IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20101125

Docket: 39746

Registry:
Vernon

Between:

Graham Roy Kinnear

Plaintiff

And

Canadian
Recreation Excellence (Vernon) Corporation,
Regional District of North Okanagan, City of Vernon,
Greater Vernon Services Commission,
John Doe #1, John Doe #2 and John Doe #3

Defendants

And

Canadian
Recreation Excellence (Vernon) Corporation,
Lloyds Underwriters, Vernon Vipers Hockey Club,
Dr. J. Duncan Wray Inc. and American Home Assurance Company

Third
Parties

Before:
The Honourable Madam Justice Beames

Oral Reasons for Judgment

[1]            
THE COURT:  In September 2006, the
plaintiff attended a Vernon Vipers hockey game at the Multiplex in Vernon. The
Multiplex is a sports and convention facility owned by the defendant, the
Regional District of North Okanagan (“NORD”), and operated and maintained at
the time the defendant, Canadian Recreational Excellence (Vernon) Corporation
(“CRE”).

[2]            
The plaintiff alleges that he slipped and fell
while he was traversing an area the parties refer to as “the boulder zone”,
which was a strip of large boulders placed at the edge of the Multiplex parking
lot adjacent to 34th Street in Vernon, which was intended to deter pedestrians
from entering or leaving the property at that location.

[3]            
The plaintiff, in his statement of claim,
alleges that as he was crossing the boulder zone, the overhead lighting which
provided illumination for the boulder zone suddenly went out, casting the area
into darkness and causing him to lose his footing and fall.

[4]            
The plaintiff alleges that the defendants NORD
and CRE were negligent and in breach of their duties as imposed by the Occupiers
Liability Act. Specifically, he alleges a failure to design, build and
maintain safe access to the site from 34th Street; failure to warn against the
danger of pedestrians crossing the boulder zone; and failure to check, maintain
and repair the overhead lighting in the area of the boulder zone.

[5]            
The defendants have filed third-party notices
against, amongst others, the Vernon Vipers Hockey Club (“the Vipers”), the
owner of the Vipers, Dr. J. Duncan Wray Inc. (“Wray Inc.”), and the
insurer of the Vipers, claiming that they, that is, NORD and CRE, are entitled
to be indemnified and to be defended with regard to the plaintiff’s claims.

[6]            
The third parties, the Vipers, Wray Inc. and the
Vipers’ insurer, which I am told by counsel before me is misnamed in the third-party
notices but which is of no moment on this application, have applied pursuant to
the old Rule 18A, now Rule 9(5), for declarations that there is no
obligation to defend or indemnify in this case and that the insurance policy
does not extend coverage to NORD or CRE for the claims made by the plaintiff in
this case and for an order that the third-party notices against them be
dismissed.

[7]            
NORD and CRE say that they are entitled to be
defended and that the issue of indemnification cannot be determined until the
determination of the main action.

[8]            
The plaintiff and the other third parties did
not attend or participate in the hearing. The trial of this action is set for
January 2011.

[9]            
I will deal first with the contractual indemnity
issue. The contractual indemnification issue arises from the Facilities Agreement
which was made between NORD and the Vipers, which includes the following:

The [Vipers]
shall indemnify and save harmless [NORD and CRE]…from and against all claims
and demands whatsoever (including all legal costs incurred by and any of them
in defending any such claims or demand) arising directly or indirectly out of
or occurring during the use of the Facility by the [Vipers] or any one
authorized by the [Vipers] to use the Facility. The [Vipers] will be under no
obligation to indemnify and save harmless [NORD and CRE] against or in respect
of any damages or judgment rendered against [NORD and CRE] resulting from or
arising out of any negligence or fault on the part of [NORD or CRE] with
respect to the maintenance or condition of the Facility to the extent that the
damage, loss for (sic) injury was caused or occasioned by the negligence of [NORD
or CRE].

[10]        
As Ehrcke J. said in Kocherkewych v.
Greyhound Canada Transportation Corp. et al, 2006 BCSC 534:

[34]      The leading authority on the
interpretation of indemnity clauses is the decision of the Judicial Committee
of the Privy Council in Canada Steamship Lines Ltd. v. The King, [1952]
2 D.L.R. 786 (Canada P.C.).

[38]      …the Privy Council…articulated a
three-part test for the interpretation of indemnity clauses [as follows]:

(1) If the clause
contains language which expressly exempts the person in whose favour it is made
(hereafter called "the proferens") from the consequence of the
negligence of his own servants, effect must be given to that provision. Any
doubts which existed as to whether this was the law in the Province of Quebec
were removed by the decision of the Supreme Court of Canada in Glengoil SS.
Co. v. Pilkington (1897), 28 S.C.R. 146.

(2) If there is no
express reference to negligence, the Court must consider whether the words used
are wide enough, in their ordinary meaning, to cover negligence on the part of
the servants of the proferens. If a doubt arises at this point, it must be
resolved against the proferens in accordance with art. 1019 of the Civil
Code: "In cases of doubt, the contract is interpreted against him who
has stipulated and in favour of him who has contracted the obligation."

(3) If the words used are wide enough for
the above purpose, the Court must then consider whether "the head of
damage may be based on some ground other than that of negligence" to quote
again Lord Greene in the Alderslade case. The "other ground"
must not be so fanciful or remote that the proferens cannot be supposed to have
desired protection against it; but subject to this qualification, which is no
doubt to be implied from Lord Greene’s words, the existence of a possible head
of damage other than that of negligence is fatal to the proferens even if the
words used are prima facie wide enough to cover negligence on the part
of his servants.

[11]        
Clearly, there are no words in paragraph 26 of
the Facilities Agreement that expressly exempt NORD or CRE from the
consequences of their own negligence. Indeed, any indemnification obligation on
the part of the Vipers is expressly inapplicable where any damages or judgment
arise out of or result from any negligence or fault on the part of NORD and CRE
with regard to the maintenance or condition of the facility.

[12]        
The plaintiff’s claim in this case is based on
allegations of negligence with regard to the maintenance and condition of the
facility. There is no allegation, by the plaintiff or by the defendants, of
negligence of any kind against the Vipers. Pursuant to the Facilities Agreement,
the club had no rights or obligations with regard to the design, maintenance,
repair or condition of anything outside of the building itself.

[13]        
In view of the whole of the agreement, I cannot
conclude that it could have been within the contemplation of the parties that
the Vipers would indemnify NORD or CRE for the consequences arising from NORD
or CRE’s negligence in an area completely outside the realm of the Vipers’
responsibility or control.

[14]        
As the court said in Sinclaire v. South Trail
Shell (1987), 2002 ABQB 378, such a “shifting of responsibility should…require
much clearer language…”

[15]        
With regard to the third step referred to above,
clearly there could be an obligation on the part of the Vipers to indemnify
NORD or CRE from claims other than those arising from NORD’s or CRE’s own
negligence, including those suggested by the third parties’ counsel, errant
pucks, negligence of staff employed by the Vipers, and claims for injuries
occurring within the areas of the Vipers’ control and responsibility.

[16]        
I conclude that clause 26 does not oblige the
Vipers or the owner of the Vipers to indemnify the defendants NORD or CRE for
any claim which is based solely on the allegations of NORD’s or CRE’s own
negligence, which this claim is.

[17]        
I turn now to the insurance and duty to defend
issues. Section 22 of the Facilities Agreement requires the Vipers to take out
and maintain a comprehensive general liability policy naming NORD and CRE as
additional named insureds, which the Vipers did. The insurance policy was to
cover the indemnity provided in section 26 of the Facilities Agreement.
There is no suggestion that the insurance coverage obtained did not comply with
the Vipers’ obligations pursuant to section 22.

[18]        
The insurance policy lists the Vipers as a named
insured. By endorsement, NORD and CRE were named as additional insureds, “but
only in respect of liability arising out of the Named Insured’s operations”.
NORD and CRE maintain that the plaintiff’s injury arises out of the Vipers’
operations on the basis that but for attending the Vipers’ hockey game, the
plaintiff would not have slipped and injured himself while traversing the
boulder zone. The third parties say that there is no allegation in the
pleadings, on which the duty to defend must be determined, connecting the
allegations of negligence made against NORD or CRE to the Vipers’ operations.

[19]        
In support of their position that a simple
"but for the hockey game” connection will support a conclusion that the
plaintiff’s claims are included within what the policy covers and what the
insurer is obligated to defend, NORD and CRE rely on the Supreme Court of
Canada decision in Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC
49, and the dissenting reasons of Southin J.A. in the BC Court of Appeal in the
same case (1999 BCCA 129), which the Supreme Court of Canada endorsed, as to
the meaning of "arising from" or "arising out of".

[20]        
The defendants say six subsequent decisions of
this court, five delivered since Monenco Ltd. v. Commonwealth Insurance Co.
was decided and one before, have consistently found that a simple "but
for" analysis is appropriate for determining whether an event "arises
out of" or "arises from" and “have always found there to be a
sufficient connection to the named insured’s operations to trigger the duty to
defend”.

[21]        
While Monenco Ltd. v. Commonwealth Insurance
Co. did not deal with an “additional insured”, it was a case concerning the
interpretation of the phrase "arising out of" in the context of an
exclusion clause in the insurance contract which was referred in that case as
the "turnkey exclusion", which excluded coverage for claims arising
out of projects which Monenco or its subsidiary designed or constructed. A subsidiary
was alleged to have been negligent in the construction of a plant. Southin J.A.,
dealing with whether the claim was a claim arising out of the project, said she
did not need to refer to the authorities provided as:

…if this
project had not existed, there would have been no claim, ergo the claim arises
out of it. (para. 11)

[22]        
In the Supreme Court of Canada, the issue was
not the proper interpretation of "arising out of", but the Supreme
Court of Canada did, in adopting Southin J.A.’s conclusion, say (at paras. 43
and 49) that the project was the proximate cause of the claim and that there
was a distinct link between Monenco’s alleged breaches and its role in the
project.

[23]        
In the five B.C. cases referred to by NORD and
CRE decided since Monenco, the claims made were connected with the
insured’s operations by more than just a simple "but for" analysis of
the sort urged upon me by the defendants in this case.

[24]        
In Saanich (District) v. Aviva Insurance Co.
of Canada, 2010 BCSC 1321, the plaintiff was hit in the head by a lacrosse
ball while at a recreational centre for a dog obedience class. The Saanich
District had leased part of the centre to the lacrosse association for
practices. It was agreed that the district was an additional insured under the
lacrosse association’s insurance policy and was covered “with respect to
liability arising out of the activities of [the named insured, the lacrosse
association]”.

[25]        
In considering whether there was a duty to
defend, Madam Justice Wedge said:

[46]      I do not accept Aviva’s argument.
The claim brought by Mr. Wright does not allege that his injuries were
caused by anything other than the errant lacrosse ball. The pleadings do not
disclose a cause of injury independent of the lacrosse activities.
Mr. Wright does not assert that his fall and resultant injuries may have
been caused by, say, debris from the vending machines or water on the floor, or
that his injuries in any way result from Saanich’s failure to generally maintain
its premises in a safe manner for its patrons. But for the lacrosse activity,
there would have been no obligation on Saanich to provide alternate access to
the patrons of the dog obedience class. The only reason the usual source
of access to the dog obedience class allegedly became unsafe was because
lacrosse was being played at the centre at the time the dog obedience class
took place.

[50]      In the
present case, there is a clear nexus or causal connection between the possible
liability of Saanich and the activities of the named insured.

[26]        
She found that the lacrosse association’s
insurer had a duty to defend the District of Saanich.

[27]        
In Williams (Guardian ad litem of) v. B.C.
Conference of the Mennonite Brethren Churches, 2010 BCSC 791, a church
floor collapsed during a concert. The named insured was a concert promoter, and
the church and performers sought coverage as additional insureds. Madam Justice
Dillon described the claims as being that the conference and the performers
failed to act appropriately, including by failing to ensure the floor and
equipment were safe for the concert, by failing to ensure that the concert
attendees’ behaviour did not get out of control and by failing to ensure that
the concert was stopped when there were indications of floor vibration and
equipment instabilities.

[28]        
These claims were clearly connected with the
named insured’s operations, namely, the hosting of the concert. Madam Justice
Dillon concluded:

[82]      …the
allegations in this case are clearly connected to the very operation that
Lloyd’s/Temple agreed to insure. As Southin J.A. stated in Monenco,
"[s]uffice it to say that if this project had not existed, there would
have been no claim, ergo the claim arises out of it." Had the promoter not
put on the concert, then no injuries would have occurred. Thus, the potential
liability arises out of the operations of the insured, Unite, and there would
be no restrictions upon the coverage potentially available to the conference
and the other additional insureds even if the wording had been included in the
certificates.

[29]        
Similarly in Penticton (City) v. AXA Pacific
Insurance Co., 2009 BCSC 1404, where the contractor was the named insured
and the city, for whom the contractor was doing a project, was the additional
insured with regard to claims “arising out of the operations” of the insured
contractor, there was a direct link between the city’s potential liability and
the contractor’s actions.

[30]        
As the judge in that case said:

[68]      …had the Contractor not been
working on the construction contract at the particular intersection in issue
and had it not removed and relocated the stop sign, there would have not have been
any claims. Thus the liability arises out of the operations of the insured, the
Contractor.

[69]      All of
these claims allege a state of facts which, if proven, result in allegations
that arise out of the operations of the Contractor in initially removing and
relocating the stop sign and failing to notify the City of the steps it had
taken with respect to the stop sign and in failing to fulfill its obligations
as to the safety of the construction site and traffic flow in that area as
stipulated in the Contract Documents.

[31]        
Liu v. Chu, 2009
BCSC 753, the plaintiff said she was injured in a collision between herself and
a cart being pushed by a bakery employee. The bakery was the named insured and
the mall owner was an additional insured with respect to operations performed
by or on behalf of the bakery. Madam Justice Russell found a duty to defend
saying:

[26] Sovereign’s
position that Manulife’s liability arises from its duties as an occupier under
the Act may be convincing at first glance. However, it disregards the
nexus between the plaintiff’s claim and the coverage that Sovereign agreed to
provide Maxim’s. It would be without dispute that the act of Maxim’s employee
in effecting a delivery of goods to its premises in Metrotown on a cart would
fall within the scope of the Policy. Such an act clearly comprises part of the
legal operations of Maxim’s and any claims arising from such actions would
permit Manulife to rely on the additional insured clause in the Policy.

[32]        
Finally, in Board of School Trustees of
School District No. 79 (Cowichan Valley) v. Underwriters and Members of
Lloyd’s, 2003 BCSC 1303, the underlying action related to an injury the
plaintiff claimed to have suffered at a ball tournament as a result of the
condition of the ball diamond. The named insured was a hockey club which rented
the school district’s baseball field, hosted the tournament, and obtained
additional insured coverage for the school district with regard to “liability
arising out of the operations of the named insured”. The insurer said it has no
duty to defend the school district because the plaintiff had sued the school
district alleging different duties and obligations as an owner than those
alleged against the tournament organizers. Mr. Justice Rogers said:

[17]      There is some logic in Lloyd’s position, and it
might have carried the day if Mr. Mayo’s claim were not so clearly associated
with the very activity Lloyd’s agreed to insure, vis playing baseball. Had
Mr. Mayo’s head been injured in the field’s parking lot when a tile fell off
the roof and struck him, then it would be no great feat to locate a distinction
between Appollo’s operation of hosting the tournament and the District’s
obligation to keep the grandstand roof in good repair.

[18]      However the pleadings in this case clearly connect
Mr. Mayo’s injury closely to the very activity that Lloyd’s agreed to insure. Mr.
Mayo would not have injured his ankle but for Appollo’s decision to put on the
tournament.

[19]      I have no difficulty concluding that part of
Appollo’s operation of the tournament was to provide a reasonably safe
environment for the ball games. The pleadings clearly allege that Appollo failed
in that aspect of the operation. That is to say, the pleadings allege that
Appollo failed to inspect and warn users of the field of hazards.

[20]      The pleadings also allege that Appollo failed to
maintain the field and, to the extent that that duty was to repair damage to
the field caused by the tournament itself, I have no difficulty concluding that
it was part of Appollo’s operation to maintain the field, at least to the
extent of making such ad hoc repairs.

[21]      Mr. Mayo’s injuries are alleged to have arisen out
of those failings. They are connected to the ball tournament. There is a clear
nexus on the pleadings between the tournament, the alleged negligence and the
alleged injury. Mr. Mayo’s claims arise, therefore, out of the operations of
Apollo as host of the tournament.

[22]      As Mr. Mayo’s pleadings have been drafted, the
allegations against the District are inseparable from the allegations against
Appollo. With respect to failure to inspect and warn, those allegations are
obviously associated with Appollo’s operation of the tournament. With respect
to failure to maintain, a liberal reading of the pleadings allows for the
possibility that the putative hole at the second base developed during play and
that it was not repaired by proper maintenance.

[23]      Both theories of
negligence arise out of the operations of Appollo, and are connected to the
ball tournament. The allegations against the District are not separate and
distinct from the allegations against Appollo. The allegations against the
District depend on Appollo having hosted the tournament and on Mr. Mayo’s game
having taken place at the District’s field. Those were the very operations that
Lloyd’s agreed to insure.

[33]        
He found in the result that Lloyd’s had a duty
to defend the school district.

[34]        
The final case relied on by CRE and NORD is McGeough
v. Stay ‘N Save Motor Inns Inc. (1993), 17 C.C.L.I. (2d) 261 (B.C.C.A.)).
The plaintiff in that case slipped and fell in a parking lot owned and
maintained by the Stay ‘N Save. Stay ‘N Save leased space, including 40
designated parking spots, to O’Donals Restaurant. The restaurant was the named
insured and the lessor, Stay ‘N Save, was an additional insured ”but only in
respect of liability arising out of the operations of O’Donals”.

[35]        
In this decision, which appears not to have been
referred to in any subsequent decisions, the court said:

The question is did this liability arise “out
of the operations of” O’Donals?

Mr. Maglio argues that this term should
be narrowly construed, and that liability of Stay ‘N Save can only arise from a
casualty occurring in or on the actual demised premises described in the lease:
of which the parking lot is not part.

Ms. Vanderburgh submits the proper
meaning of "operations" includes all activities necessarily part of
O’Donals restaurant business, such parking by patrons.

I agree with this latter argument. The
operation of the restaurant must necessarily include the provision of parking
for the vehicles of the patrons if this be possible: and here, it was. O’Donals
has the right to the use of 40 parking spaces owned by its landlord, Stay ‘N
Save, the additional insured: and the plaintiff was injured in one of these
spaces in the course of going into O’Donals restaurant. She was involved in “the
operations” of O’Donals at the material time, and any liability of O’Donals to
her arises out of those operations.

Stay ‘N Save,
then, is insured by Prudential against the risk arising in this action.

[36]        
In McGeough, decided before Monenco
and Cowichan, to which I have just referred, the claim related to a fall
on property which the named insured had the right to use, which appears to be
an important factor in the decision.

[37]        
In this case before the court today, the fall
occurred in an area solely within the control and responsibility of NORD and
CRE. None of the plaintiff’s allegations relate to the operations of the Vipers
Hockey Club. I am satisfied something more is required than the mere attendance
by the plaintiff at the game or, as Mr. Kinnear has said at discoveries, a
temporary departure from the game to find better food than CRE or NORD offered
inside the multiplex.

[38]        
I cannot conclude that the liability or alleged
negligence in this case arose out of the operations of the Vipers Hockey Club.
Consequently I find that the insurer does not have a duty to defend NORD or
CRE. I dismiss the third-party claims.

[39]        
The third parties before me on this application
will be entitled to their costs Scale B. That concludes my decision.

Beames J