Where past negligence involved in the installation of the system manifested itself in an explosion years later, the “occurrence” or “accident” was held to have occurred at the time of the explosion, not at the time of the negligent installation, years after the policy period for the occurrence-based policy.

R.C. Heating & Gasfitting Ltd. v The Sovereign General Insurance Company, 2017 BCSC 1916 per Saunders, J. [4283]

Facts and issues

The insured, R.C. Heating & Gasfitting Ltd. (“RC Heating”), was in the business of installing gas systems during the time period of August 2001 to September 2007. In February and March, 2005, RC Heating installed a gas system at a property on Whitetail Lake in British Columbia (the “Property”). During this time, RC Heating held a third party liability policy (the “Policy”) issued by Sovereign General insurance Company (“Sovereign General”). In 2007, RC Heating ceased operations and its Sovereign General policy was not renewed.   On August 13, 2014, an explosion occurred at the Property, resulting in serious bodily injuries to members of a family who were renting the Property at the time. An action was commenced and RC Heating was added as a party to the action.   RC Heating tendered the claim to Sovereign General, who refused to defend it on the basis that there had not been an “occurrence” during the policy period. RC Heating took the position that because the Policy was in place at the time of its alleged negligent acts, there had been an “occurrence” during the policy period.   The Policy provided coverage for “Bodily Injury or Property Damage caused by an occurrence”.  The term “occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”.  The term “accident” was defined as “an unintended or unforeseen event which causes an injury or damage”.   RC Heating brought an application seeking a declaration that Sovereign General had a duty to defend RC Heating against the allegations made in the civil claim and indemnity against expenses incurred in the defence of the same.

HELD: The Court found in favour of Sovereign General, determining that there was no duty to defend for lack of there being an “occurrence”. The application was dismissed with costs to Sovereign General. The Court held that the label given to a policy (e.g.  “occurrence” or “claims made”) is of little relevance in determining which type of policy it is.  It is the content of the policy must be considered:

21      It must also be borne in mind that although the subject policy is of the type referred to in insurance law, and in the insurance industry, as an “Occurrence” policy, the use of that label in itself does nothing to advance the process of interpretation. The emphasis must be on the subject policy wording. The necessity of following this approach to interpretive issues was clearly stated by McLachlin J. (as she then was), speaking for the Court in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252 (S.C.C.), a case dealing with the distinction between “occurrence” and “claims-made” policies:  

Every insurance policy must provide a mechanism for determining the claims for which the insurer is liable in a temporal sense. The traditional way has been to focus on the occurrence giving rise to the claim. For example, most automobile insurance liability policies provide coverage for accidents caused by the insured’s negligence during the policy period. Provided that the negligent act occurred in the policy period, the insurer is required to indemnify the insured for all loss arising from it, regardless of when a claim is made against the insured for that loss. This type of insurance policy is called an “occurrence” policy.   . . .   . . . it is important to note that “claims-made” and “occurrence” are not legal labels which dictate a certain legal result once a policy is characterized as one or the other. The issue is always what the particular policy dictates, regardless of what it is called. This is particularly so due to there being disagreement between academics as to just what are “pure” “claims-made” policies, and “pure” “occurrence” policies. For instance, there is disagreement as to whether “claims-made” means claims made against the insured by third parties, or claims made by the insured against the insurer for coverage under the insurer’s policy. Regarding the characterization of “pure” “occurrence” policies, one point of disagreement is whether the “occurrence” consists of a negligent act, or the resultant damage, or both.   These disagreements can perhaps be resolved by recognizing that there may be different types of “claims-made” and “occurrence” policies, as well as hybrid policies that have some features of “claims-made” policies and some features of “occurrence” policies. The essential is not the label one places on the policy, but what the policy says. The courts must in each case look to the particular wording of the particular policy, rather than simply attempt to pigeonhole the policy at issue into one category or the other. Construction of policies at issue in these kinds of cases depends much more on the specific wording of the policy at issue than on a general categorizing of the policy.   [Emphasis added by the Court.]

  The Court noted that this policy defined “occurrence” and “accident” as meaning the same thing. The Court held that “accident” as defined by this policy wording was to be given its natural and ordinary meaning – the occasion of the loss and not the negligence in its installation, accordingly the “accident”/”occurrence” took place long after the policy period:  

25      This view of liability insurance coverage was roundly rejected [in Pickford & Black Ltd. v. Canadian General Insurance Co. [1977] 1 S.C.R. 261 (S.C.C.)] both by the Appeal Division of the Nova Scotia Supreme Court (1974), 53 D.L.R. (3d) 277 (N.S. C.A.), at pp. 287-288, and by the Supreme Court of Canada. Speaking for a unanimous Supreme Court, Ritchie J. held that the word accident, in its normal meaning, refers to a discrete event of loss, not to the cause of the loss:  

. . . I am, with the greatest respect, unable to conclude that the accident at sea was so bound up with the negligence at the dockside as to transform the latter from being an originating cause into being the event of which it was causative. Such a construction appears to me to rob the word “accident” as used in the policy of its natural and ordinary meaning by interpreting it as connoting not the “accident” but the cause of the accident. What is at issue is the true construction to be placed on Exclusion No. 1 and in my view in relation to the facts of this case, the most striking feature of that exclusion is that it is not concerned with the “cause” of the accident at all but is related exclusively to the area where the accident “occurred”. (pp. 267-268) . . . No doubt the defective stowage was due to an act or omission which reasonably competent stevedores should have foreseen would have been likely to damage the cargo, but the fact that this negligence was causative of the accident which later occurred does not serve to translate the locale where the accident itself “occurred” from the broad Atlantic to the dockside at Halifax. (p. 269)

Analysis  

26      In the present case, the plaintiff seeks to distinguish Pickford & Black and similar cases on the basis that the Policy provides explicit definitions for “occurrence” and “accident”. I find, however, that nothing in those definitions negates what Pickford & Black says is the natural and ordinary meaning of “accident”. The focus must be on the immediate circumstances of a loss, not its originating cause. The insurmountable problem for the petitioners in the present case is that under the Policy, “accident” and “occurrence” are not separate concepts; the Policy states, “Occurrence means an accident . . . “ (emphasis added). In the context of Insuring Agreement “A”, the terms are intended as synonymous.

COMMENTARY:   

The reasons in this decision reinforce the principle that every insurance policy should be interpreted according to the particular wording utilized by the insurer. Though some may feel this decision fails to give life to the interpretative principle of interpreting coverage provisions broadly, this only comes into play if the wording in the definitions are considered to be superfluous or ambiguous.