Buchanan et al. v. Wawanesa Mutual Insurance Co., (2010) 289 B.C.A.C. 281 (CA)

• Judge: Newbury, Neilson and Groberman, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: May 18, 2010
• Jurisdiction: British Columbia
• Citations: (2010), 289 B.C.A.C. 281 (CA);2010 BCCA 333

Buchanan v. Wawanesa Mutual (2010), 289 B.C.A.C. 281 (CA);

    489 W.A.C. 281

MLB headnote and full text

Temp. Cite: [2010] B.C.A.C. TBEd. JL.003

Ross Scott Buchanan and Elayna Grace (appellants/plaintiffs) v. Wawanesa Mutual Insurance Company (respondent/defendant)

(CA036911; 2010 BCCA 333)

Indexed As: Buchanan et al. v. Wawanesa Mutual Insurance Co.

British Columbia Court of Appeal

Newbury, Neilson and Groberman, JJ.A.

June 29, 2010.

Summary:

The plaintiffs (insureds) claimed against their insurer under an all-risk policy for loss or damage (settling and cracking in their home) which was the result of the escape of water from a public watermain. The insurer denied coverage. Clause 2 of the policy provided that the insureds were not covered for any settling, cracking, or buckling, while clause 9 stated that the owners were covered for any loss or damage resulting from the escape of water from a watermain. The matter proceeded to court.

The British Columbia Supreme Court, in a decision reported [2009] B.C.T.C. Uned. 470; 2009 BCSC 470, held that Leahy v. Canadian Northern Shield Insurance Co. (BCCA 2000) governed this case. The damage complained of by the plaintiffs fell squarely within the words "cracking, movement, settlement, expansion, contraction" in exclusion clause 2 of the policy and Leahy made it clear that if the type of damage suffered was within the exclusion, there was no coverage. The plaintiffs appealed, seeking to have Leahy reconsidered.

The British Columbia Court of Appeal, Groberman, J.A., dissenting, allowed the appeal. The majority declined to reconsider Leahy, holding that it could be distinguished from the facts of this case, while Groberman, J.A., dissenting opined that Leahy was indistinguishable. The court held that the interpretation of the policy in issue in this case that was most commercially reasonable and most accorded with reasonable expectations was to give effect to clause 9 as a specific exception to clause 2. The plaintiffs were therefore entitled to coverage.

Insurance - Topic 1852

The insurance contract - Interpretation of contract - Intent of the parties - [See second Insurance - Topic 6602 ].

Insurance - Topic 1853

The insurance contract - Interpretation of contract - Narrow construction against insurer - [See second Insurance - Topic 6602 ].

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - [See second Insurance - Topic 6602 ].

Insurance - Topic 1859

The insurance contract - Interpretation of contract - Construction - Sensible commercial result - [See second Insurance - Topic 6602 ].

Insurance - Topic 1861

The insurance contract - Interpretation of contract - Contra proferentem rule - Ambiguity construed against insurer - [See second Insurance - Topic 6602 ].

Insurance - Topic 1865

The insurance contract - Interpretation of contract - Construction in case of ambiguity - [See second Insurance - Topic 6602 ].

Insurance - Topic 1867

The insurance contract - Interpretation of contract - Conflicting clauses - [See second Insurance - Topic 6602 ].

Insurance - Topic 1869

The insurance contract - Interpretation of contract - Reasonable expectations principle - [See second Insurance - Topic 6602 ].

Insurance - Topic 6602

Multi-peril property insurance - Exclusions - Flooding, water seepage, leaking, etc. - Insureds claimed under an all-risk policy for loss or damage (settling and cracking in their home) resulting from the escape of water from a public watermain - The insurer denied coverage - Clause 2 of the policy provided that the insureds were not covered for any settling, cracking, or buckling, while clause 9 stated that the owners were covered for any loss or damage resulting from the escape of water from a watermain - The trial judge held that Leahy v. Canadian Northern Shield Insurance Co. (BCCA 2000) governed this case - The damage complained of by the plaintiffs fell squarely within the words "cracking, movement, settlement, expansion, contraction" in exclusion clause 2 of the policy and Leahy made it clear that if the type of damage suffered was within the exclusion, there was no coverage - The plaintiffs appealed, seeking to have Leahy reconsidered - The British Columbia Court of Appeal declined to reconsider Leahy, as it could be distinguished from the facts of the case at bar because Leahy involved cracking and settling due to the escape of water from the plaintiffs' neighbour's sprinkler system (not a public watermain); therefore, in Leahy the court was only concerned with clause 12 (the exclusion for settling, expansion, etc. which was clause 2 in the present case) - See paragraphs 27 and 28.

Insurance - Topic 6602

Multi-peril property insurance - Exclusions - Flooding, water seepage, leaking, etc. - Insureds claimed under an all-risk policy for loss or damage (settling and cracking in their home) resulting from the escape of water from a public watermain - The insurer denied coverage - Clause 2 of the policy provided that owners were not covered for any settling, cracking, or buckling, while clause 9 stated that the owners were covered for any loss or damage resulting from the escape of water from a watermain - The British Columbia Court of Appeal held that the insureds were entitled to coverage - On a plain reading the two clauses appeared to be contradictory - Application of the interpretation rules (i.e., contra proferentem rule, exclusions were to be interpreted narrowly and the primacy of the specific over the general) favoured coverage - The court stated that those rules were merely specific variations of the general theme, adopted regularly by Canadian courts, that contracts were to be interpreted so as to carry out the parties' intentions as reflected by the entire document - Where an ambiguity existed it was desirable that it be resolved in accordance with the expectations of the parties - Here, a prospective insured reading this policy would reasonably have assumed that he or she would be covered for any damage resulting from the escape of water from a public watermain - The interpretation that was the most commercially reasonable and most accorded with reasonable expectations was to give effect to clause 9 as a specific exception to clause 2 - See paragraphs 1 to 34.

Insurance - Topic 6606.4

Multi-peril property insurance - Exclusions - Settling, expansion, contraction, etc. - [See both Insurance - Topic 6602 ].

Insurance - Topic 6633.1

Multi-peril property insurance - Household or homeowner's policies - Exclusions - Settling - [See both Insurance - Topic 6602 ].

Insurance - Topic 6638

Multi-peril property insurance - Household or homeowner's policies - Exclusions - Water seepage or leakage - [See both Insurance - Topic 6602 ].

Cases Noticed:

Leahy v. Canadian Northern Shield Insurance Co. (2000), 140 B.C.A.C. 302; 229 W.A.C. 302; 77 B.C.L.R.(3d) 44; 2000 BCCA 408, refd to. [paras. 1, 35].

Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; 147 N.R. 44; 83 Man.R.(2d) 81; 36 W.A.C. 81, refd to. [para. 8].

National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assurance Co. et autres, [1990] 2 S.C.R. 1029; 115 N.R. 42; 32 Q.A.C. 250, refd to. [para. 8].

Pavlovic et al. v. Economical Mutual Insurance Co. (1994), 52 B.C.A.C. 98; 86 W.A.C. 98; 99 B.C.L.R.(2d) 298 (C.A.), refd to. [paras. 9, 41].

Kravetsky v. Dominion of Canada General Insurance Co. (1994), 96 Man.R.(2d) 224; 25 C.C.L.I.(2d) 238 (Q.B.), affd. (1995), 100 Man.R.(2d) 46; 91 W.A.C. 46 (C.A.), refd to. [para. 17].

Shepherd v. Wawanesa Mutual Insurance Co. et al. (1998), 236 A.R. 28; 1998 ABQB 1040, refd to. [para. 17].

Rivard v. General Accident Assurance Co. of Canada, [2002] 7 W.W.R. 395; 166 Man.R.(2d) 39; 278 W.A.C. 39; 2002 MBCA 70, refd to. [para. 18].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 21].

Engle Estate v. Aviva Insurance Co. of Canada (2008), 459 A.R. 254; 2008 ABQB 645, affd. (2010), 469 A.R. 342; 470 W.A.C. 342; 2010 ABCA 18, refd to. [para. 23].

Brissette v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87; 142 N.R. 104; 58 O.A.C. 10; 96 D.L.R.(4th) 609, refd to. [para. 31].

Authors and Works Noticed:

Brown, Craig, Insurance Law in Canada (Looseleaf Ed.), p. 8-11 [para. 31].

Counsel:

J.D. Flannigan and D. Shea, for the appellants;

M. Carnello, for the respondent.

This appeal was heard in Vancouver, British Columbia, on May 18, 2010, before Newbury, Neilson and Groberman, JJ.A., of the British Columbia Court of Appeal. The decision of the court was delivered on June 29, 2010, including the following opinions:

Newbury, J.A. (Neilson, J.A., concurring) - see paragraphs 1 to 34;

Groberman, J.A., dissenting - see paragraphs 35 to 47.