Gordon James McDermit - v. -, 2013 SKPC 25

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 025 Date: February 7, 2013 File: 15-11 Location: Moose Jaw, SK _____________________________________________________________________________ Between: Gordon James McDermit - and - Austin McDermit - and - Saskatchewan Government Insurance Mr. Kenneth Cornea For the Plaintiff, Gordon James McDermit Self-Represented For the Defendant, Austin McDermit Mr. Steven Haichert For the Third-Party, SGI _____________________________________________________________________________

JUDGMENT M. GORDON , J _____________________________________________________________________________ [ 1 ] The plaintiff and defendant are father and son respectively and will be referred to as Gordon and Austin in this decision. There is little dispute about the facts. Gordon and Austin maintain separate and distinct farming operations. Gordon has cattle, Austin does not. The real dispute is whether the SGI AgroPak insurance policy that Austin had purchased from SGI covered the loss of cattle Gordon McDermit is claiming as a result of Austin’s negligence.

SGI denied coverage. [ 2 ] In 2010, Gordon and Austin had a verbal agreement for the lease of fertilizer bins located on Gordon’s land. Austin filled the bins with fertilizer and used the fertilizer during spring seeding. These bins are designed for fertilizer and were in good condition. There was a concrete depression below the bins and the fertilizer was released from the bin to the concrete depression and a grain auger was used to convey the fertilizer to a truck or implement. [ 3 ] In September 2010, Gordon moved his cattle from the east pasture to the west pasture.

The cattle had to pass through the area where the bins were located which is on Gordon’s land. Gordon testified this is an open herd area. Gordon brought the cattle up to the corral on the day in question and then opened the gate and let the cattle make their way to the west pasture as they knew where to go. Gordon did not check to see if any fertilizer had leaked or was left in the concrete depression under the bins or if any water had accumulated in that area. As well, Gordon did not tell his son Austin that he was moving the cattle through this area on that particular day.

According to Gordon, there should not have been any fertilizer outside the bin if using a conveyer or auger to move the fertilizer. Gordon stated it was easy to clean up any fertilizer and the extent of the clean up would depend on how fussy one was. [ 4 ] This is not the first time Gordon had rented bins to Austin. In a previous year, when Austin was renting a bin, Gordon’s cattle ingested a mixture of rotten grain and fertilizer mixture in the hopper bottom. Several of Gordon’s cows died and SGI had paid the claim (by Austin) without question. [ 5 ] Austin agreed that there were no problems with the bins.

He admitted that any spillage or leakage of fertilizer occurred when he was using the bins. The fertilizer accumulated in the depression below the bins. It was dry when he was removing the fertilizer from the bins. Austin also admitted that he needed to clean up the fertilizer at the bins. It required some shovelling and putting the fertilizer into pails. Austin always meant to go back and finish the job after seeding, but never got around to it. Austin said he is not a cattle farmer and really not familiar with cattle and their habits.

There was no water in the concrete depression under the bin when Austin was using and removing fertilizer from the bin. The rain came later in the summer and must have mixed with the bit of fertilizer that was left in the concrete depression. Austin observed that the cattle did not drink the water beside the bin, rather the cows had stood up on the cement pad and drank this lethal mixture of water and fertilizer from the depression area. Austin acknowledged a previous claim under his AgroPak the year before when some of Gordon’s cattle had eaten fertilizer mixed with spoiled grain.

This claim had been allowed and paid by SGI. [ 6 ] Nine of Gordon’s black angus cows drank this water and fertilizer mixture and died from toxicosis. Exhibit P-1 is the veterinarian report that confirms the cows died from fertilizer toxicosis. Gordon is suing Austin alleging Austin was negligent in failing to clean up the fertilizer from the depression at the bottom of the bin. Gordon looks to Austin for compensation in the amount of $11,700.00 being $1,300.00 per cow. [ 7 ] As a result of this claim from Gordon, Austin turned to SGI and made a claim for coverage under his valid AgroPak policy.

SGI denied Austin’s claim saying that the policy exempted this type of loss. SGI did not call any witnesses at trial. SGI filed a copy of Austin McDermit’s AgroPak and AgroPak policy booklet. [ 8 ] The issues: 1) Is Austin liable to Gordon in negligence for the death of these nine cows?

2) Is Gordon contributorily negligent and as a result should bear some portion of the loss? 3) If Austin is liable in any degree, is he covered for this liability under the terms of the AgroPak policy in place at the time? 4) Is SGI, the third party, obligated to defend and/or provide legal services to Austin in this action pursuant to the terms of the insurancepolicy? If so, should there be an order for costs in favour of Austin? POSITION OF THE PARTIES [9] Mr. Cornea representing Gordon McDermit submitted that his client has established negligence by Austin on the balance ofprobabilities.

Austin owed a duty of care to his landlord father. Austin admitted he breached this duty and left the spillage intending toclean it up later. This did not occur. The plaintiff argues that Austin should have foreseen the harm. Austin knew that the previous yearcattle had died from a mixture of fertilizer and grain. The veterinarian’s letter confirms the cause of death. The plaintiff submits thatthere is no evidence to show that he, Gordon, should have done something different than what he did in moving his cattle. He acted anddid the same as he normally does every year.

The plaintiff therefore asks the Court to conclude that there was no contributorynegligence made out on the part of the plaintiff. [10] The defendant, Austin McDermit represented himself and submitted he purchased insurance for unforeseen events such aswhat occurred. He was confident the insurance would cover anything to do with the cattle since SGI had paid out the year before. Austin denies the harm was foreseeable. He does not know the habits of cattle. There was no water in the concrete depression the lasttime he used and removed fertilizer from the bin.

He noted the cattle had to get up on the pad to access the mixture. And, he did notknow the cows had been moved. Austin does not think that the “exclusion” clauses in the policy apply to this situation. Austin filed twocases from Ontario which held that exclusion clauses of this kind are meant to be confined to cases of true “environmental pollution”. The cases are Zurick Insurance Company v. 686234 Ontario Ltd., 33365 (Ont. C.A.) and O’Brian v. Farmer’s MutualInsurance Company, 2012 ONSC 468 CanLII. [11] Austin submits the situation here did not involve pollutants going into the water.

Rather it was the result of some spilledfertilizer mixing with rain water which came later in the concrete depression at the bottom of the bin. It was not a situation where thepollutant leaked and dispersed into the soil. [12] Counsel for SGI filed a comprehensive brief of law and supplemental brief of law arguing that SGI is not liable under thepolicy due to an exclusion clause relating to pollutants. The position of SGI, the third party, can be summarised as follows. This is notthe first time the plaintiff Gordon McDermit has lost cattle due to the ingestion of fertilizer. He made a claim the previous year.

Theinsurance policy that Austin has in place does not apply to or cover “pollution liability” in these circumstances. The case of B.P. CanadaInc. v. Camco Service Station Construction and Maintenance Ltd. (1990), 49 CanLII 298 (Ont. S.C.) is cited as supporting such anexclusion. Counsel for SGI suggest the exclusion clause is clear and unambiguous and distinguishes the cases filed by AustinMcDermit.

SGI argues there is no justification for inserting terms into the policy where the policy is clear and no actual ambiguityexists. [13] SGI says the plaintiff’s claim does not come within the exemption to the environmental exclusion clause and thus the duty todefend does not arise. In support of this he cites Thames Steel Construction Ltd. v. Northern Assurance Company Ltd., (ON CA), 67 O.R. (2d) 158. [14] Finally SGI submits the loss did not result from a “sudden and accidental” event to bring it within the policy. He cites ParkPlaza Cleaners Ltd. v. Saskatchewan Government Insurance, 1983 ILR 1-1598 (Sask.

Q.B.). This last case involves pollution thatoccurred outdoors when water was contaminated by fertilizer. ANALYSIS [15] To address the first issue posed, I am satisfied that Austin is liable to Gordon. Austin was negligent in failing to clean up thefertilizer that had leaked into the concrete depression of the bin. It was a job he admitted he always meant to come back and clean up butnever did.

[16] The second issue I identified is whether the evidence supports a finding of contributory negligence on the part of the plaintiffGordon McDermit. In order to find any contributory negligence on the part of the plaintiff, the liability of the defendant must be basedin tort. In other words, if there is no negligence found as against the defendant there can be no contributory negligence. See BattlefordsCredit Union Ltd. v. Weenie and CUMIS Life Insurance Company, 2005 SKPC 78 at para. 43: The Contributory Negligence Act RSS 1978, ch. C-31 does not apply because the liability of CUMIS is not founded in tort.

Liability ofBCU as agent could be founded in tort or contract. The damages caused by both CUMIS and BCU are the same but the legal basis isdifferent. Each, in its own way, is responsible for 100% of the loss suffered by Weenie but on different grounds. [17] In Zsoldos v. Canadian Pacific Railway Company, 2009 ONCA 55, the Court summarised the ways in which contributorynegligence can occur. Mr. Justice Rosenberg speaking for the Court stated at paragraph 54: Contributory negligence can arise in three ways.

First the plaintiff’s negligence may have been a cause of the accident in the sense thathis acts or omissions contributed to the sequence of events leading to the accident. Second, although the plaintiff’s negligence is not acause of the accident, the plaintiff has put himself in a position of foreseeable harm. Third, as in seat belt cases, the plaintiff may fail totake precautionary measures in the face of foreseeable danger. See P.H. Osborne, The Law of Torts, 3d edition, Toronto Irwin Law 2007 at pages 104 and 105 and Lewis N.

Clar, Tort Law, 3rd edition, Toronto Thomson Carswell 2003 at page 457. [18] In the very recent case of Dhaliwal v. Premier Fitness Clubs Inc., 2012 ONSC 4711, at paragraph 81: Contributory negligence does not depend upon any duty of care, but rather depends upon the objective foreseeability of harm to oneself.More specifically, a person will be guilty of contributory negligence if they ought to have foreseen that, if they did not act as areasonable, prudent person, they might hurt themselves. A reasonably prudent person, by definition, considers whether a course of actionmight cause harm to themselves.

While the test is clearly an objective one, if the plaintiff personally, subjectively appreciated the generalnature of the risk, they will not be able to contend that the harm was not objectively foreseeable. Provided that this test of objectiveforeseeability is met, the plaintiff will be held responsible for contributory negligence even if they did not also foresee the mechanism bywhich the accident would occur, or the nature of the injury that could result. See: Rizzi v. Marvos, (ON CA), (2008),78 O.R. (3d) 142 (C.A.) at para. 39-44; Leave denied: [2008] S.C.C.A. No. 200; Avco Financial Services Realty Ltd. v.

Norman, (ON CA), (2003), 64 O.R. (3d) 239 (C.A.) at para. 26; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210, at para. 76. [19] In the within situation, the plaintiff’s biggest omission in my view was that he did not inform the defendant, his son, that hewas moving the cattle on the day in question. In my view the harm was reasonably foreseeable. He knew the cows would have access tothe bin area and that the defendant had used the bin for fertilizer. There had been a problem the previous year with cattle dying from amixture of spoiled grain and fertilizer.

A reasonable person in similar circumstances would have at the very least spoken to thedefendant and told him that the cattle were being moved that day. In the alternative, this was the plaintiff’s land and in the plaintiff’syard. It would not be unreasonable to require him to do a check of the area. The plaintiff put himself in a position of foreseeable harm. He did not take into account the possibilities that others could be careless. Again arguably he knew the bins were used for fertilizer. Gordon knew that it had been a wet summer and that there had been a problem the previous year.

Gordon left the cattle unattended andallowed them to proceed through this area at their leisure. The third way contributory negligence can arise is by the plaintiff failing totake protective measures. If the plaintiff had told the defendant he was moving the cattle that day and alerted the defendant that he bettergive priority to cleaning up any spillage, this situation could have been prevented or minimized. As well, the plaintiff could have beenphysically present to ensure the cattle moved quickly through this area by the bins into their new pasture. [20] The harm was foreseeable.

The plaintiff had a recent previous similar experience with cows dying as a result of the ingestionof fertilizer and grain. The bins were on the plaintiff’s land. The plaintiff is an experienced cattle farmer. The cows were left to movethrough this area on their own. The plaintiff had easy access to the area. The plaintiff did not take the care to contact the defendant andinform him of the move. For all those reasons, I find there is ample evidence of contributory negligence on the part of the plaintiff.

TheContributory Negligence Act of Saskatchewan states at s. 2(1): 2(1) Where by the fault of two or more persons damage or loss is caused to one or more of them, the liability to make good the damage

2(1) Where by the fault of two or more persons damage or loss is caused to one or more of them, the liability to make good the damageor loss is in proportion to the degree in which each person was at fault, but if, having regard to all the circumstances of the case, it is notpossible to establish different degrees of fault, the liability shall be apportioned equally.

(2) Nothing in subsection (1) operates so as to render any person liable for any damage or loss to which his fault has not contributed. [21] There is insufficient evidence for the Court to establish different degrees of fault and therefore I find the plaintiff 50 percentcontributory negligent. [22] The third question I posed is whether Austin is covered under the terms of his AgroPak policy in place at the time. I foundAustin was negligent and therefore need to consider this issue. [23] In York Region Condominium Corp. No. 772 v.

Lombard Canada Ltd., (ON SC), [2007] 85 O.R. (3d) 294,Justice Wilson described the general rules of interpreting an insurance policy starting at paragraphs 42 to 45: [42] There is a shifting onus of proof with respect to coverage issues. The insured bears the initial onus of proof to establish that the factsbring the claim within the ambit of the relevant insuring agreement. If this threshold is met, the onus then shifts to the insurer to provethat an exclusion clause applies. If there is an exception to an exclusion clause, the burden of proof shifts back to the insured, to establishthat the exception applies.

Alie v. Bertrand & Frere Construction, (ON CA), (2002), 62 O.R. (3d) 345 (C.A.) at 358;Total Cleaning & Security Services Ltd. v. Guardian Insurance Co. of Canada, [1993] O.J. No. 1456 (Gen. Div.), aff’d [1996] O.J. No.4389 (C.A.), para. 9. [43] Courts must decide coverage issues based upon an analysis of the words and exact terms of the insurance policy itself. Generalprinciples of insurance contract

interpretation are merely interpretative aids but are not determinative of coverage issues. BridgewoodBuilding Corp. (Riverfield) v. Lombard General Insurance Company of Canada, (ON CA), (2006), 79 O.R. (3d) 494(C.A.). [44] The Supreme Court of Canada in Brisette Estate v. Wesbury Life Insurance Co., (SCC), (1992), 96 D.L.R. (4th) 609(S.C.C.) sets out guidelines to be used by Canadian courts in interpreting insurance policies. Sopinka J. stated at pp. 610-611 that therules of construction relating to insurance contracts are to be applied as follows:

(1) The court must search for an

interpretation from the whole of the contract which promotes the true intent of the parties at the time ofentry into the contract.

(2) Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties willbe selected.

(3) Ambiguities will be construed against the insurer.

(4) An

interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided. [45] The general principles of

interpretation of insurance policies have been further elaborated in several Supreme Court of Canadadecisions including Derksen v. 539938 Ontario Ltd., 2001 SCC 72 , [2001] 3 S.C.R. 398 (S.C.C.) at para. 47, Monenco Ltd. v.Commonwealth Insurance Co., 2001 SCC 49 , [2001] 2 S.C.R. 699 at para. 11, Reid Crowther & Partners Ltd. v. Simcoe & Eerie General Insurance Co., (SCC), (1993), 99 D.L.R. (4th) 741 (S.C.C.) at 752; National Bank of Greece (Canada) v. Katsikonouris, (SCC), (1990), 74 D.L.R. (4th) 197 (S.C.C.) at 201.

(1) The contra proferentem rule construes any ambiguity in the policy against the insurer, as the author of the contract; (2) the question of coverage should be construed broadly whereas the applicability of exclusion clauses should be interpreted narrowly; (3) at least where the policy is ambiguous, the court should give effect to the reasonable expectations of the parties; and (4) policy language should be construed in its ordinary, everyday meaning. [24] In the case of Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., (SCC),[1980] 1 S.C.R. 888 at 901 to 902, Mr.

Justice Estey states: Even apart from the doctrine of contra proferentem as it may be applied in the construction of contracts, the normal rules of construction

lead a court to search for an

interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the

interpretation which would promote the intention of the parties. Similarly, an

interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an

interpretation of the policy which promotes a sensible commercial result. It is trite to observe that an

interpretation of an ambiguous contractual provision which would render the endeavour on the part of the insured to obtain insurance protection nugatory, should be avoided. Said another way, the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought nor anticipated at the time of the contract. [ 25 ] Numerous cases point out that exclusion clauses should be narrowly construed.

One must look at the entire document or contract and reject clauses that are inconsistent with the main purpose of the contract. In Western Ornamental Iron Works Ltd. v. Continental Insurance Co. , 1981 ILR 477 (Ont. C.A.) , the Court stated that even an exclusion clause that was clear and unambiguous should not be enforced if it would defeat one of the main objectives of the contract. [ 26 ] The SGI policy defines “pollutants” as any solid, liquid, gaseous or thermal irritant or contaminant including smoke, odour, vapour, soot, fumes, acids, alkalies, chemicals and waste.

Waste includes material to be recycled, reconditioned or reclaimed. The exclusion clause applies only when pollution has actually occurred within the meaning of the clause. In Medicine Hat (City) and Continental Casualty Company (2002), 37 S.C.L.I. (3d) 48 (Alta. Q.B.), the exclusion clause is very similar to the within case. The case involved the release or dispersal of chemicals that caused injury to employees. At paragraph 27 the Court held that: Discharge, dispersal, release or escape of pollutants is the language of improper or unintended events or conduct.

It is not the language of intended use or consequences or of the normal operation of facilities or vehicles. In this case, the polluting substance or gas is part of and confined to the intended and normal operation of a transit garage and buses. This conduct and these events do not fall within the exclusion clause. In my view the pollution exclusion clause is intended to protect the insurer from liability for the enforcement of environmental laws.

The exclusion clause uses environmental terms of art because it is intended to exclude coverage only as it relates to environmental pollution and the improper disposal or contamination of hazardous wastes. [ 27 ] In this case there is no suggestion that the fertilizer was not intended to be released into the concrete depression. The purpose of the concrete depression was to contain and facilitate the handling of the fertilizer. The cattle died as a result of access to the area where the fertilizer/pollutant was contained.

The defendant by his own admission stated that he ought to have cleaned up the area in a timely fashion. He always intended to do so but other work was a priority. After all the defendant only rented the fertilizer bins, not the surrounding land. So here we have a situation where Austin should have cleaned up the fertilizer. However, the failure to do so did not result in damage caused by pollution. Rather, the result is the claim in tort resulting from the presence of a substance which resulted in the harm when cattle came into contact with it.

In addition, the fertilizer in the within case remained in the bottom portion of the concrete depression. It did not move. The fertilizer was not released into or upon the land. I note the water was not in existence until some time later over the course of the summer due to summer rains. I am not satisfied that this contamination of rain water by fertilizer contained in this concrete depression falls within the rubic of traditional environmental pollution as described in case law. Interpreting the exclusion clause narrowly, following the rules of

interpretation and construction in my view, the exclusion should not apply in this case. Here the pollutant or fertilizer did not actually escape or migrate from where it was intended to be. The resulting damage occurred as the cattle had access to the area where the fertilizer was stored. The fertilizer did not escape to a place where it ought not to have been. It is my conclusion that the defendant ought to have properly cleaned up the area and he did not. [ 28 ] Finally, at the very least, the exclusion clause with respect to pollution is ambiguous.

It does not clearly include a pollutant which has not in any way moved, migrated or escaped. I am not satisfied that the exclusion clause is applicable to rain water which falls into an artificially constructed unit which is meant to contain and handle the fertilizer. As I have indicated the water was not in existence at the time the fertilizer was released in the concrete depression but later materialized in the form of rain water.

Therefore at the time of the alleged pollution, that being the fertilizer leaking into the concrete depression, there was no water of any description. [ 29 ] Surely this SGI AgroPak policy was intended to cover an area of risk such as this for farmers. Austin purchased the insurance coverage to cover unintended events. SGI paid the previous year under the same policy for a loss involving cattle ingesting fertilizer and grain. Giving effect to this exclusion clause is not only inconsistent but is repugnant with the main purpose of insurance coverage for a farmer such as Austin.

I conclude that in this case the exclusion clause does not apply and SGI must cover the proven loss. [ 30 ] The last issue to be addressed is whether SGI, the insurer, had a duty to defend. One of the leading cases is Nichols v.

American Home Assurance, (SCC), [1990] 1 S.C.R. 801. Madam Justice McLachlin states the following about thisduty to defend: The duty to defend is broader than the duty to indemnify. The duty to defend is restricted by claims for damages which fall within thescope of the policy where it is clear from pleadings that the suit falls outside the coverage of the policy by reason of an exclusion clause,the duty to defend does not arise. It is not necessary to prove the obligation to indemnify will in fact arise. The mere possibility that aclaim within the policy may succeed if sufficient to trigger the duty.

The widest latitude should be given to the allegations in pleadings indetermination of whether a claim within the policy is raised. [31] These principles were later affirmed and explained by the Supreme Court in Non Marine Underwriters Lloyds of London v.Scalera, 2000 S.C.R. 24 and Monenco Ltd. v. Commonwealth Insurance Company, 2001 SCC 49 , 2001 S.C.C. 49. In thewithin case, the application is certainly arguable. The allegations in the Statement of Claim were not clearly beyond the scope of thepolicy. The Court must look at the true nature of the claim, not the insurer’s view of the merits of the claim.

In Royal Sun AllianceInsurance Company of Canada v. Fiberglass Canada Inc., 1999 OTC 196, the Court held that in order to find no obligation to defend,the Court would have to find it would be impossible for damages claimed in the pleadings to fall within coverage. I find there was a dutyto defend on the part of SGI. CONCLUSION AND ORDERS [32] (

a) The plaintiff shall have judgment against the defendant in the amount of $5,850.00 together with pre-judgment interest tobe paid on this sum from September 4, 2010 to date of this judgment. The defendant shall pay the plaintiff costs in the amount of$500.00. (

b) The defendant shall have judgment against the third party SGI, in the amount of $5,850.00 together with pre-judgment interestto be paid on this sum from September 4, 2010 to date of this judgment. SGI shall pay the defendant costs in the amount of $500.00. [33] Dated at the City of Moose Jaw, Saskatchewan this 7th day of February, 2013. ________________________ M. Gordon, J