The Duty to Defend Under A Homeowner's Policy for Automobile-Related Incidents

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The Duty to Defend Under A Homeowner’s Policy for Automobile-Related Incidents: SCC Confirms Analysis of Pleadings and Narrow Reading of Exclusions Apply

On May 7, 2020, the Supreme Court of Canada denied an Insurer’s leave to appeal from a notable decision of the Ontario Court of Appeal on an insurer’s duty to defend. 

The decision in Pembridge Insurance Company of Canada v. Chu, 2019 ONCA 904 (CanLII) <>, arose out of a motor vehicle accident.  A third party claim was commenced by the defendant driver against Dennis Chu. It was alleged that he drove negligently, got out of his vehicle following the collision, and made threats towards the defendant driver and passenger.  The defendant driver claimed that his accident with the plaintiff was the result of fleeing from the third party.  

Chu held a policy of motor vehicle insurance issued by Dominion. At the same time, he also held a policy of home insurance issued by Pembridge.   Pembridge, relying on an exclusion in the homeowner’s policy for claims made arising from the ownership, use or operation of any motorized vehicle, denied coverage and a duty to defend based on the allegations of negligent driving against Chu.

The Court of Appeal found that the motion judge erred in deciding that there was no duty to defend because he did not compare the specific allegation against Chu in the third party claim against the homeowner policy’s language.  Further, the motion judge inappropriate made factual findings that Chu’s actions after exiting his vehicle would be deemed ‘incident to the ownership, use or operation of a vehicle” and therefore covered by Dominion as opposed to Pembridge. The Court of Appeal confirmed that the case law to date requires factual findings to be made at trial, whereas the duty to defend must be determined based on the allegations as pleaded.

Ultimately, the Court of Appeal found that, according to the pleadings, Chu was no longer in the vehicle and not operating his vehicle at the time of the threats.  Therefore, the exclusion in the Pembridge homeowner policy for acts arising from the ‘ownership, use or operation of any motorized vehicle” does not apply to Chu’s alleged assault.

The Court of Appeal’s decision in Pembridge Insurance Company of Canada v Chu was an instructive decision on the issue of duty to defend.  It is valuable for its discussion of when a duty to defend arises, and how the Court should determine whether the Insurer has a duty to defend when there are multiple policies potentially responding.

It essentially confirmed that it is not the Court’s place to consider whether it was “more appropriate” for one insurer to provide coverage, as opposed to another insurer.  The analytical framework continues to require an insure to review the specific allegations being made in the pleadings, review them against the language of the policy and determine in any exclusions or conditions would apply. It is essentially irrelevant if any other policy of insurance responds to the claim also.   Overall, the decision is well in-step with preceding jurisprudence in this area of the law. 

The bottom line? The requirement for a broad reading of the pleadings and a narrow interpretation of exclusions prevails.

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