A recent decision of the Alberta Court of Queen's Bench demonstrates that policyholders must carefully consider the interplay between an insurance policy and its endorsements. In Wage v Canadian Direct Insurance Incorporated (2019 ABQB 303) the court interpreted a standard form family protection endorsement to an automobile insurance policy to provide coverage for an accident in the Philippines, even though the territorial limit of the underlying policy was Canada and the United States.
The decision turned on a conflict between the wording of the territorial limit stated in the policy and the nature of the family protection endorsement. The policy provided coverage while the insured automobile was located within Canada or the United States, but the endorsement extended coverage to certain accidents not involving that vehicle. As a result, even though the endorsement was expressly subject to all limits specified in the policy, the insured argued that the accident in the Philippines was covered because:
- the insured vehicle had remained in Canada at all times; and
- the endorsement's only additional territorial limitation was to exclude application in Quebec.
The court accepted that argument. While it acknowledged that worldwide coverage outside Quebec may not have been intended, that was the effect of the insurance contract read as a whole. Further, the court noted that a more commercially reasonable effect could have been easily achieved, as was done in a referenced Ontario case with the following wording: "This policy covers you and other insured persons for incidents occurring in Canada or the United States." In the absence of such wording, the policyholder was entitled to a plain language interpretation, with broad construction given to coverage provisions.
Wage demonstrates the need for a careful review of the policy text in any coverage dispute. One consideration will be the distinction between endorsements that provide standalone coverage and those intended only to modify the existing policy terms. However, most important is the overarching principle that any limitations of coverage should be clearly stated.
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