Case Study: Pembridge Insurance Company Of Canada v. Chu

• Published date: 10 August 2020
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation, Personal Injury
• Law Firm: Field LLP
• Author: Mr Brian Vail, QC

The insurer was obligated to defend its insured under a homeowner policy where its insured was alleged to have engaged in a road rage assault against another driver after the insured stopped and exited from his own vehicle - it was not sufficiently clear that the resulting injuries arose from the ownership, use or operation' of the insured's vehicle.

Pembridge Insurance Company of Canada v Chu, 2019 ONCA 904; lv. to appeal to the S.C.C. dismissed 2020 CarswellOnt 2801 (S.C.C.)

Facts and Issues

The Plaintiff Moran sued the Defendant Fabrizi for injury alleging that Fabrizi ran a red light. Fabrizi third partied Dennis Chu. Chu was alleged to have driven negligently and then to have exited his vehicle and threatened Fabrizi and her passenger with violence, yelled at them and hit various parts of the Fabrizi vehicle and made gestures at Fabrizi and her passenger all of which put them in fear for their lives. It seems to have been alleged that this caused Fabrizi to drive away from Chu and run the red.

Dominion Insurance had issued an auto policy to Dennis Chu and conceded that it had a duty to defend him regarding the vehicular negligence allegations.

At the time, Chu lived at home and his father John Chu had a homeowner policy from Pembridge Insurance. Pembridge's policy had an exclusion clause which excluded claims arising from 'the ownership, use or operation of any motorized vehicle'. That policy also excluded coverage for injury 'caused by any intentional or criminal acts' of an insured. Pembridge denied coverage to the Chus on the basis of these exclusions.

The motions judge held that Pembridge had no duty to defend the Chus. He did not compare the allegations against them in the pleadings with the Pembridge policy but held that it was 'more appropriate' that they be defended by the auto insurer, Dominion. He concluded that the auto insurer Dominion was bound to defend Chu as his acts after leaving his vehicle were incident to the ownership, use or operation of that vehicle. He found that Pembridge had no duty to indemnify the Chus.

Dominion appealed.

HELD: For the auto insurer Dominion appeal allowed.

1. The Court summarized the principles relating to an insurer's duty to defend:

7 The insurer is obliged to defend if a claim alleges facts which, if proven, would fall within the insurer's policy coverage. A judge hearing a duty to defend coverage dispute is precluded from fact-finding on matters at issue in the underlying tort action: Cooper v. Farmers' Mutual Insurance Co. (2002), 59 O.R. (3d) 417 (Ont. C.A.) , at para. 13.

8 The mere possibility that a claim on the policy may succeed is sufficient to engage an insurer's contractual duty to defend Cooper at para. 15.

9 If pleadings are not framed with sufficient precision to determine whether the policy covers the claims, the insurer's obligation to defend will be triggered where, on a reasonable reading of the pleadings, a claim within coverage can be inferred. Coverage clauses are construed broadly, while exclusion clauses should be interpreted narrowly: Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] S.C.R. 699 (S.C.C.) , at para. 31.

10 Whether or not another insurer also has a duty to defend based on the construction of another policy and a...