



COURT OF APPEAL FOR ONTARIO

CITATION:
Savage v. Belecque, 2012
    ONCA 426

DATE: 20120621

DOCKET: C53842

Armstrong, Blair and Lang JJ.A.

BETWEEN

Amy Savage

Plaintiff

and

Michel Belecque, Lynn Belecque, Gilles Belecque, Shayne
    Poitras, Philippe Poitras, Darlene Poitras,
CGU Insurance Company of Canada and Aviva Insurance Company of Canada

Defendants (Respondents/
Appellants by way of cross-appeal
)

and

Allstate Insurance Company of Canada, added by
    Order pursuant to section 258(14) of the
Insurance
    Act
, R.S.O. 1990, c. I.8, as amended, with all
    rights which are conferred upon such party  pursuant to
    section 258(15)  of said Act

Third Party (Appellant/Respondent by way of cross-appeal)

AND BETWEEN

Michel Belecque, Lynn
    Belecque and Gilles Belecque

Plaintiffs (Respondents)

and

Allstate Insurance Company
    of Canada
and Dennis Brock

Defendants (
Appellants/
Respondents by way of cross-appeal
)

Ian D. Kirby, for the appellant/respondent by way of
    cross-appeal, Allstate Insurance Company of Canada

Kevin S. Adams, for the respondents/appellants by way of
    cross-appeal, CGU Insurance Company of Canada and Aviva Insurance Company of
    Canada

Tara M. Sweeney, for the respondents, Michel Belecque, Lynn
    Belecque, Gilles Belecque

Heard: April 25, 2012

On appeal and cross-appeal from the judgment of Justice
    M. Gregory Ellies, of the Superior Court of Justice, dated May 11, 2011, with
    reasons reported at 2011 ONSC 2330, 1 C.C.L.I. (5th) 112; and on appeal from
    the order of Justice M. Gregory Ellies, of the Superior Court of Justice, dated
    October 13, 2011, with reasons reported at 2011 ONSC 5771, 1 C.C.L.I. (5th) 139.

Lang
    J.A.:

[1]

This appeal arises from a summary judgment decision granted by the
    motion judge.  The appellant insurer argues that there was no genuine issue
    requiring a trial concerning the insurers obligation to indemnify because
    coverage was statutorily excluded on the basis that the harm or loss sustained
    was caused intentionally.  Additional challenges relate to the insurers duty
    to defend, as well as the litigation costs awarded.

BACKGROUND

[2]

Amy Savage was injured on January 4, 2001 when she was hit by a car in
    the parking lot of a skating rink.  Michel Belecque was driving the car, which
    was owned by his mother.  The accident occurred after Amy spoke to Shayne
    Poitras, a back-seat passenger in the car, apparently to ask him for a
    cigarette.  At the time the car was either stopped or was moving very slowly. 
    Shayne held on to Amys jacket.  The car advanced with Amy on her skates alongside.
    She was released and fell.    Michel stopped the car, looked back, did not see
    Amy, and reversed the car sharply.  The car hit Amy, who was still on the
    ground trying to get up.

[3]

Several actions were launched following the accident. Amy sued both
    Michel and Shayne.  Allstate applied and was added as a statutory third party to
    that action pursuant to the
Insurance Act
, R.S.O. 1990, c. I.18, s.
    258(14).

[4]

In addition, Amy sued the Belecque and Poitras parents for negligent
    supervision of their children.  This claim, together with the cross-claims brought
    by the parents, were later dismissed on consent without costs.

[5]

Finally, Amy sued her parents insurer, CGU Insurance Company of Canada
    and Aviva Insurance Company of Canada, collectively referred to as CGU.  CGU
    provided uninsured and inadequately insured motorist coverage to Amy Savages
    family.

[6]

In turn, the Belecques sued their insurer, Allstate Insurance Company of
    Canada (Allstate), which denied them coverage for the accident (the coverage
    action). The Belecques sought a declaration that Allstate was obliged to
    provide coverage under their automobile and homeowners policies. Allstate
    denied coverage under the automobile policy on two bases: first, that Michel
    Belecque acted deliberately when he struck Ms. Savage while operating the
    vehicle and, second, that the Belecques failed to report the accident in accordance
    with the notification requirements of the policy.

[7]

The parties settled the main action at $450,000 for Amys compensatory
    damages, plus costs.  Effectively, the only remaining question was which
    insurer would pay those damages.  The answer turned largely on whether Michels
    conduct was negligent (in which case he would be covered by Allstate up to $1
    million) or whether his conduct was intended to cause Amys loss (in which case
    coverage would be excluded except for the $200,000 statutory minimum).    CGU,
    which was potentially liable as the excess insurer, moved for summary judgment pursuant
    to rule 20.01 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194. 
    It sought a declaration that Allstates policy covered one or both of Michel
    and Shayne, as well as an order dismissing Amys claims against CGU. CGU filed affidavit
    and transcript evidence in support of its motion.

[8]

CGU argued that Allstates defences of lack of timely notice and of
    deliberate loss did not raise genuine issues requiring trial.  Alternatively,
    CGU took the position that Allstate was liable to indemnify Amy for her losses
    up to the minimum limits of the policy, which CGU argued would be $200,000 for
    Michel as driver, as well as $200,000 for Shayne as passenger.  CGU sought
    costs of the action against Allstate in the approximate amount of $79,220.84 on
    a partial indemnity basis.

[9]

Returnable at the same time, the Belecques sought a declaration that
    Allstate owed them a duty to defend and a duty to indemnify.   They sought
    approximately $180,168.29 in litigation costs against Allstate for the expenses
    they incurred arising from the main action, coverage action, and motion for
    summary judgment.

[10]

The
    motion judge carefully considered the primary issue before him: whether the
    Belecques had provided timely notice of their claim to Allstate. He decided
    they did so. His decision was supported by an abundance of evidence that the
    Belecques had notified their insurance agent of the accident on multiple occasions.
    Turning to the remaining issues, the motion judge concluded that Allstate had
    both a duty to defend as well as a duty to indemnify Michel Belecque, a duty to
    defend his mother under the automobile policy and a duty to defend Michels
    father under the homeowners policy.  He declined to make a ruling regarding
    coverage for the defence and indemnification of Shayne Poitras.  He dismissed
    the claims against CGU.  Finally, the motion judge awarded the litigation costs
    requested by the Belecques and CGU.

[11]

Allstate
    appeals the motion judges determination of indemnification coverage, his
    decision of a duty to defend under the automobile and homeowners policies, and
    his disposition of the litigation costs.  CGU cross-appeals, arguing that the
    motion judge erred in declining to decide Allstates obligations to Shayne
    Poitras.

[12]

As
    I will explain, in my view, Michel was entitled to coverage and Allstate owed
    all the Belecques a duty to defend.  I would not interfere with the litigation costs
    awarded by the motion judge.  Accordingly, I would dismiss the appeal.  I would
    also dismiss the cross-appeal since I am not persuaded that the motion judge
    made any error in declining to decide the issue involving Shayne.

Issues

[13]

There
    is no appeal from the motion judges decision that there was no genuine issue
    requiring a trial concerning Allstates position that the Belecques had failed
    to comply with the notice requirements of their automobile policy.

[14]

Rather,
    the appellant argues that the motion judge erred in concluding:

1.

there was no genuine issue requiring a trial with respect to Michels
    intention and Allstates duty to indemnify;

2.

Allstate owed a duty to defend Michel and his mother under the
    automobile policy and his father under their homeowners policy; and

3.

that the Belecques and CGU were entitled to the litigation costs
    awarded.

[15]

The
    cross-appeal raises a fourth issue.  It challenges the motion judges decision
    dismissing the CGUs motion for a declaration that Allstate was obliged to
    defend and indemnify Shayne under the Belecque car insurance policy.  I will
    first deal with the issues concerning the Belecques and then with the issue
    concerning Shayne Poitras.

(1)

The duty to indemnify Michel Belecque

[16]

Whether
    the insurer was obliged to indemnify depended on whether the accident was
    excluded from coverage as the result of Michels intention at the time of the
    accident.  On the summary judgment motion, CGU had the onus of establishing
    that there was no genuine issue requiring a trial of this issue.

[17]

The
    interpretation of the rule amending the test for summary judgment is the
    decision of this court in
Combined Air Mechanical Services Inc. v. Flesch,
2011 ONCA 764, 108 O.R. (3d) 1
.
Under
Combined Air,
a motion
    judge must achieve a full appreciation of the evidence and the issues before
    concluding that the moving party has established that there is no genuine issue
    requiring a trial.

[18]

The
    decision of a motion judge on a summary judgment motion is reviewed on a
    standard of correctness on the applicable principles of law and is entitled to
    deference on findings of fact and the inferences drawn from those facts:  see
Combined
    Air
at paras. 70-71.

[19]

In
    the course of argument, counsel informed the motion judge of the damages
    settlement, which was reached after the motion was filed, but before it was
    heard. In particular, counsel advised the motion judge that the settlement
    provided Amy with compensatory, not punitive damages. While counsel did not
    argue that the terms of the settlement were relevant to the question of Michels
    intent, they apparently also did not clearly explain their position that the settlement
    terms were irrelevant to whether Michel was covered under the automobile policy.
    In the end, the motion judge relied on the terms of the parties damages
    settlement in the main action as the foundation to decide that the issues
    raised in the coverage action did not require a trial.

[20]

In
    his view, the terms of the settlement were determinative because their
    provision for compensatory damages amounted to an admission that Michels
    impugned conduct, while negligent, were not intentional.  The motion judge
    concluded that the claim for punitive damages was no longer alive.  On this
    basis, he found there to be no genuine issue requiring a trial.  Allstate
    owed a duty to indemnify Michel Belecque.

[21]

On
    appeal, counsel essentially agreed in argument that the motion judge erred in
    basing his indemnification decision on the terms of the settlement of the liability
    action. However, counsel also agreed that it is unnecessary to return this
    issue for a re-hearing because the record provides ample foundation for this
    court to decide the issue.

[22]

That
    decision must be based not on the terms of settlement, but on the applicable
    exclusion.  In this case, the Belecque automobile insurance policy contained no
    exclusion for intentional acts. However, Allstate invoked s. 118 of the
Insurance
    Act
, which excludes coverage for conduct that contravenes any criminal or
    other law committed with intent to bring about loss or damage.  In arguing
    that a trial was required to determine Michels intention, Allstate relied on his
    conviction for careless driving under the
Highway Traffic Act
, R.S.O.
    1990, c. H.9.  Allstate also relied on Amys claim for punitive damages, as
    well as its argument that Michels driving was so reckless that it amounted to
    intentional misconduct.

[23]

To
    consider these arguments, it is necessary to review in more detail the evidence
    about the incident that was before the motion judge. In doing so, it is
    important to be mindful, since this evidence goes to the question of Allstates
    coverage obligations for indemnification purposes (as opposed to its duty to
    defend), that the motion judge was required to consider the numerous affidavits
    and the discovery excerpts filed on the motion.

[24]

The
    evidence showed that Amy, Michel and Shayne were all teenagers:  Amy was 14,
    Shayne 16 and Michel 17 years of age.  They all knew each other as members of
    the community, including through each others siblings.  Amy testified at
    discovery that, on the night the accident occurred, she had been skating at the
    rink with friends.  Still wearing skates, Amy and a friend left the rink for
    the parking lot so that Amy could find someone who would give her a smoke.

[25]

Michel
    and Shayne had been at the local rink playing hockey.  They had returned to Michels
    family car in the parking lot.  Shayne sat in the right rear passenger seat.   Shaynes
    window was rolled down.  Michel drove the car slowly between Amy and her
    friend.  While there were inconsistent recollections on whether Michel stopped or
    just slowed the car to a crawl, it was going sufficiently slowly that Amy
    apparently was able to ask Shayne for a smoke through his open window.   According
    to both Amy and Shayne, Shayne reached out his back-seat window and, in
    horseplay, grabbed Amy by her jacket.  The Belecque car moved forward and accelerated. 
    According to Amy, she was dragged alongside for some distance upright on her
    skates.  She screamed.  A will-say statement from a Marc Bourdon provided his
    version of what happened.  According to that statement, when Amy was released, her
    momentum carried her forward a further 15 feet before she fell to the ground.

[26]

Michel
    then remembered he had forgotten an item at the rink.  He decided to return and
    retrieve it.  He stopped the car, looked behind him and did not see Amy, who
    was still on the ground trying to get up.  He executed what was called a
    high-speed doughnut or sharp reverse turn that caused the car to spin.  According
    to the evidence, Michel repeated this manoeuvre at least one more time.  In the
    course of doing so, the Belecque car struck and injured Amy.

[27]

All
    the parties who were questioned under oath, including Amy, testified about Michels
    intention.  Michels unshaken testimony was that he had absolutely no intention
    to harm Amy.  He was not aware that she had been grabbed by Shayne and was towed
    beside the car or that she had fallen.  He testified that, before reversing the
    car, he looked behind and believed his path was clear. Shayne testified to the
    same effect: that he did not believe Michel had an intention of hurting Amy. 
    Amy testified that she did not know Michels intention and did not know whether
    he knew Shayne had forcibly towed her alongside the car.  All the participants
    testified that there was no animosity between any of them and there was no
    reason why either Michel or Shayne would cause harm to Amy.

[28]

The
    only evidence relied on by Allstate was the affidavit of its solicitor.   That
    affidavit referred to the potential evidence of Marc Bourdon.  Since no
    affidavit was filed from Mr. Bourdon, his version could not be tested. Counsel
    simply read the will-say in at Amys discovery.  In any event, Mr. Bourdons potential
    evidence did not assist with the core question of Michels intention because the
    statement was restricted to what Mr. Bourdon witnessed concerning the mechanics
    of the accident, and his perception of the number of manoeuvres.  He could not
    and did not give evidence about Michels intention in carrying out those manoeuvres.

[29]

Allstate
    also relied on Michels conviction for careless driving under the
Highway
    Traffic Act
as evidence of his allegedly intentional conduct. Since that
    conviction only related to Michels execution of the impugned manoeuvres, in
    light of the other evidence no inference could be drawn that Michel had any
    intention to cause damage or loss to Amy.

[30]

While
    there was also some conflicting evidence among those present concerning the
    speed and acceleration of the vehicle, the number of reverse manoeuvres and other
    details, the resolution of those issues would not reasonably have affected the
    question of Michels intention to bring about loss or damage to Amy.

[31]

Finally,
    Allstate relied in part on Amys pleading for punitive damages. However, that
    pleading did not allege that Michel intended to cause Amy any harm.  Moreover,
    none of the evidence reviewed above supported a conclusion of intentional
    harm.

[32]

The
    motion record is sufficient to allow for a full appreciation of the evidence
    and the issues surrounding Michels intent.  In my view, CGU successfully established
    that there was no genuine requiring a trial of Michels intention and his
    consequent coverage under the automobile policy.  For these reasons, I agree
    with the result arrived at by the motion judge.  Under the Belecque automobile
    insurance policy, Allstate was required to indemnify Michel as the driver.

(2)

The
    duty to defend

[33]

Allstate argued that it had no duty to defend Michel and his mother
    on the basis of the same issue of Michels intention at the time of the
    accident.  Allstate also argued that it had no duty to defend Michels father
    under the homeowners policy because that policy excluded coverage both for
    matters arising from the ownership, use of operation of a vehicle as well as
    for intentional acts.

[34]

Counsel agree that an insurers duty to defend is broader than its
    duty to indemnify. The existence of a duty to defend is discerned by
    consideration of the provisions of the policy, the pleading, and the documents incorporated
    by reference in the pleading.

[35]

In my view, the motion judge correctly decided the duty to defend
    issue vis-à-vis Michel and his mother on the basis of the pleading in the main
    action. While that pleading included a claim for punitive damages, at its
    highest, it alleged deliberate acts on the part of Michel and Shayne. Nowhere
    did the pleading allege an intention on the part of either Michel or Shayne to cause
    Amy any damage.

[36]

Allstate challenges its duty to defend Michels father under the
    homeowners policy, which excluded claims arising from the ownership, use or
    operation of the vehicle. However, the pleaded allegation against Michels father
    had nothing to do with the ownership, use or operation of the vehicle, but
    rather with the allegation of negligent supervision of Michel. Accordingly, I
    would not give effect to this argument.

[37]

In addition, I agree with the motion judges rejection of Allstates
    alternative argument based on the homeowners policy exclusion of intentional
    acts. There was no allegation of intentional acts on the part of Michels father,
    only of negligence.  Finally, in my view, Michels mother was also owed a duty
    to defend, whether under the automobile or the homeowners policy.

(3)

The costs of the
    actions

[38]

After
    addressing Allstates duty both to defend and indemnify the Belecque defendants,
    and dismissing the action against CGU for excess coverage, the motion judge turned
    to the Belecques claim for compensation for their litigation costs of the main
    action, the coverage action and the summary judgment proceedings.  In all these
    proceedings, the Belecques were required to retain their own counsel in light
    of Allstates denial of coverage.

[39]

The
    motion judge concluded that the Belecques were entitled to compensation for
    their resulting legal expenses on a full indemnity basis.  Even so, he recognized
    that the amount of costs must be reasonable.

[40]

The
    motion judge gave careful consideration to the question of the appropriate
    award for the Belecques litigation costs. He reviewed in detail the bill of
    costs submitted, examined and compared hourly rates for counsel involved, and
    considered the time spent in connection with the three proceedings, including
    the main action, the coverage action and the motion for summary judgment. He
    specifically considered and explained why counsels hourly rates charged to the
    Belecques as individual litigants might reasonably be higher than those charged
    by counsel to a corporate insurer. He gave cogent reasons for refusing to
    reduce the amount of the Belecques compensation on the basis of a comparison
    to CGUs costs.  In his view, the lower amount of CGUs costs reflected the
    different issues and the importance of those issues to the different parties.
    He also properly rejected the Belecques argument that the amount of costs
    should be increased as some kind of sanction against Allstate for its conduct
    in refusing coverage.

[41]

Allstate
    argues that the motion judge simply accepted an accounting of the bill of costs
    without considering the overall amount of the bill. However, this is not so.
    After reviewing the particulars of the costs, the motion judge specifically
    considered the claimed costs on the whole and concluded they were not
    unreasonable. There is no principle of law requiring a judge to reduce a
    requested costs award automatically or by a certain percentage on an unfounded
    assumption that the claimed amount must be inherently excessive.

[42]

In
    my view, this is not a case where the motion judge simply acceded to a
    particular number put forward by counsel without giving any consideration to
    the relevant factors.  I see no basis to interfere with the motion judges
    exercise of his discretion in awarding the Belecques $180,168.29 for litigation
    costs.

[43]

The
    motion judge awarded CGU its costs on the appropriate partial indemnity basis. In
    fixing the amount of those costs, the motion judge was alert to the factors in rule
    57.01(1), including the importance of the issue to insurers. He rejected the
    argument that costs should be increased as a result of Allstates conduct.  He
    observed that Allstates conduct in the litigation was unfortunate, but not unreasonable.
    He also noted he had no information about the amount charged by counsel to
    Allstate. After taking into account the proper considerations, the motion judge
    concluded that CGU should be awarded the claimed amount of $79,220.84. In his
    view, this amount was both fair and reasonable.

[44]

Allstate
    argues simply that CGUs costs award was excessive. There is no explanation
    to support that position. The costs awarded by the motion judge are entitled to
    a high degree of deference. In the absence of any error in principle, a
    misapprehension of the facts, or an award that is clearly wrong, there is no
    basis to interfere with his exercise of discretion.

[45]

Accordingly,
    I would dismiss the appeal of the award for litigation costs.

(4)

The cross-appeal by CGU

[46]

I
    turn to the final issue of the cross-appeal in which CGU argues that the motion
    judge ought to have declared that Shayne was entitled to coverage as a
    passenger in the Belecque vehicle. While Shayne delivered a statement of defence
    in the main action, he did not bring a coverage action against Allstate and did
    not respond to the motions. There was no evidence about whether Shayne had been
    denied coverage under the Belecque policy.  In its motion, CGU sought a
    declaration that one or both of Michel and Shayne were covered under the
    policy, Shayne as an occupant. In particular, CGU argued that, absent full
    coverage, Allstate was still required to pay the $200,000 statutory minimum for
    each of Michel and Shayne. Allstate resisted on the basis that Shayne did not
    have any coverage under the Belecque policy, even though he was an occupant of
    the vehicle, because his conduct in towing Amy alongside the car disentitled
    him to coverage.

[47]

The
    motion judge concluded that it was not either appropriate or possible to
    determine Allstates duty to defend and indemnify Shayne Poitras.  He
    specifically declined to make any ruling on this issue.

[48]

I
    see no error in this conclusion, particularly in light of the paucity of information
    before the motion judge. The lack of information was compounded on appeal by Allstates
    failure to file a responding factum and failure to respond to the issues raised
    by CGUs cross-appeal.

[49]

Moreover,
    in light of the result of the appeal upholding the motion judges decision that
    Allstate must indemnify the Belecques, there does not appear to be any need to
    address the question of Shaynes coverage under the Belecque automobile policy.
    Nonetheless, out of an abundance of caution, the dismissal of CGUs cross-appeal
    is made without prejudice to its right to bring a fresh motion for summary
    judgment on this point if so advised.

RESULT

[50]

In
    the result, the appeal and cross-appeal are dismissed.

COSTS OF THE APPEAL

[51]

Allstate
    has been unsuccessful on the appeal.  As well, the cross-appeal turned in part
    on Allstates failure to file a responding factum.  In these circumstances, I
    would award the Belecques and CGU their costs of the appeal.  I would fix the
    Belecques costs at $20,000 and the CGU costs at $15,000, both inclusive of
    disbursements and applicable taxes.

Released: RPA June 21, 2012                    S.E. Lang
    J.A.

I
    agree Robert Armstrong J.A.

I
    agree R.A. Blair J.A.


