Renter’s Insurer is First to Respond, Even if Only a Third Party

A recent decision of the Ontario Superior Court of Justice provides guidance as to whose insurer must respond first to a plaintiff’s claim in motor vehicle accidents involving rented or leased automobiles.

In Elias v. Koochek, 2014 ONSC No. 5003 (S.C.J.), the Court heard a motion involving a rental car accident. The passengers of the car brought a lawsuit naming the uninsured driver of the car (Koochek) and the owner of the car (Aviscar) as defendants. Aviscar then brought a third party claim against the renter of the car (Moshe). The court was asked to determine whether the renter’s insurer was required to respond first to the plaintiff’s claim.

In order to answer this question the court looked to section 277(1.1) of the Insurance Act and the corresponding provisions of the Ontario Automobile Policy. Section 277(1.1) provides for the priority in which available insurance policies are to respond to liability from the ownership or operation of a leased (rented) automobile. It states that the lessee’s (renter’s) policy is to respond first, followed by the driver’s policy and then the owner’s policy. This is an exception to the general rule in motor vehicle accidents that the owner’s policy is to respond first.

The renter argued that his insurance was not “available” because he was not named as a defendant in the main action. The court disagreed, and stated that making the availability of the renter’s policy dependant on whether the renter was named as a defendant or a third party would lead to inconsistent results and subvert the legislative intent behind section 277(1.1). The court said that while a claim does need to be made against the renter in order to trigger the availability of their insurance under 277(1.1), the procedural manner of pleading by which this claim is made is not relevant.

As such, the court found that the renter’s insurer did need to respond first to the plaintiff’s claim.

Senate fails to renew TRIA

The United States Senate has failed to renew the Terrorism Risk Insurance Act (TRIA) before its expiration on December 31, 2014. 

I offered my suggestions for amendments to TRIA here. 

Here's a sampling of articles on the effect of the failure to renew TRIA: 

Insurance Journal

Insurance Thought Leadership

Property Casualty 360

National Review Online

Changes to the Rules of Civil Procedure

The Rules of Civil Procedure are being amended as of January 1, 2015.  Included in the amendments are changes to r. 48.

Currently, r. 48.14 provides that if an action has not been placed on the trial list within two years after the first defence is filed, the Registrar will issue a status notice providing that the action will be dismissed in 90 days.

The new rule provides that the Registrar shall dismiss the action for delay if:

(a) The action has not been set down or terminated by the later of five years after its commencement or January 1, 2017; or
(b) The action was struck from the trial list and has not been restored to the trial list by the later of  two years of being struck or January 1, 2017.

If a status hearing was scheduled before January 1, 2015, the old rule continues to apply.

These amendments will likely help to avoid many motions that were necessary to either avoid a dismissal or to set aside an administrative dismissal.

Payroll expenses are not part of gross revenue; why policies are impossible to understand

Gene Killian at New Jersey Insurance Coverage Litigation has blogged about a Massachusetts Appeals Court case, Verrill Farms LLC v. Family Farm Cas. Ins. Co., 86 Mass. App. Ct. 577 (2014).  The case addressed business interruption coverage and held that payroll expenses should be deducted from gross revenue in the calculation of profit or loss to determine loss of business income. 

Killian wonders why insurance policies are so badly written.  I disagree with both of his hypotheses: that the underwriters think the nature of the risks they seek to cover is complicated, or that they think that if they write the policies in an arcane and convoluted manner they'll have wiggle room when coverage disputes arise.

Policies are complicated because they are written reactively rather than proactively.  They react to court decisions that interpret them. 


Say there's an exclusion that provides, "This policy excludes damage to trees."  A court holds the exclusion does not apply to apples that have fallen from trees.  (For those of you who did not grow up near orchards, such apples are used for cider.) 

The next version of the exclusion will provide, "This policy excludes damage to trees and to the product of any tree that has not yet been harvested." A court  holds that that exclusion does not apply to damage to apples sitting in a wheelbarrow under a tree, because they have been harvested. 

The next version of the exclusion will provide, "This policy excludes damage to trees and to the product of any tree that has not yet been harvested, and to the product of any tree that has been harvested that remains on the insured property."  A court decision holds that "the product of any tree that has been harvested" applies only when the the tree itself has been harvested (such as for lumber) and not when its fruit has been harvested.

The next version of the exclusion will provide, "This policy excludes damage to trees and to any tree that has not been harvested and to any product that has not yet been harvested that grows on trees on the property and to any tree that has been harvested and remains on the property and to any product that grows on trees that has been harvested and remains on the property." 

By now no one can read through the exclusion without their eyes crossing, much less figure out what it purports to exclude.  Combine it with a few policy definitions and maybe an anti-concurrent causation clause, and . . . welcome to a modern insurance policy. 

City Not Liable for Icy Boulevard

In 2013, we blogged on a decision by Justice Gorman dismissing a claim where the plaintiff fell on a sloped boulevard between the street and the sidewalk, Bondy v. London.  The link to the blog post can be found here.  The plaintiff appealed the decision.

The Court of Appeal dismissed the appeal, at 2014 ONCA 291 (C.A.).  The parties agreed that the boulevard was a "highway" within the meaning of the Municipal Act.  The Court of Appeal held that the highest standard to which the area needed to be maintained was as a highway for vehicles, not as a passageway for pedestrian traffic. 

The plaintiff argued on appeal that because from time to time people cross the road in the middle between intersections, it creates a special circumstance that elevates the standard of maintenance.  The Court of Appeal disagreed, holding that "The fact that people may cross at undesignated places on a road does not create or impose on the Municipality a higher level of maintenance obligation."  There were also no special circumstances that created an obligation on the adjacent property owner to maintain the boulevard.

Massachusetts Appeals Court continues trend of PIP decisions against insurers

On April 7, 2007 a passenger was injured in an automobile accident.  Pilgrim was the PIP carrier.  Bryan Hartunian provided orthopedic treatments to the insured.  Pilgrim paid some of the bills from the treatment but withheld payment of $990 on the ground that the charges exceeded an amount that was reasonable in comparison to other medical providers in the same geographic area.  However, it did not notify Hartunian  within ten days of its intention not to pay. 

After twelve months of demanding payment, Hartunian sued Pilgrim in the Massachusetts District Court.  In addition to the unpaid portion of his bill he sought damages under Mass. Gen. Laws ch. 93A.  Pilgrim then issued payment of $990 and filed a motion for summary judgment on all counts of the complaint.  The motion was denied with respect to the 93A count.  Pilgrim was found liable for breach of 93A after a bench and subsequently appealed.

In Hartunian v. Pilgrim Ins. Co.,  __ N.E.3d __, 2014 WL 6607866 (Mass. App. Ct.), Pilgrim argued that its refusal to make payment was not an unfair business practice because it disputed the obligation to pay in good faith.  The court held that that argument ignored the fact that an insurer must, by statute, make PIP payments within ten days or notify the submitting physician or claimant of its intention not to pay. 

Pilgrim also argued that it did not act in bad when  it had an independent medical exam conducted by a physical therapist (apparently a common thing now) rather than a practitioner licensed in the same medical specialty as Hartunian. While not dismissing out of hand the use in all circumstances of a physical therapist for an IME, the court held that whether such use is in good faith raises a factual issue. 

Similarly, the court held that review of the bills by a billing program is not automatically a bad faith act by an insurer but that "its use as a substitute for a practitioner's review of billing statements and underlying services provides an additional basis for an inference of Pilgrim's lack of good faith." 

Municipal Toboganning Case Dismissed

The Municipality of Leamington recently successfully defended a case where the plaintiff alleged she was injured tobogganing.  In De Cou v. Leamington, 2014 ONSC 6044 (S.C.J.), the plaintiff was injured while sledding down a hill in a park run by Leamington.  Although the Town was aware that people used the hill, there had been no complaints about it.  The plaintiff was 29 years old and had been sledding on the hill since she was 5.  The Town did not maintain the park in the winter.

Justice Carey held that there was no breach of the duty of care.  The plaintiff willingly assumed the risk.  Justice Carey held that "Going down a snow covered hill in February  on a light piece of material (be it plastic, cardboard, Styrofoam or wood) is a typical Canadian winter experience.  Falling off a sled is also part of that experience."  There was no causal link between the Town's failure to supervise or inspect the hill and the plaintiff's injuries.  The case was dismissed.