Insurer can’t sue “Your and You”

April 23, 2014

The Ontario Superior Court has released a subrogation decision dealing with two interesting issues: Assessing a defendant’s negligence and the ability of an insurer to subrogate against its own unnamed insured.

In Rochon v. Rochon, the defendant was the plaintiffs’ son. He owned a 2009 Chevrolet Cobalt motor vehicle. Economical Insurance issued an Ontario Automobile Policy of insurance to the defendant in accordance with the statutory requirements in return for a premium.

On March 28, 2010, the defendant drove his vehicle into the detached garage on the plaintiff’s property in order to install new auxiliary lights underneath the headlights on the front of his vehicle. He connected the vehicle’s battery to a battery charger with jumper cables to provide a source of power and turned the car engine off. He worked on the repairs and left the garage. While he was away, the vehicle caught on fire. The fire spread to the structure of the garage causing significant property damage.

Grenville insured the plaintiffs under a home policy. It paid out the property damage loss to the plaintiffs in the amount of $148,581.65. Grenville then sought to recover from Economical in a subrogated claim, the sum of $148,581.65, alleging that the fire was as a result of the defendant’s negligent use and operation of a motor vehicle. In addition, the plaintiffs sought judgment for their uninsured loss of $8,000.00 for a total judgment claimed by the plaintiffs as against the defendant of $156,581.65.

The defendant raised two issues: Firstly, he denied negligence for causing the accident. Secondly, he claimed that he was an insured person under the plaintiffs’ policy, which precluded Grenville from suing him.

Negligence

On the negligence issue, the judge found that the plaintiffs established on a balance of probabilities that the defendant was negligent and that the defendant’s negligence caused the fire and damage. Of note, the plaintiffs urged the judge to find that the mere fact that the defendant’s vehicle caught on fire was prima facie evidence of negligence. This is because vehicles do not, in the ordinary course of things, catch on fire in the absence of negligence. It followed that the very fact that the defendant’s vehicle caught on fire was evidence of the defendant’s negligence.

The judge rejected that argument in part, noting that what the plaintiff’s were asking was for her to apply the outdated doctrine of res ipsa loquitur (“the thing speaks for itself”). The Supreme Court of Canada has rejected the doctrine as an appropriate use to determine negligence. However, the judge held that there was still some merit to the plaintiffs’ argument, only that she had to be careful in affording it much weight.

On the facts of the case, the judge agreed that vehicles do not ordinarily catch fire in the absence of some negligence, but that was only one piece of evidence. She found that the defendant did not lead any evidence to negate the evidence of the plaintiffs as to the origin or cause of the fire. Conversely, the plaintiffs’ expert testified that the origin of the fire was at the positive terminal post of the battery where the most extensive fire damage was found. The cause of the fire was electrical arching caused by a poor connection on the battery post. The judge accepted his evidence as being credible and reliable and that it went to the origin and cause of this fire. She found, among other things, that the defendant did not take reasonable care to ensure that his battery connections were secure.

Right to Subrogate

An insurer cannot subrogate against its own insured.

In the Grenville policy of insurance, there was no definition of who was an “Insured”. The policy defined “You” and “Your”: This definition applied to all four sections of the Grenville policy. It was admitted that the defendant was an unnamed insured on the plaintiffs’ residential insurance policy with Grenville and that he was subject to the term and conditions of the policy. It was admitted that the work done by the defendant on the vehicle and the subsequent fire were within the definition of being related to the ‘use and operation of a motor vehicle’.

The judge held that as the defendant son was an unnamed insured on the policy, by the definition of “You” and “Your” in the policy, the defendant son’s rights were the equivalent of his parents throughout the policy.

Among other reasons, the judge noted that contractual conditions in the Grenville policy required the insured (the defendant), to take reasonable steps to recover lost property, transfer his right against others to the insurer Grenville and to submit to an examination under oath and produce all documentation in his possession at Grenville’s request. The defendant was also required to speak to Grenville’s adjuster and provide a statement, which he did, to assist Grenville in recovering the loss. The judge held that this requirement was contrary to the defendant’s interest if he could now be sued under the same policy by Grenville, his own insurer. The only way these contractual requirements made sense was that these conditions relate to the conditions required of the insurer’s own insured on the policy to recover losses from third persons, but not their own insured.

Accordingly, the judge despite finding that the defendant was negligent, the judge dismissed the insurer’s subrogation claim against him. That said, the judge allowed the parents’ claim for the uninsured losses totalling $8,000 (makes sense, since the parents could maintain a common law tort action against the defendant for their uninsured losses).

See Rochon v. Rochon, 2014 ONSC 2337 (CanLII)

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