Northbridge General Insurance Corporation v, 2013 ABQB 760

Court of Queen ’ s Bench of Alberta Citation: Northbridge General Insurance Corporation v 943240 Alberta Ltd., 2013 ABQB 760 Date: 20131231 Docket: 1301 02431 Registry: Calgary Between: Northbridge General Insurance Corporation formerly known as Lombard General Insurance Company of Canada Applicant - and - 943240 Alberta Ltd. operating as K.E.W. Oilfield Services Respondent And Between: Jesse Cole Webster and 943240 Alberta Ltd. operating as K.E.W.

Oilfield Services Cross-Applicant Northbridge General Insurance Corporation formerly known as Lombard General Insurance Company of Canada Cross-Respondent _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice J.T. McCarthy _________________________________________ ______________ I. Factual Overview

[ 1 ] This is a dispute about insurance coverage pursuant to an insurance policy issued by Northbridge General Insurance Corporation, formerly known as Lombard General Insurance Company of Canada (“Northbridge”) to the insured, 943240 Alberta Ltd., operating as KEW Oilfield Services (“KEW”). Northbridge and KEW entered into a contract for insurance that commenced on July 19, 2008 (the “Policy”). The initial policy period ended on July 19, 2009, and it was subsequently renewed for another year. [ 2 ] The insurance contract included an endorsement that provided coverage for fleet vehicles.

The Policy required KEW to submit a list of vehicles owned or leased by it prior to the start of the policy period. As well, the insured, KEW, was required to submit an updated list of vehicles at the end of the policy period. This list would initially be used to set premiums, and the updated list would be used to adjust premiums at the end of the policy period. Vehicles owned or leased by KEW but not included in the list provided at the start of the policy period would not be insured.

Otherwise, insurance coverage would be broadly provided to all fleet vehicles covered by the Policy. [ 3 ] The Policy was obtained through an insurance broker who is not a party to this proceeding. The broker is involved in another court proceeding relating to the Policy. [ 4 ] On June 9, 2009, Jesse Webster, an employee of KEW, was driving a 2002 Ford F-250 pick-up truck (the “Truck”) registered to KEW. On that day, Mr. Webster and the Truck were involved in a motor vehicle accident.

KEW has been named as a defendant in another court proceeding relating to tort claims arising from the accident. [ 5 ] Northbridge denied insurance coverage on the basis that KEW did not include the Truck in the list of vehicles prior to the start of the Policy. While there is no dispute about the validity of the Policy, the parties disagree as to whether Northbridge’s insurance policy provides coverage for the Truck. There is an application and cross-application seeking opposing declarations from this Court as to whether there is insurance coverage. II.

Issues [ 6 ] The key issue in dispute on this application and cross-application is whether there is insurance coverage for the Truck under the Policy, specifically, is Northbridge in breach of its obligations under the Policy or the Insurance Act , RSA 2000, c I-3 [ Insurance Act ], such that it cannot now deny coverage? Further, is KEW in breach of the requirements under the Policy such that the Truck is not covered?

The parties have raised a number of arguments relating to whether the Policy provides coverage for the Truck and whether other remedies such as relief from forfeiture are available. [ 7 ] I have considered the submissions of both parties, and I have determined that the issues are as follows: 1. Are the lists of vehicles that the insured submitted to the insurer considered an “amendment” to the insurance contract in relation to section 612(3) of the Insurance Act such that Northbridge is in breach of its obligations under the Insurance Act or the Policy? 2.

Is the Truck covered by the Policy, even though it was not included in the list of vehicles prior to the start of the policy period? 3. Is relief from forfeiture available to KEW? 4. Does Northbridge have a duty to defend the tort claim? [ 8 ] Related to these issues, KEW raises a number of other arguments that I will briefly address towards the end of this judgment. III.

Summary of Conclusions [ 9 ] For the reasons set out below, I conclude: 1. Northbridge is not in breach of its obligations under the Insurance Act or the Policy; 2. The Policy does not provide coverage for the Truck; 3. Relief from forfeiture is not available to assist KEW in this circumstance; and 4. Northbridge does not have a duty to defend KEW in the tort claim. IV. Analysis 1. Breach of Section 612(3) of the Insurance Act and the Policy A. Parties’ Positions [ 10 ] Under the Policy, KEW was required to submit a list of vehicles at the inception of the Policy.

KEW argues the submission of this list is an “amendment” to the insurance contract. Consequently, KEW submits that Northbridge is required to provide a revised copy of the Policy to KEW pursuant to section 612(3) of the Insurance Act . More specifically, KEW submits that Northbridge was required to provide a clear description of vehicles, specifically identifying which of the vehicles owned by KEW were insured under the Policy.

Because Northbridge did not provide KEW with a copy of the revised policy that included a clear description of the insured vehicles, KEW argues that Northbridge cannot now deny coverage for the Truck.

[ 11 ]

Section 612 of the Insurance Act , as it was worded at the commencement of the Policy on July 19, 2008, states in part: 612(3) Subject to subsection (5), the insurer must deliver or mail to the insured named in the policy, or to the agent for delivery or mailing to the insured, the policy or a true copy of the policy and every endorsement or other amendment to the contract. [...]

(5) When an insurer uses the standard owner’s policy, it may, instead of issuing the policy, issue a certificate in a form approved by the Superintendent which, when issued, is of the same force and effect as if it were the standard owner's policy, subject to the limits and coverages shown on the certificate by the insurer and any endorsements issued concurrently with the certificate or subsequent to the certificate, but at the request of an insured at any time, the insurer must issue the policy and a copy of the written application or purported application as required by subsection (1). [Emphasis added] [ 12 ] KEW places particular emphasis on the portion of section 612(3) that states: “or other amendment to the contract”.

Their position is that the submission of a list of vehicles is an amendment that fundamentally changed coverage otherwise provided by the policy documents. [ 13 ] KEW submits that it had insufficient information with respect to coverage of the Truck. KEW claims that Northbridge failed to comply with the Insurance Act by not providing an updated copy of the Policy. As a result, KEW’s position is that Northbridge cannot rely on the Truck’s omission from the list of vehicles to deny coverage. [ 14 ] Northbridge’s position is contrary to KEW’s.

Northbridge notes that there are two general types of prescribed Standard Endorsement Forms affording fleet insurance in Alberta: the “Monthly Reporting Basis Fleet Endorsement” and the “Blanket Basis Fleet Endorsement”. The Policy is a “Blanket Basis Fleet Endorsement”, referred to in the Policy as “S.E.F. No. 21B-1 Blanket Basis Fleet Endorsement (Pro Rata)” (the “Blanket Fleet Endorsement”). Therefore, the Policy required all vehicles owned or leased by KEW to be declared to Northbridge prior to the commencement of the Policy.

Vehicles could be added or deleted at any time during the policy period, but any vehicles owned or leased by KEW and not declared at the start of the policy period are expressly excluded from coverage. [ 15 ] Northbridge submits that the coverage afforded by the Policy is broad.

As a result, it avoids the necessity of individually reporting each vehicle addition or deletion during the term of the Policy, and further avoids the necessity of multiple endorsements and premium adjustments during the term of the Policy. [ 16 ] Though broad coverage is afforded, Northbridge submits that the Policy excludes coverage for vehicles owned by the insured, but not declared prior to the effective date of the Policy.

Northbridge submits that the exclusion prevents an insured from only declaring a vehicle after a loss, or obtaining free insurance for the vehicle if a loss does not occur during the Policy term. [ 17 ] Northbridge submits that under the Blanket Fleet Endorsement of the Policy, Northbridge does not have to provide KEW with a list of vehicles, but rather, KEW must provide the list to Northbridge. B. The Policy and Statutory

Interpretation i. Endorsements under the Policy [ 18 ] The insurance contract between Northbridge and KEW is partly comprised of a number of endorsements, including the Blanket Fleet Endorsement. Subject to certain exceptions, this endorsement provides insurance for all of KEW’s vehicles in Alberta. Under this endorsement, KEW was obligated to provide Northbridge with a list of vehicles that it had owned or leased prior to the effective date of the Policy. As well, KEW was required to submit a written statement of additions and deletions to their list of vehicles at the end of the policy period.

Northbridge would use this updated list to adjust premiums on a pro rata basis. The language of the Blanket Fleet Endorsement is consistent with the arrangement outlined above. The Blanket Fleet Endorsement is reproduced in part below: 1. The Policy shall provide insurance with respect to all automobiles except those licensed or required to be licensed in the Province(

s) of Quebec, Ontario, Manitoba, Saskatchewan or British Columbia, which are: a. owned by and licensed in the name of the Insured [...] 3. The

Schedule of Automobiles filed with the Insurer includes all automobiles set out in 1. above at the effective date of the Policy. NO COVERAGE IS PROVIDED BY THIS ENDORSEMENT ON ANY AUTOMOBILE OWNED OR LEASED BY THE INSURED PRIOR TO THE EFFECTIVE DATE OF THE POLICY WHICH IS NOT INCLUDED ON THE

SCHEDULE OF AUTOMOBILES FILED WITH THE INSURER UNTIL A REQUEST FOR COVERAGE HAS BEEN FILED WITH THE INSURER. 4. The total premium stated in item 4 of the Policy is an advance premium only and is due and payable at the effective date of the Policy. 5. The advance premium is subject to adjustment at the end of the policy period when the Insured shall deliver to the Insurer a written statement with effective dates of all additions to and deletions from the original

schedule of automobiles during such policy period. At the end of the policy period, the Insurer shall calculate the adjustment of the earned premium for such automobiles on a pro rata basis of the premium specified in the

Schedule of Automobiles for each type of use or description of automobiles.

If the earned premium exceeds the advance premium stated in item 4 of the Policy, the Insured shall immediately pay such additionalpremium; if less, the Insurer shall refund to the Insured the return premium due. If the coverage is provided on automobiles of a type or classification which is not listed on the

Schedule of Automobiles attached to thisPolicy, the Insurer’s manual book rate adjusted by the application of the experience credits or debits on which the Policy was written willapply. [Emphasis added] [19] The Blanket Fleet Endorsement states two important principles. First, vehicles that the insured owned at the start of the Policybut did not disclose to the insurer in the insurance application are not covered. If the insured failed to disclose a vehicle in the insuranceapplication, it must file a request for coverage with the insurer.

In this case, at no material time did KEW disclose to Northbridge that itowned the Truck. [20] The second important principle in Blanket Fleet Endorsement is that the insured has the obligation to provide informationabout additions and deletions to the list of vehicles, referred to in the Policy as a “Schedule of Automobiles”. Furthermore, the BlanketFleet Endorsement states that an updated

schedule is required at the end of the policy period. The updates are not required on an ongoingbasis. The insurer uses the updated

schedule to adjust premiums at the end of the policy period. The insurer does not use the updated listto determine coverage. The Blanket Fleet Endorsement expressly states that the Policy covers all automobiles, except those that werepreviously owned and undisclosed. ii. Section 612(3) of the Insurance Act [21] The next question to consider is whether Northbridge breached its obligation to provide KEW with an updated Policyfollowing any amendments, as required by section 612(3) of the Insurance Act.

The issue here is whether the list of vehicles provided byKEW to Northbridge, directly or through its broker, was an “amendment” to the Policy. To determine this, it is necessary to look at thewords of the Policy, as this is a matter of contract

interpretation. [22] The Supreme Court of Canada discusses principles of insurance contract

interpretation in Consolidated-Bathhurst Export Ltdv Mutual Boiler & Machinery Insurance Co (1979), (SCC), [1980] 1 SCR 888. The Ontario Court of Appeal recentlyapplies these principles in Lombard Canada Ltd v Zurich Insurance Co, 2010 ONCA 292 at paras 32-33: The foundation for the relevant principles and process for the

interpretation of an insurance contract is Consolidated-Bathurst ExportLtd. v. Mutual Boiler & Machinery Insurance Co., (SCC), [1980] 1 S.C.R. 888. At pp. 899 – 901 of that case, Estey J.,writing for the majority, explains the two phases of the analysis for the

interpretation of any contract, including an insurance contract. The first is the interpretive phase based on the guidelines for construction. Subjective intention is irrelevant at this stage of theprocess, although the words used may be “possibly read in light of the surrounding circumstances which were prevalent at the time”: seeEli Lilly, at para. 54. If the meaning is plain on the face of the contract, it is unnecessary to proceed further: see Non-MarineUnderwriters, Lloyd's of London v. Scalera, 2000 SCC 24 , [2000] 1 S.C.R. 551, at para. 71. However, if the interpretive phaseresults in two equally reasonable

interpretations, the contract is ambiguous. In those circumstances, the court turns to the second phase ofthe inquiry. At this phase, the court may consider extrinsic evidence: see Eli Lilly, at para. 55. As well, the court may consider theapplicability of contra proferentem: see Consolidated-Bathurst, at p. 901. [Emphasis added] [23] In the present case, there is no ambiguity in the wording of the Blanket Fleet Endorsement contained in the Policy. Therefore,it is unnecessary to proceed further into extrinsic evidence.

What follows in this analysis is a plain reading of the insurance contract. [24] The original “Schedule of Automobiles” and the updated “Schedule of Automobiles” are not amendments to the insurancecontract. The vehicle lists, or schedules, are components of the Policy used to set and adjust premiums at the inception of the Policy andat the end of the Policy. Once a particular policy period ends, the insured is able to renew the policy, forming a new contract. [25] Under a plain reading, the updated vehicle lists are not an amendment to the contract. Therefore, Northbridge’s obligationsunder

section 612 of the Insurance Act are not triggered. [26] An American author summarized the insured’s obligation to provide a

schedule as it relates to fleet insurance in the UnitedStates. In Couch on Insurance, it states: §117:58 –

Schedule as Determining Coverage of Existing Vehicles Under a fleet policy, the insured is required to

schedule the vehicles to be covered thereunder, so that the insurer can adequatelydetermine the risk assumed and compute premiums. If the insured owns vehicles at the time the policy is issued, and these vehiclesdo not appear on the schedule, they are not covered by the policy. [Footnotes removed] [Emphasis added] (Lee R Russ, Couch on Insurance, 3d ed (St. Paul, Minnesota: West Group, 2006) at 117-90) [27] According to Russ, it is an insured’s obligation in the United States to

schedule the vehicles to be covered. Furthermore, anyvehicles owned by the insured, but not disclosed to the insurer when the policy is issued, are not covered by the policy. While specificinsurance laws differ among jurisdictions, even between provinces in Canada, the concepts are similar and the American experience isinstructive.

[ 28 ] The obligation is on KEW to provide a list of vehicles owned or leased by KEW prior to the effective date of the Policy. This information is used to establish the premium. This list is not an amendment to the insurance contract. Therefore, Northbridge is not in breach of its obligations under section 612(3) of the Insurance Act . 2. Is the Truck covered by the Policy? [ 29 ] The Blanket Fleet Endorsement sets out a limitation on coverage under the Policy: 1. The Policy shall provide insurance with respect to all automobiles except those licensed or required to be licensed in the Province(

s) of Quebec, Ontario, Manitoba, Saskatchewan or British Columbia, which are: a. owned by and licensed in the name of the Insured [...] 3. The

Schedule of Automobiles filed with the Insurer includes all automobiles set out in 1. above at the effective date of the Policy. NO COVERAGE IS PROVIDED BY THIS ENDORSEMENT ON ANY AUTOMOBILE OWNED OR LEASED BY THE INSURED PRIOR TO THE EFFECTIVE DATE OF THE POLICY WHICH IS NOT INCLUDED ON THE

SCHEDULE OF AUTOMOBILES FILED WITH THE INSURER UNTIL A REQUEST FOR COVERAGE HAS BEEN FILED WITH THE INSURER. [Emphasis added] [ 30 ] Blanket Fleet Endorsement requires the insured to submit a list of vehicles to the insurer. The insured failed to include the Truck in this list. Consequently, coverage does not extend to the Truck until the insurer approves a request for coverage from the insured. The insured did not submit a request for coverage for the Truck. [ 31 ] KEW purchased the Truck on or about September 6, 2006, prior to the effective date of the Policy.

The first vehicle list provided to Northbridge in July 2008 listed 16 vehicles to be insured, and neither the Truck, nor a vehicle with a similar description of the Truck, was on this list. Northbridge states that they made further inquiries with the broker who provided a second list of vehicles, which also did not include the Truck. [ 32 ] Although KEW failed to include the Truck on the initial list of automobiles, clause 3 of the Blanket Fleet Endorsement provides KEW with an opportunity to submit a “[...] request for coverage [...]”.

The use of the word “request” implies that Northbridge may choose to deny coverage if the vehicle was not included in the initial list of automobiles. In any event, KEW did not file such a request before the accident, or at any material time thereafter. Consequently, this clause does not aid KEW’s position. [ 33 ] A plain reading of clause 3 in Blanket Fleet Endorsement establishes that the fleet endorsement does not cover any vehicles that KEW owned prior to the start of the Policy which were not included on a “Schedule of Automobiles” filed with the insurer.

The Truck falls into this category and should have been included on the initial list. Therefore, there is no coverage for the Truck under the Policy. 3. Is relief from forfeiture available to KEW? [ 34 ] In the alternative, KEW asks this Court to grant relief from forfeiture on the basis of

section 521 of the Insurance Act . I considered the availability of both statutory and common law relief from forfeiture. A.

Section 521 of the Insurance Act [ 35 ] KEW submits that

section 521 of the Insurance Act provides the Court with a broad discretion to relieve a party against forfeiture or avoidance of insurance where it considers denial of coverage for imperfect compliance with the insurance contract inequitable. [ 36 ]

Section 521 of the Insurance Act , as it was worded at the inception of the contract, states: When there has been imperfect compliance with a condition or term of the contract as to proof of loss to be given by the claimant and a consequent forfeiture or avoidance of the insurance, in whole or in part, and the Court considers it inequitable that the insurance be forfeited or avoided on that ground, the Court may relieve against the forfeiture or avoidance on any terms it considers just. [Emphasis added] [ 37 ] A plain reading of the Insurance Act highlights that relief from forfeiture may be granted but that imperfect compliance has to be in relation to the proof of loss.

In the case at bar, the issue concerns proof of coverage and thus

section 521 does not apply. [ 38 ] KEW cites the Alberta Court of Appeal in Re Blue Range Resource Corp , 2000 ABCA 285 at para 23 [ Re Blue Range ] for the two-part test as to whether to grant relief from forfeiture in an insurance context. Re Blue Range is not an insurance law case, but it refers to relief from forfeiture principles in insurance law. The Court of Appeal states at para 25: These authorities arise in a clearly different context from that which I am dealing with in this case, but they demonstrate that there is a somewhat consistent approach in a variety of areas of the law when dealing with the impact of late notice or delays in particular processes.

[Emphasis added] [39] Again, both late notice and delays in processes deal with providing proof of loss under an insurance policy. They do not relateto satisfying policy requirements for coverage. Consequently,

section 521 of the Insurance Act does not apply. Therefore, relief fromforfeiture under the Insurance Act is not available to assist KEW. B. Relief from forfeiture as an equitable remedy [40] The Insurance Act is not a complete code of the applicable principles, and does not include all available remedies. TheAlberta Court of Appeal recently commented, in Coulter v Co-operators Life Insurance Co, 2013 ABCA 295 at para 60, that: [...] the Insurance Act is patently not a code covering the whole field of insurance. Very few Alberta statutes are codes.

See St Denisv Trumbley (1977) 1977 ALTASCAD 113 , 4 AR 212, 3 Alta LR (2d) 193 (CA) (paras 5-10, 14-15), and Maritime LifeAssurance Co v Saskatchewan River Bungalows (SCC), [1994] 2 SCR 490, 505 f-g, 168 NR 381 (para 36). The lattercase is about the Insurance Act. A

section in the Insurance Act creating a new type of third party is not a code, and the usual rights ofdiscovery are not excluded: Koczka v Carruthers (ON SC), [1967] 2 OR 176, 177, leave den. id at 178n. A

section inthe Insurance Act giving an insurer a right is ordinarily read as giving it the same rights, with the same procedure, as other people have,not a brand new procedure: Witts v Sax (1980) 1980 ABCA 63 , 22 AR 249, 109 DLR (3d) 674 (CA) (paras 4, 14). A glance atthe table of contents of a textbook on insurance law, or a textbook on the law of contracts, will reveal large critical topics underlyinginsurance law and insurance policies, which the Insurance Act scarcely touches on, or is entirely silent on.

No one could even begin tolearn insurance law merely by reading the Insurance Act. [Emphasis added] [41] Relief from forfeiture is a remedy that may also be available in equity, and is not limited to provisions in the Insurance Act.The words of

section 521 are not restrictive. The Supreme Court of Canada states this principle in Saskatchewan River Bungalows Ltd vMaritime Life Assurance Co, (SCC), [1994] 2 SCR 490 at 505 [Saskatchewan River]: As the respondents are barred by their conduct from recovering, it is not necessary to determine whether our general power to relieveagainst forfeiture under s. 10 of the Judicature Act applies to contracts regulated by the Insurance Act.

However, I would note that theexistence of a statutory power to grant relief where other types of insurance are forfeited (Insurance Act, ss. 201, 205, and 211) does notpreclude application of the Judicature Act to contracts of life insurance. The Insurance Act does not “codify” the whole law ofinsurance; it merely imposes minimum standards on the industry.

The appellant's argument that the “field” of equitable relief isoccupied by the Insurance Act must therefore be rejected. [Emphasis added] [42] Furthermore, the Supreme Court lists the factors to consider in deciding whether to grant relief from forfeiture at 504 ofSaskatchewan River: The power to grant relief against forfeiture is an equitable remedy and is purely discretionary.

The factors to be considered by the Courtin the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of theproperty forfeited and the damage caused by the breach: Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691 (H.L.); Snell's Equity (29thed. 1990), at pp. 541-42. [43] In Saskatchewan River, the plaintiff did not meet the first branch of the test (the reasonable conduct requirement). Therefore,the Court did not grant relief from forfeiture.

In its analysis, the Court emphasized that the codification of this remedy in the InsuranceAct does not preclude its application. In addition, the Supreme Court of Canada deferred on deciding whether a liberal

interpretation ofrelief against forfeiture is possible, while leaving such an

interpretation open to future consideration. The Court states, at 506: It is also unnecessary to determine whether relief from forfeiture can operate generally as a before-loss remedy in the insurance context.Clearly, the holder of a term life policy has no vested right to benefits until the loss insured against — death of the insured — hasoccurred.

However, a modern understanding of the doctrine of relief would likely expand the notion of forfeiture to include lesstangible losses, such as the loss of an option to convert a term policy into one under which benefits would be certain, or the loss ofone’s insurability. This question remains open. [Emphasis added] [44] While the parting words of the Supreme Court of Canada leave relief from forfeiture open to more liberal consideration in thefuture, the language suggests that this remedy is still only available when coverage is first established.

In the case at bar, the Truck wasnever covered by the Policy and therefore no coverage is being forfeited. There can be no loss of insurability when there is noinsurability in the first place. Consequently, as an equitable remedy, relief from forfeiture does not apply in this case. 4. Duty to Defend [45] In the further alternative, KEW submits that even if there is no liability coverage for the Truck, Northbridge has a duty todefend the tort claim. KEW refers to

section 621 of the Insurance Act. This section, as it was worded at the commencement of the Policy,states in part: Every contract evidenced by a motor vehicle liability policy must provide that, when a person insured by the contract is involved in anaccident resulting from the ownership, use or operation of an automobile in respect of which insurance is provided under the contract andresulting in loss or damage to persons or property, the insurer must

[...] (

b) defend in the name and on behalf of the insured and at the cost of the insurer any civil action that is brought against the insured atany time on account of loss or damage to persons or property, (

c) pay all costs taxed against the insured in any civil action defended by the insurer and any interest accruing after entry of judgment onthat part of the judgment that is within the limits of the insurer’s liability, and [...] [46] KEW submits that this

section imposes a duty to defend.

Section 621 is cited in conjunction with the Supreme Court ofCanada decision in Nichols v American Home Assurance Co, (SCC), [1990] 1 SCR 801 [Nichols]. KEW refers thisCourt to Nichols at 810 which states: Thus far, I have proceeded only by reference to the actual wording of the policy. However, general principles relating to the constructionof insurance contracts support the conclusion that the duty to defend arises only where the pleadings raise claims which would bepayable under the agreement to indemnify in the insurance contract.

Courts have frequently stated that “[t]he pleadings govern the dutyto defend”: Bacon v. McBride (1984), (BC SC), 6 D.L.R. (4th) 96 (B.C.S.C.), at p. 99. Where it is clear from thepleadings that the suit falls outside of the coverage of the policy by reason of an exclusion clause, the duty to defend has been heldnot to arise: Opron Maritimes Construction Ltd. v. Canadian Indemnity Co. (1986), (NB CA), 19 C.C.L.I. 168(N.B.C.A.), leave to appeal refused by this Court, [1987] 1 S.C.R. xi.

At the same time, it is not necessary to prove that the obligation to indemnify will in fact arise in order to trigger the duty to defend. Themere possibility that a claim within the policy may succeed suffices. In this sense, as noted earlier, the duty to defend is broader than theduty to indemnify. O'Sullivan J.A. wrote in Prudential Life Insurance Co. v. Manitoba Public Insurance Corp. (1976), (MB CA), 67 D.L.R. (3d) 521 (Man.

C.A.) at p. 524: [...] [Emphasis added] [47] KEW submits that a duty to defend arises when the pleadings disclose a claim which, if proven at trial, would be covered byprovisions in the insurance policy. KEW argues that Northbridge denied coverage on the basis that the Truck was not covered under thePolicy. However, KEW argues that the tort action does not fall outside the scope of coverage. KEW’s position is that the pleadings in thetort action give rise to a duty to defend. [48] KEW submits that the claim made against Mr.

Webster alleges that he operated the Truck in a negligent manner and that thisallegation is covered under the Policy.

In their written brief, KEW argues that: The wording of the policy is unambiguous: it specifically states the Policy covers the insured and every other person who with hisconsent personally drives an insured automobile, or personally operates any part thereof, against the liability imposed by law for loss ordamage arising from the ownership, use or operation of the automobile and resulting from bodily injury or death of any person ordamage to property. [Emphasis added] [49] A duty to defend can be triggered even when there is no duty to indemnify as a duty to defend is based upon the assumptionsthat the facts in the pleadings are true, while the duty to indemnify is based on facts proven at trial.

In this case, neither duty is triggered.The Supreme Court of Canada’s decision in Nichols affirmed that a duty to defend does not arise when the allegations in the pleadingsfall outside the scope of the policy. This principle has been recently applied by the Alberta Court of Appeal in Tarrabain v WawanesaMutual Insurance Company, 2010 ABCA 25. The Court of Appeal states at para 15: It is well established that there is a distinction between an insurer’s duty to defend and the duty to indemnify. In Nichols v. AmericanHome Assurance Co., (SCC), [1990] 1 S.C.R. 801 [Nichols] and Monenco Ltd. v.

Commonwealth Insurance Co., 2001SCC 49, [2001] 2 S.C.R. 699, it was held that the insurer is obliged to defend only those claims that may result in legal liability forwhich there is insurance coverage. That is, the duty to defend arises when the claim may be payable under the agreement toindemnify in the insurance contract. [Emphasis added] [50] Therefore, while the Policy is broad and provides coverage for all insured automobiles, the significant distinction is that theTruck was not insured under the Policy. The Truck was never listed on the “Schedule of Automobiles” that KEW was required tosubmit.

Consequently, the exclusion under the Blanket Fleet Endorsement means that the Truck is not an insured automobile, and noduty to defend is triggered, regardless of whether the allegations about the Truck in the pleadings in the tort claim are assumed to be true.Northbridge does not have a duty to defend KEW or Mr. Webster in the tort action 5. Other grounds for extending coverage [51] KEW raised a number of other arguments as to why the Truck is covered under the Policy. I briefly address these argumentsbelow. A. Reference to other documents

[52] KEW submits that the “Declaration Page” of the Policy identifies an “Auto Schedule” or “Schedule of Automobiles” asschedules that set out the specific scope of coverage under the Policy. Yet, the Policy does not include any document by either of thosenames. KEW argues that Northbridge does not have a list of vehicles in their documents. Therefore, they submit that this leads toconfusion when identifying which vehicles are covered under the Policy. [53] As identified earlier, the onus to provide the original and updated list of vehicles in the “Schedule of Automobiles” was onKEW.

Further, this list was not an amendment to the insurance contract, it is a document used by the insurer to set and adjust premiums.The Blanket Fleet Endorsement does not require Northbridge to provide KEW with this list of vehicles. Section 612(3) of the InsuranceAct only requires Northbridge to provide KEW with a copy of the policy together with any endorsements and amendments to thecontract. The “Schedule of Automobiles” is not captured by any of those categories.

It is therefore irrelevant that an “Auto Schedule” or“Schedule of Automobiles” is not included in the Policy documents provided to KEW. [54] In any event, none of the documents or lists that Northbridge provided to KEW includes the Truck, or a vehicle similar indescription to the Truck. Therefore any ambiguity or inconsistency in those documents or lists is irrelevant. B. Ontario case law [55] KEW cites an Ontario Court of Appeal decision in support of its position that Northbridge was obligated to provide the list ofvehicles which was relied upon to exclude coverage for certain vehicles.

While Ontario decisions are persuasive, not binding authority, Iwould distinguish this decision in any event. [56] In GMAC Leasco Corporation v Lombard Insurance, 2007 ONCA 665 [GMAC], GMAC was the owner and lessor of avehicle leased to two individuals. Both individuals were named insureds. However, one of the individuals was an excluded driverpursuant to an endorsement. The excluded driver was involved in an accident and the insurer denied coverage.

In GMAC, the Court ofAppeal overturned the prior decision and stated that the insurer was obligated to defend and indemnify GMAC because the insurer didnot deliver a copy of the policy and every endorsement to the insured. The endorsement had the harsh effect of denying coverage and theappellant, GMAC, was entitled to know that one of the lessees was an excluded driver, which was information only available to theinsurer: GMAC at paras 3-9, 11-12. [57] In GMAC, the lessee arranged insurance with the insurer.

Meanwhile, the owner and lessor of the vehicle were not in aposition to know that one of the lessees was an excluded driver: GMAC at para 3. The owner and lessor did not have control orknowledge of the information.

This was further exemplified by the insurer’s failure to provide a copy of the endorsement informing theowner and lessor that one of the lessee’s was an excluded driver. [58] In this case before me, the insured, KEW, had the onus of submitting the list of vehicles referred to in the Blanket FleetEndorsement as the “Schedule of Automobiles” and had the knowledge of which vehicles it owned or leased prior to the commencementof the Policy.

Although the endorsement has the harsh effect of denying coverage, the onus is on the insured to submit a list of vehiclesthat it owned or leased prior to the commencement of the Policy. [59] The insured, KEW, is in a position to take action, and the insured is the only party with the requisite knowledge of whichvehicles it owned or leased prior to the commencement of the Policy. As a result, GMAC is distinguishable. C. Proof of insurance as evidence of insurance [60] In Alberta, proof of insurance is provided to insureds in the form of a “pink card”.

KEW submits that it received 19 pink cardsevidencing insurance coverage for its fleet. This represents a greater number of vehicles than was to be covered under the Policy. KEWsubmits that the delivery of extra pink cards is evidence that the Policy was intended to cover all vehicles owned by KEW. Further, KEWargues that Northbridge can rely on the representation that the pink cards are evidence of blanket coverage only after the Policy(including the “Schedule of Automobiles”) is provided to KEW. [61] This argument cannot succeed. The provision of extra pink cards is not evidence that the Truck is insured. [62]

Section 822 of the Insurance Act as it was worded at the commencement of the Policy, states in part: 822(1) In this section, “insured” means a person named as the insured in an owner’s policy.

(2) Every licensed insurer that issues an owner’s policy must at the time of issue of the policy also issue and deliver to the insured afinancial responsibility card and, on request by that insured, any additional copies of the card required to be provided under theregulations. [...]

(4) When an insured to whom a financial responsibility card has been issued pursuant to this

section ceases to be insured by the owner’spolicy in respect of which the card was issued, that person must forthwith destroy the card and every copy of the card issued to thatperson. [...] [63] This

section requires Northbridge to provide a financial responsibility card, the pink card, to KEW. However, these cards arenot a certificate of insurance. The Supreme Court of Canada in Patterson v Gallant, (SCC), [1994] 3 SCR 1080 states at1091-92: The pink card by itself does not constitute a binding policy. It is only an administrative requirement placed on an insurer under the

Insurance Act to allow for compliance with the Highway Traffic Act. The pink card by itself does not bind the insurer in the absenceof an underlying insurance policy. While various approaches have been taken by courts concerning the

interpretation of renewal documentation, including pink cards, Iadopt the reasons expressed by the Alberta Court of Appeal in Bordeniuk v. Co-operative Fire & Casualty Co. (1979), 1979ALTASCAD 117 , 101 D.L.R. (3d) 274. [...] The Alberta Court of Appeal found that sending the Auto Renewal Notice and Auto Expiry Notice constituted offers which were notaccepted, and therefore the policy had expired when the accident occurred on May 5, 1974, even though the pink card purported on itsface to be valid until May 11, 1994.

The court found the pink card was not a binding insurance policy. [Emphasis added] [64] The Policy sets out what is insured; the pink cards simply provide proof of insurance. Requirements for vehicle insurance areestablished by the Blanket Fleet Endorsement, including the requirement for KEW to disclose those vehicles that it owned or leased priorto the commencement of the Policy. V. Conclusion [65] In the result, I grant an order declaring that Northbridge is not obligated to defend or indemnify KEW or Mr.

Webster underthe Policy in respect to any matters in relation to the tort action or the accident involving the Truck. [66] The 2002 Ford F-250 pick-up truck involved in the accident was not insured on June 9, 2009. [67] The application of Mr. Webster and KEW seeking a declaration that Northbridge must indemnify them and must defend themin the tort action is dismissed. [68] If the parties are unable to agree on costs they may make an appointment to make further submissions. Heard on the 2nd day of October, 2013. Dated at the City of Calgary, Alberta this 31st day of December, 2013. J.T. McCarthy J.C.Q.B.A.

Appearances: J.H. MacMaster Branch MacMaster LLP for the Applicant Northbridge General Insurance Corporation formerly known as Lombard General Insurance Company of Canada Murray Harris McLennan Ross LLP for the Respondents Jesse Cole Webster and 943240 Alberta Ltd. operating as KEW Oilfield Services