ONTARIO COURT OF APPEAL PROVIDES CLARIFICATION ON OVERLAPPING INSURANCE POLICIES CONTAINING “OTHER INSURANCE CLAUSES”

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In the recent Ontario Court of Appeal case, TD General Insurance Co. v. Intact Insurance Co., [2019] ONCA 5, the passenger of a boat sustained injuries when the boat struck the shoreline. 

The passenger sued both the driver and the owner of the boat.  Two insurance policies were triggered by the loss. The owner of the boat held a TD insurance policy that covered the driver, who was driving the boat with the owner’s permission. The driver was also covered by his own homeowner’s policy, issued by Intact.

The two policies had identical “other insurance clauses”. The clauses provided as follows:

If you have other insurance which applies to a loss or claim, or would have applied if this policy did not exist, this policy will be considered excess insurance and we will not pay any loss or claim until the amount of such other insurance is used up.

TD brought an application seeking an order that both insurance companies were on an equal footing and had to share equally in the defence and indemnity of the driver stemming from the passenger’s claim.

The application judge dismissed the application. TD appealed the decision.

On appeal, the Ontario Court of Appeal found that the application judge erred in its application of the governing authority – the Supreme Court’s decision in Family Insurance Corp. v. Lombard Canada Ltd., [2002] 2 S.C.R. 695 and clarified its application in instances of overlapping insurance policies with “other insurance clauses” covering the same loss.

The Court determined that the analysis in instances of overlapping coverage would boil down to two questions:

  • Whether there was overlapping coverage; and
  • Whether the insurers intended to limit their obligation to contribute, by what method, and in what circumstances vis-a-vis the insured. 

The focus of the second question was with respect to the excess insurance clauses.  Since both insurance policies had identical “other insurance clauses”, the Court found that if the claim exceeded the limits of the Intact policy, TD would be the excess insurer. In this way, the limiting obligations of the two policies were found to be irreconcilable and the two insurers had to share the burden equally under a coordinated obligation to make good the loss. 

The appeal was allowed and the two companies had to share equally in the defence and indemnity of the driver.