Oh Deer!!

A consignment of temperature-controlled Orange Juice, in its retail packaging, was being transported in a refrigerated trailer using services of a third party common carrier. The driver, enroute, witnessed an incident where a car rammed over a poor deer crossing the road, killing the same. What the driver did next was not foreseeable. The driver got down off the truck and picked up the road kill, and put it inside the refrigerated trailer, alongside the Orange Juice. Well he might have got some dinner plans! What he did next was not just not foreseeable, was simply unimaginable. He delivered the consignment with the deer still lying inside the trailer. Not surprisingly, the shipment got rejected and a liability claim was then pursued by the common carrier under its motor truck cargo legal liability policy.

As with any insurance policy, willful misconduct and intentional acts leading to damages are not afforded with any coverage. However, the question arose, whether the act of picking a road kill and delivering a consignment of edible product with the road kill inside the trailer was willful misconduct on part of the driver (employee of the common carrier) or was it simply an action amounting to ignorance.

In Peracomo Inc. v. TELUS Communications Co., 2014, a crab fisherman [“V”], was fishing when one of his anchors snagged a cable lying on the river bottom. To disentangle his fishing gear from the cable, he cut the cable using an electric saw after raising it to the surface of the river. The fisherman wrongly believed that the cable was not in use, based entirely on a handwritten note on some sort of a map that he had seen for a few seconds the year before on a museum wall. The cable was a live fiber-optic submarine cable and the incident resulted in almost $1 million in damage.

The Supreme Court of Canada held that [Per McLachlin C.J. and Rothstein, Cromwell and Karakatsanis JJ.]:

For insurance purposes, the fact that V believed that the cable was not in use is beside the point. V knew that what he was cutting was a submarine cable. He adverted to the risk that it could be in use but failed to make further inquiries in order to confirm or dispel his belief that the cable was abandoned and useless. His conduct exhibited a reckless indifference to the possible consequences of his actions of which he was actually aware. He thus committed an act of wilful misconduct: he ran an unreasonable risk with subjective knowledge of that risk and indifference as to the consequences.

Per Wagner J. (dissenting):

“Wilful misconduct requires either a deliberate act intended to cause the harm, or such blind and uncaring conduct that one could say that the person was heedless of the consequences. Conduct exhibiting reckless indifference in the face of a duty to know cannot be characterized as wilful misconduct unless it is proven that at the time of the wrongful act, the person who committed it had subjective knowledge of the loss that would result. Proving conduct exhibiting reckless indifference in the face of a duty to know is but the first step, as it must then be proven that this misconduct was wilful. If after considering the possible consequences of an act, an insured sincerely, although erroneously, believes that the act will cause no loss, his or her misconduct cannot be characterized as wilful.

The fact that a reasonable person ought to have known, or that a person had a duty to know, does not suffice to justify a finding that an act has the characteristics of wilful misconduct: it is also necessary to establish that the person intended to cause the loss, and to prove gross negligence or misconduct in which there is a very marked departure from the conduct of a reasonable person.

This definition clearly does not apply to V’s conduct. He sincerely believed the cable was not in use. Nothing in the record supports a finding that V actually knew or had any suspicion that the cable was in use. Nor is there any support in the record for a conclusion that V had knowledge of the loss that would result, let alone that he intended to cause such a loss. This shielded him from being deprived of coverage under his liability insurance policy while at the same time enabling him to limit his liability.

Interestingly, both the above interpretations could be applied to the Deer claim.

The insurance broker argued that the act was not intentional from the perspective that the driver had intentions to damage the consignment. While the examiner argued reckless behaviour on part of the driver with complete indifference to the consequences. The claim was settled on a without prejudice and non-precedent basis, but the interesting question is still moot.

In Pinder v. Farmers’ Mutual Insurance, 2018, the Ontario Superior Court of Justice rejected the plaintiff’s submission that errors on the proof of loss, in absence of an intention to defraud the insurers, should not constitute “wilfully false” statement and must be considered as a statement made inadvertently or carelessly. The coverage under the insurance policy was thus void.

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