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Supreme Court of Canada

Insurance—Comprehensive business liability policy—Collapse of crane—Accident within meaning of policy—Unlooked for mishap or occurrence—Insurance Act, R.S.B.C. 1960, c. 197, s. 100.

In an action arising as a result of the collapse, on September 16, 1966, of one of two pintle cranes erected on a barge, the plaintiffs succeeded against the defendants, Walkem and Washington, on a finding “that the omission of Walkem and Washington to warn the plaintiffs, and the act of returning the vessel to them in a state of inadequate repair, was a breach of the clear duty which both defendants had to the plaintiffs in the circumstances of this case”. In third party proceedings instituted by Walkem against the appellant Canadian Indemnity, the latter, which had issued to Walkem a “Comprehensive Business Liability Policy” covering the period from March 10, 1963, to March 10, 1966, was condemned to idemnify Walkem against the losses incurred by it arising out of the main action. The trial judge held that the mishap was an “accident” “originating during the policy period” within the meaning of the policy. The trial judgment was affirmed on appeal and the insurer then appealed to this Court.

Held: The appeal should be dismissed.

The appellant’s contention, first raised in this Court, that Walkem’s negligence was criminal and public

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policy obliged the Courts to deny it recovery failed as well as the submission, contrary to the clear terms of the policy, that the mishap giving rise to the claim was not within the coverage because it occurred on September 16, 1966, and the policy expired March 10, 1966.

As held by both Courts below, the collapse of the crane was an “accident” within the meaning of the policy. The damages sustained by Walkem were due to an “accident” in the sense of “an unlooked for mishap or occurrence” which occurred during the policy period and which was attributable to Walkem’s negligence.

Home Insurance Co. v. Lindal and Beattie, [1934] S.C.R. 33, distinguished; North Western Salt Co. Ltd. v. Electrolytic Alkali Co. Ltd., [1914] A.C. 461; O’ Grady v. Sparling, [1960] S.C.R. 804; R. v. Fane Robinson Ltd. (1941), 76 C.C.C. 196, referred to; Marshall Wells of Canada Ltd. v. Winnipeg Supply and Fuel Co. (1964), 49 W.W.R. 664, disapproved; Fenton v. Thorley & Co. Ltd., [1903] A.C. 443; Clover, Clayton & Co. Ltd. v. Hughes, [1910] A.C. 242, referred to.

APPEAL from a judgment of the Court of Appeal for British Columbia dismissing an appeal from a judgment of Macfarlane J. Appeal dismissed.

H.T. Wheeldon and W.M. Holburn, for the third party, appellant.

W.A. Esson and B.R. Henderson, for the defendant, respondent.

MARTLAND J.—I agree with the conclusion reached by the Courts below, and by my brother Pigeon that the collapse of the crane was an “accident” within the meaning of the policy. I agree with his reasons for rejecting the other submissions made on behalf of the appellant.

I would dismiss the appeal with costs.

The judgment of Judson, Spence, Pigeon, Dickson and Beetz JJ. was delivered by

PIGEON J.—This is an appeal from the judgment of the British Columbia Court of Appeal[1]

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affirming the judgment of Macfarlane J.[2] whereby, on third party proceedings, the appellant (Canadian Indemnity) was condemned to indemnify the respondent (Walkem) against the losses incurred by it arising out of the action instituted by Straits Towing Limited and Straits Barge Limited against Washington Iron Works (Washington), Walkem and Yarrows Limited.

The principal action was instituted as a result of the collapse, on September 16, 1966, of one of the two pintle cranes supplied by Washington and erected on the “Straits Logger”, a self‑unloading barge designed for transporting logs. Yarrows was the builder of the barge and the plaintiffs acknowledged during argument in trial Court that they could not succeed against it because of the limitation of liability clause in its contract. Accordingly, the claim against it was dismissed by the trial judge. The plaintiffs succeeded against the other two defendants on a finding “that the omission of Walkem and Washington to warn the plaintiffs, and the act of returning the vessel to them in a state of inadequate repair, was a breach of the clear duty which both defendants had to the plaintiffs in the circumstances of this case”.

The damages were assessed on the same basis as Ruttan J. subsequently assessed them in the case of a similar barge, the “Rivtow Carrier”, which had to be laid up for repairs immediately after September 16, 1966, in order to avoid what had occurred on the “Straits Logger”. By that judgment[3] reversed on appeal[4] and restored in this Court[5], the recovery was limited to the loss suffered over what it would have been if a timely warning had been given. In the present case, Macfarlane J. noted in his reasons for judgment on the principal action, that the plaintiffs had conceded that there should be a deduction made from the special damages in the amount which it would have cost to have the cranes repaired if a timely

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warning had been given, and he made a similar deduction in estimating the loss of profits.

The judgment with which we are concerned on this appeal was subsequently rendered in the third party proceedings instituted by Walkem against Canadian Indemnity. Macfarlane J. noted that Canadian Indemnity had issued to Walkem a “COMPREHENSIVE BUSINESS LIABILITY POLICY” covering the period from March 10, 1963, to March 10, 1966, that in February 1966 Walkem, in concert with Washington, had performed certain repairs to the “Straits Logger” cranes and that he had found them both negligent as above stated, apportioning 25 per cent of the liability against Walkem. He added that he had described the latter’s negligence by saying that “Walkem knew of the dangerous condition of the crane, but nevertheless pawned off on an unsuspecting customer an inadequately and negligently repaired piece of equipment.”

The trial judge after quoting relevant clauses of the policy held that the mishap was an “accident” “originating during the policy period” within the meaning of the document. Accordingly, he ordered that Walkem be indemnified from the condemnation “excluding only that part of the damages not covered because of certain exclusionary clauses in the contract which counsel have indicated they may wish to argue after this aspect of the matter has been determined”.

As previously noted, this judgment was affirmed on appeal. Reasons for the Court were written by Robertson J.A. in which all relevant clauses of the policy are quoted. After a review of many authorities, the conclusion that the damages were due to an “accident” “originating during the policy period” was affirmed.

At the outset of the argument in this Court, counsel for Canadian Indemnity raised a new

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ground of defence not taken in the Courts below. He contended that Walkem’s negligence was criminal and public policy obliged the Courts to deny it recovery. This submission was based essentially on the judgment of this Court in Home Insurance Co. v. Lindal and Beattie[6]. In that case, a motorist who had been driving in a state of intoxication was denied recovery from his insurer. However, it should be noted that this Court did not disagree with the rule stated by the House of Lords in North Western Salt Co., Ltd. v. Electrolytic Alkali Co., Ltd.[7] that this ground avails only when the illegality of the transaction is fully established. It proceeded on the basis that the proof made at the trial was sufficient to justify the Court in passing upon the act as being illegal. It was stated that the trial judge had held that, at the time of the accident, Beattie was driving his car while in an intoxicated condition to such extent that he was unable to drive with safety. Thus, the basis of the judgment was that a finding supported by evidence did establish the commission of a crime. There is nothing like that in the present case. The only finding is one of negligence in a civil case. This supplies no basis for holding that it was criminal negligence. As Judson J. said in O’Grady v. Sparling[8], at p. 808:

“It is a difference in kind and not merely one of degree.”

Furthermore, consideration would have to be given to the fact that Walkem is an incorporated company. In civil proceedings, it is answerable for the negligence of its servants on the basis of respondeat superior but this is not the rule for criminal responsibility. In the absence of special provisions such as those considered in Tesco Supermarkets v. Nattrass[9], a corporation is party to an offence only when the act is brought home to

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its directing mind (R. v. Fane Robinson Ltd.[10]), much as a shipowner is deprived of the benefit of limitation of liability only in the case of his “actual fault or privity” (British Columbia Telephone Co. v. Marpole Towing Ltd.[11]). In the present case, no consideration was ever given to this question and there is no finding that Walkem itself was privy to the negligence of its servants as required to make it criminally responsible for it, assuming it to be criminal.

Accordingly, as counsel was informed at the conclusion of the argument for the appellant, this first ground fails as well as the submission, contrary to the clear terms of the policy, that the mishap giving rise to the claim is not within the coverage because it occurred on September 16, 1966, and the policy expired March 10, 1966. As noted in the Courts below, the wording of clause 10 of the policy, which clause governs recovery herein, covers accidents “originating” during the policy period. Elsewhere reference is made to accidents “occurring” during the policy period. This difference must be deemed intentional and must be given full effect. No reason appears for departing from this clear wording.

Therefore, the only ground remaining to be considered is whether the collapse of the crane was an “accident” within the meaning of the policy. Counsel for the appellant relied heavily on the judgment of the Court of Appeal for Manitoba in Marshall Wells of Canada Ltd. v. Winnipeg Supply and Fuel Co.; R. Litz & Sons Co. Ltd. v. Canadian General Insurance Co.[12] In my view, Macfarlane J. was quite correct in preferring to the views of the majority those expressed by Freedman J.A., dissenting, in these words (at p. 665):

With respect, I am of the view that what occurred here was an accident. One must avoid the danger of

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construing that term as if it were equivalent to “inevitable accident.” That a mishap might have been avoided by the exercise of greater care and diligence does not automatically take it out of the range of accident. Expressed another way, “negligence” and “accident” as here used are not mutually exclusive terms. They may co-exist.

Guy J., for the majority, had said (at p. 669):

Halsbury, (vol. 22, 3rd ed.), uses these expressions at p. 294:

“The idea of something haphazard is not, however, necessarily inherent in the word; it covers any unlooked for mishap or an untoward event which is not expected or designed, or any unexpected personal injury resulting from any unlooked for mishap or occurrence. The test of what is unexpected is whether the ordinary reasonable man would not have expected the occurrence, it being irrelevant that a person with expert knowledge, for example of medicine, would have regarded it as inevitable.”

In the light of the foregoing, I must agree with the learned trial judge that this was not an unanticipated mishap. Indeed, it is difficult to see how Litz, the insured, can argue that it was an accident and not a calculated risk, in view of his continued insistence that in his conversation with Mr. Coad, superintendent of Winnipeg Supply & Fuel Company, he had pointed out vigorously how dangerous it was to leave the tank in the unsupported condition it was.

A great deal of argument was devoted to the finding of the learned trial judge that he believed Coad, as opposed to Litz, in so far as the alleged critical conversation is concerned. But surely whichever one he believed, both of them agreed that leaving this unsupported hot-water tank was dangerous.

With respect, this is a wholly erroneous view of the meaning of the word “accident” in a comprehensive business liability insurance policy. On that basis, the insured would be denied recovery if the occurrence is the result of a calculated risk or of a dangerous operation. Such a construction of the word “accident” is contrary to the very principle of insurance which is to protect against mishaps, risks and dangers. While it is true that the word “accident” is sometimes used to describe unanticipated

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or unavoidable occurrences, no dictionary need be cited to show that in every day use, the word is applied as Halsbury says in the passage above quoted, to any unlooked for mishap or occurrence. That this is the proper test rather than the words italicized by Guy J. is apparent from a reading of the two cases on which that passage is based. These are Fenton v. Thorley & Co. Ltd.[13] and Clover, Clayton & Co. Ltd. v. Hughes[14]. Both dealt with the meaning of “accident” in the Workmen’s Compensation Act, 1897. In the first, a workman had ruptured himself by an act of overexertion; in the second, “… a workman suffering from serious aneurism was employed in tightening a nut by a spanner when he suddenly fell down dead from rupture of the aneurism”. In both cases, the injury was held to result from an “accident”. It is in the first that Lord Shand said (at p. 451):

If the word “accident” were interpreted in the Workmen’s Compensation Act, 1897, or were there defined so as to bear a special limited or narrow sense only, it. ° might be necessary to consider and examine the American authorities, which were so fully cited by Mr. Powell in his able argument. But I agree with my noble and learned friend in thinking that the words “personal injury by accident” and “accident” are used in the statute in the popular and ordinary sense of these words. I refrain from referring in detail to the language used in the different parts of the statute, because in so doing I should only be repeating what has already been said.

I shall only add that, concurring as I fully do in holding that the word “accident” in the statute is to be taken in its popular and ordinary sense, I think it denotes or includes any unexpected personal injury resulting to the workman in the course of his employment from any unlooked-for mishap or occurrence.

I find it equally unnecessary in the present case to consider the American cases we were referred to. However, I wish to add that, in construing the word “accident” in this policy, one should bear in mind that negligence is by far the most frequent source of exceptional liability which a businessman has to contend with. Therefore, a policy which

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would not cover liability due to negligence could not properly be called “comprehensive”. But foreseeability is an essential element of such liability. If calculated risks and dangerous operations are excluded, what is left but some exceptional causes of liability?

I find it unnecessary to consider in the present case whether the approach to the construction of the policy ought to be that which prevailed in The Canadian Indemnity Co. v. Andrews & George Co. Ltd.[15] or that which was adopted in Indemnity Ins. Co. of North America v. Excel Cleaning Service[16]. Neither case dealt with primary coverage. Both were decided on the construction of an exclusion clause. What was said by Rand J. in the first case as to the meaning of the word “accident” clearly does not form part of the ratio decidendi.

I would dismiss the appeal with costs.

Since writing the above, I have discovered that in 1948, that is subsequent to the Home Insurance and similar cases cited by appellant, the British Columbia Legislature enacted what is now s. 100 of the Insurance Act, R.S.B.C. 1960, c. 197.

100. Unless the contract otherwise provides, a violation of any criminal or other law in force in the Province or elsewhere does not, ipso facto, render unenforceable a claim for indemnity under a contract of insurance except where the violation is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage, except that in the case of a contract of life insurance this section applies only to disability insurance undertaken as part of the contract.

This provision which was not mentioned in the factums or in the argument of counsel for the appellant appears conclusive against his first point, seeing that he answered No to the following question from the Bench: “Are you saying that the Company intended this to happen?”

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In my view, the test laid down by the statute namely, whether or not something was done by or for the insured “with intent to bring about loss or damage” is the very same test which must be applied to decide whether the occurrence is an accident or whether it is a crime barring recovery.

RITCHIE J.—I have had the advantage of reading the reasons for judgment prepared for delivery by my brother Pigeon and I agree with him that this appeal should be dismissed and that the damages sustained by the respondent were due to an “accident” in the sense of “an unlooked for mishap or occurrence” which occurred during the policy period and which was attributable to the respondent’s negligence.

I do not, however, agree that the word “accident” as used in a comprehensive business liability insurance policy includes a “calculated risk” which phrase appears to me to imply the very antithesis of an “unlooked for mishap or occurrence”. I know of no principle of insurance law which would compel such a construction in such a policy, but as I regard my brother Pigeon’s expression of the contrary view as being an obiter dictum which is not necessary to his decision in this appeal, it does not prevent me from agreeing with his reasons for judgment in all other respects. I would accordingly dismiss this appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Alexander, Guest, Wolfe, Holburn & Beaudin, Vancouver.

Solicitors for the respondent: Bull, Housser & Tupper, Vancouver.

 



[1] [1973] 5 W.W.R. 212.

[2] (1970), 74 W.W.R. 228.

[3] (1970), 74 W.W.R. 110.

[4] [1972] 3 W.W.R. 735.

[5] [1974] S.C.R. 1189.

[6] [1934] S.C.R. 33.

[7] [1914] A.C. 461.

[8] [1960] S.C.R. 804.

[9] [1972] A.C. 153.

[10] (1941), 76 C.C.C. 196.

[11] [1971] S.C.R. 321.

[12] (1964), 49 W.W.R. 664.

[13] [1903] A.C. 443.

[14] [1910] A.C. 242.

[16] [1954] S.C.R. 169.

 

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