In the recently released decision of the Supreme Court of Canada (SCC) in Co-operators Life Insurance Co. v. Gibbens , the court had to struggle with the meaning of the word "accident" in a group accident insurance policy. Despite its common use in virtually all insurance policies, Mr. Justice Binnie noted that a century and a half of insurance litigation had failed to produce a "bright-line definition." As insurers have consistently declined to define the term, it has been left to the courts to interpret the term. They have found it to be "one of the more philosophically complex simple questions."
Mr. Gibbens contracted genital herpes after having unprotected sex with three women over the course of two months. This resulted in a rare complication known as transverse myelitis, which paralyzed him from the waist down. Mr. Gibbens' group accident policy paid a benefit for paraplegia "sustained as a direct result of a Critical Disease or resulting directly and independently of all other causes from bodily injuries occasioned solely through external, violent and accidental means, without negligence" on the part of Mr. Gibbens. As neither herpes nor transverse myelitis were listed as Critical Diseases in the policy, Mr. Gibbens predictably argued that his condition arose from "accidental means."
The trial court held that Mr. Gibbens was entitled to compensation under the policy on the basis that what must be considered in the determination of whether a means is accidental is whether the consequences were unexpected. As Mr. Gibbens did not expect to become a paraplegic as a result of having unprotected sex, his resultant condition was accidental.
The British Columbia Court of Appeal upheld the trial decision. However, it disagreed with the trial judge that the only factor to consider was whether the event itself, here a disease, was unexpected. Equally important was that words "accident" and "accidental" be construed in accordance with the ordinary person's understanding. The Court of Appeal found that an insured is also required to show that the event arose from an external factor as opposed to an internal or natural cause. Here the external factor was the introduction of the herpes virus into his body by a sexual partner and, while close to the line, qualified as accidental.
The SCC found that Mr. Gibbens' condition was not caused by accidental means. The issue the SCC had to struggle with was how to avoid converting an accident policy into a more expensive comprehensive health policy. If a disease arising in the natural and ordinary course of events was an accident because it was merely unexpected this would be the result. Mr. Justice Binnie used the example of an insured sitting in front of her television set who suddenly suffers from a stroke and dies. While unexpected, "there is no accident involved in any ordinary manner of speech."
Five insurance interpretation principles were cited by Mr. Justice Binnie:
- words like "accident" should be given their ordinary meaning;
- a generous interpretation should be given to "accident" unless a policy clearly restricts it;
- if the policy is ambiguous the words should be construed against the insurer;
- if the policy is ambiguous effect should be given to the reasonable expectations of the parties; and
- continuity of interpretation to achieve certainty and predictability.
Relying heavily on the latter two, the SCC emphasized the importance of:
- considering the type of policy in interpreting its terms;
- considering both means and results in determining if a loss is accidental;
- distinguishing between "accidents" and "diseases contracted in the ordinary course of events"; and
- distinguishing between unexpected events and accidents.
While Mr. Justice Binnie started with the seminal cases of Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd. (1976 SCC) and Mutual Omaha Insurance Co. v. Stats (1978 SCC), which held that an accident is "any unlooked-for mishap or occurrence" and an "unlooked-for mishap or an untoward event which is not expected or designed," he pointed out that not every unexpected mishap is an accident. Applying the principles of interpretation and the factors listed above, he concluded that Mr. Gibbens' disease proceeded from natural causes in the ordinary course of events (here, unprotected sex) and was therefore not accidental.
McCarthy Tétrault Notes
This case has provided clarification on the scope and extent of accident policies. What remains unclear is the application of the principles applied in this case, and the interpretation of "accidental means," to the meaning of "accident" in commercial general liability (CGL) policies. CGL policyholders should expect insurers to focus on both means and results in determining if an accident has occurred. Policyholders will focus on the typical term providing that the bodily injury or property damage suffered be "neither expected nor intended from the standpoint of the insured."
On April 20, 2010, the SCC will have the opportunity to address this specific issue in the context of business risks and the coverage language in a number of CGL policies, during the hearing of the Progressive Homes Ltd. v. Lombard General Insurance Co. appeal.
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