Regional Insurance Litigation Group: Atlantic Canada Case Law Updates

New Brunswick

Bifurcation orders and the threshold for severance

- Shanks v. Shay, 2015 NBCA 2

Shanks, who was involved in two car accidents, was denied Section B benefits. TD Home was his insurer at the time of the first accident. It took the position that Shanks failed to disclose that his vehicle was used for commercial purposes, a material change in the risk. CAA, the insurer for the second accident, argued that all of Shanks' injuries were caused by the first accident. Shanks sued TD Home and CAA, as well as their respective adjusters. Apart from his claim for Section B benefits, Shanks also alleged induced breach of contract, bad faith and negligence.

TD applied to sever the claim for Section B benefits from the other claims. It also sought to have the claims for each accident tried separately. CAA brought a similar motion. The court severed the claims for policy benefits from the claims of induced breach of contract and bad faith. It denied the request for separate trials for each accident.

Shanks appealed, arguing that the threshold test for bifurcation, described in Walsh v. Nicholls, 2004 NBCA 59, was biased against plaintiffs. The Court of Appeal clarified the proper test. It rejected any suggestion that "exceptional or special circumstances" were required for severance. The test is whether it is "just and convenient" to sever the issues. According to the Court of Appeal, it was "just and convenient" to sever the more simple issue of insurance coverage from the more complicated issues involving bad faith and induced breach of contract. This was a matter of "common sense", since the determination of the coverage issue might put an end to the entire action.

Driving while under the influence does not necessarily exclude coverage

- Conrad v. Wawanesa Mutual Insurance Company, 2015 NBQB 14

Conrad and her friend, Rideout, were out at a pub. Rideout said she was able to drive Conrad's car. While operating the vehicle, Rideout rear-ended another car. Rideout's breathalyzer samples showed a blood alcohol level of .200. Rideout was charged with impaired driving, but the charges were later dropped. Wawanesa denied coverage for the damages to Conrad's vehicle, arguing that Conrad had allowed Rideout to drive the vehicle while Rideout was under the influence of alcohol. In addition to suing for coverage, Conrad alleged bad faith.

The court held that impairment by intoxicating liquor does not, by itself, satisfy the test under the exclusion. The test is whether the impairment was to such an extent as to render the driver incapable of proper control of the vehicle. Despite the breathalyzer samples and the police officer's...