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By: Camille M. Dunbar, Litigation Associate

In Coachman Insurance Co. v. Kraft,[1] a recent decision of the Ontario Superior Court, the Court found that “use” of a “motorized vehicle” in a homeowner’s policy exclusion includes the conduct of a passenger on an ATV. Even as a passenger, one may exercise “some form of control over” a motor vehicle, sufficient to come within the definition of the term “use”.  In the underlying action, David Kraft (“Mr. Kraft”) was allegedly injured in a single-vehicle ATV accident caused by Barry Kelley’s (“Mr. Kelley”) negligent conduct. The ATV was owned and operated by Mr. Kraft. Mr. Kelley was a passenger seated behind Mr. Kraft, on the left side of the ATV’s rear rack. Mr. Kraft alleges that as he began to execute a turn, the ATV flipped backwards and landed on top of him causing significant injuries.

The relevant allegations against Mr. Kelley in the statement of claim were grouped by the Court into 3 categories:

  1. Allegations with respect to the negligent manner in which Mr. Kelley physically interacted with the ATV, or a part of the ATV, which caused the ATV to flip over. sitting/straddling the ATV or exiting the ATV in a manner that caused it to flip over (the “First Category”);
  2. Allegations that Mr. Kelley was negligent in the manner in which he interacted with Mr. Kraft during and after the time that the ATV flipped overe. physical contact with Mr. Kraft’s body which impeded Mr. Kraft’s ability to extricate himself when the ATV flipped over (the “Second Category”); and
  3. General allegations of negligent conduct which may have contributed to the alleged negligent conduct that comprises the other two categories. Mr. Kelley being intoxicated to the point he became a danger to others including Mr. Kraft and creating and perpetuating a situation of danger (“the Third Category”).[2]

At the time of the accident, Mr. Kelley was insured under a home insurance policy issued by Coachman Insurance Company (“Coachman”). The Coachman policy granted third party liability coverage for bodily injury and/or property damage fortuitously arising out of Mr. Kelley’s personal actions anywhere in the world. However, that coverage was subject to a series of enumerated exclusions, which included “claims due to a motorized vehicle or trailer that you own or use” [the “Motorized Vehicle Exclusion”]. The term “motorized vehicle” expressly included “all-terrain-vehicles”; however, the term “use” was not defined in the policy.

Coachman brought an application for a declaration that it did not owe a duty to defend or indemnify Mr. Kelley, asserting that the policy’s Motorized Vehicle Exclusion precluded coverage.

Mr. Kelley did not defend the underlying action and similarly, did not respond to Coachman’s application. However, Mr. Kraft, the plaintiff in the underlying action, argued that the allegations of liability against Mr. Kelley fell within the policy’s scope of coverage because the word “use” in the motorized vehicle exclusion should be construed as meaning “some measure of operational control over” a motorized vehicle, in this case the ATV. The allegations in the statement of claim did not assert that Mr. Kelly exercised “operational control” over the ATV and therefore they did not amount to allegations of his “use” of it.

Mr. Kraft’s own automobile insurer also intervened on the application pursuant to the underinsured coverage (OPCF 44R Family Protection endorsement), in support of Mr. Kraft’s position.

In finding that Coachman had a duty to defend Mr. Kelley in the underlying action, the Court first reviewed the well-established legal principles applicable to assessing an insurer’s duty to defend and the interpretation of insurance policies, generally. The Court pointed out that an insurer’s duty to defend (which is broader than its duty to indemnify) is triggered when a “mere possibility exists” that a pleaded claim falls within the scope coverage.[3] The Court also noted that where the language of the policy is ambiguous, the court should resolve the ambiguity in accordance with general rules of contract construction, contra proferentem and the principle that coverage clauses should be construed broadly in favour of the insured and exclusion clauses narrowly against the insurer.[4]

The Court found that the Motorized Vehicle Exclusion was ambiguous as it relates to the nature of the activities intended to constitute an insured’s “use” of a motorized vehicle. In resolving this ambiguity, the Court reviewed the relevant case law and narrowly construed the subject exclusion, finding that the Motorized Vehicle Exclusion is intended to apply when the insured’s negligence giving rise to liability is founded in an act or omission in which the insured exercises “some form of control over” a motorized vehicle and that conduct causes “bodily injury” or “property damage”.[5]

In each of the allegations in the First Category, the Court noted, there is an inference or expression that Mr. Kelley exercised “some form of control over the ATV”, because his various negligent actions and interactions with the ATV (or a part thereof) were alleged to be the direct cause of the ATV flipping over. As a result, the Court concluded that the allegations included in the First Category constituted “claims due to a motorized vehicle…used” by Mr. Kelley, within the meaning of the Motorized Vehicle Exclusion and therefore did not trigger Coachman’s duty to defend.

However, the Court found that the substance of the Second Category of allegations did not constitute claims due to Mr. Kelley’s “use” of a motorized vehicle within the meaning of the exclusion. In support of this conclusion, the Court noted as follows:

The basis for the liability asserted in the allegations included in the second category are not dependent on an allegation or finding involving the insured’s “use” of the ATV, within the meaning of the exclusion. The allegations in the second category do not plead any exercise of control by the insured over any aspect of the ATV. Rather, the asserted basis for liability is founded in: Mr. Kelley’s alleged unreasonable conduct in physically contacting Mr. Kraft’s body in a manner that prevented him from safely exiting the ATV; and Mr. Kelley’s breach of a pleaded duty “not to obstruct, delay or prevent Mr. Kraft from exiting the ATV in an emergency situation”. The substance of those allegations rests upon a claim that Mr. Kelley negligently interfered with Mr. Kraft’s person and his activities and that his conduct, in that regard, resulted in bodily injury to Mr. Kraft.[6]

The Second Category of allegations were distinct and divisible from the allegations of negligent use of the ATV by Mr. Kelley in the First Category. As a result, the Court held that the allegations in the Second Category triggered Coachman’s duty to defend.

With regards to the Third Category of allegations, the Court found these allegations were equally capable of applying to Mr. Kelley’s alleged negligence in the manner in which he interacted with the ATV and his alleged negligent interference with Mr. Kraft’s body and activities. The allegations that Mr. Kelley was negligent due to intoxication and creating a situation of danger could be read as elements of both Mr. Kelley’s negligent “use of/interference with” the ATV and his “negligent interference” with Mr. Kraft’s person and activities, thereby falling both within and outside of the Motorized Vehicle Exclusion. As a result, the Court concluded that the Third Category of allegations also engaged Coachman’s duty to defend.

The Court made a point to note that had Coachman wished to exclude coverage where the loss was concurrently caused by a covered peril and an excluded “motorized vehicle” peril, it ought to have employed specific language to achieve that result, as it did with another exclusion in the policy.[7]

As a result of the Court findings regarding the Second and Third Category of allegations, the Court held that Coachman owed a duty to defend Mr. Kelley in the underlying action. The Court also concluded that a determination of Coachman’s duty to indemnify was premature and should only be made after relevant findings of fact are made in the final disposition of the underlying action.

The Court in Coachman interprets the definition of “use” to include exercising “some form of control over” a vehicle. This “control” over a motorized vehicle, as we have seen in this case, can be exercised by not only an operator of a motorized vehicle, as one would expect, but also as a passenger. Counsel may wish to consider how this interpretation can be applied in other cases involving allegations of “use”.


[1] 2017 ONSC 1875 [“Coachman”].

[2] Coachman, supra at para 102. The relevant allegations against Mr. Kelley are set out in complete detail at para. 10 of the decision.

[3] Coachman, supra at para 23 citing Progressive Homes Ltd. v. Lombard General Insurance Co., 2010 SCC 33 at paras. 19-20.

[4] Coachman, supra at para 29.

[5] Coachman, supra at para 105.

[6] Coachman, supra at para. 107.

[7] Coachman, supra at para. 114.

Camille M. Dunbar is an associate at Theall Group LLP and maintains a broad civil/commercial litigation practice. Prior to joining Theall Group LLP, Camille summered and articled at the Toronto office of a prominent national business law firm, gaining commercial litigation experience in class proceedings, injunctions, franchise disputes, professional liability, employment law, municipal liability and negligence/product liability. Camille graduated from Osgoode Hall Law School in 2013 and was called to the Ontario Bar in 2014.

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