Gregor Blaine Edmison - v. -, 2016 SKPC 120

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2016 SKPC120 Date: September 20, 2016 File: SC#421[2015] Location: Saskatoon _____________________________________________________________________________ Between: Gregor Blaine Edmison - and - The Wawanesa Mutual Insurance Company Self-Represented For the Plaintiff Kelsey O'Brien For the Defendant _____________________________________________________________________________ JUDGMENT S.L. METIVIER , J _____________________________________________________________________________ I. Introduction [ 1 ] This case involves the

interpretation of a personal insurance policy (the “Policy”) issued by Defendant, The Wawanesa Insurance Company (“Wawanesa”), to the Plaintiff, Gregor Blaine Edmison. Both the Plaintiff and his wife, Patricia Edmison, are insured under the Policy. [ 2 ] Patricia Edmison is the unfortunate victim of a fraudulent employment scam that resulted in a monetary loss of $10,727.85.

The principal issue in this case is whether the loss is covered by the Policy. It is further alleged that the Defendant breached its duty of good faith. II. Background [ 3 ] Patricia Edmison responded to an advertisement on the Internet to earn money as a “mystery shopper” for a market research company (the “Fraudster”). The Fraudster couriered Ms. Edmison several cheques over a short period of time and instructed her to deposit them into her account. She was directed to pose as a regular customer and use the funds to purchase gift cards and transfer money through Western Union back to the Fraudster.

She discovered the scam a few days later when the cheques were returned to her bank as counterfeit and the funds reversed from her account. [ 4 ] The relevant parts of the Policy provide as follows:

SECTION I - PROPERTY COVERAGE ADDITIONAL COVERAGES The following ADDITIONAL COVERAGES do not increase the Amounts of Insurance in this policy unless otherwise stated and are subject to the exclusions, limitations and conditions of this policy. 6. CREDIT OR DEBIT CARDS, FORGERY AND COUNTERFIET CURRENCY “We” will pay up to $5000.00 for: a. “your” legal obligation to pay because of a theft or unauthorized use of credit card(

s) issued to “you” or registered in “your” name; or b. loss caused by theft of “your” debit or automated teller cards. “We” will not pay for loss under item a. or b. unless “you” have complied with all the conditions under which the cards are issued nor will “we” pay for any loss caused by the use of “your” cards by a resident of “your” household or by a person to whom the cards have been entrusted. c. loss caused by forgery or alteration of any cheque or negotiable instrument; d. loss sustained by “your” acceptance in good faith of counterfeit paper currency.

SECTION I - LOSS OR DAMAGE NOT INSURED “We” do not insure” (15) loss or damage resulting from a change in ownership of property that is agreed to, even if that change was brought about by trickery or fraud; III. Issues [ 5 ] The following issues arise in this case: 1. Does the loss fall within the insurance coverage provided under the Policy? 2. If so, is coverage excluded by application of the “trickery or fraud” exclusion clause? 3. Did the Defendant breach its duty of good faith? IV.

Analysis [ 6 ] Counsel for Wawanesa referred me to the case of Progressive Homes Ltd. v Lombard General Insurance Co of Canada, 2010 SCC 33 , [2010] 2 SCR 245 [ Progressive Homes ] where Rothstein J. summarized the general principles applicable to the

interpretation of insurance policies, at paras 22-24: [22] The primary interpretive principle is that when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole. [23] Where the language of the insurance policy is ambiguous, the courts rely on general rules of contract construction. For example, courts should prefer

interpretations that are consistent with the reasonable expectations of the parties, so long as such an

interpretation can be supported by the text of the policy. Courts should avoid

interpretations that would give rise to an unrealistic result or would not have been in the contemplation of the parties at the time the policy was concluded. Courts should also strive to ensure that similar insurance policies are construed consistently. These rules of construction are applied to resolve ambiguity. They do not operate to create ambiguity where there is none in the first place. [24] When these rules of construction fail to resolve the ambiguity, courts will construe the policy contra proferentem – against the insurer.

One corollary of the contra proferentem rule is that coverage provisions are interpreted broadly, and exclusion clauses narrowly. [ 7 ] The Supreme Court in Progressive Homes also noted that insurance contracts are generally interpreted in the order of

coverage followed by exclusions. The onus rests on the Plaintiff to prove that the loss falls within the coverage provided by the Policy,then shifts to the Defendant to establish that an exclusion clause applies. [8] With these principles in mind, I will now turn to the issues raised in this case.

Does the loss fall within the insurance coverage provided under the Policy? [9] The Plaintiff claims that the loss was caused by forgery of the cheques provided by the Fraudster and is covered under para.6 c. of the Policy [10] Heath Peterson, Claims Supervisor for Wawanesa in Saskatoon, testified that his understanding of the coverage provision inpara. 6 c. is that it provides coverage for losses incurred as a result of the forgery or alteration of cheques on the insured’s account.

TheDefendant also argued that the loss was not “caused by” the forged cheque as contemplated in the Policy. [11] I do not find any ambiguity in the coverage provision set out at para. 6 c. of the Policy. The

interpretation put forward byWawanesa - that coverage is limited to losses incurred as a result of the forgery or alteration of cheques on the insured’s account - is notsupported by the Policy wording. If Wawanesa intended for the coverage to be limited in that way, it could have specified that in thewording, as it did in relation to loss caused by theft or unauthorized use of credit card(

s) or debit card(

s) in sub paras. a. and b. [12] The Defendant’s argument on causation, as I understand it, is that the Plaintiff’s loss was not caused by the forged cheques,but by Ms. Edmison’s voluntary actions, albeit induced by trickery or fraud, in transferring gift cards and money to the Fraudster. Asimilar argument was raised by the insurer in Francey v Wawanesa Mutual Insurance Co. (1990), (AB KB), 72 DLR (4th) 544(ABQB); aff’d 1991 ABCA 251 , 84 DLR (4th) 575 (ABCA) [Francey]. [13] Francey involved a claim made under a motor vehicle policy.

The Plaintiff advertised her motor home for sale and wascontacted by a fraudster offering to sell her motorhome on consignment. The Plaintiff signed a consignment agreement and gave themotor home to the fraudster to sell. The fraudster sold the motor home to a third party, but did not provide the proceeds of the sale to thePlaintiff.

The insurer denied liability on the basis that the loss was not covered by the policy or, in the alternative, that coverage wasprecluded by exclusion clauses in the policy. [14] The motor vehicle policy in Francey provided coverage for “direct and accidental” losses caused by insured perils, includingtheft. In concluding that the Plaintiff’s loss was covered, Fraser J. determined that coverage for “theft” extended to any situation inwhich the taking was by fraud, theft, or conversion, and that the loss suffered by the Plaintiff was both “direct” and “accidental”.

Hisreasons for concluding that the loss was “directly” caused by the fraud are set out at para. 27 where he stated that: This brings me to the question of whether the loss was “direct”. This issue is linked to the question of whether the loss arose from one ofthe perils insured against. Wawanesa contends it did not. Instead, it argues, the loss was attributable to Francey’s voluntarily executingboth the consignment agreement and the additional document.

But Wawanesa’s view of events overlooks the fact that the supposedvoluntary consensual transaction was induced by Checknita’s fraud. [15] In the present case, the cheques supplied to Ms. Edmison by the Fraudster were returned to the Plaintiff’s bank marked “counterfeit”. “Counterfeit” is defined in Black’s Law Dictionary, 5th ed. (St. Paul: West Publishing Co., 1979) at p. 315 as: To forge: to copy or imitate, without authority or right, and with a view to deceive or defraud, by passing the copy or thing forged for thatwhich is original or genuine.

Most commonly applied to the fraudulent and criminal imitation of money or securities. [16] In my view, the ordinary and plain meaning of the word “forgery” includes a counterfeit cheque. In this case, the counterfeitor forged cheques were the means by which the Fraudster achieved his end. I conclude that the Plaintiff’s loss was “caused by” forgedcheques and, as such, falls with the coverage provided by para. 6 c. of the Policy.

Is coverage excluded by application of the “trickery or fraud” exclusion clause? [17] The Defendant submits that the working of the “trickery or fraud” exclusion clause in para. (15) of the Policy is clear andunambiguous. The Defendant argues that the exclusion applies in this case as Ms.

Edmison agreed to transfer ownership of money and/orgift cards to the Fraudster, even though her agreement to do so was brought about by trickery or fraud. [18] The Plaintiff disputes that the “trickery or fraud” exclusion applies in this case for two reasons: 1) money is legal tenderowned by the Bank of Canada and, as such, cannot constitute “property” for the purpose of the exclusion; 2) there was never “a changein ownership of property” in this case as the money and/or gift cards sent to the Fraudster never belonged to the Plaintiff or his wife, butwere purchased as agent for the Fraudster. [19] The use of the word “property” in para. (15) must be considered in the context of the policy as a whole.

Section I sets out adescription of the property that is insured under the Policy. It includes a “special limit of insurance” for certain types of “personalproperty” including “money, cash cards, bullion” in the amount of $1000.00. Money is clearly considered to be the personal property ofthe insured under the Policy. [20] I do not accept the Plaintiff’s submission that the money and/or gift cards never belonged to the Plaintiff, or his wife, but weremerely held on behalf of the Fraudster as his agent. The scam in this case occurred because the Fraudster induced Ms.

Edmison totransfer money from her account to the Fraudster in return for forged cheques. The Fraudster never had any money or property in thegame – that was the trickery or fraud. It was the Plaintiff and his wife who sustained a loss of their money from their bank account. [21] The Defendant in Francey argued that the Plaintiff’s loss was excluded under the motor vehicle policy based on an exclusion

clause, similar to the one in this case, that excluded losses “caused by the voluntary parting with title or ownership, whether or not induced to do so by any fraudulent scheme, trick, device or false pretense.” Fraser J. determined that the exclusion clause did not apply to the facts of that case as consignment of the motor home for the purpose of resale did not constitute “parting with title or ownership”. The facts of this case are distinguishable from Francey as Ms.

Edmison sent the money or gift cards to the Fraudster for their sole use and benefit based on the belief, albeit induced by trickery or fraud, that they were the rightful owner of that property. [ 22 ] Accordingly, it is my conclusion that the wording of the “trickery or fraud” exclusion, read in the context of the policy as a whole, is unambiguous and that it applies to the circumstances of this case. Did the Defendant breach its duty of good faith? [ 23 ] It is well established that an insurer owes a duty of good faith to an insured.

The duty does not require an insurer to make the correct decision, but only to act fairly when making decisions by assessing the merits of the claim in a balanced and reasonable manner and basing payment decisions on a reasonable

interpretation of the insurance policy [see: Saskatchewan Government Insurance v Wilson , 2012 SKCA 106 at para. 4 ; 405 Sask R 8] [ 24 ] The Plaintiff failed to establish any facts that might reasonably suggest bad faith on the part of the Defendant. Rather, the evidence at trial established that the Defendant handled the Plaintiff’s claim in a professional manner in accordance with their established claims handling procedures. V. Conclusion [ 25 ] The Plaintiff’s claim is dismissed. I make no order as to costs. _________________________ S.L. Metivier, J