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B.C. follows Ontario's lead on family exclusion

The British Columbia Court of Appeal’s interpretation of a family member exclusion clarifies the law in that province, but not to the benefit of policyholders, says Vancouver insurance lawyer Sean Lerner

The decision by the province’s top court overturned a chambers judge decision in favour of the policyholder, who was represented by Lerner, principal of Lerner Law Corporation.

The lower court refused to dismiss the insured’s claim against his insurer, ruling that the family member exclusion was ambiguous, but the appeal court disagreed and reversed the ruling, bringing B.C. into line with jurisprudence on similar exclusions in Ontario.

“The standard of review on this appeal was one of correctness — the court was free to substitute its own view for that of the chambers judge. Unfortunately for the insured, they preferred to interpret the exclusion in a way consistent with the Ontario Court of Appeal.  Uniformity seems to have been a dominant consideration,” Lerner tells AdvocateDaily.com

The case involves a Vancouver man who sought coverage from his insurer after his two-year-old son was injured following a 25-foot fall at a Burnaby mall.

The boy’s litigation guardian initially sued the mall operator, which in turn issued a third-party notice against the father for contribution and indemnity due to his negligent supervision.

When the father reported the third-party claim against him, the insurer denied personal liability coverage, relying on a family exclusion in the policy that bars coverage for claims "arising from bodily injury" to a member of the same household.

Lerner argued that while the exclusion clearly bars coverage for claims between family members, it is much less clear whether it applies to claims like the ones brought against the father by the mall owners.

And in a decision issued last year, B.C. Supreme Court Justice Peter Voith agreed:

“Based on an analysis of the Policy as a whole, I consider that there is some ambiguity in the language of the Family Exclusion and, in particular, whether that exclusion, which is to be narrowly construed, extends to indirect or third party claims made against an Insured for bodily injury to another Insured,” Voith wrote, adding that the extension of the exclusion proposed by the insurer would strip the father “of coverage that the policy was intended to provide.” 

“Looking at the chambers judge’s decision, the question of whether indirect claims against the insured by strangers to the policy were caught by this exclusion posed an interpretive difficulty. After all, claims by these actors were not referenced in the exclusion itself,” Lerner says.

“He looked to other exclusions in the policy that did use language to distinguish between direct and indirect claims and he found that the absence of that kind of language in the family member exclusion made it ambiguous — at least with respect to indirect claims.” 

But in its Oct. 17 judgment, a unanimous three-judge panel of B.C.’s appeal court found that “there is no ambiguity,” noting that the use of the term “directly or indirectly” in other parts of the policy should have no bearing on the interpretation of the family 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,” they wrote.

The judges also said that the fact that Ontario’s Court of Appeal had previously interpreted a “virtually identically worded” exclusion as applying to third-party claims “militates in favour of reaching the same conclusion in the case at bar.”

The resulting certainty and predictability in terms of policy interpretation is in the interests of both the insurance industry and their customers, the appeal court added in its decision.

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