IN THE SUPREME
COURT OF BRITISH COLUMBIA

Date: 20160218

Docket: S114959

Registry:
Vancouver

Between:

Gurjeet Singh Gill
by his Litigation Guardian
the Public Guardian and Trustee of British Columbia

Plaintiff

And

Ivanhoe
Cambridge I Inc./Ivanhoe Cambridge I Inc.,
Ivanhoe Cambridge 1 Inc., Ivanhoe Cambridge I Inc., Inc. No. 55168A
all doing business as Metropolis at Metrotown,
Schindler Elevator Corporation,
Concord Security Corporation and
Black Tusk Ventures Ltd., formerly Marquise Facilities Corporation

Defendants

And

Schindler
Elevator Corporation,
Kirpal Singh Gill,
John Doe I, John Doe II, John Doe III,
Concord Security Corporation
Ivanhoe Cambridge I Inc./Ivanhoe Cambridge I Inc.,
Ivanhoe Cambridge 1 Inc., Ivanhoe Cambridge I Inc., Inc. No. 55168A
all doing business as Metropolis at Metrotown,
Schindler Elevator Corporation,
Concord Security Corporation and
Black Tusk Ventures Ltd., formerly Marquise Facilities Corporation,
Economical Mutual Insurance Company and in French,
Economical, Compagnie Mutuelle D’Assurance
and Island Insurance Agency Ltd.

Third
Parties

Before:
The Honourable Mr. Justice Voith

Reasons for Judgment

[1]            
Economical Mutual Insurance Company (“Economical”), seeks an order,
pursuant to Rule 9-7 of the Supreme Court Civil Rules, that the Third
Party Notice that Mr. Gill filed against Economical on June 12, 2015, be
dismissed. In that Third Party Notice, Mr. Gill seeks insurance coverage
from Economical. In particular, Mr. Gill seeks a declaration that he is
entitled to insurance coverage under an insurance policy issued to him by
Economical (the “Policy”), and that he is entitled to indemnification under the
Policy for both his legal expenses incurred in defending himself, as well as
for any judgment that may be rendered against him under the various third party
claims that have been made against him.

[2]            
Economical argues that an exclusion in the Policy, described by the
parties as the “Family Exclusion”, precludes or denies coverage to Mr. Gill.

Background

[3]            
On July 25, 2011, a notice of civil claim was filed by Mr. Gill,
the father, and litigation guardian at the time of the infant plaintiff,
Gurjeet Singh Gill.

[4]            
On April 23, 2014, an amended notice of civil claim was filed by the
Public Guardian and Trustee of British Columbia, qua litigation
guardian, for the infant plaintiff. That pleading alleges that on June 30,
2009, the infant plaintiff, who was two years old at the time, was walking on
the second floor of a shopping mall at 463 Central Boulevard in Burnaby,
British Columbia (the “Premises”), when he fell through an opening in a glass
partition near an escalator, to the ground below. I was advised that the infant
plaintiff’s injuries were quite severe.

[5]            
In that amended notice of civil claim, the plaintiff has advanced
various claims against, inter alia, the owner, occupier, and manager of
the Premises, the company charged with the maintenance and repair of the
escalators at the Premises, the company responsible for performing janitorial
services at the Premises, and a company alleged to be responsible for security
and safety hazards at the Premises.

[6]            
Three of the defendants thereafter filed third party claims against Mr. Gill.
Though there are some differences in those claims, their underlying focus is
consistent. These third party claims allege that on the day of the accident,
the infant plaintiff entered the Premises accompanied by his father, that the
infant plaintiff played unsupervised in a location adjacent to the second floor
escalator and the missing glass partition, and that the infant plaintiff’s
injuries were caused or contributed to by the negligence of his father.
Specifically, it is alleged that Mr. Gill failed to supervise his son and
to otherwise ensure his safety. The third parties seek contribution and
indemnity from Mr. Gill.

[7]            
Mr. Gill first reported these third party claims to Economical on
or about April 23, 2015. On or about May 7, 2015, Economical denied coverage to
Mr. Gill, citing an exclusion in the Policy as the basis for the denial.

The Policy

[8]            
The Policy covers certain risks occurring during the period of September
30, 2008 to September 30, 2009, subject to the terms and conditions contained
in the Policy.

[9]            
The Policy includes comprehensive personal liability coverage and
contains policy limits of $1 million. In particular, the Policy includes the
following relevant coverage and exclusion provisions:

Section II – Comprehensive Personal Liability

1.   Description of Coverages

. . .

1)   PERSONAL LIABILITY: To pay as
compensatory damages on behalf of the Insured all sums which the Insured shall
become obligated to pay by reason of the liability imposed by law upon the
Insured arising out of Bodily Injury or Property Damage anywhere in the world.

. . .

2.   Exclusions

a)   PERSONAL LIABILITY: There is
no coverage in this Section for claims arising from

. . .

5)   Bodily injury to the Insured
or to any person residing in the Insured’s household other than a Residence
Employee, [the “Family Exclusion”]

[10]        
The Policy defines “Insured” to include the following:

The unqualified word Insured within the meaning of this
Insurance is defined as:

a)         the Named Insured;

b)         if residents of the household, the spouse, the
relatives of either, and any other person under the age of twenty-one (21) in
the care, custody or control of the Insured;

. . .

[11]        
It is common ground that Mr. Gill and his son, the infant
plaintiff, both qualify as “Insureds” under the Policy. Mr. Gill qualifies
as the “Named Insured”. The infant plaintiff qualifies as an “Insured” because
he is the Named Insured’s relative (his son), a resident of the insured’s
household, and a person under the age of 21 years in Mr. Gill’s care,
custody or control.

Analysis

a)       Rule 9-7

[12]        
Counsel for Economical and for Mr. Gill agree that the matter is
suitable for disposition under Rule 9-7. I am also satisfied that this is so.

[13]        
None of the other parties involved in this action takes any position on
this application.

b)       The Legal Framework
for the Interpretation of an Insurance Policy

[14]        
The relevant and proper legal framework, when addressing the interpretation
of an insurance policy, has been expressed many times. Counsel for both parties
agree that that framework was concisely summarized in Progressive Homes Ltd
v. Lombard General Insurance Co. of Canada, 2010 SCC 33, where Rothstein J.,
for the Court, said:

[21]      Principles of insurance policy interpretation have
been canvassed by this Court many times and I do not intend to give a
comprehensive review here (see, e.g., Co‑operators Life Insurance Co.
v. Gibbens, 2009 SCC 59, [2009] 3 S.C.R. 605, at paras. 20-28; Jesuit
Fathers, at paras. 27-30; Scalera, at paras. 67-71; Brissette
Estate v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87, at pp. 92-93;
Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery
Insurance Co., [1980] 1 S.C.R. 888, at pp. 899-902). However, a brief
review of the relevant principles may be a useful introduction to the
interpretation of the CGL policies that follow.

[22]      The primary interpretive principle is that when the
language of the policy is unambiguous, the court should give effect to clear
language, reading the contract as a whole (Scalera, at para. 71).

[23]      Where the language of the insurance policy is
ambiguous, the courts rely on general rules of contract construction (Consolidated‑Bathurst,
at pp. 900-902). For example, courts should prefer interpretations that
are consistent with the reasonable expectations of the parties (Gibbens,
at para. 26; Scalera, at para. 71; Consolidated-Bathurst,
at p. 901), so long as such an interpretation can be supported by the text
of the policy. Courts should avoid interpretations that would give rise to an
unrealistic result or that would not have been in the contemplation of the
parties at the time the policy was concluded (Scalera, at para. 71;
Consolidated-Bathurst, at p. 901). Courts should also strive to
ensure that similar insurance policies are construed consistently (Gibbens,
at para. 27). These rules of construction are applied to resolve
ambiguity. They do not operate to create ambiguity where there is none in the
first place.

[24]      When these rules of
construction fail to resolve the ambiguity, courts will construe the policy contra
proferentem — against the insurer (Gibbens, at para. 25; Scalera,
at para. 70; Consolidated-Bathurst, at pp. 899-901). One
corollary of the contra proferentem rule is that coverage provisions are
interpreted broadly, and exclusion clauses narrowly (Jesuit Fathers, at para. 28).

[15]        
The Supreme Court of Canada’s language has recently been referred to by
the Court of Appeal in this province in each of Wormell v. Insurance Corp.
of British Columbia, 2011 BCCA 166 at para. 17 and Danicek v.
Alexander Holburn Beaudin & Lang, 2012 BCCA 434 at para. 29.

[16]        
The following succinct comments found in Desormeaux v. Dominion of
Canada General Insurance Company, 2012 ONSC 3199 are also helpful:

[14]      I summarize these principles only as they relate to
the interpretation of insurance contracts and exemption clauses as the narrow
focus of this matter involves the interpretation of an exemption clause.

•     The focus of insurance policy
interpretation should first and foremost be on the language of the policy at
issue. General principles of tort law are no substitute for the language of the
policy.

•     The primary interpretive principle
is that when the language of the policy is unambiguous, the court should give
effect to clear language, reading the contract as a whole.

•     It is axiomatic that the
rules of construction are applied to resolve ambiguity; they do not operate to
create ambiguity where none exists.

•     Where the language of the
insurance policy is ambiguous the courts rely on general rules of contract
construction: for example supportable interpretations that are consistent with
the reasonable expectations of parties; avoidance of interpretations giving
rise to unrealistic results or beyond the contemplation of parties when the
policy was concluded; striving to ensure similar insurance policies are
construed consistently.

•     However, in respect of the interpretation of exclusions
from coverage, because the threshold for the duty to defend is only the
possibility of coverage, the insurer must show that exclusion clearly and
unambiguously excludes coverage.

[17]        
In this case, the parties agree that the third party claims made against
Mr. Gill fall within the grant of coverage. The burden of proving that the
Family Exclusion applies rests with Economical.

c)       The Position of Economical

[18]        
Economical argues that the language of the Family Exclusion is clear and
unambiguous. It argues that that language pertains to both direct claims, in
the sense of a claim that might be made by Mr. Gill’s son against him, as
well as indirect claims, such as the third party claims that have been made by
various parties against Mr. Gill. Both types of claims, it argues, are
“claims arising from Bodily Injury to…any person residing in the Insured’s
household…”

[19]        
The issue raised by the language of the Policy and by Economical’s
application has not, I was told, been directly addressed by a court of this
jurisdiction. Economical relies heavily, however, on the case of Sheppard v.
Co-operators General Insurance Co.; Quick v. MacKenzie (1997), 33
O.R. (3d) 362 (C.A.) [Quick].

[20]        
Quick is an interesting decision in which the Court addressed two
separate appeals involving two separate insurance policies that had similar but
not identical language.

[21]        
The first appeal related to the Sheppard family. The infant plaintiff
was four years old. He lived with his mother. One day, while playing with other
children in the street in front of his home, he was struck by a car owned and
driven by the defendant. He suffered serious injuries. The driver issued a
statement of defence and counterclaim alleging that Ms. Sheppard was
responsible for her son’s injuries by allowing him to play where he did.

[22]        
The second appeal related to the Quick family. In this case, the
six-year-old infant plaintiff was attacked by a dog. In a suit against the dog
owner, the dog owner counterclaimed against the plaintiff’s parents and nanny
for, inter alia, a failure to supervise.

[23]        
Both Ms. Sheppard and the Quick family carried homeowner’s
insurance policies. Both Ms. Sheppard and the Quick family requested their
respective insurers defend the counterclaims on their behalf. Both insurance
companies refused. Proceedings were brought against the insurance companies and
motions were brought to determine the insurance companies’ obligations under
the policies. In both cases, orders were made by the motions judge that
required the insurance companies to defend the counterclaims on behalf of their
respective insureds. Appeals were brought from both orders.

[24]        
The Sheppard homeowner’s policy contained the following provision
regarding coverage for legal liability:

If your actions unintentionally
cause bodily injury or property damage to others, we will pay for all amounts
for which you are legally responsible up to the limit of insurance stated on
the Coverage Summary.

[25]        
The Sheppard homeowner’s policy also contained the following exclusion
provision:

You are not insured for claims arising from:

. . .

·       
or between any person(s) insured by this policy named or not;

[26]        
The Court was satisfied that the Sheppard homeowner’s policy provided Ms. Sheppard
with coverage in respect of the claim that had been brought against her for
various reasons. The Court said, in part, at 368:

 In my view, this submission must fail. The claim
made against Christine Sheppard in the counterclaim is not made by Curtis or on
behalf of Curtis and is clearly not a claim made "between" persons
insured by the policy. Neither, in my view, is it a claim "arising
from" any person insured by the policy. To fall within that language, the
only person "from" whom the claim could be said to arise is Curtis.
But the only allegation in the counterclaim that involves Curtis is the claim
that his mother failed to supervise his activities properly. Such an allegation
cannot be said to "arise from" him.

 When pressed in
argument, Mr. Gerry said the claim was one "arising from" Curtis
because without Curtis there would be no claim. It is true that, without
Curtis, there would have been no counterclaim in the sense that, if Curtis had
not been struck by Guevara’s car, there would have been no action against
Guevara and no counterclaim against Christine Sheppard. But the claim against
Christine Sheppard does not "arise from" Curtis merely because of his
presence in the scenario of events.

[27]        
The Quick’s home insurance policy, on the other hand, had personal liability
coverage with the following exclusion:

You are not insured for claims made against you arising from:

e.         bodily injury to you
or to any person residing in your household other than a residence employee.

[28]        
The insurer’s position, in this case, was that the counterclaim against
the parents by the dog owner was a claim that “arose out of bodily injury” to
the child. On appeal, the insurer argued that the phrase “arising from” should
be read to refer to an event or occurrence giving rise to the claim, and not to
the cause of action alleged against the insured. It appears to have based this
argument on an earlier case that had considered a pollution exclusion (at 371).

[29]        
Catzman J.A., for the Court, in allowing the insurer’s appeal in Quick,
said, at 371-372:

Quite apart from the analysis in Kansa, I agree with Mr. Fine’s
submission that, on its plain wording, the exclusion clause effectively
excludes coverage in the circumstances alleged in the counterclaim. The
essential words of the exclusion clause are "claims made against [the
Quicks] arising from bodily injury to [Laura]". The counterclaim is a
claim made against the Quicks. That claim, while expressed in terms of
vicarious liability and lack of supervision, is clearly a claim "arising
from" Laura’s bodily injury. "Arise", in its ordinary dictionary
definition, means:

To spring up, originate, to come
into being or notice; to become operative, sensible, visible, or audible; to
present itself.

(Black’s Law Dictionary,
6th ed. (1990), p. 108)

III. To spring up, come above
ground, into existence. 1. To spring forth from its source. . . . To take its
rise, originate. 2. To be born, come into the world of action. 3. Of things: To
spring up, be raised, built, etc. 4. To spring, originate or result from. 5. To
come into existence or notice.

(The Shorter Oxford Dictionary,
3rd ed. (1973), p. 103).

In contrast to the almost
meaninglessly broad words of the exclusion clause under consideration in the Sheppard
appeal ("claims arising from…any person(s) insured by this policy named
or not"), the language of this exclusion clause ("claims made against
you arising from…bodily injury to you or to any person residing in your
household other than a residence employee") is precisely focused. The
claim against the Quicks is one "arising from" the bodily injury to
Laura within the meaning of this clause.

[30]        
Economical, correctly, argues that the language of the Policy much more
closely resembles the language of the policy in the Quick portion of the
appeal than it does the language of the policy in the Sheppard portion
of the appeal.

[31]        
Economical also relies on the more recent decision of Bawden v.
Wawanesa Mutual Insurance Company, 2013 ONSC 1618, aff’d 2013 ONCA 717,
where the motions judge, in obiter, addressed the Quick case and
confirmed that the language of the exclusion clause examined in the Quick policy
served to exclude coverage for both direct and indirect claims (at para. 53).

[32]        
Neither party referred to the more recent case of Allstate Insurance
Company of Canada v. Aftab, 2015 ONCA 349. In that case, the Ontario Court
of Appeal succinctly reaffirmed the decision in Quick and explained the
difference in the language of the policies found in Quick and Bawden
respectively.

d)       The Usefulness of
Relying on Different Authorities to Address the Meaning of Specific Policy
Language

[33]        
I accept that the language in insurance policies is often addressed or
interpreted by referring to other cases in which similar or identical language
has already been considered. This point is made, for example, in Aftab
at para. 16. Nevertheless, it is clear that a further guiding tenet, when
interpreting the language of an insurance policy, is the need to examine the
language of the policy as a whole; see Progressive at para. 23. In Non-Marine
Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 at para. 71,
the Court said: “Where a contract is unambiguous, a court should give effect to
the clear language, reading the contract as a whole”.

[34]        
There are numerous cases where the risk inherent in comparing specific
clauses or language in different insurance policies, without access to either
portions or the whole of those insurance policies, has been expressed even more
clearly.

[35]        
In Snaak (Litigation Guardian of) v. Dominion of Canada General
Insurance Co. (2002), 61 O.R. (3d) 230 (C.A.) at para. 31, the Court
said:

…More importantly, the case
report of Wilkieson contains only eight words of the exclusion [clause].
Without knowing the wording of the entire exclusion clause or any of the
wording of the coverage sections, Wilkieson is not particularly helpful
in the interpretation of other insurance contracts.

[36]        
In Rocky Mountain House (Town of) v. Alberta Municipal Insurance
Exchange, 2007 ABQB 548, the Court said:

[55]      In my opinion, while the reasoning and outcome of
the cases discussed above can assist a court in determining whether the phrases
"legally obligated to pay" or "imposed by law" include
contractual liability, one must still employ general principles of contractual
interpretation and construe the wording of the insuring clause in the context
of the policy as a whole. This is the only way to definitely determine the
intention of the parties. By way of example, this approach can be seen in the
following cases discussed above:

–Andrews & George
in which the majority of the Supreme Court of Canada construed the language in
Endorsement 10 in the context of the policy as a whole and the inclusion of
"by written contract" elsewhere in the policy led to the result that
contractual liability was not included;

–Moffat Tank in which
the Alberta Court of Appeal refused to apply the meaning the Supreme Court of
Canada attributed to "imposed by law" because the insuring clause at
issue was "significantly different" and to do so would render the
exclusion clause meaningless; and

–Cutless Lake where
the British Columbia Court of Appeal explicitly decided the outcome of that
case by construing the insuring clause in the context of the particular policy
and indicating that case law in which "legally obligated to pay" has
been interpreted to exclude contractual liability, was done so based on the
specific policy at issue.

[58]      While it is true that
cases involving consideration of identical or nearly identical policy wording
will be highly persuasive, caution must still be used. By way of example, the
insuring agreement in Acklands, supra ("the insured
shall become obligated to pay by reason of the liability imposed by law upon
the insured or assumed by the insured under contract or agreement") is
very similar to the one contained in the Policy ("the Insured shall become
legally obligated to pay or assumed by the Insured under any Contract").
However the remainder of the wording in the policies in each case is different.

[37]        
In Bawden at paras. 51-52, relied on by Economical, the
motions judge declined to follow any of the cases provided to him because of
the differences in the language of the different policies that had been
considered in those cases.

[38]        
In this case, these principles and cautions are relevant because only
limited portions of the coverage and exclusion provisions that existed in the Quick
policy are referred to in that decision. Furthermore, what, if any, other
relevant provisions may have existed in that policy is unknown.

e)       Ambiguity

[39]        
In Geoff R. Hall, Canadian Contractual Interpretation Law, 1st
ed. (Markham, Ont.: LexisNexis Canada, 2007) at 173, the author identifies
numerous specific principles that are relevant to the interpretation of
insurance contracts. The first three of those principles state:

1.   The court
should look at the words of the contract to determine if there is ambiguity.

2.   The court
should ascertain the intention of the parties concerning specific provisions by
reference to the language of the entire contract.

3.   The court
should construe ambiguities found in the insurance contract in favor of the
insured (the contra proferentem rule).

[Footnotes omitted.]

[40]        
In Bawden, the motions judge expressed these same principles,
albeit even more concisely:

[50]      Absent ambiguity in the
exclusion clause (interpreted narrowly and having regard to the Policy as a
whole), contra preferentem and other doctrines governing the
interpretation of ambiguous provisions do not apply. Those doctrines cannot be
used to create ambiguity.

[41]        
In this case, counsel for Mr. Gill argues that the Family Exclusion
is ambiguous, at least insofar as it is applied to circumstances where claims
are made against the insured by strangers to the policy. Counsel further argues
that reference to and an interpretation of various other coverage and exclusion
provisions within the Policy highlight this ambiguity. Specifically, he argues
that, notwithstanding the fact that the words “arising from” are found in
different provisions in different portions of the Policy, those specific
provisions develop, or specify, or elaborate on what types of claims fall
within the particular exclusion and, in particular, distinguish between direct
and indirect claims.

[42]        
Thus, he argues that more precise language was available to make clear
that the Family Exclusion extends to third party or indirect claims, and that
such language can be seen by looking at other exclusions in the policy.

The Policy – Other Exclusions

[43]        
The Policy makes extensive use of the phrase “arising from” in the
exclusion provisions of both the Property Section and the Liability Section.

[44]        
Exclusion 4(k)(ii) excludes damage to the Insured’s property caused by
drug activity. The exclusion is framed in terms of damage “arising from”
certain activity, but it also uses additional language that removes doubt about
its scope:

4.   PERILS EXCLUDED

This insurance does not cover loss or damage arising from:

k)

ii)     any activity relating to
the illegal cultivation, manufacture or distribution of any drug, including,
but not limited to, cannabis, whether or not the insured has knowledge of
such activity;

[Emphasis added.]

[45]        
Similar language could have been employed in the Family Exclusion to
make clear the intent to exclude indirect claims or third party claims. For
example, the drafter could have said there is no coverage for “claims arising
from: … (5) Bodily Injury to the Insured or any person residing in the
Insured’s household”, whether such claims are brought by the Insured, a
person residing in the same household, or any other person.

[46]        
The “Comprehensive Personal Liability Coverages” section of the Policy
also contains examples that make the intent of the exclusions explicit. These
exclusions are, again, framed in the “claims arising from” language of the
Family Exclusion.

[47]        
Thus, the Policy has a terrorism exclusion. It excludes:

3.         LOSS OR DAMAGE NOT INSURED

This Insurance does not apply…to claims arising from:

a)

2)   terrorism directly or
indirectly, in whole or in part, or out of any activity or decision of a government
agency or other entity to prevent, respond to or terminate terrorism

[Emphasis added.]

In this example, the drafter has removed any doubt about
how far the scope of the “arising from” language extends.

[48]        
The exclusion for mold in the “Comprehensive Personal Liability
Coverages” section provides further guidance about the insurer’s intent with
respect to the scope of the Family Exclusion. The mold exclusion purports to exclude
all claims against the Insured “arising from” mold damage, but goes on to
specify that “arising from” includes claims arising out of failure to supervise
activities that could be connected with mold damage. Importantly, it also
clarifies that the words “arising from” include claims for contribution and
indemnity by others who are being sued for mold damage.

[49]        
The mold exclusion provides:

3.   LOSS OR DAMAGE NOT INSURED

This Insurance does not apply … to claims arising from:

m)  1)   “Bodily
Injury”, Property Damage”, Personal Injury”, or Voluntary Medical Payments or
any other cost, loss or expense incurred by others, arising directly or
indirectly, from the actual, alleged or threatened inhalation of, ingestion
of, contact with, exposure to, existence of, presence of, spread of
reproduction, discharge or other growth of any “fungi” or “spores” however
caused, including any costs or expenses incurred to prevent, respond to, test
for, monitor, abate, mitigate, remove, cleanup, contain, remediate, treat,
detoxify, neutralize, assess or otherwise deal with or dispose of “fungi” or
“spores”, or;

2) any
supervision, instructions, recommendations, warnings, or advice given or which
should have been given in connection with 1. above; or

3) any
obligations to pay damages with or repay someone else who must pay damages
because of any such injury or damage referred to in 1. or 2. above.

[Emphasis added.]

[50]        
This exclusion demonstrates an apparent appreciation by the insurer that
indirect claims arising from an excluded risk may not be caught by the phrase
“claims arising from”. Furthermore, the language of this exclusion shows a
clear and unambiguous intent to bring such indirect claims within the
exclusion.

[51]        
The absence of similar language in the Family Exclusion either discloses
the absence of an intent to exclude indirect claims by strangers or, at a
minimum, renders the exclusion ambiguous.

[52]        
Based on an analysis of the Policy as a whole, I consider that there is
some ambiguity in the language of the Family Exclusion and, in particular,
whether that exclusion, which is to be narrowly construed, extends to indirect
or third party claims made against an Insured for bodily injury to another
Insured.

The Purpose of the Family Exclusion

[53]        
In instances where a court is faced with ambiguity about the meaning or
ambit of an exclusion, the court can and will seek to ascertain the purpose or
object of that exclusion and endeavour to interpret the wording of the
provision in a manner that is consistent with its object; see Appel (Guardian
ad litem of) v. Dominion of Canada General Insurance Co. (1997), 39 B.C.L.R.
(3d) 113 at para. 44 (C.A.), relying on Wawanesa Mutual Insurance
Company v. Bell, [1957] S.C.R. 581 at 583.

[54]        
In this case, the purpose of the Family Exclusion is clear. That purpose
has been considered on numerous occasions.

[55]        
Many insurance policies that provide personal liability coverage contain
an exclusion for claims between members of the insured’s household. The wording
of these exclusions is not, as has been seen, uniform, but the unifying theme
or element is language that excludes claims that arise among or between members
of the same household. Various courts have commented on the purpose or policy
reason for such exclusions.

[56]        
In Appel, the Court of Appeal dealt with an exclusion which
stated:

This policy does not apply to:

under Coverage E(1)

Personal Liability

1.   Bodily injury to you, or any person
residing in your household, other than residence employees.

[57]        
The Court, in addressing the purpose of the exclusion, said:

[46]      … the purpose of the
exclusion clause in this Policy is to prevent named insured and family members
"residing in the household” from making claims against each other. The
perceived need for such protection may be the potential for collusive claims
being advanced by such individuals.

[58]        
Other courts have commented on the rationale for the Family Exclusion to
similar effect. In Wawanesa Mutual Insurance Co. v. Hewson, 2004 SKCA
112 the Saskatchewan Court of Appeal examined an exclusion for “claims brought
against you for: … bodily injury to you or to any person in your household
other than an employee” and said:

[9]        Liability insurance is
usually intended to provide indemnity against claims made by third parties,
that is, persons who are not parties to, or have no interest in, the contract
of insurance. Exclusion clauses, such as Exclusion (3) in this case, are
intended to prevent collusive claims by members of the insured’s family and
members of his household: Hilliker Liability Insurance Law in Canada (3d
ed.) (Toronto: Butterworths, 1996) at pp. 254-57, Appel (Public Trustee
of) v. Dominion of Canada General Insurance Co., [1998] 1 W.W.R. 592
(B.C.C.A.) at paras. 45 and 46, and Whirlpool Corp. v. Ziebert, 539
N.W. 2d 883 (U.S. Wis. S.C. 1995.)

[59]        
In Bawden, the Court referred to, and relied on, the
foregoing passage from Wawanesa; and concluded:

[82]      For all of the reasons set out above, Wawanesa has
not met the onus of proving that the exclusion clause here unequivocally
restricts the extent and scope of the coverage provided in the coverage
provision in the event of an indirect claim for contribution and
indemnity against David and Elizabeth.

[Emphasis in original.]

[60]        
The Ontario Court of Appeal, in affirming the decision in Bawden,
endorsed the purpose of the exclusion as framed by the motions judge at para. 10
of the judgment.

[61]        
Economical seeks to extend the Family Exclusion to circumstances that
have nothing to do with the intended object of such clauses. There is no
prospect, in the present circumstances, of a “collusive claim” being raised by
either Mr. Gill or his son. The claim that is being advanced against Mr. Gill
is not a claim that was brought by his family or any member of his household.

[62]        
The practical consequence of the Family Exclusion advanced by Economical
would mean that if Mr. Gill, on the day his son was injured, was caring
for both his son and his brother’s son, and both boys fell through the gap in
the glass railing, the Policy would provide him with coverage against third
party claims for failing to supervise his nephew, but not for an identical
claim for failing to supervise his son.

[63]        
In Consolidated-Bathurst v. Mutual Boiler, [1980] 1 S.C.R. 888,
Estey J., for the majority, at 901-902, provided the following often-quoted
guidance:

Even apart from the doctrine of contra
proferentem as it may be applied in the construction of contracts, the
normal rules of construction lead a court to search for an interpretation
which, from the whole of the contract, would appear to promote or advance the
true intent of the parties at the time of entry into the contract. Consequently,
literal meaning should not be applied where to do so would bring about an
unrealistic result or a result which would not be contemplated in the
commercial atmosphere in which the insurance was contracted. Where words may
bear two constructions, the more reasonable one, that which produces a fair
result, must certainly be taken as the interpretation which would promote the
intention of the parties. Similarly, an interpretation which defeats the
intentions of the parties and their objective in entering into the commercial
transaction in the first place should be discarded in favour of an
interpretation of the policy which promotes a sensible commercial result. It is
trite to observe that an interpretation of an ambiguous contractual provision
which would render the endeavour on the part of the insured to obtain insurance
protection nugatory, should be avoided. Said another way, the courts should be
loath to support a construction which would either enable the insurer to pocket
the premium without risk or the insured to achieve a recovery which could
neither be sensibly sought nor anticipated at the time of the contract.

[64]        
I am satisfied that the Family Exclusion in the Policy, when considered
in light of its intended purpose, and the language of the whole of the Policy, does
not extend to the third party claims that have been made against Mr. Gill.
I further consider that extending the Family Exclusion, in the manner that
Economical proposes, would strip Mr. Gill of coverage that the Policy was
intended to provide.

[65]        
Accordingly, the application of Economical is dismissed. Mr. Gill
is to have the costs of this application.

“Voith J.”