*Since the writing of this blog the decision has been reversed/appealed.
Traders General Insurance Company appealed to the Ontario Court of Appeal after having been ordered, during the initial coverage application, to provide a defence and indemnity to Elizabeth Gibson in relation to a legal action commenced by her daughter, Betty. Betty sued her mother after falling from a balcony that collapsed in the home they shared, which was owned by Elizabeth.
It was agreed that Elizabeth was an insured under the Trader’s policy of homeowner’s insurance, which she had purchased. As is standard for homeowner’s policies, the Trader’s policy provided Elizabeth with coverage for all sums she would become legally liable to pay as compensatory damages because of unintentional bodily injury or property damage arising out of her personal actions anywhere in the world, and out of her ownership, use or occupancy of the insured premises.
It was also agreed that Betty lived with Elizabeth at the material time. She and Elizabeth shared chores equally but informally, ate meals together, and shared the cost of renovations. Betty paid her mother a small amount of rent, being $200.00 a month and then $400.00 a month.
The locus of the disagreement between the parties was whether Betty’s claim against Elizabeth fell within the ambit of the following policy exclusion: “We do not insure claims made against you arising from bodily injury to you or any person residing in your household other than a residence employee.”
The application judge held that although Betty was member of the household and was not a residence employee (which is defined in the policy), she paid rent and was therefore a tenant. By virtue of the tenancy, Betty’s claim did not fall within the exclusion. The application judge inferred this exception to the exclusion by looking to Elizabeth’s reasonable expectations under the contract, and to the governing principles of policy interpretation, which promote broad coverage and narrow exclusion.
On appeal, Traders did not attempt to disturb the application judge’s finding that Betty was a member of the household. Traders reiterated the factors to be considered in determining whether there is household membership, set out in an earlier decision of the Court of Appeal:
- the person contributes to the household in a meaningful way through time and/or resources for the benefit of the collective good of the household;
- the person shares common space with other members of the household; and
- the person is motivated by an interest in the life of all members of the household.
- Traders argued that payment of rent did not alter the essence of Betty’s situation as a household member. Despite paying rent to Gibson, Betty continued to share in the “intimacy, stability, and common purpose of the household”. Traders further noted another interpretive principle, which is that
The Court of Appeal agreed with Traders: Betty was a household member, and payment of rent did not, on its own, alter that membership. The Court relied another interpretative principle, which is that “where the policy is unambiguous, the court should give effect to its clear language, reading the policy as a whole”. The exclusion itself does not contain any exception in relation to payment of rent, and there was no basis on which to infer such an exception. Accordingly, Traders did not owe Elizabeth a defence or indemnity.
This decision represents a rare win for insurers at the appellate level. It maintains the integrity of the multi-faceted “household member” analysis, which, at its best, searches for the true essence of the relationship between people who live together. It also has policy ramifications that favour insurers: individuals will not be able to avoid the household member exclusion simply by accepting money from a person who is otherwise a clear member of a household.
Sonya Katrycz is a member of the firm’s Coverage practice group and the author of this blog. If you have a question about this decision or a similar coverage file, please contact Sonya at 416-777-7381.