Insurance Policies in Canada are steeped in a rich history of drafting, re-drafting, revising, adding, and subtracting - mostly in response to the ever-shifting landscape of risk and legal interpretation. On top of that, policies often consist of a patchwork of coverage, exclusions, exceptions, and endorsements. The result is that sometimes a policy will resemble a byzantine maze of technical terms where the underlying intent of the policy can be difficult, if not impossible, for the average person (or even lawyers and judges) to discern. Unfortunately for insurers, they are most often required to bear the burden of any ambiguity, leading to cases where coverage is extended beyond what was likely anticipated or intended.
This was exemplified recently in the case of Wage v Canadian Direct Insurance Incorporated, 2019 ABQB 303. In that case, Ms. Wage was insured under a standard automobile policy (SPF1) as well as an additional family protection endorsement (SEF 44). Ms. Wage tragically lost her life as a result of being struck by an unidentified motorcyclist while on vacation in the Phillipines. Her spouse and estate claimed benefits under the policy and the endorsement. The question before the Court was whether or not the policy applied to an accident that occurred overseas (and that did not involve the insured automobile).
The policy and endorsement were not reproduced in full in the decision, but the relevant clauses were:
Under the policy:
General Provisions, Definitions and Exclusions
1. TERRITORY: The policy applies only while the automobile is being operated, used, stored or parked within Canada, the United States of America or upon a vessel plying between ports of those countries.
Under the endorsement:
8. This endorsement does not apply to an accident occurring in the Province of Quebec for which compensation is payable under the Automobile Insurance Act of Quebec or by virtue of an agreement referred to in the Act.
11. This endorsement is attached to and forms part of the policy […]
Except as otherwise provided in this endorsement, all limits, terms, conditions, provisions, definitions and exclusion of the policy shall have full force and effect.
The Insurer’s argument before the Court was essentially that the intent of the policy was to provide coverage for accidents occurring within or between Canada (except Quebec) and the United States. This argument was dismissed by the Court, which held that the policy did not specify any territorial restriction on where the accident itself occurred. Rather, the policy (and correspondingly the endorsement) was found to apply so long as the insured automobile was used, stored or parked within the defined territory. At the time of the accident in the Phillipines, Ms. Wage’s vehicle was parked or stored in Alberta. Accordingly, the coverage was found to apply. This interpretation was aided by the general principle that coverage provisions are to be construed broadly. In the words of the Court: “the territorial limit of the policy determines coverage based on where the vehicle is located. This applies to the endorsement, even though the endorsement specifically relates to accidents that do not involve that vehicle.”
In dismissing the Insurer’s argument, the Court provided an example of how easily it could have placed a territorial restriction on the endorsement, if that is what it had intended. Specifically, in the case of Radu v Hartford Fire Insurance Co. [1997] O.J. No. 6356, the Court declined to extend coverage under a similar endorsement for an accident that occurred in Jamaica due to the wording of the territorial clause in that case: “This policy covers you and other insured persons for incidents occurring in Canada or the United States of America…” (emphasis added).
This case illustrates two things: (1) the benefits of using clear and plain language, where possible; and (2) how broadly the Court will interpret coverage provisions in favour of insureds. Unless the policy (or the exclusion or endorsement, as the case may be) clearly and unambiguously states what is or is not covered, an insurer runs the risk of having to extend coverage beyond what may have been contemplated.
