Defendant Who Crosses Centre Line Prima Facie Negligent

The Court of Appeal has set aside a jury verdict that dismissed an action against a defendant who crossed out of his lane and collided with another vehicle.

In El Dali v. Panjalingham, 2013 ONCA 24 (C.A.), the plaintiff was injured in an automobile accident when the defendant lost control of his vehicle on an icy road, crossed the centre line, slid into oncoming traffic, and hit the plaintiff's vehicle.  The plaintiff remained on his side of the road and was able to bring his vehicle to a complete stop.  The police officer who attended the scene decided not to lay charges due to weather conditions.  The defendant did not testify at trial and called no other evidence to explain his driving.

A jury found there was no negligence on the part of the defendant and dismissed the case.  The plaintiff appealed.  The Court of Appeal allowed the appeal and ordered a new trial. The defendant breached s. 148 of the Highway Traffic Act by crossing the centre line of the road and a driver who does so is prima facie negligent.  The driver then bears the onus of explaining that the accident could not have been avoided with the exercise of reasonable care.  The explanation need not come from the defendant, but must come from someone or the defendant will be held at least partially responsible.  The fact the police officer did not lay charges and that there were icy road conditions were not sufficient to support the jury's conclusion.  Defence counsel suggested a 50% apportionment in her closing, which also suggested the defendant bore some responsibility.

Those defending similar claims will have to consider the appropriate evidence to call in order to rebut the onus to explain how the accident occurred without negligence.

Missouri Federal Court Holds Pollution Exclusion Inapplicable to Exposure to Fumes

In its recent decision in United Fire & Casualty Co. v. Titan Contractors Service, Inc., 2013 U.S. Dist. LEXIS 10716 (E.D. Mo. Jan. 28, 2013), the United States District Court for the Eastern District of Missouri, applying Missouri law, had occasion to consider the application of a total pollution exclusion to claims arising out of what would not ordinarily be considered traditional environmental contamination.

The insured, Titan, is a company that specializes in cleaning construction project sites.  Three individuals that worked in an office space adjacent to where Titan had performed a cleanup project sued Titan.  They alleged that Titan had used an acrylic floor sealant, TIAH, as part of its cleanup operations, and that the fumes from the sealant caused plaintiffs to suffer various physical ailments.  Titan’s general liability insurer, United Fire, provided Titan with a defense in the underlying suit subject to a reservation of rights to deny coverage based on its policy’s pollution exclusion stating:

This insurance does not apply to:

f.  Pollution

(1)       "Bodily injury" or "property damage" which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.

This exclusion does not apply to "bodily injury" or "property damage" arising out of heat, smoke or fumes from a "hostile fire" unless that "hostile fire" occurred or originated:

(a)   At any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste; or

(b)  At any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to, or assess the effects of, "pollutants."

(2)       Any loss, cost or expense arising out of any:

(a)    Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants"; or

(b)   Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, or neutralizing, or in any way responding to, or assessing the effects of, "pollutants".

United Fire argued that the exclusion unambiguously applied since the underlying suit involved allegations of bodily injury caused by exposure to pollutants.  Titan countered that the exclusion was inapplicable to products put to their intended use, and instead applied only to matters traditionally considered environmental pollution. 

Having determined that Missouri law governed the policy, the court observed that Missouri’s highest court had not yet addressed the meaning and scope of the total pollution exclusion.  The court, therefore, concluded that it would have to predict how the Missouri Supreme Court would rule on the issue, looking for guidance to decisions by Missouri’s Court of Appeals to help determine whether TIAH is a pollutant for the purpose of the exclusion, and if so, whether the exclusion applied.  Looking to cases such as Hocker Oil Co., Inc. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510 (Mo. Ct. App. 1999); Casualty Indemnity Exchange v. City of Sparta, 997 S.W.2d 545 (Mo. Ct. App. 1999); Boulevard Investment Company v. Capitol Indemnity Corporation, 27 S.W.3d 856 (Mo. Ct. App. 2000), the court gleaned several guiding principles for determining the application of the exclusion.  First, Missouri courts take a “common sense, situational approach” in determining whether a substance qualifies as a pollutant.  Second, this common sense determination is necessarily “fact intensive.”  Third, and most notably, the court observed that “whether an insurance policy’s language is plain and unambiguous is determined by what the layman who brought and paid for the policy would ordinarily have understood.”  As such, explained the court:

… the insured is entitled to characterize the allegedly polluting substance in a manner consistent with the insured’s daily activities, particularly if the alleged pollutant belongs in the environment in which the insured routinely works.

Notwithstanding these principles, however, the court also observed that Missouri courts do not reflexively limit application of the exclusion “to traditional environmental pollutants.”

With these guiding principles in mind, the court acknowledged that application of the exclusion to the claims against Titan “is not an easy case,” but ultimately found it ambiguous whether United Fire’s pollution exclusion applied to Titan’s use of TIAH.  Central to the court’s analysis was that Titan routinely used TIAH as part of its normal operations, thus influencing Titan’s expectations of coverage.  As the court noted, under the circumstances it “is reasonable for Titan to expect that its work in sealing concrete floors would be covered by its commercial general liability policy, and that TIAH would not be deemed a pollutant.” 

Mississippi Court Holds No Coverage for Voyeurism Claim Under E&O Policy

In its recent decision in Tudor Ins. Co. v. Manchester Educ. Found., Inc., 2013 U.S. Dist. LEXIS 8458 (S.D. Miss. Jan. 22, 2013), the United States District Court for the Southern District of Mississippi had occasion to consider the application of an exclusion for bodily injury in a professional liability policy.

Tudor Insurance Company insured the Manchester Educational Foundation under an educational errors and omissions insurance policy.  Manchester operated the Manchester Academy in Yazoo, Mississippi.   During the time the Tudor policy was in effect, several former students brought suit for battery and invasion of privacy against the school, various administrators, and a teacher-coach whom the students claimed subjected them to unlicensed physical examinations and also spied on them while they were changing.  In a separate criminal proceeding, the perpetrator plead guilty to several counts of voyeurism and as a result was sentenced to fifteen years of probation and was required to register as a sex offender.

Tudor brought suit against Manchester and the various individual defendants, seeking a declaration that it had no coverage obligations in the underlying civil suit as a result of various policy exclusions, most notably an exclusion barring coverage for:

D.        any damages, whether direct, indirect or consequential, arising from or caused by, bodily injury, personal injury, sickness, disease or death, mental anguish or emotional distress[.]

Tudor settled with Manchester and each of the individual defendants with the exception of the perpetrator, who defaulted in the coverage action. 

Notwithstanding the default, the court considered the substantive coverage issue on Tudor’s motion for summary judgment, and agreed that the underlying civil suit constituted a claim falling wholly within the scope of the exclusion, noting that several courts, including the United States Courts of Appeals for the First and Fifth Circuits held similar exclusions applicable in analogous factual scenarios.  Winnacunnet Coop. Sch. Dist. v. Nat'l Union Fire Ins. Co., 84 F.3d 32 (1st Cir. 1996); Foreman v. Cont'l Cas. Co., 770 F.2d 487 (5th Cir. 1985).  As such, the court concluded that Tudor had no duty to defend or indemnify in connection with the underlying suit.

Litigation Privilege - Production of Lawyer's Notes of Interview

A recent case deals with production of statements taken by an opposing party.  It provides a summary of the principles relating to litigation privilege.

In Hart v. Canada (Attorney General), 2012 ONSC 6067 (S.C.J.), the plaintiff brought a motion seeking production of notes that had been made by counsel for the defendant several years earlier when the plaintiff was a potential witness in another lawsuit arising out of the same factual nexus.  The notes appeared to be an almost verbatim translation of the interview.  The defendant argued the notes were protected by litigation privilege.  The Master ordered the notes to be produced and the defendant appealed.

The appeal was dismissed.  Litigation privilege cannot restrict disclosure of an opposing party's statements.  Information or statements that are obtained from an opposing party cannot be confidential from that party.  To the extent a document is a mere recording of information given by the opposing party, it is not subject to litigation privilege, even though it was created with a view to anticipated future actions; however, if the document contains something more that amounts to a solicitor's work product, then it is privileged.  Counsel for the defendant would be permitted to make a proposal to redact certain parts of the document that contained information that was more than simply a record of the plaintiff's interview and statement, such as margin notes, underlining and highlighting.

It appears that the key fact was that the notes contained an almost verbatim recording of the plaintiff's interview.  If the notes contained the solicitor's strategies or theories, the outcome may have been different.

Rhode Island Supreme Court Invalidates Healthcare Provider’s Right to Self-Insure

In its recent decision in Peloquin v. Haven Health Ctr. of Greenville, 2013 R.I. LEXIS 9 (R.I. Jan. 14, 2013), the Supreme Court of Rhode Island had occasion to consider the validity of a self-insured retention in a healthcare professional liability policy issued to a Rhode Island insured.

Green Haven Health Center (“Health Haven”), a Rhode Island nursing facility, was insured by Columbia Casualty Company (“Columbia”) under a claims made and reported healthcare professional liability policy with limits of liability of $1 million per claim and $3 million in the aggregate.  Columbia’s policy contained a self-insured retention endorsement stating that its policy attached excess of a self-insured retention of $2 million per claim to be paid by the insured.  The endorsement specifically stated that:

[Columbia's] obligation to pay 'damages' and 'claim expenses' as a result of a 'claim' is in excess of the Self-Insured Retention. [Haven Health] [is] required to pay all 'damages' and 'claim expenses' up to the amount of the Self-Insured Retention listed herein. The Limits of Liability set forth on the Declarations Page are in excess of the Self-Insured Retention regardless of [Haven Health's] financial ability or inability to pay the Self-Insured Retention and in no event are we required to make any payments within [Haven Health's] Self-Insured Retention.

Health Haven was named as a defendant in a medical malpractice lawsuit brought on behalf of a patient who died when a Health Haven nurse accidentally administered a fatal dose of morphine.  While the suit was pending, Health Haven filed for bankruptcy.  The underlying suit was later amended to add Columbia as a defendant pursuant to a Rhode Island statute permitting direct actions against insurers when an insured files for bankruptcy.  Plaintiff nevertheless continued to prosecute her claim against Health Haven, and two related entities, and eventually obtained a default judgment against these entities in the amount of $364,421.63.   Plaintiff then moved for summary judgment against Columbia, arguing that the self-insured endorsement was void as against public policy.  Plaintiff argued, therefore, that she was entitled to recovery from Columbia of $100,000 (based on Rhode Island’s statutory minimum required insurance for medical professionals) plus pre- and post-judgment interest of nearly $140,000.  The lower court held in favor of Columbia, reasoning that Columbia’s obligations under its policy were triggered only by a loss in excess of $2 million.

Plaintiff’s arguments regarding the validity of the self-insured retention were relied on Rhode Island statute § 42-14.1-2(a), which governs malpractice insurance requirements for medical and dental professionals.  The statute states that:

(a) The director of business regulation shall promulgate rules and regulations requiring all licensed medical and dental professional and all licensed health care providers to be covered by professional liability insurance insuring the practitioner for claims of bodily injury or death arising out of malpractice, professional error, or mistake. The director of the department of business regulation is hereby authorized to promulgate regulations establishing the minimum insurance coverage limits which shall be required; provided, however, that such limits shall not be less than one hundred thousand dollars ($ 100,000) for claims arising out of the same professional service and three hundred thousand dollars ($ 300,000) in the aggregate. The director of the department of business regulation is further authorized to establish rules and regulations allowing persons or entities with sufficient financial resources to be self-insurers.  (Emphasis supplied.)

Plaintiff argued that Health Haven’s $2 million retained limit was not insurance as required by the statute, and thus did not satisfy the minimum insurance requirement established in § 42-14.1-2(a) of $100,000 per claim and $300,000 in the aggregate.  Plaintiff therefore contended that the self-insured endorsement violated public policy to the extent of the statutorily mandated minimum insurance requirements.  Plaintiff further argued that because the Rhode Island Department of Business Regulation ("DBR") had not yet established “rules and regulations allowing persons or entities with sufficient financial resources to be self-insurers,” Health Haven’s $2 million retained limit was impermissible.

The Rhode Island Supreme Court stated that it need not address plaintiff’s arguments concerning Rhode Island public policy since the absence of DBR promulgated rules or regulations on the issue was determinative.  As the court explained:

… we conclude that before any self-insurance may be incorporated into an insurance policy governed by § 42-14.1-2(a), the DBR first must promulgate a regulatory framework expressly "allowing" for self-insurance. … before a Rhode Island healthcare provider lawfully may self-insure, the DBR is required to take the affirmative step of "allowing" self-insurance and defining the conditions under which "persons or entities" possess "sufficient financial resources to be self-insurers." See § 42-14.1-2(a). Thus, unless and until the DBR promulgates regulations that expressly make provision for self-insurance by healthcare providers, by its plain language, the final sentence of § 42-14.1-2(a) does not permit the SIR Endorsement that appears in the Columbia policy.

In reaching this conclusion, the court agreed with plaintiff’s contention that self-insurance is the antithesis of insurance, since the risk remains with the insured.   As such, explained the court, to satisfy the minimum requirements of § 42-14.1-2(a), and assuming the DBR permits self-insurance, a medical or dental professional would, at the very least, have to demonstrate “the same sorts of underwriting procedures that insurance companies employ” of its financial ability to insure a loss.

Having concluded that the $2 million self-insured retention was impermissible, the Supreme Court resisted drawing a broader conclusion as to the minimum amount of insurance required under the statute.  As the court explained:

We already have determined the SIR Endorsement in the Columbia policy to be invalid, and we hold that plaintiff should receive the $100,000 in damages to which she consistently has argued she is entitled. Thus, we need not determine whether the $100,000 per-claim minimum specified in § 42-14.1-2(a) currently is mandatory (and therefore applicable to all policies insuring Rhode Island healthcare providers), or whether it becomes effective only if and when the DBR exercises its discretion by promulgating regulations setting forth minimum professional liability insurance coverage requirements for healthcare providers.

Thus, the court concluded that plaintiff was entitled to recovery of $100,000, in addition to pre-and post-judgment interest calculated on the $100,000 recoverable under the Columbia policy rather than the $364,000 amount of the underlying default judgment.

Definition of "Accident" Under the SABS

How far can the definition of "accident" under the SABS be stretched?

In Dominion of Canada v. Prest, 2013 ONSC 92 (S.C.J.), the insured was washing his car and tripped over a curb sticking out from the wall of his parking garage.  He claimed that his right hand was touching the car as he fell, and therefore he was entitled to accident benefits.  Dominion sought a determination as to whether the incident met the definition of an "accident" within s. 3(1) of the SABS, which defines "accident" as "an incident in which the use or operation of an automobile directly causes an impairment."

Justice McNamara held that the incident was not an "accident".  He used the two part test set out by the Court of Appeal in Chisholm v. Liberty Mutual (2002), O.R. (3d) 776 (C.A.) and Greenhalgh v. ING (2004), CanLii 21045 (C.A.):

(a)  Did the incident arise out of the use or operation of an automobile (the “purpose test”); and

(b)  Did such use or operation of an automobile directly cause the impairment (the “causation test”).

Justice McNamara held that the vehicle was not being used or operated at the time of the incident and was not a direct cause of the impairment.  The use of the car had ended without injury being suffered and tripping over the curb was a new intervening act. The insured was not entitled to accident benefits, showing that there is indeed a limit to how far the definition can be stretched.

Kentucky Court Holds Pollution Exclusion Applicable to Release of Diesel Fuel

In its recent decision in Hardy Oil Co. v. Nationwide Agribusiness Ins. Co., 2013 U.S. Dist. LEXIS 4760 (E.D. Ky. Jan. 11, 2013), the United States District Court for the Eastern District of Kentucky had occasion to consider the application of the pollution exclusion and under what circumstances it will be deemed ambiguous under Kentucky law.

Hardy Oil Company sought coverage under a general liability policy issued by Nationwide for a release of diesel fuel on its premises. Nationwide denied coverage on the basis of the lack of an occurrence and lack of third-party property damage.  Nationwide also denied coverage on the basis of its policy’s pollution exclusion, applicable to:

f. Pollution

(1) "Bodily Injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

(a) At or from any premises, site, or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.

                                [...]

(2)       Any loss, cost or expense arising out of any:

(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, "pollutants"; [...]

By endorsement, the term “pollutants was defined as:

(a) Any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

(b) Gasoline, diesel fuel and all other petroleum products.

The court acknowledged that while the pollution exclusion was unambiguous on its face, Kentucky courts have nevertheless deemed the exclusion ambiguous as applied in certain contexts.  For instance, in Motorists Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679 (Ky. App. 1996), Kentucky’s Court of Appeals held the exclusion ambiguous as applied to carbon monoxide fumes emanating from a dry cleaner to two neighboring businesses.  Likewise, in Certain Underwriter's at Lloyd's, London v. Abundance Coal, Inc., 352 S.W.3d 594 (Ky. App. 2011), Kentucky’s Court of Appeals held the exclusion ambiguous as applied to allegations of “negligent trespass” of coal dust from the insured’s property to the plaintiff’s property.  In both cases, explained the Hardy court, the Kentucky Court of Appeals, looking to the historical use and understanding of the exclusion, concluded the exclusion was ambiguous in the context of “accidental, small-scale scenarios.”  The court distinguished these scenarios from that involving Hardy:

In contrast to these cases, Hardy Oil's claim involves a classic environmental catastrophe that led to a government-ordered cleanup. As Kentucky courts have recognized, these are exactly the type of situations that the pollution exclusion historically sought to exclude from coverage. … Therefore, the pollution exclusion is not ambiguous as applied to the factual circumstances of this case, and Hardy Oil cannot claim coverage under the Liability Policy.

The court further concluded that even if the exclusion was ambiguous under the circumstances, the lack of any third-party property damage further precluded coverage under the policy.