Atlantic Canada Case Law Updates - October 2015

NOVA SCOTIA

Insurance coverage refused on the basis of an unintentional misrepresentation on insurance policy

Grafton Connor Property Inc. v Murphy, 2015 NSSC 195

In 2007, the North-End Pub in Halifax was destroyed by fire. It was owned by Grafton Connor and insured by Lloyd's of London Underwriters under an insurance policy that had been placed through Marsh Canada Limited.

After the fire, Underwriters discovered that, contrary to the information on the insurance application, the Pub was neither sprinklered nor entirely of masonry construction. Underwriters denied the claim due to material misrepresentation in the application. Grafton Connor brought an action against Underwriters and Marsh for coverage under the policy and for damages as a result of delay in rebuilding the Pub and an apartment complex it planned for the site.

Although Grafton Connor argued that the misrepresentation was unintentional, Justice LeBlanc found that Underwriters had no liability under the policy, which was not intended to excuse unintentional material misrepresentations by the insured. Underwriters had no duty to investigate the accuracy of the information provided in order to determine whether its insured had made any misrepresentations. Justice LeBlanc further found that Marsh had breached the standard of care of a reasonable insurance broker by failing to make inquiries to determine whether the insured's representatives had the necessary training or expertise to accurately complete the insurance application. Marsh was ordered to pay Grafton Connor approximately half of the insurance proceeds and half of the increased costs and lost profit from the Pub which it would have rebuilt had it received the insurance money.

Grafton Connor was also negligent and held 50% responsible for its misfortune in failing to ensure that its representatives who handled the placement of insurance had sufficient knowledge of the properties to place coverage.

Court finds that CPP disability benefits are deductible from loss of income claim

Tibbetts v Murphy, 2015 NSSC 280

Tibbetts was injured following a motorcycle/motor vehicle accident with Murphy. The court concluded that although Tibbetts was primarily responsible for the collision, Murphy was one-third liable for the accident.

On the issue of damages, Tibbetts argued that her CPP disability benefits, which she began receiving after the accident, were not deductible from her loss of income claim. Tibbetts relied on the court's decision in Hollett v. Yeager, 2014 NSSC 207, where it found that CPP disability benefits are not deductible from a claim for past loss of income. Murphy, however, argued that the decision in Hollett was wrongly decided based on section 113A of the Insurance Act, which provides that in claims for damages arising from the use or operation of a motor vehicle, a plaintiff's claim for loss of income or...

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