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Case Summary: Wage v Canadian Direct Insurance Incorporated
Defence + Indemnity

The Alberta Court of Appeal found that the territorial limitation provisions in the standard Alberta auto policy apply to the entire policy, such that if the insured is injured or killed in a jurisdiction other than Canada or the United States, there is no coverage under Section B and SEF44 Endorsement.

Wage v Canadian Direct Insurance Incorporated, 2020 ABCA 49

Facts + Issues

This matter involves the death of Ms. Wage, who was a pedestrian struck and killed by a motorcycle while vacationing in the Philippines. Ms. Wage’s vehicle was insured under an SPF No. 1 standard Alberta auto policy (the “Policy”) with an SEF 44 Endorsement issued by Canadian Direct Insurance. The Wage vehicle was parked in Edmonton at the time of the accident.

The territorial limitation provision, contained in the general provisions section of the Policy, stated: “This Policy applies only while the automobile is being operated, used, stored or parked within Canada, the United States of America or upon a vessel plying between ports of those countries.”

The SEF 44 Endorsement provided that “the Insurer shall indemnify...for the amount that such eligible claimant is legally entitled to recover from an inadequately insured motorist as compensatory damages in respect of bodily injury...arising out of the use or operation of an automobile” (emphasis added by the Court).  Furthermore, the Endorsement provided that “[e]xcept as otherwise provided in this endorsement, all...provisions...of the Policy shall have full force and effect” [emphasis added by the Court]. There was nothing in the Endorsement that “otherwise provided” regarding the Policy’s territorial limitation provision.

That term “automobile” had its own definition in the SEF 44 Endorsement: “a vehicle with respect to which motor vehicle liability insurance would be required if it were subject to the law of the province governing the Policy”.

Canadian Direct denied the Wage’s coverage under Section B of the Policy and the SEF44 Endorsement on the basis that the vehicle which killed Ms. Wage was not “being operated, used, stored or parked within Canada, the United States of America or upon a vessel plying between ports of those countries”.

Canadian Direct’s application for summary dismissal in Master’s chambers on the basis that the territorial limitation did not apply to the SEF 44 Endorsement and did not apply to negate coverage under Section B of the Policy. Canadian Direct’s appeal to a justice of the Court of Queen’s Bench was dismissed so it appealed further to the Court of Appeal. The issue before the Alberta Court of Appeal was as to whether the territorial limitation provision contained in the Policy applied to deny coverage both under Section B of the Policy and the SEF 44 Endorsement.

HELD: Appeal allowed and the Respondent’s action was dismissed.

The Court held that there was no entitlement to coverage under the SEF 44 Endorsement.

  1. The Court relied on the principles set out in Cardinal v Alberta Motor Association Insurance Company, 2018 ABCA 69 for interpreting the Policy and the SEF 44 Endorsement, specifically that:
  1.  “[i]f the language of an insurance policy, when read as a whole, is unambiguous, effect should be given to the clear language.” (Cardinal at para 11); and
     
  2.  “[a]n ambiguity cannot be created by external means such as reading in an element not present in a plain reading of the provision.”

The Court held that the relevant provisions of the Policy were not ambiguous.

  1. While the term “automobile” was defined differently for various sections of the Policy proper, the definition contained in the Endorsement was held to apply to coverage under the Endorsement. That definition was held to apply to the vehicle which struck Ms. Wage, as opposed to the Wages’ vehicle:

18   The word automobile is defined in many different areas of the Policy, but those definitions pertain only to the coverages under Sections A, B and C, not the coverage under the SEF 44 Endorsement.

19   Rather, the SEF 44 Endorsement contains its own definition of automobile: “a vehicle with respect to which motor vehicle liability insurance would be required if it were subject to the law of the province governing the Policy”. It is this definition that describes the vehicle that struck Ms. Wage, and it is that vehicle which is at issue under the SEF 44 Endorsement.

[Emphasis added by the Court]

  1. The Court found that the SEF 44 Endorsement formed part of the Policy and was subject to the Policy’s general provisions, including the territorial limitation provision. As such, the territorial limitation provision had full force and effect in the SEF 44 Endorsement.
     
    1. It was noted that in Cardinal the Court found that the SEF 44 Endorsement is a standard form endorsement that is issued as part of an underlying automobile liability policy. SEF 44 Endorsements are not issued alone. If an SEF 44 Endorsement is issued, “it is “endorsed” on the underlying policy and attaches to and forms a part of that policy” (Cardinal at para. 13).
       
    2. The Court held that there was nothing in the SEF 44 Endorsement itself which “otherwise provided” for the territorial limitation provision not applying to the Endorsement. Accordingly, it was held that the SEF 44 Endorsement “specifically provides that it is subject to the provisions in the underlying policy”, including the territorial limitation provision.

20   The SEF 44 Endorsement provides that “[e]xcept as otherwise provided in this endorsement, all...provisions...of the Policy shall have full force and effect” [emphasis added by the Court], which includes the territorial limitation provision in the General Provisions. Nothing is “otherwise provided” in the SEF 44 Endorsement which clearly states or suggests that the territorial limitation provision does not apply to the Endorsement. Thus, the Policy’s territorial limitation has full force and effect in the SEF 44 Endorsement.

...

22   Put another way, the Policy’s territorial limitation applies to the whole policy, of which the entire SEF 44 Endorsement forms a part. Thus applied, the territorial limitation restricts its coverage territorially, in the same manner and to the same extent as applied to the underlying policy.

  1. The Court found that the contrary interpretation was not in accord with commercial reality:

23   Insurance Bureau of Canada, Intervenor, submits that the typical premium for coverage under the SEF 44 Endorsement (usually about $20) supports the foregoing interpretation and negates its worldwide application. We agree.

24   Moreover, the suggestion that the SEF 44 Endorsement provides greater territorial coverage than the underlying policy, does not comport with commercial reality; it is inconsistent with the reasonable expectations of the insurer and insured, and a contrary interpretation is unrealistic. The SEF 44 Endorsement is not travellers’ insurance.

25   We endorse, to this extent, what was said in LaPierre v. General Accident Assurance Co. of Canada, 2007 NSSC 9 (N.S. S.C.) at para 44:

It would be a surprising and unanticipated result if the territorial limitation were held to apply to all of the Policy except the Endorsement. It is not logical that in these circumstances the Endorsement, an addendum to the Policy’s primary cover, could afford unlimited territorial coverage. The characterization by courts of SEF 44 coverage as ‘last ditch’ or ‘safety net’ coverage, as noted by Saunders J.A. at paragraphs 55 and 56 in MacIsaac v Deveaux, 2004 NSCA 87, supports this conclusion.

26   To conclude, the SEF 44 Endorsement specifically provides that it is subject to the provisions in the underlying policy, of which one is the territorial limitation provision. In our view, applying the unambiguous language of the Policy and the SEF 44 Endorsement to the undisputed facts of this case, compels the conclusion that the respondents are not entitled to coverage under the SEF 44 Endorsement where the only vehicle involved in the death of Ms. Wage was not “being operated, used, stored or parked within Canada, the United States of America, or upon a vessel plying between the ports of those countries”.

  1. Thus, the Court found that the insured Wages were not entitled to coverage under the SEF 44 Endorsement because the vehicle involved in Ms. Wage’s death was not being used or operated in Canada, the United States or on a vessel between the two.

The Court held that there was no entitlement to coverage under Section B.

  1. The Court held that the territorial limitation provision, found in the general provisions of the Policy, applied to the entire Policy, including Section B coverage as well as to the Endorsement. (para. 27)
     
  2. It was held that Section B coverage is based on the “insured person”, not the automobile which injures or kills the insured. That term is to be defined by reference to the specific circumstances of the claim which, in this situation, is qualified by the territorial limitation provision:

28   Section B of the Policy focusses on the “insured person”, not the vehicle involved in injuring the insured person. Its insuring agreement provides that “[t]he Insurer agrees to pay to...each insured person...who sustains bodily injury or death directly and independently of all other causes by an accident arising out of the use or operation of an automobile” certain discrete benefits.

29   In Section B, “insured person” is defined by reference to specific circumstances: (a) any person while an occupant of an automobile as defined in the Policy... ; (b) the insured... while an occupant of any other vehicle; (c) any person who is not an occupant of an automobile... ; and (d) the insured...who is struck by any other automobile while not an occupant of an automobile.

30   At the end of Section B, in bold print, it states: “See also general provisions, definitions, exclusions, and statutory conditions of this Policy”. As the territorial limitation provision is set out in the general provisions of the Policy, it is expressly incorporated into Section B.

31   In our view, Section B is correctly interpreted by having regard to the specific circumstances that define whether a claimant is an “insured person”. When determining coverage under Section B, therefore, the territorial limitation provision restricts “insured person” to one injured by an “automobile...being operated, used, stored or parked within Canada, the United States of America, or upon a vessel plying between the ports of those countries”.

[Emphasis added by the Court].

Commentary

It is clear that SEF 44 Endorsements should not be relied upon as a form of travel insurance, particularly where there is a territorial limitation provision contained in the underlying insurance policy.