Exclusion of Section B coverage

The Standard Owner’s Policy for New Brunswick (N.B.P.F. No 1), like all other types of insurance contracts, is composed of coverage and exclusion provisions. The coverage clauses giveth while the exclusions taketh away. One typical exclusion found in insurance policies relates to insured who claim compensation following participation in an illegal act. In New Brunswick, many clauses of the standard policy deal with related topics, albeit not necessarily designated as intentional or criminal acts:

GENERAL PROVISIONS, DEFINITIONS AND EXCLUSIONS OF SECTION B

[…]

  1. EXCLUSIONS

(a)   The insurer shall not be liable under this section for bodily injury to or death of any person,

(i)   resulting from the suicide of such person or attempt thereat, whether sane or insane;

[…]

(b)   The insurer shall not be liable under subsection I or Part II of subsection 2 of this section for bodily injury or death,

(i)   sustained by any person who, at the time of the accident, was driving or operating the automobile while in a condition for which he or she is convicted of an offence under Section 253 of the Criminal Code (Canada) or under or in connection with the circumstances of which he or she is convicted of an offence under Section 254 of the Criminal Code (Canada); or

(ii)  sustained by any person driving the automobile who is not for the time being either authorized by law or qualified to drive the automobile.

In answer to s. 231(1) of the Insurance Act, RSNB 1973, c. I-12, Section B of the standard automobile insurance policy concludes with the following clause:

Insofar as applicable the general provisions, definitions, exclusions and statutory conditions of the policy also apply.

Exclusion Section C coverage

Additional exclusions of the standard policy that pertain to intentional or criminal acts are found in the following clauses of Section C:

EXCLUSIONS

The insurer shall not be liable

(1)   under any subsection of Section C for loss or damage

[…]

(c)   caused by the voluntary parting with title or ownership, whether or not induced to do so by fraudulent scheme, trick, device or false pretense;

[…]

(h)   where the insured drives or operates the automobile

(i)   while under the influence of intoxicating liquor or drugs to such an extent as to be for the time being incapable of the proper control of the automobile; or

(ii)  while in a condition for which he or she is convicted of an offence under Section 253 of the Criminal Code (Canada) or under or in connection with the circumstances for which he or she is convicted of an offence under Section 254 of the Criminal Code (Canada); or

[…]

(i)   where the insured permits, suffers, allows or connives at the use of the automobile by any person contrary to the provisions of (h); or

(2)   under subsections 3 (Comprehensive), 4 (Specified Perils) only, for loss or damage caused by theft by any person or persons residing in the same dwelling premises as the insured, or by any employee of the insured engaged in the operation, maintenance or repair of the automobile whether the theft occurs during the hours of such service or employment or not.

Finally, regarding exclusion clauses for intentional or criminal acts, the General and Statutory provisions provide that:

GENERAL PROVISIONS, DEFINITIONS AND EXCLUSIONS

CONSENT OF INSURED

No person shall be entitled to indemnity or payment under this policy who is an occupant of any automobile which is being used without the consent of the owner thereof.

[…]

STATUTORY CONDITIONS

[…]

Prohibited Use by Insured

  1. (1) The insured shall not drive or operate the automobile,

(a)   unless he is for the time being either authorized by law or qualified to drive or operate the automobile; or

(b)   while he is prohibited under order of any court from driving or operating an automobile; or

(c)   while he is under the age of sixteen years or under such other age as is prescribed by the law of the province in which he resides at the time this contract is made as being the minimum age at which a license or permit to drive an automobile may be issued to him; or

(d)   for any illicit or prohibited trade or transportation; or

(e)   in any race or speed test.

Prohibited Use by Others

(2)   The insured shall not permit, suffer, allow or connive at the use of the automobile,

(a)   by any person,

(i)   unless that person is for the time being either authorized by law or qualified to drive or operate the automobile; or

(ii)  while that person is under the age of sixteen years or under such other age as is prescribed by the law of the province in which he resides at the time this contract is made as being the minimum age at which a license or permit to drive an automobile may be issued to him; or

(b)   by any person who is member of the household of the insured while that person is prohibited under order of any court from driving or operating an automobile; or

(c)   for any illicit or prohibited trade or transportation; or

(d)   in any race or speed test.

The last 2 clauses are drawn verbatim from s. 230 of the Insurance Act, supra.

That being said, although not contained in the standard policy, it is worth noting that, as a matter of public policy, s. 2 of the Insurance Act, supra, states that:

  1. Unless the contract otherwise provides, a violation of any criminal or other law in force in the Province or elsewhere does not, ipso facto, render unenforceable a claim for indemnity under a contract of insurance except where the violation is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage; but in the case of a contract of life insurance this section applies only to disability insurance undertaken as part of the contract.

Thus, the field of exclusions is potentially broader than what is expressly contained in the insurance contract. However, as far as car insurance is concerned, s. 250(4)(c) of the Insurance Act, supra, adds:

250   (4) The right of a person who is entitled under subsection (1) to have insurance money applied upon his judgment or claim is not prejudiced by,

[…]

(c) any contravention of the Criminal Code, chapter C-34 of the Revised Statutes of Canada, 1970, or a statute of any province or territory of Canada or of any state or the District of Columbia of the United States of America by the owner or driver of the automobile,

and nothing mentioned in paragraph (a), (b) or (c) is available to the insurer as a defence in an action brought under subsection (1).

The New Brunswick Court of Appeal, in MacDonald v. Prudential Assurance Co. Ltd (1971), 24 DLR (3d) 185 p 194, held unanimously that the latter provision “intended to deprive insurers of the benefit of the principle of public policy defined in s. 2”. Of course, that is limited to third parties, not the insured himself or herself. However, the insurance policy must first be applicable (i.e. car driven with the consent of the owner): Co-Operators General Insurance Co. v. Lanteigne (1999), 211 NBR (2d) 102 paras 13-17 (QB), confirmed at (1999), 215 NBR (2d) 394 (CA). See Morrison v. Co-Operators General Insurance Co., 2004 NBCA 62, where a similar issue was addressed from the perspective of the insurer’s duty to defend. See also J.B. v. Co-Operators General Insurance Co. (1999), 222 NBR (2d) 203 (QB); O’Donnell v. Halifax Insurance Co., 2001 NBCA 109; and Donovan v. Optimum Insurance Co. Inc., 2009 NBCA 6.

It is thus safe to say that the standard policy has exclusions specific to Section B or Section C and others that are general (contractual or legislative). There is a fair amount of duplication between the various provisions. It is worth mentioning that, at any given time, the burden rests on insurers to show that the conditions of an exclusion are met: Cooperative Fire and Casualty Co. v. Beaulieu (1977), 16 NBR (2d) 623 paras 23-25 (QB); McClure v. Co-Operative Fire and Casualty Co. (1986), 75 NBR (2d) 205 para 20 (QB).

One of the rules of interpretation of insurance policies is that coverage provisions are construed broadly, while the exclusions are interpreted narrowly: Berardinelli v. Ontario Housing Corp., [1979] 1 SCR 275 p 280; Ryan v. Victoria (City), [1999] 1 SCR 201 para 38; Graham v. Hill, 2003 NBCA 24 para 12; Axa Insurance Co. v. Rolfe, 2004 NBCA 14 para 25; Burke Estate v. Royal and Sun Alliance Insurance Co. of Canada, 2011 NBCA 98 para 45; Holohan v. Dunfield (1982), 133 DLR (3d) 267 para 25 (QB); Morrison, supra para 40 (see “Deductibility of Section B Weekly Indemnity Benefits”). Thus, these various clauses will generally receive an interpretation that favors insureds.

Driver Not Authorized by Law or Qualified

The standard policy does not cover damages where the driver is not authorized by law or not qualified to operate the motor vehicle. The contract contains at least 9 variances of this exclusion: (1) at clause 3(b)(ii) under Section B; (2) at clauses 1(h)(i) and 1(i) under Section C; (3) at clauses 2(1)(a), (b) and (c) of the Statutory Conditions; and (4) at clauses 2(2)(a)(i), (ii) and 2(2)(b) of the Statutory Conditions. While (1), the first part of (2) and (3) are directed at the driver of an automobile, the second part of (2) and (4) are concerned with owners who let other people drive who are not authorized by law or qualified to operate the vehicle. In addition to the general language of not being authorized by law or qualified to operate, there are further restrictions directed at the minimum legal age and being intoxicated or prohibited by a court order.

The case of Gallant v. Sun Alliance Insurance Co. (1983), 4 DLR (4th) 180 (NBQB), presents an unusual set of facts. The insured plaintiff was the spouse of a driver with a terrible driving record. His license had been suspended numerous times and he had been involved in prior accidents while impaired. Although the husband disappeared with the car at some point, returning to New Brunswick and leaving the plaintiff in British Columbia, apparently no attempt was made to cancel the insurance. However, the police had been informed but refused to get involved as presenting “a family affair” (para 18). Of course, the husband again got involved in an accident while his license was suspended and the insurer denied Section C coverage. The wife sought the value of the car from her insurer, who denied the claim. The trial judge concluded that, even though the license had been suspended, there was no evidence that the driver had been prohibited from driving “under order of any court” (para 27). The insurer was ordered to cover the damages.

The matter of Pheonix Assurance Co. of Canada v. Robichaud (1984), 55 NBR (2d) 1 (QB), is another case where the owner allows a person without a driver’s license to drive his car. The driver “had practically no previous driving experience” (para 3). The vehicle got involved in an accident and the owner pleaded guilty to a charge of allowing an unauthorized person to operate his car. The use of the disjunctive “either … or” in the exclusion led the court to conclude that it does not apply where the driver is qualified to drive the car even if he is not authorized by law (para 7):

According to the wording of the statutory condition the use of the disjunctive words “either” and “or” in subparagraph (i) leaves no doubt that an owner does not breach the statutory condition if he allows a qualified but unauthorized person to drive his car.

The trial judge applied a presumption that the driver was qualified to drive, to be refuted by the insurer (para 13). However, where an owner is aware that the driver is not authorized by law, there is a heavier burden to show that the driver was nonetheless qualified. Ultimately, the exclusion applied to deny coverage and the defendant was ordered to reimburse the insurer of the money paid to the injured parties.

In McClure, supra, the plaintiff’s vehicle sustained almost $6,000 worth of damages. The insurer raised clause 1(i) of the Section C Exclusions (allowing someone to operate the vehicle while impaired), and clause 2(2)(a)(i) of the Statutory Conditions (allowing someone to operate the vehicle who is not authorized by law or qualified). While he was 70 years old, his vehicle had been damaged while being operated by a person whom he knew didn’t have a driver’s licence. Although the driver was not authorized by law to do so, no evidence was presented that he was incompetent. In any event, the trial judge concluded that the driver took the car without the consent of the owner, who had, earlier that evening, refused to give him the keys. The car had been taken while he was sleeping. Hence, the plaintiff’s claim was allowed.

Driving Under Influence

This exclusion is also found several times in the standard policy. There is the specific Section B exclusion contained in clause 3(b)(i), plus the specific Section C exclusions contained in clauses 1(h)(i), 1(h)(ii) and 1(i). While the Section B exclusion is directed solely at the driver, the Section C exclusion also extends to the owner who lets an impaired person operate his or her car.

The case of Beaulieu, supra, is of significance. The defendant had been involved in an accident. He had been charged and convicted of driving while intoxicated. A civil trial had further found him to be solely responsible for the accident. Hence, the insurer sought reimbursement of the damages paid to the plaintiff in the civil action. The driver did not take the stand in the action instigated by his insurer, but the transcript of his discovery from the first action was accepted in evidence as it involved essentially the same parties. On the basis of that record, the trial judge was satisfied “to a degree much closer to that required in criminal cases that [sic] to that ordinarily required in a civil case” (para 27) that the exclusion was met.

In MacLaughlin v. Commercial Union Assurance Co. of Canada (1982), 42 NBR (2d) 265 (QB), the plaintiff’s vehicle sustained over $4,500 in damages in an accident. A claim was therefore presented to the insurer. However, a month later, the plaintiff was convicted of a refusal to provide a breath sample. Therefore, the insurer raised exclusion H(ii) of Section C, dealing “with the circumstances for which he or she is convicted of an offence under Section 254 of the Criminal Code (Canada)” (i.e. driving under influence), and presented as sole evidence the certificate of conviction. The presiding justice wrote (paras 7-8):

[7]   In my view the plain meaning of the words within Exclusion H intend that an insured is not entitled to coverage if he were involved in circumstances, at the time of the accident which caused his damages, for which he was convicted under section 235(2) of the Code. I believe it is for the court to consider those circumstances under or in connection with which an insured was so convicted and by inference to decide in the case at hand whether or not an insured ought to have been convicted and/or whether such conviction relates to the accident in question which caused the damages. As is usual, it is open to the court to consider evidence from the insured, then the insurer and rebuttal by the insured.

[8]   Obviously one very relevant circumstance would be proof of conviction under section 235(2) of the Code. Such a certificate of conviction would prima facie show the circumstances of the who, when, where and what of the conviction. I believe that this evidence must be considered together with whatever other evidence the parties chose to adduce. That is to say I do not hold to the view […] that the certificate of conviction itself is to be considered the full answer to such a claim by an insured. However, I equally believe that if, as here, the only evidence adduced is the certificate of a conviction which admittedly related to the instance which gave rise to the damages claimed, it itself is sufficient to meet the onus on the insurer to exclude coverage, because of the unrebutted and indisputed [sic] information it contains.

The exclusion was thus applied as the plaintiff had not presented any evidence in response to the certificate of conviction.

The exclusion was raised in the aforementioned case of Gallant, supra, as well. In the opinion of the trial judge, the insurer presented unsatisfactory evidence of the alleged impairment at the time of the accident (paras 31-33). The damages were thus compensated.

Again, in McClure, supra, the insured raised clause 1(i) of the Section C Exclusions (allowing someone to operate the vehicle while impaired). As for the other exclusion relied upon (discussed above), no evidence was presented that the driver was intoxicated at the time, that he had been charged of driving under influence or found guilty. Some evidence was filed that the parties had drank wine during the evening. Even if he were intoxicated, the trial judge concluded that the driver took the car without the consent of the owner and the plaintiff’s claim was allowed.

The case of Conrad v. Wawanesa Mutual Insurance Co., 2015 NBQB 14, dealt with the situation of an owner who lets another person drive who is intoxicated, more specifically “under the influence of intoxicating liquor or drugs to such an extent as to be for the time being incapable of the proper control of the automobile” (clause 1(h)(i) of Section C, through clause 1(i)). The Criminal Code charges against the driver had been withdrawn before a conviction. The trial judge explained the issue as follows (para 21-22):

[21]  In this case the evidence is clear that Ms. Rideout was driving Ms. Conrad’s vehicle at the time of the accident. It is also clear that she was under the influence of intoxicating liquor at the time of the accident. It was on that basis that Wawanesa denied coverage.

[22]  However, impairment by intoxicating liquor does not, by itself satisfy the test under the exclusion in the policy. Rather, the ultimate question that must be determined is whether or not the impairment was to such an extent as to render the driver incapable of proper control of the vehicle […]. That question must be answered on the basis of the admissible evidence before the court.

Hence, that specific exclusion is similar in nature to the one of not being qualified to operate the vehicle. In final analysis, the insurer failed to show that the driver was intoxicated to the point of not being able to maintain proper control of the car (paras 28-29). Furthermore, no evidence showed that the insured was aware of such inability on the part of the driver (paras 32-34). For a decision going the other way, see Thériault v. Fidelity Insurance Co. of Canada (1984), 52 NBR (2d) 236 (CA), where an adverse inference was drawn against the owner who had not testified (para 10).

A similar exclusion, albeit in a life insurance policy, was dealt with in Comeau v. Transamerica Insurance Co., 2007 NBQB 68, where the driver was killed while operating a snowmobile with a level of alcohol in his blood over the legal limit. The trial judge applied the exclusion.

Suicide or Attempted Suicide

Another exclusion of the standard policy, provided by clause 3(a)(i) of Section B, pertains to a suicide or attempt suicide by the driver of a vehicle.

Theft

The standard policy does not cover the person who operates a vehicle without the consent of the driver (clause 3 of the General Provisions), or the owner who may be deemed a participant in the theft of his or her own car (clause 2 of Section C). Although the clauses are clearly broader than the crime of theft, the word here designates the use of the vehicle without the consent of the owner: see Cormier v. Commercial Union Assurance Co. of Canada (1983), 144 DLR (3d) 746 (NBCA).

Even if the owner may ultimately be vicariously liable in tort pursuant to s. 267(1) of the Motor Vehicle Act, RSNB 1973, c. M-17, it does not mean that the unauthorized driver will be covered by the insurance policy: Collrin v. Parker (1997), 188 NBR (2d) 226 paras 14-21 (QB). To the extent that a third party has coverage for uninsured motorists, his or her insurer will be liable for the damages where the other car was driven without the consent of the owner: Lanteigne, supra.

Race or Speed Test

The standard automobile insurance policy also refuses to cover vehicles involved in races or speed test. Although the case of Rothwell v. Mutual Life Assurance Co. of Canada (1984), 53 NBR (2d) 309 (QB), dealt with a life insurance policy, the plaintiff was the mother of a guy killed in a car accident. He was found to be driving at least double the posted speed limit. The exclusion therein expressly spoke of committing a criminal offence. The accident happened on a busy downtown city street where the deceased lost control of his car. Although the infraction does not need to be established ‘beyond a reasonable doubt’, the court gave a hard look at the evidence and then applied the exclusion.

This paper is offered for the purpose of discussion only. It does not constitute legal advice and its distribution does not create a solicitor-client relationship. Please consult a lawyer if you require legal advice.