What happens when two insurers cover the same risk and each declare themselves excess to other available insurance? Ontario’s Court of Appeal addressed that issue in the recent case of TD General Insurance v. Intact Insurance, which involved a claim for bodily injury advanced by a passenger in a boat driven by the insured.
The TD policy covered the specific boat involved in the accident and the driver was covered as he was operating the boat with the owner’s consent. The driver was also covered under his homeowner’s policy with Intact, which provided liability coverage for claims arising out of the insured’s use or operation of any type of watercraft. Each policy declared itself excess to other available insurance.
Because the TD policy specifically covered the boat in question, the application judge held that the TD policy provided primary insurance for the watercraft in question and dismissed TD’s application that the two policies share equally in the defence and indemnity of the driver. In doing so he relied on the ‘closeness to the risk approach’ in which courts consider:
- Which policy specifically described the accident causing instrumentality?
- Which premium reflect the greater contemplated exposure?
- Is coverage of the risk primary in one policy and incidental to the other?
Unfortunately the Supreme Court of Canada expressly rejected this approach to overlapping coverage in the Family Insurance Corp. v. Lombard Canada Ltd. Case. Instead, the Supreme Court preferred to focus on “whether the insurers intended to limit their obligation to contribute, by what method, and in what circumstances vis-à-vis the insured”. Because the contest, as here was between two insurers, the court held that there was no need to look to surrounding circumstance and instead relies strictly on the policy wording. If there are no limiting intentions or limiting intentions that cannot be reconciled, the burden is shared equally between the insurers. The Court of Appeal considered the identical ‘other insurance clauses’ to be limiting intentions. Because each policy was declared excess to the other, the court concluded that they were irreconcilable. As a result, the policies had to contribute equally. The reasons of the Court of Appeal in this case are nuanced and underscore the importance of a close reading of policy wording when faced with a circumstance of overlapping coverages.
