A party suffering a loss during a move may claim against the insurer of the moving company, even though the moving company is out of business

Solway v. Lloyd’s Underwriters, [2005] O.J. No. 1331, Ontario Superior Court of Justice

On February 1, 1999, Mr. Solway contracted, and obtained a bill of lading from, Kennedy Moving Systems (“Kennedy”) to move and temporarily store all his belongings. Kennedy loaded the belongings into its trailer and then parked the trailer on a public street unattended. On February 10, 1999, the trailer was stolen, and the goods stored in the trailer were not recovered. Mr. Solway issued a Statement of Claim against Kennedy to recover the cost of his stolen possessions (the “Solway Action”). The main issue in the Solway Action was the applicability of a limitation of liability clause contained in the bill of lading provided to them by Kennedy. The action proceeded to trial, and on December 19, 2001, Himel J. granted judgment in favour of Mr. Solway against Kennedy. The liability was appealed to the Ontario Court of Appeal, and leave to the Supreme Court of Canada was denied. Damages were later assessed at over $600,000.

Kennedy was primarily insured by a policy issued by Lloyd’s of London. The Lloyd’s policy applied a coverage limit of $500,000 for damages arising from transportation, and $1,000,000 for warehousing and storage coverage. In addition, Kennedy was insured by an excess policy issued by Allianz Insurance Company of Canada (“Allianz”). Lloyd’s of London paid $500,000 into the court to the credit of Mr. Solway, and a competing claim. These funds remain in court and no amount has been paid to Mr. Solway or to the competing claim.

Mr. Solway commenced this action against Lloyd’s of London and Allianz pursuant to section 132 of the Insurance Act of Ontario for their refusal to pay Mr. Soloway funds for the Soloway Action. The trial judge noted that section 132 provides Mr. Solway with a statutory right to pursue his claim for payment of the Solway Action directly against Kennedy’s insurers. Mr. Solway argued that one or both of Lloyd’s of London and/or Allianz was liable to pay the judgment arising from the Solway Action depending upon the policy limit and interpretation of the Lloyd’s of London policy. Lloyd’s of London took the position that the loss occurred during the transportation of Mr. Solway’s goods by Kennedy, and as such its policy was limited to $500,000, and that Allianz was liable for the balance owed to Mr. Solway. Allianz asserted that the Lloyd’s of London’s policy limit was $1,000,000, and there was no coverage under the Allianz policy for the Solway’s claim.

The Lloyd’s of London policy is entitled “Movers and Warehousemen’s Insurance Policy”. According to the policy declarations, the amount of insurance provided for transportation insurance is $500,000; the amount of insurance provided for warehouse insurance is $1,000,000. The relevant sections of the policy are as follows:

2A.    As respects property under a Bill of Lading, similar shipping document or agreement under which the Insured has agreed to provide Declared Valuation Protection, for direct loss, destruction or damage (including General Average and Salvage charges) of the Property Insured occasioned by all risks, except as hereinafter excluded, provided such loss, destruction or damage occurs while in due course of transit, including handling for packing and unpacking, or while in storage incidental to transit for a period not exceeding 90 days.

B.    As respects property under a Warehouse Receipt or similar document under which the Insured has agreed to provide insurance to protect the interest of the owner(s) of the Property Insured while in storage in any location(s) described in the Schedule of this policy, including while in transit thereto or therefrom in or on trucks or trailers operated by the Insured or his authorized representative, for direct loss, destruction or damage (including General Average and Salvage charges) of the Property Insured by all risks as hereinafter excluded.

C.    To the extent that such is not provided for under sub-paragraphs A or B above, all sums which the Insured shall become obligated to pay by reason of the liability imposed by law upon, or assumed under agreement by, the Insured as a private or common carrier or warehouseman.

…

4(a)  As respects claims made under sub-paragraphs A and B of Scope of Insurance the amount of insurance or Declared Valuation agreed between the Insured and the Owner(s) of the Property Insured.

(b)   As respects claims made under sub-paragraphs A and C combined, in no event for more than the Limit of Liability expressed in the Schedule as applicable to Transportation Insurance in any one occurrence.

…

6. VALUATION

Except where clause 8 – Replacement Cost – applies, as respects claims made under paragraph A or B of Scope of Insurance of this policy the Insurer agrees to pay not exceeding the actual cash value or cost of repair of property lost, damaged or destroyed, nor exceeding as respects any one in transit or in storage lot the value declared in the applicable Bill of Lading, Warehouse Receipt or similar document.

As respects claims made under paragraph C of Scope of Insurance under this policy, the Insurer agrees to pay all sums for which the Insured is legally liable subject to the limits of liability of the Transportation and Storage Sections.

Lloyd’s of London submitted that Mr. Solway’s claim falls within Scope of Insurance 2A. It submitted that Mr. Solway’s goods were property under a bill of lading and that the loss occurred while the goods were in storage incidental to transit for a period of less than 90 days. With respect to the limit of liability, Lloyd’s of London submitted that limit 4(a) was not applicable, because there was no amount of insurance or declared valuation agreed between Kennedy and Mr. Solway. Lloyd’s of London submitted that limit 4(b) applies, because it is a claim under Scope of Coverage 2A. As a result, the policy limit applicable to the Transportation Insurance of $500,000 governs.

Allianz submitted that the claim fell within paragraph 2A because Kennedy did not agree to provide declared valuation protection. Similarly, Allianz submitted coverage 2B was inapplicable because Kennedy did not agree to provide insurance to protect Mr. Solway’s property while it was in storage. Instead, the argument continued, since it was outside 2A and 2B, Mr. Solway’s claim falls within Scope of Insurance 2C. The relevant policy limit is found in the General Conditions, paragraph 6, which references the limits of liability of the Warehousing Sections. Since Kennedy’s liability to Solway was for breach of the storage agreement, the warehousing limit of $1,000,000 should apply.

The trial judge concluded that the determination of which policy limit was applicable came down to properly characterizing the claim in which Kennedy seeks indemnity under his insurance policy. In the Solway Action, Himel J., noted that Mr. Solway arranged to have his goods stored in the trailer for a two-week period. In addition, it was intended that the storage would be on the Kennedy parking lot. At no time was Mr. Solway advised that his goods would be stored in a trailer parked unattended on a public street, nor did he consent to such an agreement. Himel J. determined that liability was imposed upon Kennedy for breach of contractual term relating to the storage of the Mr. Solway’s goods.

After reviewing the Solway Action, the trial judge determined that the policy limit relating to the transportation of the customer’s goods was not applicable. Therefore, the appropriate policy limit was the $1,000,000 applicable for the warehousing and storing of goods under the Lloyd’s of London policy. In addition, the trial judge noted that the Lloyd’s of London policy contained a provision that claims made that fell within the scope of insurance would be resolved with no expense to the insured. The trial judge determined that this clause meant that Kennedy would not be called upon to bear any expenses arising from the defence of the claim, whether payable to its own solicitors or payable to the other party. Therefore, the trial judge determined that the costs of defending the Solway Action, including any award of costs made by the court in favour of Mr. Solway from Kennedy, would be payable by Lloyd’s of London and would not be deducted from the policy limit.

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