Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
A Clear and Present Exclusion
As the advertisement goes, there is something
to be said for clarity. Many an insurance policy has floundered on
the rocks of "ambiguity" however in the recent case of Kingsway
General Insurance Company v. Lougheed Enterprises Ltd. and Vine
Enterprises Ltd. 2003 BCSC 1161 the British Columbia Supreme Court
found that a clause restricting coverage was, in fact, clear and
acted as a bar to coverage.
Kingsway had brought a petition for a declaration
that they were not required to defend Lougheed and Vine against
actions brought against them by owners of a condominium complex.
Lougheed and Vine were named insureds under Kingsways policy.
However, within the definitions section of the policy was an
exclusion to the definition of "insured" such that:
No person or organization is an insured with
respect to the conduct of any current or past partnerships or joint
venture that is not shown as a Named Insured in the Declarations.
(the "clause restricting coverage")
As participants in a partnership, Blundell Place
Partnership, Lougheed and Vine were involved in the design and
construction of the subject condominium project. Blundell was not a
named insured under the policy. Kingsway took the position that,
while the allegations of negligence against Lougheed and Vine
concerned matters which would be within the scope of coverage for
the policy, the definition of "insured" acted as a bar to indemnity.
In return Lougheed and Vine advanced two arguments
in support of coverage:
The restriction relied on by Kingsway only
made sense, in the context of the entire definition of insured, if
it was taken to mean that only the partnership with which Lougheed
and Vine were associated is not afforded coverage. As they were each
alleged to have individually committed acts of negligence and as
there were no express plea in the claims against them that they were
liable solely as partners in a partnership then they have coverage
and Kingsway was bound to defend.
As named insureds, Lougheed and Vine are
"insureds" under the policy for all purposes unless the exclusions
section of the policy states a circumstance in which they are not
covered. The clause relied on by Kingsway was found in the
definition section, not the exclusion section, of the policy. It was
submitted that a definition section of a policy gives meaning to
words used in the policy but is not designed to create or limit
coverage.
The Court determined that it was possible to look
at the plain meaning of the policy as a whole to infer the intent of
the parties. In doing so the Court held that it was the intent of
the parties that Kingsway would provide liability coverage to
Lougheed and to Vine but not if they carried out an otherwise
insured activity as part of a partnership with a third party who
was not a named insured. While placing the clause restricting
coverage in the exclusion section of the policy would have
emphasised the restriction the Court held that it was no less
unambiguous in the section that defines who is an insured.
Insurable Interest Subscribers who would like
to read the decision in full can access the Reasons for Judgment at:
http://www.courts.gov.bc.ca/Jdb-txt/SC/03/11/2003BCSC1161.htm
Readers with any questions regarding the
definitions of insured or coverage issues generally, are invited
to contact Nigel Kent at (604) 643-3135 or npk@cwilson.com.
