A recent case heard by the Financial Services Commission of
Ontario demonstrates the importance to insurers of understanding
their clients' businesses and the importance to insureds of
setting clear policies and rules for their clients. Failure to do
so left the Economical Mutual Insurance Company liable for damages
resulting from Daniel Whipple's paralysis.
After a day of golfing, drinking and partying as part of a group of
12 golfers, Mr Whipple and others engaged in various antics in a
luxury limousine coach. The coach was a form of luxury bus, replete
with large-screen televisions, high-end sound systems, mood
lighting and mirrored ceilings. The specific coach also had a pole
in the centre of the rear of the vehicle that the owner and the
driver of the vehicle referred to as a "stripper
pole".
Whipple and the others proceeded to engage in a game of
"one-upmanship" involving the pole installed in the
coach, mimicking the dance moves of exotic dancers, each attempting
to outdo the other. This playful game, conducted in the moving
vehicle, ended when Whipple broke his neck after a failed attempt
at performing a headstand. He suffered injuries resulting in
incomplete quadriplegia.
The insurer refused to pay statutory accident benefits, arguing
that Whipple did not suffer an 'accident' as defined in
legislation as "an incident in which the use or operation of
an automobile directly causes an impairment". Specifically,
the insurer argued that an inebriated, 62-year-old man would not be
expected to perform a headstand in a moving vehicle. Whipple
appealed this refusal, arguing that he was entitled to statutory
accident benefits. He specifically stated that his behaviour was
within the normal use and operation of the limousine coach, which
was marketed as a "party bus", and that this allegedly
normal behaviour was the direct cause of his injury.
The key question underlying the claim by Whipple for benefits was
whether his injuries amounted to an 'accident'. This would
turn on whether the use or operation of the limousine coach
directly caused his impairment according to the tests of
'purpose' (whether the incident resulted from the ordinary
and well-known activities to which automobiles are put) and
'causation' (whether the use or operation of the automobile
directly caused an impairment).
On the issue of 'purpose', the arbitrator found that as the
limousine coach was designed, marketed and operated as a
"mobile party room", Whipple's activities within it
were in accordance with its purpose. The arbitrator reasoned that
Ontario's no-fault system did not require looking into
questions such as foreseeability and levels of risk. In addition,
the arbitrator found the group's broader dancing and drinking
activities to be within the normal scope of the bus's function
and design as a "mobile party room". As a result, she
viewed Whipple's headstand as falling within the vehicle's
ordinary features and scope.
On the issue of 'causation', the arbitrator noted that
Whipple's attempted headstand was the:
"culminating activity in a series of antics where the
participants, all occupants of the motor vehicle, were entertaining
each other by using an obvious amenity in the vehicle, while the
vehicle was in use on a highway, exactly as the vehicle was
intended to be used."
The arbitrator rejected the insurer's view that the dominant
feature of the incident was Whipple's misjudgment - as opposed
to the use or operation of the bus - and instead found the
headstand to be a natural progression in a series of activities
which centered around the main internal feature of the vehicle: the
pole.
Accordingly, the arbitrator determined that Whipple was entitled to
statutory benefits as a result of his accident. As a post-script,
the insurer radically increased the insurance premiums charged to
the owner of the limousine coach, which suggested that the insurer
was either unaware of the activities taking place within such
coaches or unaware of its potential liability for such
activities.
While the Whipple decision is under appeal, insurers and insureds
can take a number of lessons from the case:
- It is important to discuss any expectations placed on clients and restrictions on activities permitted on the insured premises or within an insured vehicle. It is likely that the limousine coach owner and the insurer had different conceptions of permitted activities.
- It is important to work together to develop a written policy or contract dictating how the insured vehicle or premises should be used by clients. No rules or policies were communicated to Whipple when he rented the bus, nor was there any evidence of any express or implied waiver.
- It is important to review the marketing by insureds of their premises or vehicles. The fact that the vehicle was referred to as a "Party Bus" designed to provide "service and transportation needs to fit the client requests" weighed heavily on the arbitrator in her determining that Whipple's activities were not outside of the scope of the vehicle's use and operation.
- It is important to review the insured premises and vehicles. The arbitrator found that the freedom, privacy and amenities within the limousine coach were viewed as provided, permitted or tolerated by the owner. Specifically, the stripper pole was seen by the arbitrator to be an invitation to the exact forms of activities that occurred, although the performance of a headstand was admittedly somewhat unusual. As a result, insurers should be warned that almost any behaviour that seems 'unpredictable' and 'unreasonable' in another context could be deemed to be an 'accident' within a context similar to Whipple's.
- It is important to consult with legal counsel if in doubt about potential liability and policy terms.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2011 McMillan LLP