



COURT OF APPEAL FOR ONTARIO

CITATION: Pembridge Insurance Company of Canada v. Chu, 2019
    ONCA 904

DATE: 20191115

DOCKET: C66728

Simmons, Pardu and Nordheimer JJ.A.

BETWEEN

Pembridge Insurance
    Company of Canada

Applicant (Respondent)

and

John Chu, Dennis G.K. Chu and
The Dominion of
    Canada  
    General Insurance Company

Respondent
    (Appellant)

Thomas J. Donnelly and Joyce Tam, for
    the appellant

Todd J. McCarthy, for the respondent

Heard: November 4, 2019

On
    appeal from the judgment of Justice Chris De Sa of the Superior Court of
    Justice, dated February 27, 2019, with reasons reported at 2019 ONSC 1359.

REASONS FOR
    DECISION

[1]

The Dominion of Canada General Insurance Company (Dominion) appeals
    from an application judges decision that Pembridge Insurance Company of Canada
    (Pembridge) was under no duty to defend Dennis Chu and John Chu from claims
    related to a motor vehicle accident.

[2]

Dominion is Dennis Chus auto-insurer and conceded a duty to defend
    allegations of negligent driving against him. Pembridge provides John Chus
    homeowner insurance. Dennis Chu is John Chus son, and was living at home at
    the time of loss. Pembridge therefore covers Dennis Chu under the homeowners
    policy.

[3]

In the underlying litigation, Tate Moran, claims Ottavio Fabrizi caused
    her injuries by driving through a red light. Fabrizi made a third party claim
    against Dennis Chu, alleging, among other things, that Dennis Chu not only drove
    negligently but also:

·

Got out of his vehicle;

·

Threatened Fabrizi and a passenger in Fabrizis vehicle with
    violence;

·

Yelled at them, hit the window and other parts of the vehicle;
    and

·

Made other gestures causing Fabrizi and his passenger to fear for
    their lives.

Fabrizi claimed, among other things, that his flight
    from Dennis Chu led to the collision which caused Morans injuries.

[4]

The Pembridge homeowners policy insured the policy holder for legal
    liability arising out of [their] personal actions anywhere in the world but
    excluded claims made arising from the ownership, use or operation of any
    motorized vehicle.

[5]

The appellant submits that the motion judge erred in three respects:

1.

He did not compare the allegation against the Chus in the pleading with
    the homeowner policys language, as binding jurisprudence mandates. Instead,
    the motion judge considered that it was more appropriate for the auto-insurer,
    Dominion to provide coverage.

2.

He erred in concluding that the intentional act exclusion in the
    homeowners policy meant that Pembridge was under no duty to defend. The
    homeowner policy excludes coverage for bodily injury caused by any intentional
    or criminal acts or failure to act. Binding jurisprudence confines that
    exclusion to acts intended to cause harm. On this point, the motion judge erred
    by conflating the issue over the duty to defend with the issue of the duty to
    indemnify, the latter of which can only be determined after the facts are found
    at trial.

3.

He inappropriately made factual findings that Dennis Chus actions after
    getting out of the vehicle would be deemed incident to the ownership, use or
    operation of a vehicle and therefore covered by the auto-insurer and not by
    the homeowner insurer. Factual findings are to be made at trial. The duty
    to defend issue is to be based on the allegations as pleaded.

[6]

We agree with those arguments.

Principles

[7]

The insurer is obliged to defend if a claim alleges facts which, if
    proven, would fall within the insurers 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 (C.A.), at para. 13.

[8]

The mere possibility that a claim on the policy may succeed is
    sufficient to engage an insurers 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 insurers 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, at para. 31.

[10]

Whether or not another insurer also has a duty to defend based on the
    construction of another policy and a comparison with the pleadings is not
    relevant to this determination.

Analysis

[11]

At the time of the threats and assaults attributed to Chu, he was no
    longer in his vehicle and was not using the car. This gives rise to an argument
    that the chain of causation  connecting use of Chus car with the alleged threats
    and assaults, Fabrizis flight, and Fabrizis collision with Moran  was broken.
    We note that, under similar circumstances
[1]
,
    the court in
Tench v. Erskine
(2006), 244 N.S.R. (2d) 55,
concluded that the claim could not be
    said to have arisen out of the ownership, use or operation of a vehicle, and
    the auto insurer was under no duty to defend. Without deciding whether the
    decision in
Tench
would be the same in Ontario, it serves to demonstrate
    that there is more than one possible outcome to the events in this case.

[12]

It is arguable that the exclusion in the Pembridge homeowner policy for
    acts arising from the ownership, use or operation of any motorized vehicle,
    when construed narrowly, does not apply to Chus alleged assaults. In other
    parts of the policy, Pembridge excluded coverage for matters such as terrorism
    or fungal contamination where there are other causes of the losses, whether
    concurrent or sequential. In other exclusions, Pembridge uses the language of
    bodily injury arising directly or indirectly from an excluded event. The
    automobile exclusion does not include that language. Consequently, a court
    might conclude that the automobile exclusion in the Pembridge homeowner policy
    did not apply so as to exclude coverage for Chus actions after he got out of
    his car: see, for instance, the discussion in
Consolidated Bathurst Export
    Ltd. v. Mutual Boiler & Machinery Insurance Co.
[1980] 1 S.C.R. 888 at
    pp. 898-899.

[13]

Under these circumstances, the motion judge erred in concluding that
    Pembridge had no duty to defend under the use of an automobile exclusions.

[14]

The Pembridge homeowner policy also excludes bodily injury caused by
    any intentional or criminal acts by any person insured by the policy. Dennis
    Chus alleged conduct after he left his vehicle was intentional in the sense
    that it was advertent behaviour. However, in
Non-Marine Underwriters
    Lloyds London v. Scalera
, 2000 SCC
    24, [2000] 1 S.C.R. 551,

a clause excluded insurance
    coverage for bodily injury caused by any intentional or criminal act. In the
    context of damage claims for sexual battery, the Supreme Court of Canada concluded
    that this clause could not be read literally. Instead, the exclusion clause had
    to be read to require that in addition to the intentional act, there was also
    an intent to injure:
Scalera,
at paras. 37 and 92.

[15]

Here, there is no allegation that Dennis Chu intended to harm the
    plaintiff, Moran. There is also no allegation that Dennis Chu intended to harm Fabrizi,
    It is not clear that the assaults and threats attributed to Dennis Chu would be
    sufficient to invoke the exclusion. Based on
Scalera
,
it is arguable that the intentional or
    criminal act exclusion has no application. Again, since the exclusion clause
    may be narrowly construed, and since there is a possibility that Pembridge may
    have to indemnify the Chus depending on what facts are ultimately found, there
    is a duty to defend.

[16]

Finally, as indicated above, a duty to defend motion does not resolve
    the ultimate factual issues as to a duty to indemnify. That motion involves comparing
    allegations in the pleadings and the relevant policy. Findings of fact are not
    made about the accidents circumstances. Determination of ultimate
    responsibility for indemnity must await those findings of fact.

[17]

The motion judge erred in ordering that Dennis Chus actions after
    exiting the vehicle is now deemed to be incident to the ownership, use or
    operation of a vehicle. He also erred in giving judgment that the Chus were
    not entitled to indemnity from Pembridge, and that Dominion, and the trial
    judge, were bound by his determination of coverage as between Pembridge and the
    Chus.

[18]

Accordingly, we set aside paras. 1 and 2 of the judgment of February 27,
    2019, and substitute the following:

THIS COURT DECLARES that John Chu
    and Dennis G. K. Chu are entitled to a defence under the Homeowners Policy in
    place with Pembridge Insurance Company of Canada on October 8, 2013 for the
    Third Party Claim action No. CV-13-475467-00A1 at Toronto.

[19]

For the first time on appeal, Pembridge argues that Dominion should be
    considered to have waived the right to assert that Pembridge had a duty to defend,
    because Dominion acknowledged its duty to defend, based on the claim relating
    to Dennis Chus driving and did not, in any way, reserve its rights. This is
    not necessarily inconsistent with another insurers duty to defend under a
    different policy. There is no clear evidence of waiver here, and the motion
    judge did not deal with this issue as it was not argued before him. It would be
    inappropriate to deal with this new issue on appeal, particularly given the
    state of the record:
Kaiman v. Graham
, 2009 ONCA 77, 245 O.A.C. 130,
    at para. 18.

[20]

Pembridge shall pay the costs of the appeal fixed in the agreed sum of
    $10,000 inclusive of disbursements and taxes to Dominion.

Janet Simmons J.A.

G. Pardu J.A.

IV.B.
    Nordheimer J.A. »




[1]
With the
    caveat that in
Tench
, the assaulting party was a passenger in the
    vehicle, not the driver.


