Damages caused by a trailer towed by a vehicle may be limited to an automobile policy

Application by insured for indemification under its CGL policy for damages paid in respect of a tort claim. The insurer denied indemnification on the basis that the auto exclusion applied as the injuries compensated were caused by the use and operation of a motor vehicle. The alleged negligent act relied on by the numbered company was the improper securing of a trailer to a vehicle. The court held that there was no other purpose for securing the trailer other than to tow it. The court was satisfied that both the securing and the towing are ordinary and well known activities to which automobiles are put. The court therefore found that there was no concurrent liability in this case and that the exclusion was properly employed.

430937 Ontario Ltd. v. Zurich Insurance Co., [2012] O.J. No. 2431, May 30, 2012, Ontarior Superior Court of Justice, A.J. Goodman J.

This was an application by the numbered company for indemnity for damages claimed by the plaintiffs. Funds were paid out by the numbered company to settle claims with the plaintiff. An employee rented a trailer on behalf of the numbered company. He then attached the trailer to a truck owned by the numbered company. While driving, the rented trailer became disconnected from the truck, crossed the center line and hit the plaintiffs’ vehicle. At the time of the accident, the respondent, Zurich Insurance Co. (“Zurich”) provided Commercial General Liability (“CGL”) insurance to the numbered company. Zurich took the position that the liability pursuant to which the numbered company sought indemnity arose out of the ownership, use or operation of an automobile and was therefore excluded under the policy. The numbered company took the position that there were two independent and concurrent causes for the incident and an associated loss. Those causes were the use or operation of a motor vehicle and the negligent attachment of the trailer to the vehicle. For the latter cause, the numbered company argued that the CGL policy with Zurich was triggered.

The court drew a distinction between the duty to defend and the duty to indemnify on the basis that duty to defend requires only a chance of indemnity, whereas an indemnity application requires a finding of liability that is to be indemnified. The court held that on an indemnity application, once the insured establishes that the policy is engaged, the onus of proving the exclusion then shifts to the insurer. Thus, the onus fell on Zurich to satisfy the court that the event causing the loss or damage was clearly within the language of the exclusion relied upon.

The court noted that the language used in the CGL auto exclusion was very similar to the language used in a standard automobile insurance policy, and such policies appeared to be designed to be complementary. The court further held that the language in the Zurich policy was clear and unambiguous such that there was no need to rely on the general rules of contract construction. The court held that the CGL policy did not apply where the obligation to pay compensatory damages for bodily injury arose from the ownership, use or operation of any automobile.

The numbered company argued that while some liability arose out of the ownership, use or operation of the motor vehicle, there were other concurrent causes for liability which did not arise from the ownership, use or operation of the motor vehicle. The numbered company relied on the Supreme Court of Canada’s decision in Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398 for the argument that as there were two concurrent causes of action that formed the basis of the indemnity claim, the negligent attachment of the trailer to the vehicle and the operation of the motor vehicle, and that as one was non-automobile related, it had to be covered under the Zurich policy.

The court recognized that s. 267.1 of the Insurance Act recognizes that there may be concurrent causes. As such, more than one insurer may be liable to defend and to indemnify an insured because of concurrent actions. To be “concurrent” each cause of action must be “non-derivative” of the other. Each cause of action must be independent of the other although the injuries arise from concurrent acts. In Derksen, the Supreme Court found that there were two independent and concurrent causes of the accident; namely, the use or operation of the vehicle and worksite negligence. The court held that the two were unrelated and created a distinct and independent, but concurrent, allegation of liability for the bodily injury.

The court also considered the Supreme Court of Canada decision in Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405 wherein the court set out a two step test to determine whether injuries arose out of the use or operation of the motor vehicle. The test requires that the accident result from the ordinary and well known activities to which automobiles are put and there must be some nexus or causal relationship between the injuries and the use or operation of the motor vehicle. There must be an unbroken chain of causation linking the conduct of the motorist as a motorist to the injuries in respect of which the claim is made.

The court held that the alleged negligent act relied on by the numbered company was the improper securing of the trailer to be towed. The court held that there was no other purpose for securing the trailer other than to tow it. The court was satisfied that both the securing and the towing are ordinary and well known activities to which automobiles are put. The court therefore found that there was no concurrent liability in this case and that the exclusion was properly employed.

This case was digested by Katherine E. Tinmouth and edited by David W. Pilley of Harper Grey LLP.

To stay current with the new case law and emerging legal issues in this area, subscribe here.