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THE INSURANCE CONTRACT - Coverage provisions and exclusion clauses

Tuesday, June 25, 2019 @ 6:27 AM  


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Appeal by Optimum West from an order holding that W, a defendant in an underlying negligence action, was an insured under Optimum’s policy and that the respondent Economical had a right of equitable contribution against Optimum for 50 per cent of all defence costs and damages awarded against W. The appellant insured premises owned by W’s brother and his wife. The premises were always leased to third parties. W managed the premises by hiring service providers to maintain the premises, paying the property taxes, interviewing and entering into lease agreements with tenants and collecting rents. Economical provided liability coverage to W pursuant to a condominium owner’s policy. The chambers judge found W to be a Residence Employee and thus an insured under the Optimum policy. Under the Optimum Policy, a residence employee was a person employed by the insured to maintain or use the insured premises but excluded persons performing duties in connection with the insured’s business. W and the insured were sued after a child living on the premises was injured. The chambers judge found that the insured employed W to perform duties in connection with the maintenance and use of the insured premises and that those duties were performed in connection with their business. He held that the definition of residence employee, by itself, was clear and unambiguous but found a latent ambiguity when read with other provisions of the policy, specifically the policy form declaration Rented Dwelling and Coverage H.

HELD: Appeal allowed. The chambers judge erred in his approach. Where the definition itself was unambiguous, the general principles of interpretation of insurance policies dictated it was not proper to refer to other provisions to introduce ambiguity. The premises were being used for business purposes and W was providing services to that business. Those facts did not create an ambiguity regarding the meaning to be given to the term Residence Employee. They simply resulted in W not being an insured under the policy. Giving Residence Employee its clear and unambiguous interpretation would not defeat the main object of the contract or virtually nullify coverage that the insured purchased. The chambers judge erred in finding that W was a Residence Employee as defined in the policy. If W was employed by the insured, W was nonetheless performing duties in relation to their rental business.

Economical Mutual Insurance Co. v. Optimum West Insurance Co., [2019] B.C.J. No. 944, British Columbia Court of Appeal, R.J. Bauman C.J.B.C., D.M. Smith and R. Goepel JJ.A., May 29, 2019. Digest No. TLD-June242019006