustained failure to produce documents, refusal to entertain an early, reasonable settlement in the fall of 2007 and delivery of a late offer 8 days before trial encourage the orderly conduct of litigation and the policy of early, reasonable offers to settle?” The answer is that given by the defence: “… the time and expense of both the trial and several months of litigation could have been avoided had the plaintiff accepted the defence offer which was only a few thousand dollars less, or, alternatively, countered at that time with the plaintiff’s offer which would have been accepted as per the affidavit of [] [the ICBC adjuster]”.

Thus, the court refused to award double costs against ICBC despite the fact that there was an obvious disparity in the parties relative financial circumstances and the plaintiff was not only successful, but beat their offer of costs.

In addition, the Court apportioned 30% of costs to the defendant, ICBC on the basis that the Plaintiff has not been successful on all counts, and the defence had been required to prepare for issues that were abandoned at trial.

This decision is encouraging for insurers making settlement offers that the conduct of the plaintiff will be considered, and weighed appropriately.  It also serves as a good reminder to plaintiffs generally that the costs provisions in Rule 37B have teeth, even when they are going against a “big bad” company.