Economical Insurance Co. v. Gill 2017 BCCA 351
The BC Court of Appeal has unanimously overturned a lower court ruling, and has found that a common exclusion clause regularly found in homeowner insurance policies is unambiguous, effective and widely applicable.
In a landmark decision in favor of insurers, BC’s top court ruled that a coverage exclusion which denies insurance for claims against an insured arising from bodily injury to any person (excluding employees) residing in the insured’s household, is clear and broad in scope. The decision will be a welcomed assurance to insurers seeking to enforce such “Family Member Exclusions”. Meanwhile, insureds should be aware that their coverage could be significantly limited by operation of this type of exclusion clause in their insurance product.
The case is also crucial, because it confirms that exclusions for claims “arising from” a certain act will exclude coverage for all claims arising from that act, regardless of whether those claims arise directly or indirectly from the act (the policy need not specify that the exclusion also applies to indirect claims). This represents another big win for insurers seeking to enforce generally-worded exclusions in their policies.
In Economical Insurance Co. v. Gill 2017 BCCA 351, an infant, Gurjeet Singh Gill (by his litigation guardian) sued the owners of Metropolis at Metrotown Mall for bodily injuries suffered when Gurjeet fell from an escalator at the mall. The mall’s owners then filed a third party notice against Kirpal Singh Gill, Gurjeet’s father, alleging that Mr. Gill was negligent in supervising his son while at the mall.
Mr. Gill reported the third party claim to his insurer (Economical Ins. Co.) seeking liability coverage. However, Economical denied coverage, relying on a ‘Family Member Exclusion’ in Mr. Gill’s residential insurance policy.
The impugned exclusion clause read as follows:
a) PERSONAL LIABILITY: There is no coverage in this Section for claims arising from:
5) Bodily Injury to the Insured or to any person residing in the Insured’s household other than a Residence Employee;
The trial judge (2016 BCSC 252) found that, in this case, the “Family Member Exclusion” was ambiguous because it did not specify that the exclusion applied to claims arising either directly or indirectly from bodily injury (while other exclusion clauses in the policy expressly applied to claims arising directly or indirectly from a certain act). The trial judge went on to find that the exclusion could not apply in this situation because the third party claims against Mr. Gill arose indirectly from bodily injury, and the policy did not expressly exclude coverage for indirect claims.
This reasoning was unanimously rejected on appeal. The BCCA found that the exclusion clause was unambiguous and clearly applied to all claims arising from bodily injury to residents of Mr. Gill’s home, regardless of whether those claims arose directly or indirectly from bodily injury.
The court opined as follows on its interpretation of the exclusion clause:
 An average person reading the policy would understand the family member exclusion to mean that an insured does not have coverage for any claims arising from bodily injury to a family member who resides in the insured’s household. The absence of the words “directly or indirectly” would not cause such a person to find that clause ambiguous or to have doubts with respect to what is or is not excluded.
The court ruled that Mr. Gill was not entitled to coverage with respect to the third party claims filed against him – even if those claims arose indirectly from bodily injury to Gurjeet.
The BCCA ruling is a positive development for insurers, as they will be able to enforce exclusion clauses like the “Family Member Exclusion” for all claims against insureds arising out of bodily injury to family members, regardless of whether those claims arise directly or indirectly from bodily injury. Insurers will be comforted knowing that the exclusions in their policies will still apply broadly even in the absence of the words “directly or indirectly”.
Meanwhile, insureds should be aware that such exclusions in their insurance policies will operate to deny coverage for indirect (third party) claims against them, even if the policy itself does not specify that the exclusion attaches to both direct and indirect claims.