Family Insurance Corp. v. Lombard Canada Ltd., (2002) 288 N.R. 373 (SCC)

• Judge: McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 23, 2002
• Jurisdiction: Canada (Federal)
• Citations: (2002), 288 N.R. 373 (SCC);2002 SCC 48;JE 2002-942;113 ACWS (3d) 1064;[2002] 2 SCR 695;EYB 2002-31851;288 NR 373;212 DLR (4th) 193;38 CCLI (3d) 165;167 BCAC 161;[2002] SCJ No 49 (QL);274 WAC 161

Family Ins. Corp. v. Lombard Can. (2002), 288 N.R. 373 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2002] N.R. TBEd. MY.046

Family Insurance Corporation (appellant) v. Lombard Canada Ltd. (respondent) and Canadian Universities Reciprocal Insurance Exchange (intervenor)

(28093; 2002 SCC 48; 2002 CSC 48)

Indexed As: Family Insurance Corp. v. Lombard Canada Ltd.

Supreme Court of Canada

McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour, JJ.

May 23, 2002.

Summary:

A woman was injured in a fall from a horse. The woman's claim against the owner of the stable (Young) was settled for $500,000. Young was insured under two insurance policies: a homeowners/residential policy with Family Insurance and a compre­hensive business policy with Lombard. Each policy contained "other insurance" clauses rendering coverage excess to any other policies held by the insured. The sole issue as between the two insurers was the extent to which each of them was liable to pay the claim. Each relied on its "other insurance" clause to shield itself from primary liability.

The British Columbia Supreme Court, in a decision reported in (1999), 20 B.C.T.C. 373, held that the two clauses could not be reconciled by determining the intent of the insurers as revealed by the content of the policies. The court held that the clauses were inoperative and that the insurers were to equally share liability up to the limits of the Family policy, which had the lower limits, with responsibility for any damages above that sum being borne by Lombard, until the exhaustion of its policy limits. Lombard appealed. Family cross-appealed, but later abandoned it.

The British Columbia Court of Appeal, in a judgment reported 139 B.C.A.C. 181; 227 W.A.C. 181, allowed the appeal. Had the policies been identical, the trial judge would have been correct. However, the policies were designed to be different in purpose and scope of intended coverage. Based on the wording of the policies and the surrounding circumstances, the Family policy provided primary coverage, while the Lombard policy was excess coverage only. Family appealed.

The Supreme Court of Canada allowed the appeal and restored the trial judge's decision. Looking solely at the wording of the two policies (extrinsic evidence and surrounding circumstances irrelevant as between the insurers), the "other insurance" clauses were mutually repugnant and inoperative. Accord­ingly, both policies provided primary cover­age and the loss was to be equally borne by each insurer up to the lower policy limit, with the policy having the higher limit contributing any remaining amount.

Insurance - Topic 785

Insurers - Liability - Where two or more policies cover risk - Primary v. excess insurance - An insured was liable for $500,000 to an injured woman - The insured was insured under two insurance policies: a homeowners/residential policy with Family and a comprehensive business policy with Lombard - Each policy covered the risk and each contained an "other insurance" clause rendering cover­age excess to any other policies held by the insured - Each insurer submitted that the other's policy provided primary cover­age - The Supreme Court of Canada held that the intention of the insurers was to be determined solely by the wording of the policies (extrinsic evidence and surround­ing circumstances irrelevant as between the insurers absent privity of contract between them) - The "other insurance" clauses were irreconcilable and inoperative - The most equitable means of resolving the impasse was to find that both policies provided primary coverage and the loss was to be equally borne by each insurer up to the lower policy limit, with the policy having the higher limit contributing any remaining amount - See paragraphs 14 to 45.

Insurance - Topic 785

Insurers - Liability - Where two or more policies cover risk - Primary v. excess insurance - The insured had two insurance policies, each covering the same risk and each having an "other insurance" clause rendering coverage excess to any other policies held by the insured - The Supreme Court of Canada stated that in determining whether both insurers were liable or whether one was primary insur­ance and the other excess, the insurers' respective intentions, as expressed in the policies, was the governing factor - Since there was no privity of contract between the two insurers (only between each insurer and the insured), surrounding cir­cumstances were irrelevant and resolution of the issue was limited to the intentions as expressed within the insurance contracts - See paragraphs 16 to 19.

Insurance - Topic 788

Insurers - Liability - Where two or more policies cover risk - Contribution among insurers - The Supreme Court of Canada stated that "it is a well-established prin­ciple of insurance law that where an insured holds more than one policy of insurance that covers the same risk, the insured may never recover more than the amount of the full loss but is entitled to select the policy under which to claim indemnity, subject to any conditions to the contrary. The selected insurer, in turn, is entitled to contribution from all other insurers who have covered the same risk. This doctrine of equitable contribution among insurers is founded on the general principle that parties under a coordinate liability to make good a loss must share that burden pro rata." - The general prin­ciples respecting the right of contribution between insurers were "(1) All the policies concerned must comprise the same sub­ject-matter. (2) All the policies must be effected against the same peril. (3) All the policies must be effected by or on behalf of the same assured. (4) All the policies must be in force at the time of the loss. (5) All the policies must be legal contracts of insurance. (6) No policy must contain any stipulation by which it is excluded from contribution." - See paragraphs 14 to 15.

Insurance - Topic 788

Insurers - Liability - Where two or more policies cover risk - Contribution among insurers - [See both Insurance - Topic 785 ].

Insurance - Topic 2944

Contribution among insurers - Excess coverage clauses - [See both Insurance - Topic 785 ].

Cases Noticed:

Simcoe and Erie General Insurance Co. v. Kansa General Insurance Co. (1994), 46 B.C.A.C. 278; 75 W.A.C. 278; 93 B.C.L.R.(2d) 1 (C.A.), refd to. [para. 6].

McGeough v. O'Donals Restaurant of Canada Ltd. et al. (1994), 46 B.C.A.C. 219; 75 W.A.C. 219; 116 D.L.R.(4th) 137 (C.A.), refd to. [para. 6].

Dominion of Canada General Insurance Co. v. Wawanesa Mutual Insurance Co. (1985), 64 B.C.L.R. 122 (S.C.), refd to. [para. 7].

Godin v. London Insurance Co. (1758), 1 Burr. 489; 97 E.R. 419, refd to. [para. 14].

Seagate Hotel Ltd. v. Simcoe and Erie General Insurance Co. (1981), 27 B.C.L.R. 89 (C.A.), refd to. [para. 18].

Hartford Steam Boiler Inspection and Insurance Co. v. Cochran Oil Mill & Ginnery Co. (1921), 105 S.E. 856, refd to. [para. 21].

Auto Owners Insurance Co. v. Northstar Mutual Insurance Co. (1979), 281 N.W.2d 700 (Minn.), refd to. [para. 22].

Interstate Fire & Casualty Co. v. Auto-Owners Insurance Co. (1988), 433 N.W.2d 82 (Minn.), refd to. [para. 23].

Garrick v. Northland Insurance Co. (1991), 469 N.W.2d 709 (Minn.), refd to. [para. 23].

American Family Insurance v. National Casualty Co. (1994), 515 N.W.2d 741 (Minn. Ct. App.), refd to. [para. 23].

Northstar Mutual Insurance Co. v. Mid­west Family Mutual Insurance Co. (2001), 634 N.W.2d 216 (Minn. Ct. App.), refd to. [para. 23].

Carriers Insurance Co. v. American Pol­icyholders' Insurance Co. (1979), 404 A.2d 216 (Me.), refd to. [para. 24].

Brown v. Travelers Insurance Co. (1992), 610 A.2d 127 (R.I.), refd to. [para. 24].

Hoffmaster v. Harleysville Insurance Co. (1995), 657 A.2d 1274 (Pa. Sup. Ct.), refd to. [para. 24].

Wawanesa Mutual Insurance Co. v. Co-operative Fire & Casualty Co. (1980), 10 Sask.R. 217; 119 D.L.R.(3d) 188 (Q.B.), refd to. [para. 25].

Marchand v. Dominion of Canada General Insurance Co., [1999] O.A.C. Uned. 70 (C.A.), refd to. [para. 26].

Lamb-Weston Inc. v. Oregon Automobile Insurance Co. (1959), 341 P.2d 110, refd to. [para. 29].

Weddell v. Road Transport and General Insurance Co., [1932] 2 K.B. 563, refd to. [para. 30].

Wawanesa Mutual Insurance Co. v. Com­mercial Union Assurance Co., [1994] 10 W.W.R. 701; 96 Man.R.(2d) 284 (Q.B.), refd to. [para. 30].

Seagate Hotel Ltd. v. Simcoe and Erie Gen­eral Insurance Co. (1980), 22 B.C.L.R. 374 (S.C.), refd to. [para. 33].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 36].

Guardian Insurance of Canada v. New Hampshire Insurance Co. (1997), 193 N.B.R.(2d) 111; 493 A.P.R. 111 (Q.B.), refd to. [para. 39].

Commercial Union Assurance Co. v. Hay­den, [1997] 1 Q.B. 804 (C.A.), refd to. [para. 42].

Authors and Works Noticed:

Brown, Craig, Insurance Law in Canada (1999) (loose-leaf updated 2001, release 2), vol. 1, p. 14-9 [para. 32].

Concurrent Coverage in Automobile Lia­bility Insurance (1965), 65 Colum. L. Rev. 319, generally [para. 24].

Couch, G., Cyclopedia of Insurance Law (2nd Ed. 1966), p. 498 [para. 17].

Grimes, Samuel G., Insurance - The "Other Insurance" Clause Conflict (1968), 46 N.C. L. Rev. 433, p. 439 [para. 24].

Guthrie, Mark C., "Other Insurance" Con­flicts: A Common-Sense Proposal (1984), 36 Baylor L. Rev. 689, pp. 692, 693 [para. 24].

Hasse, Linda Kogel, Is There a Solution to the Circular Riddle? The Effect of "Other Insurance" Clauses on the Public, the Courts, and the Insurance Industry (1980), 25 S.D. L. Rev. 37, p. 37 [para. 24].

Ivamy, Edward Richard Hardy, General Principles of Insurance Law (3rd Ed. 1975), pp. 312, 313 [para. 8].

Ivamy, Edward Richard Hardy, General Principles of Insurance Law (6th Ed. 1993), p. 518 [para. 15].

Counsel:

Jonathan L.S. Hodes and Neo J. Tuytel, for the appellant, Family Insurance Corp.;

Donald B. Lebans and James H. Mac­Master, for the respondent, Lombard Canada Ltd.;

Patrick J. Monaghan, for the intervenor, Canadian Universities Reciprocal Insur­ance Exchange.

Solicitors of Record:

Clark, Wilson, Vancouver, B.C., for the appellant, Family Insurance Corp.;

Branch MacMaster, Vancouver, B.C., for the respondent, Lombard Canada Ltd.;

Black, Sutherland, Crabbe, Toronto, Ontario, for the intervenor, Canadian Universities Reciprocal Insurance Exchange.

This appeal was heard on February 19, 2002, before McLachlin, C.J.C., Gonthier, Iacobucci, Major, Bastarache, Binnie and Arbour, JJ., of the Supreme Court of Canada.

On May 23, 2002, Bastarache, J., delivered the following judgment in both official languages for the Supreme Court of Canada.