An auto insurer (“Economical”) was found to have no duty to defend an Insured who assaulted the driver of a neighbouring vehicle where the Court held that the assault did not arise from the “ownership, use or operation” of the vehicle

Tench v. Erskine, [2006] N.S.J. No. 143, Nova Scotia Supreme Court

In September 1999, a motor vehicle accident occurred in which the Defendant’s motor vehicle rear-ended the Plaintiff’s motor vehicle, causing personal injuries to the Plaintiff. The Defendant commenced a Third Party claim against Graham Bowlby, alleging that while traffic was temporarily stopped, Bowlby intentionally left the vehicle in which he was a passenger, approached the Defendant’s vehicle and assaulted the Defendant causing the Defendant to lose control of his vehicle which then struck the Plaintiff’s vehicle. After being served with the Third Party action, Bowlby reported the claim to his auto insurer, Economical, and to his homeowner’s insurer (“Federation”).

Economical denied coverage on the basis that the Third Party claim did not arise out of the “ownership, use or operation” of the Insured vehicle and therefore did not fall within coverage under the auto insurance policy. Federation elected to provide a defence under a reservation of rights but was not prepared to admit that the claim fell within the policy coverage. Bowlby was not satisfied with the situation and applied to the Court for an order that both Economical and Federation had an obligation to defend the Third Party action and also for an order permitting the appointment of defence counsel of his choice at the Insurer’s expense.

In reviewing the application as against Economical, the Court held that the test to be applied in determining whether a particular loss resulted from the “ownership, use or operation” of the motor vehicle was that laid down by the Supreme Court of Canada in Amos v. Insurance Corp. of British Columbia (1995), 127 D.L.R. (4th) 618. This two-part test was set out as follows:

1. Did the accident result from the ordinary and well-known activities to which automobiles are put?

2. Is there some nexus or causal relationship (not necessarily a direct or proximate causal relationship) between the appellant’s injuries and the ownership, use or operation of his vehicle, or is the connection between the injuries and the ownership, use or operation of the vehicle merely incidental or fortuitous?

In finding that the facts alleged in the Third Party action did not meet the Amos test, the Court reviewed the analysis outlined in Duval v. Alberta Motor Association Insurance Co., [2000] A.J. No. 184. Duval also involved a road rage situation and, in that case, the court held that one could not reasonably contend that an assault arose out of an ordinary and well-known activity to which automobiles are put. When an individual leaves his vehicle and accosts another driver, this is not an activity relating to the automobile. The Court in Duval also had held that there was not a sufficient nexus between the assault and the use or operation of the vehicle to satisfy the causal relationship requirement. The connection is merely incidental. In the case at bar, the Court agreed that the facts alleged in the Third Party action outlined similar circumstances and, therefore, it could not be said that there was a realistic possibility that a claim within the Economical policy coverage may succeed. The Court found that Economical had no legal obligation to defend Bowlby.

As Federation agreed to defend the claim under a reservation of rights, the application against Federation dealt solely with the issue of choice of counsel. Federation acknowledged that the counsel appointed to defend the case also advised Federation on issues of coverage. The Court noted that this raised the apprehension that the Insurer might tend to slant the defence so as to serve its interest rather than those of its Insured. Significantly, the reservation of rights arising out of the coverage issue depended on an aspect of the Insured’s own conduct, i.e., whether such conduct fell within the intentional act exclusion, and this conduct was very much in issue in the underlying litigation. In the circumstances, the court held that Federation must surrender the right to control the defence of the Third Party action because of the reasonable apprehension of a conflict of interest.

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