Rand on insurance: strict reading and the individual.

• Author: Bird, Richard W.
• Position: Canada

Ivan Cleveland Rand was once described as "one of the most outstanding legal minds ever to come out of the Maritimes" (1) and, so dominant was his presence at the Supreme Court of Canada, that the 1950s were described as "the Rand years." (2) His opinions in cases concerning the detention of Japanese-Canadians during the Second World War and the discriminatory treatment of Jehovah's Witnesses in Quebec made him a "champion of religious freedom and civil liberties." (3) Having such a dominant and respected role in the field of civil liberties, the question naturally arises whether his contributions in other areas of the law were equally significant. In particular, having sat on twenty-two insurance appeals to the Supreme Court of Canada, (4) what did he contribute to the law of insurance? This article will answer that question.

1. THE 1940s

   Rand's first insurance appeal as a justice of the Supreme Court of Canada was The Travelers Indemnity Company, et al. v. Powers. (5) The respondent, Powers, was a passenger in an automobile owned by Hibbard Motors Sales Limited and driven by one of its employee's, Dean, for personal pleasure. Unfortunately, Dean had an accident and Powers suffered injuries which resulted in a judgment against Dean. The insurer, Travelers Indemnity, had issued the motor vehicle liability policy to the owner, Hibbard. By agreement of the insured and insurer, the "omnibus" clause had been deleted from the policy. This clause would have extended coverage to other persons who drove the vehicle with the consent of the named insured. However, the policy did contain a "Canadian garage endorsement" which insured Hibbard for liability caused by "the ownership, maintenance or use of any automobile for all purposes in connection with the above described operations, and also for pleasure use...." Counsel for Powers had argued successfully at trial and on appeal before the Quebec courts that Dean fell within the words "and also for pleasure use". The Supreme Court of Canada allowed the appeal by Travelers Indemnity. In the judgment of Justice Taschereau, with Justice Rand concurring as a member of the unanimous panel, the Court agreed with the insurer that the policy covered only Hibbard: "The policy as amended does not say that all persons driving an automobile belonging to the insured for 'pleasure use are protected by its terms." (6) Though he did not write reasons for decision and merely concurred in the case, The Travelers Indemnity Company, et al. v. Powers set the tone for Justice Rand's approach to insurance policies in subsequent appeals. As contracts, insurance policies were to be given a literal (if not a strict) interpretation consistent with respect for freedom of contract. From a public policy perspective, all legislatures in Canada eventually reversed The Travelers Indemnity Company, et al. v. Powers by legislatively extending an owner's policy to cover all persons who drive a vehicle with the consent of the insured owner. Public policy was a role for the legislature, not the courts.

   Justice Rand's concurrence with Justice Taschereau was the first and last time that he ever did so. Likewise, Justice Taschereau thereafter concurred only once with Justice Rand. Twice they both managed to concur with a third judge. In all the other insurance appeals on which they both sat, they either delivered separate or dissenting opinions. One may suspect that the differences of opinion that they expressed in later years in the fields of religion and civil liberties carried over into the fields of private law, including insurance.

   Rand more often found in favour of the insurer than the insured. As a justice of the Supreme Court of Canada, he heard nineteen appeals concerning the scope of insurance coverage and found no coverage in thirteen. The trend was set early in his judicial career. In New York Life Insurance v. Schlitt, (7) the deceased had purchased a double indemnity life insurance policy but, to collect the double indemnity, death had to occur "through external, violent and accidental cause." The deceased died in a fire in his barn. Was this fire accidental or intentionally set by the deceased to effect his suicide? The evidence was sparse. The deceased's wife had told him earlier that day of her intention to leave the marriage and the deceased had responded that, if that happened, he could not face it. A gasoline can was found in the barn after the blaze and the doors of the barn had been closed during the fire. In separate reasons for decision, Justices Kerwin (Rinfret, C.J. concurring), Taschereau, and James Estey each concluded that the evidence did not support a finding of suicide and decided in favour of the estate against the insurer. They applied the presumption against imputation of a crime, i.e., suicide, and considered the evidence fell short of establishing that the deceased had committed suicide. Justice Rand alone dissented. He put the question as follows:

   Does, then, the presumption against suicide as it arises in this case throw upon the appellant [insurer] the burden of establishing it by the preponderance of probability, or does the onus remain [on the insured] of establishing death by accident? I have no doubt it is the latter; and if, with the presumption and its underlying probative force properly applied, the proof in rebuttal brings the court to the point where on the whole case it must say that the probabilities are in equal balance, the respondent [insured] must fail. (8) In his view, the estate had the legal burden to establish death by accidental means within the meaning of the insurance contract and this it had failed to do.

   The legal burden on the insured often proved heavy when Ivan C. Rand sat. In Boiler Inspection and Insurance Co. v. Abasand Oils Ltd., (9) "a gas explosion in the furnace ... damaged the boiler; as a direct result, a flame, forced out of a small aperture in the furnace, played upon a wooden support and set a fire which spread to the structure of the building and ultimately consumed it...." (10) The insurance policy covered loss of property from the explosion of gas within the furnace but not loss from fire and an endorsement provided business interruption insurance "caused solely by an accident," but again excluding an accident caused by fire. Justice Rand (with Rinfret C.J. and Locke J. concurring) concluded that the policy "makes it perfectly clear that a fire caused by an explosion is to be deemed to be completely severed from the explosion...." (11) Not all members of the Court found the policy so clear. Justice Estey (Taschereau, J. concurring) in dissent, read the policy as covering the business when the explosion and the fire occurred concurrently. One year later, what had been perfectly clear to Justice Rand did not seem so clear to the majority of his colleagues. In Sherwin- Williams Co. of Canada Ltd. v. Boiler Inspection and Insurance Co. of Canada, (12) Justice Rand alone concluded that a fire was separate from the explosion which produced it, and therefore the resultant damage was not covered by the policy. Justice Taschereau (Rinfret, C.J. concurring) held "there was an unbroken sequence between the explosion in Tank No. 1, which is the casualty, and the ultimate loss. There was not an intervening cause, in which was merged the original casualty." (13) In separate reasons for decision, Justices Estey and Locke agreed.

   Again, Justice Rand's analysis and conclusion did not find favour with provincial policy makers. Legislatures across Canada intervened with statutory amendments requiring insurance policies to provide coverage "against fire, whether resulting from an explosion or otherwise..." and "against explosion...whether fire ensues therefrom or not." (14)

   Legal difficulties for an insured continued in Marcoux v. Halifax Insurance Co. (15) A truck overturned when the steering mechanism malfunctioned and the driver lost control. A pedestrian, who initially indicated that he had not been hurt, was later found to have suffered several broken ribs when struck by the truck. The insured did not forward notice of the accident to the insurer, though the policy required notice to be given promptly. When the injured pedestrian claimed damages, the insurer denied the insured's claim for indemnification because of the failure to give prompt notice. Though the Supreme Court of Canada unanimously held that the insured's claim must fail, Justice Rand did not join in the reasons of Justice Taschereau (Rinfret C. J., Kerwin, Locke, JJ. concurring) but expressed himself separately. He wrote:

   On the facts, then, as they have been presented, I feel bound to conclude that there was sufficient to indicate to a reasonable and prudent person that bodily injury had most probably been suffered. The obligation to give notice therefore arose and in that situation it is scarcely disputable that it was not given promptly. (16) Today, it is likely that the Court would at least consider granting relief from forfeiture available under provincial insurance legislation (17) or the Judicature Act. (18)

   One decision of Justice Rand's which stood apart from the others...