Smith v. Wawanesa Mutual Insurance Company, 2013 ABQB 369

Court of Queen ’ s Bench of Alberta Citation: Smith v. Wawanesa Mutual Insurance Company, 2013 ABQB 369 Date: 20130627 Docket: 1204 00177 Registry: Grande Prairie Between: Vernon Smith and Judy Smith Plaintiffs - and - Wawanesa Mutual Insurance Company Defendant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] The Smiths insured their shop/barn/storage building with Wawanesa under a policy which excludes from coverage loss or damage caused to the interior of the building by rain, hail, snow, sleet, sand or dust unless an opening in the roof or the wall of the building is made by wind or hail. In this application, the Smiths ask the court for judgment under that policy. [ 2 ] The Smiths ’ application is denied.

[3] There is no ambiguity in the language of the policy. Ambiguity arises in a written document only where its language cangive rise to two or more reasonable

interpretations. Here, there is only one possible reasonable

interpretation of the language of thepolicy. Even if it were possible to have expressed the exclusion more clearly, any such alternative does not create an ambiguity. Becausethere is no ambiguity, there is no basis to consider the reasonable expectation of the Smiths. Without an ambiguity, there is no basis forthe application of the contra proferentem principle, nor the reception of parol evidence. [4] Here, the exclusion provisions of the policy are clear and unambiguous.

The Agreed Statement of Facts establishes thatalthough damage to the interior of the building was indeed caused by rain or snow, neither wind nor hail had anything to do with thecreation of an opening which allowed the snow and rain to cause the damage; therefore the damage to the interior of the building isclearly excluded under the policy. However, the damage to the exterior of the building may be covered by the policy and that issueremains to be settled. Cases and authority cited [5] By the applicants: Kardash v.

Prudential Assurance Co. (1989), (MB KB), 40 C.C.L.I. 76; BrownFraser & Co. v Indemnity Marine Assurance Co. (1958), (BC CA), 27 WWR 31; The Continental InsuranceCompany v Dalton Cartage Company Limited, (SCC), [1982] 1 SCR 164; 539938 Ontario Ltd. v Derksen, [2001] SCC72; Reid Crowther & Partners Ltd. v Simcoe & Erie General Insurance Co., (SCC), [1993] 1 SCR 252; DawsonCreek (City) v Zurich Insurance Co., 2000 BCCA 158. [6] By the respondent: Progressive Homes Ltd. v Lombard General Insurance Co. Of Canada [2010] SCC 33; ConsolidatedBathhurst Export Ltd. v.

Mutual Boiler & Machinery Insurance Co., (SCC), [1980] 1 SCR 888. [7] By the court: Ziegler Estate v Green Acres (Pine Lodge) Ltd., 2013 ABQB 349. 1. Background [8] The parties have presented an agreed statement of facts which includes the following: 4. A shop/barn/storage building located on the Plaintiffs' lands (the "Building") formed part of the "covered property" referenced bySection III FARM PROPERTY COVERAGES, Coverage G of the Policy. 5.

On or about March 20, 2011 the Building was damaged in the circumstances described by the August 4, 2011 Statement ofVernon Smith and the Roof Inspection Report of John MacLeod Engineering dated February 9, 2012 6. The cost of repair of the damage to the building is $68,292.00. 7. The Plaintiffs gave notice of the damage and potential claims under the Policy to the Defendant on July 28, 2011 and havecomplied with all conditions precedent entitling them to indemnity for any loss or damage which is insured pursuant to the terms of thePolicy. 8.

Following investigation of the Circumstances of the Loss, the Defendant communicated a denial of coverage through itsinsurance adjuster by a letter dated November 29, 2011. 9. The parties agree that the question for the Court is:

Do the agreed facts and documents establish that the Plaintiffs are entitled to indemnity for the Damage? If the answer to this question is "yes", the parties agree that judgment may be entered against the Defendant in the sum of $68,292.00 plus interest pursuant to the Judgment Interest Act from July 29, 2011 to the date of judgment, plus costs.

If the answer to this question is "no", the parties agree that this action shall be dismissed, with costs to the Defendant. [ 9 ] The statement from Vernon Smith referred to in the Agreed Statement of Facts includes the following: We got home from holidays on July 26, 2011 and I came in to the shop and found it flooded with water. We were on holidays for 3 weeks and it rained the whole time we were gone. Back in March 2011 we had a weekend where there was 4' of snow, and I had a guy shovel the roof off right after. After all the snow melting and snowing more I noticed water coming in.

It was enough water behind the insulated tarps that I cut them open and about 100 gallons drained. It was getting close to spring so I was just going to leave it and tar it when the weather was nice. It looks like with snow melting and freezing, it buckled the tin and got under there. I went up on the roof and seen that the tin is bowed between the girders. It is too much damage to be tarred and the only way to get the insulation out is to take the tin off. With all the rain in July and water coming in, some of my stuff was damaged. Some papers and some stuff I won't really know until I test it.

Water was all around the perimeter so all the insulation is damaged. We have lived here for 5 years and never had any problems before. [ 10 ] The expert report referred to in the Agreed Statement of Facts includes the following: During the inspection the owner reported that in the spring of 2011 there was four feet of heavy wet snow on the roof. Moisture infiltration into the heated shop area and cold storage area was noted and the roof was shoveled off. The roof sheeting is thirty six inches wide, full length metal roof sheeting from the peak to the eave.

The weight of the snow allowed moisture to infiltrate along the seams in the metal roofing as well as the roof fastener locations. [ 11 ] The insurance policy which applies here contains the following terms:

SECTION III LOSS OR DAMAGE NOT INSURED The following exclusions apply when any or all of the INSURED PERILS, F & L (FIRE AND LIGHTNING), F & EC (FIRE AND EXTENDED COVERAGE) or SPL (SPECIAL), are designated in the Declarations. “We”do not insure: . . . (4) loss or damage caused: (

a) to the interior of a building or the personal property inside a building caused by rain, hail, snow, sleet, sand or dust, unless an opening in the roof or wall is made by wind or hail and the rain, hail, snow, sleet, sand or dust enters concurrently through this opening; 2. Legal framework - insurance claims [ 12 ] There is no dispute between the parties about the overall framework of claims such as those advanced by the Smiths.

In particular, the parties agree that: - it is a fundamental principle of insurance law that the onus is on the insurer on a balance of probabilities to establish that an exclusion clause applies to preclude recovery by an insured from a risk otherwise falling within the parameters of a given insurance policy,

- exclusion clauses in insurance contracts are to be interpreted narrowly and in favour of the insured, and - coverage provisions should be construed broadly, and, where a policy is ambiguous, it is desirable to give effect to the reasonableexpectations of the parties. 3. Is the language of the policy ambiguous? [13] The Smiths say that the policy is ambiguous and that they did not understand that they were not covered for the damagewhich they sustained. [14] With respect, the test for ambiguity is not so subjective. Rather, the test is objective. Yamauchi J., in Ziegler Estate, usefullyreviewed the basic principles of

interpretation in contract law: 12 There are general principles that this Court must apply when dealing with the issue that is before it. The words that the contractingparties have used in their contract form the foundation on which this Court must build its

interpretation house. The words that thecontracting parties use assist the court in determining the parties' objective intention: Nexxtep Resources Ltd v. Talisman Energy Inc,2013 ABCA 40 at para 22, 226 ACWS (3d) 275 [Nexxtep]. If the words in the contract are clear and unambiguous, extrinsic evidence isnot admissible: Nexxtep at para 20. This is in keeping with the general principle that where there is no ambiguity, the court must give thewords their literal or plain, ordinary meaning: North Eastern Ry Co. v. Hastings, [1900] AC 260 at 263 (HL); Alberta Treasury Branchesv.

MacLeod Dixon, 2001 ABQB 73 at para 32, 283 AR 4; Matthison v. RA Bradburn Enterprises Inc, 2004 ABQB 485 at para 31, 360AR 266, aff'd, 2007 ABCA 173 , [2008] 1 WWR 383 (CA); Suncor Inc v. Norcen Int. Ltd, (AB KB), 1988CarswellAlta 630 at paras 92-94, 89 AR 200 (QB). In Merrill Petroleums v.

Seaboard Oil (1957), (AB KB), 22 WWR529 at 550 (Alta SC), Egbert J said: ...The cardinal principle of the construction of contracts is that each word must have assigned to it its plain, ordinary meaning ...Therefore, when parties choose certain words to express their meaning and to define their relationships, there is no excuse for distortingthose words out of their ordinary plain meaning. 13 That does not mean, however, that a court is left with parsing each word and using dictionary

definitions to arrive at its conclusion.It must look at the contract as a whole and give effect to everything in it, if possible: Nexxtep at para 20; Canada Deposit Insurance Corpv. Canadian Commercial Bank, 1991 ABCA 76 , 1991 CarswellAlta 308 at para 12, 113 AR 371 (CA), aff'd (1992), (SCC), 13 CBR (3d) 183 (SCC). In Nexxtep at para 21, the Alberta Court of Appeal provided the following quotation fromBank of Credit & Commerce Int'l v.

Ali, [2001] 1 All ER 961 at 965 (HL): To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural andordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far asknown to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind butmakes and [sic] objective judgment based on the materials already identified. See also Eli Lilly & Co v. Novopharm, (SCC), [1998] S.C.J.

No. 59 at para 54, [1998] 2 S.C.R. 129. 14 Even though the court must look to the contract as a whole and relevant facts surrounding the transaction, it must avoid rewritingthe contract for the parties or relieving one of the parties against the consequences of an improvident agreement: Keephills AggregateCompany Limited v. Riverview Properties Inc, 2011 ABCA 101 at para 12, 44 Alta LR (5th) 264 [Keephills]. . . . 36 Hall at para 29 says: Ambiguity means something more than the mere existence of competing

interpretations, otherwise parol evidence would be admitted in

Ambiguity means something more than the mere existence of competing

interpretations, otherwise parol evidence would be admitted invirtually every case, Thus the question of whether there is ambiguity is to be determined by an objective evaluation of whether there aretwo or more reasonable

interpretations, Put another way, where a written contract is ambiguous in the sense of being reasonablysusceptible of having more than one meaning, extrinsic evidence is admissible to determine which meaning is preferable. See also Erehwon Exploration v. Northstar Energy Corp, (AB KB), [1993] A.J.

No. 916 at paras 100-05 (QB). (Emphasis added) [15] As Wawanesa has pointed out, it is only once the court concludes that there is ambiguity that, in order to resolve theambiguity, it may consider extraneous factors such as parol evidence or policy provisions such as the contra proferentem rule or theapplication of the reasonable expectations of the parties.

In this context, I add in passing that even where the “reasonable expectation ofthe parties” approach can be applied, that approach is objective rather than subjective. [16] Here, the Smiths say that there is at least one way in which the language used in the exclusion portion of the policy couldhave been re-arranged to make its meaning more clear. Even if that were so, that is not the test. The test is whether there are two or morereasonable

interpretations of the language under consideration. With respect, there is not more than one reasonable

interpretation of thelanguage of this policy. Therefore, the court must give effect to the plain language of the contract. 4. What is the answer to the question posed by the parties? [17] In the circumstances here, the court is unable to give a “yes” or “no” answer to the question posed by the parties: the agreedstatement of facts leaves open the issue of whether there was damage to the exterior of the Smiths’ building that does come within thecoverage of the policy. [18] However, the court can state positively that the plaintiffs are not entitled to indemnity for interior damage claimed in theseproceedings. 5.

Costs [19] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 25th day of June, 2013. Dated at the City of Grande Prairie, Alberta this 27th day of June, 2013. J.B. Veit J.C.Q.B.A. Appearances:

D. Van Tassel, Stefura Greber & Beal LLP for the Plaintiffs Daniel Hagg, Q.C. for Wawanesa Mutual Insurance Company