Conradi v Economical Mutual Insurance Company, 2015 ABQB 308 and Burch v Intact Insurance Company, 2015 ABCA 229 both deal with the resolution of ambiguities in insurance contracts.  In Conradi the court resolved the ambiguity against the insurer because the policy was inconsistent in its use of defined terms whereas in Burch the court resolved the ambiguity in favour of the insurer when it restrictively construed “necessary operations” of a farm to exclude horse riding training.  Caution needs to be taken when drafting policies to ensure internal consistency as any inconsistency will be construed against the insurer.  That being said, to the extent policies are internally consistent, courts will be hesitant to unduly expand the scope of the policy beyond its plain language meaning.

In Conradi, the plaintiff, was in a motor vehicle accident while driving a rental vehicle and was sued for injuries alleged to have been caused to a passenger in the other vehicle. There was no coverage for the plaintiff under the rental vehicle liability insurance policy however the plaintiff was listed as an occasional driver on the insurance policy held by his mother. The mother’s policy was issued by the defendant, Economical Mutual Insurance Company.

The plaintiff claimed that under the Economical policy he was insured for operating a non-owned motor vehicle under the SPF 1. The claim was denied by the defendant on the basis that the plaintiff was not the “named insured” within the meaning of “the automobile” of the SPF 1 policy.

Importantly SPF 1 did not define the word “insured” in Section A or in the automobile definition.  Instead the policy used the terms “the insured”, “insured”, the “Insured”, “named insured”, and “a named insured” resulting in ambiguity specifically with regard to the term “the Insured” and whether or not it is referencing the named insured or any insured under the policy.

As a result the court held that the term “the insured” in section A of the policy included the plaintiff as well as his mother.

In Burch v Intact Insurance Company, 2015 ABCA 229 the appellant, suffered injuries in a horseback riding accident on a farm after purchasing the horse from its owner, Mr. Miller. Following the accident Mr. Miller dies however the appellant successfully obtained judgment against the estate.  The appellant then initiated a direct recourse action against Miller’s insurer, pursuant to section 530 (now section 534(1)) of the Insurance Act, RSA 2000, c I-3.

Mr. Miller had purchased an insurance policy from a local broker and disclosed that the activities on his property included farming and breeding of horses. The broker did not ask further questions and arranged for an insurance policy through Intact Insurance Company. The policy included liability coverage for certain bodily injury which occurred on the property but excluded bodily injury arising from the conduct of any “business pursuits” on the property other than farming. “Farming” was defined as the use of the premises for the production of crops or for the raising of livestock. Intact denied coverage for Burch based on the exclusion clause in the policy.

The Court of Appeal affirmed that riding lessons were not included in the definition of “farming” which was defined as “ownership, maintenance or use of premises for the production of crops or the raising or care of livestock, including all necessary operations.”  Training people to ride horses was not a “necessary operation” of breeding horses. As a result the Court of Appeal affirmed that the exclusion clause applied and that there was no coverage.

It is important to note that because the insured was deceased that there was no evidence as to what was said by the insured to the broker at the time that he obtained the policy.  We raise this as a caution to brokers to be careful to note any unusual circumstances that occur when arranging insurance policies and to be sure to explain any exclusions as they relate to same.  Had there been evidence that the insured had raised the issue of horse riding training the broker would have had potential exposure.