Canada: Negligent Acts During Policy Period But Resultant Damage After: When Did The "Accident" Occur?

In a judgment released in May 2015 in Canadian Northern Shield Insurance Company v. Intact Insurance Company, the BC Supreme Court decided whether an insurer had a duty to defend where the insureds committed negligent acts within the policy period but the claimant's resulting damage happened after. The particular question was whether there had been an "accident" within the policy period.

The insureds, Norman and Hazel Sibson, were sued for property damage, bodily injury and death resulting from a landslide originating from a lot (the "Property") they formerly owned and occupied. The Property was located at the top of an escarpment in the east bank of the Seymour River in the District of North Vancouver. In 1958, the Sibsons constructed a concrete retaining wall that ran along the length of their property. Over the ensuing years, they added to the wall height, placed further topsoil on the Property, installed a concrete pond, topped trees, and used the downhill slope beyond the wall to deposit compost. Following some landslides in the area in 1979, the District retained a geotechnical engineer who recommended removal of existing debris from the lot, control of vegetative growth, periodic inspection of drainage and slopes for signs of distress, improvement of existing drainage, and removal of abandoned septic tanks. The Sibsons did not follow these recommendations. On January 13, 2004, they sold the Property to another couple. On January 9, 2009, following heavy rains, a landslide originating from the Property resulted in damage to a downhill lot owned by Michael and Elizabeth Kuttner, bodily injury to Mr. Kuttner, and the death of Ms. Kuttner. Mr. Kutner and his wife's estate sued the Sibsons.

For a ten year period ending October 27, 2004, the Property was covered by a homeowners insurance policy issued by Allianz Insurance, a company that was subsequently acquired by ING Insurance of Canada, which, in turn, became Intact Insurance Company ("Intact"). From October 27, 2004 to October 27, 2005, the Sibsons had a personal lines policy issued by Canadian Northern Shield Insurance Co. ("CNS"). CNS defended the Sibsons, settled the claims against them and then brought an action against Intact for an equitable contribution toward defence and indemnity costs.

The insurers agreed that the Sibsons' negligent conduct occurred multiple times during the Intact policy period and materially contributed to the landslide. They also agreed that the resulting property damage and bodily injury occurred after the Intact policy period.

The Intact policy had the following liability provisions:


This insurance applies:

1. to accidents or occurrences which take place during the period this policy is in force.
2. ...


We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional personal injury or property damage arising out of:

1. your personal actions anywhere in the world;
2. your ownership, use or occupancy of the premises defined in the Additional Definitions.

The words "accidents" and "occurrences" were not defined in the Intact policy. "Premises" was defined as,

All premises where the person(s) named as Insured on the Coverage Summary, or his or her spouse, maintains a residence, including seasonal and other residences, provided such premises are specifically described on the Coverage Summary.

The presiding judge concisely described the contentious issue: 

The issue is whether the terms "accident" or "occurrence" as used in the Intact Policy apply to negligent acts or omissions of an insured occurring within the period of the policy in circumstances where damage or injury does not result from those acts or omissions until after the policy has expired.

The judge noted that the terms "accident" and "occurrence" were not defined but, in considering the context of the policy as a whole, concluded that the words required that at least some resulting damage must occur within the policy period.

In my view, there is no need for a temporal restriction of property damage because such damage must arise from the ownership, use or occupancy of premises that are maintained by the insureds during the policy period. This is because "premises" is defined in the present tense: all premises where the insured "maintains" a residence. The Sibsons did not own, use or occupy the Berkeley Avenue residence at the time of the landslide.

The judge also cited previous cases where it was held that an "accident", as the word is used in its natural and ordinary meaning, is not defined by the act or omission which caused it but instead by the resulting event. The judge agreed that an occurrence is somewhat broader than an accident, but it still connotes an event of some kind rather than the causal act.

Based on the foregoing, the judge ruled that because there had been no injury or damage during the Intact policy period, there had been no "accident" during that period within the meaning of the policy. Therefore, Intact had no obligation to contribute to the defence and indemnity costs incurred by CNS.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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