Supreme Court of Canada
Indemnity Insurance Co. of North America v. Excel
Cleaning Service, 1954 S.C.R. 169
Date: 1954-04-12
Indemnity Insurance
Company of North America (Defendant) Appellant;
and
Excel Cleaning
Service (Plaintiff) Respondent.
1953: October 15; 1954: April 12.
Present: Kerwin, Rand, Estey, Locke and
Cartwright JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
ONTARIO.
Insurance—Contractors Liability Policy
issued “on location” cleaning service—Property in care, custody and control of
insured excluded from risk—Whether damage to rug fastened to floor within
exclusion.
The appellant by a “Contractors Liability
Policy” agreed by “Coverage B” to indemnify the respondent in respect of all
sums it should be obligated to pay because of injury to property arising out of
the respondent’s work caused by accident. Exclusion clause (g) provided
that the policy did not apply “to damage to or destruction of property owned,
rented, occupied or used by or in the care, custody or control of the insured.”
The respondent operated an “on location” cleaning service and due to a
defective cleaning machine, caused damage to a rug it was cleaning in the home
of its owner. The rug, which extended from wall to wall, was tacked down all
the way round the edges by a quarter round. The rug’s owner obtained judgment
against the respondent and the latter sought to recover under its policy. The
appellant contended that it was relieved of liability under the exclusion
clause (g).
Held: (Kerwin
and Cartwright JJ. dissenting) that the exclusion clause (g) did not
apply to relieve the appellant of its liability.
Per: Rand J.
The rug, attached as it was to the floor, was for the purposes of the service
in the same relation to “care, custody or control” of the respondent as the
surface of the floor itself. The obligation to do the work upon the property
was in contemplation of law to do it while the property remained within the
exclusive care and control of the owner. Clearly custody was not transferred;
the only care called for was in the execution of the service, not toward the
property as such; and no control, in a proprietory sense was intended.
Per: Estey J.
The exclusion clauses were general in character and not directed to any special
undertaking such as that of the respondent. In this context the words “care,
custody and control” as cited in clause (g) might be variously construed
and therefore should be construed in a manner favourable to the insured. Cornish
v. The Accident Ins. Co. 23 Q.B.D. 453 at 456; Woolfall & Rimmer
Ltd. v. Moyle [1942] 1 K.B. 66 at 73.
Locke J. would dismiss the appeal for the
reasons stated by Laidlaw J. in delivering the unanimous judgment of the Court
of Appeal, [1953] O.R. 9.
Per: Kerwin J.
(dissenting).—Exclusion (g) must be read with coverage B as the agreement
of the appellant to pay was made subject to the exclusions. “Property” included
real and personal property and the clause must be read disjunctively. The rug
was in the respondent’s
[Page 170]
safekeeping in the sense that the respondent
was not to damage it and, to that extent at least, it had “authority” over the
rug. With the consent of the owner the respondent had taken such possession as
was possible. Hardware Mut. Cas. Co. v. Mason-Moore-Tracey Inc. 194
F. 2d. 173 referred to.
Per: Cartwright
J. (dissenting)—It is not necessary to determine whether there was technically
a bailment of the rug. The words “care”, “custody” and “control” are used
disjunctively in clause (g) and interpreting them in their plain,
ordinary and popular sense the respondent, at the time the damage was done, had
both the care and control of the rug and had the owner taken it out of his
control before the work was finished he would thereby have committed a breach
of the contract.
Judgment of the Court for Ontario [1953] O.R.
9, affirmed, Kerwin and Cartwright JJ. dissenting.
APPEAL by the defendant by special leave of
the Court of. Appeal for Ontario from a judgment of that Court affirming a decision of the County Court of
the County of York in favour of the plaintiff.
G.N. Shaver, Q.C. for the appellant.
J.H. Osler for the respondent.
KERWIN J. (dissenting):—By special leave of the
Court of Appeal for Ontario, Indemnity Insurance Company of North America
appeals from a judgment of that Court1 affirming a decision of the
County Court of the County of York. The question is whether under a
contractors’ liability policy of insurance issued by the appellant to the
respondent, Excel Cleaning Service, the former is liable to indemnify the
latter against a judgment by which the respondent became obligated to pay John
H. King the sum of $500 for damages and costs. Counsel for the appellant
contended that, assuming it would be so liable by virtue of the provisions of
“Coverage B” of the insuring agreements in the policy, Exclusion (g) in
the policy relieved it of that liability. This is the sole point to be
determined.
As stated in the Declarations in the policy, the
respondent carried on, in Toronto and the surrounding territory, the business
of “General Household Cleaning Service (including cleaning of walls, floors,
furniture, etc.).” According to the evidence it was an “on location cleaning
service”, that is, the cleaning at a house of everything therein, such as
walls, windows, floors, rugs, upholstery and
[Page 171]
furniture, but excepting drapes and lamp shades,
the cleaning of which the respondent sublet to others who did the necessary
work at their own premises, or at any rate away from those of the owner. By the
policy the appellant “AGREES WITH THE INSURED, named in the declarations made a
part hereof, in consideration of the payment of the premium and in reliance
upon the statements in the declarations and subject to the limits of liability,
exclusions, conditions and other terms of this policy:
INSURING
AGREEMENTS
* *
*
Coverage B—Property Damage Liability
To pay on behalf of the insured, provided
premium is charged under Coverage B in the declarations, all sums which the
insured shall become obligated to pay by reason of the liability imposed upon
the insured by law for damages because of injury to or destruction of property,
including the loss of use thereof, arising out of the work of the insured and
during the prosecution thereof, caused by accident, including accidents
occurring after completion or abandonment of the operations and arising out of
pick-up or delivery operations or the existence of tools, uninstalled equipment
and abandoned or unused materials, or occurring elsewhere if caused by an
employee of the insured while engaged in the performance of his duties for the
insured in connection with the work at such locations.
Under the heading “Exclusions” appears the
following:—
This policy does not apply:
* *
*
(g) to damage to or
destruction of property owned, rented, occupied or used by or in the care,
custody or control of the insured.
During the currency of the policy the respondent
agreed with John H. King to clean in his home some furniture and a broadloom
rug. The necessary cleaning fluid and equipment were taken there by one of the
members of the respondent partnership and one of its employees. At the trial an
other partner agreed that the respondent’s advertising circulars correctly put
the position in stating:—“You (the customers) are free to stay at home and just
watch, or take the day off and return to a shining clean house.” On this
particular occasion Mr. King was not at home and, while his wife was, the
witness could not say if she was in the room containing the rug when an
accident occurred. Mr. King had had the rug tacked to the floor all the way
around the edges by a quarter-round. The two workmen were cleaning it with a
second-hand cleaning machine
[Page 172]
which, as it transpired, was defective inasmuch
as the detergent tank had become rusted and a trip on the tank was also faulty.
During the process of cleaning and while the machine was stopped so that the
tank might be refilled some of the detergent leaked out and formed a spot on
the rug although the damage was not evident for some hours. It was for this
damage that Mr. King sued the respondent and recovered judgment.
It appears from the evidence; (a) the
tacks had not been removed; (b) Mrs. King did not touch the rug
while the workmen were cleaning it; (c) if she had made any suggestions
as to the method to be employed, they would have considered they knew more
about the matter than she but, of course, if she had told them to stop, they
would have done so.
Exclusion (g) must be read with
Coverage B as the agreement on the part of the appellant to pay is made subject
to the exclusions. I am unable to agree with the trial judge’s conclusion that
temporary care, custody or control by the respondent arising out of its work or
during its duration is not covered by (g) as that would be
inserting a limitation upon the words that is not justified. The reasons for
judgment of the Court of Appeal were delivered by Laidlaw J.A. He decided that
the words involved actual possession of the property that was damaged, and then
proceeded:—
Care in the sense in which it is used in
the paragraph is synonymous with “safe‑keeping”; “custody” imports some
authority over the property; “control” supposes physical possession of property
over which control may be exercised. The respondent did not assume the care,
custody or control of the property or the responsibilities incidental thereto
and the owner did not transfer or surrender such care, custody or control to
the respondent. Indeed I think the respondent had no right, without special
permission or authority from the owner, to remove any of the quarter-round
strip or any nails holding the rug to the floor or to alter the position of the
rug in any way or otherwise exercise control in respect of it in the course of
cleaning. The respondent and its employees were simply “on location” in the
house of the owner of the rug for the purpose of doing certain specific work.
The mere fact that they were engaged there in the performance of that work did
not give them the care, custody or control of the property on which the work
was being done.
As to this it is important to note that “property”
includes real and personal property and that the clause must be read
disjunctively. If Mrs. King had left her home upon the arrival of the
workmen, the rug would surely have been
[Page 173]
in the care, custody or control of the
respondent, and the mere fact that she was in the house does not alter the
position, even though the rug was held to the floor by tacks and the quarter‑round.
There is nothing to indicate that the respondent’s contract with Mr. King
involved the removal of the rug from the floor and in fact it was being cleaned
in the position it occupied; but it was in the respondent’s safekeeping in the
sense that the respondent was not to damage it and, to that extent at least, it
had “authority” over the rug. With the consent of the owner the respondent had
taken such possession of it as was possible.
None of the decisions referred to are precisely
in point but some assistance is to be gained from a perusal of the judgment of
the United States Court of Appeals, Second Circuit, in Hardware Mut. Cas.
Co. v. Mason-Moore-Tracey Inc.
The Court consisted of Chief Judge Swan, Judge Learned Hand and Judge Agustus
N. Hand, the judgment being delivered by the latter. The action was upon an
insurance policy and the exclusion to the coverage of property damage liability
was the same as Exclusion (g) except that the word “injury” was
substituted for the word “damage”. The actual decision was upon the word “used”
and it was held that an insured had been using an elevator in a building not
owned or rented by it and over which building it had no “control”,
notwithstanding that the insured’s use of the elevator might have been in
conjunction with others.
The appeal should be allowed, the judgments
below set aside and the action dismissed. In accordance with the undertaking of
the appellant to the Court of Appeal when leave was given to come to this
Court, the dismissal is without costs and there will be no costs in the Court
of Appeal but the appellant will pay the respondent $350 for its costs in this
Court in addition to the costs of printing its factum.
RAND J.:—The respondents conduct what is known
as an “on location” cleaning service of walls, floors, ceilings, furniture and
rugs, on the premises of its customers, including such articles as drapes and
lamp shades done by out-
[Page 174]
side specialists in cleaning them. In the course
of servicing a rug held down by tacks and a half-round border strip, a
destructive fluid escaped from the cleaning machine and the rug was ruined.
Action was brought and damages recovered.
The respondents were insured by the appellants
under what is called a “Contractor’s Liability Policy” and a claim to be
indemnified against the judgment is the matter of this appeal. The applicable
obligation is in these words:—
COVERAGE
B—PROPERTY DAMAGE LIABILITY
To pay on behalf of the insured, provided
premium is charged under Coverage B in the declarations, all sums which the
insured shall become obligated to pay by reason of the liability imposed upon
the insured by law for damages because of injury to or destruction of property,
including the loss of use thereof, arising out of the work of the insured and
during the prosecution thereof, caused by accident, including accidents
occurring after completion or abandonment of the operations and arising out of
pick-up or delivery operations or the existence of tools, uninstalled equipment
and abandoned or unused materials, or occurring elsewhere if caused by an
employee of the insured while engaged in the performance of his duties for the
insured in connection with the work at such locations.
From the scope of this there are certain
exclusions, and that with which we are here concerned is:—
This policy does not apply:
* *
*
(g) To damage to or
destruction of property owned, rented, occupied or used by or in the care,
custody or control of the insured.
The sole ground taken is that no claim arises
because the rug at the time of being damaged was “in the care, custody or
control of the insured”; and it is not contended that in the absence of the exclusion,
liability would not have arisen.
I am unable to accept Mr. Shaver’s argument
that the case is within the exclusion. The rug, attached as it was, to the
floor, was, for the purposes of the service, in the same relation to “care,
custody or control” of the respondents as the surface of the floor itself. The
owner, continuing in the ordinary relation to his property, engages for work to
be done to or upon it as it is in situ. Obviously while the respondents
are in the process of cleaning any article, a de facto impact on the
dominion over it is involved; but it is only of the nature of something imposed
upon that dominion, not derogating from it; or, to put it in another form, the
obligation to do work upon the property is in
[Page 175]
contemplation of law to do it while the property
remains within the exclusive care and control of the owner. Clearly custody was
not transferred; the only care called for was in the execution of the service,
not toward the property as such; and no control, in a proprietary sense, was
intended. Either care or control would have involved some degree of
responsibility towards the property, apart from and in addition to that
relating to the application to it of the cleaning process. The situation was
one in which all proprietary relations remained in the owner and only an
operating responsibility towards the property arose.
The appeal should be dismissed with costs.
ESTEY J.:—The respondent’s business is cleaning
the interior of homes, including furniture and rugs. On November 5, 1951, two
of the respondent’s employees attended at the home of J.H. King and, while in
the course of cleaning a rug, damaged it, for which J.H. King obtained judgment
against respondent in the sum of $450 and costs.
The respondent was, at all times material
hereto, insured by appellant under a policy of insurance styled “Contractors
Liability Policy” and in this action sought to be indemnified for the said
amounts under the terms of that policy.
The relevant provisions of the policy read:
Coverage
B—Property Damage Liability
To pay on behalf of the insured, provided
premium is charged under Coverage B in the declarations, all sums which the
insured shall become obligated to pay by reason of the liability imposed upon
the insured by law for damages because of injury to or destruction of property,
including the loss of use thereof, arising out of the work of the insured and
during the prosecution thereof, caused by accident, including accidents
occurring after completion or abandonment of the operations and arising out of
pick-up or delivery operations or the existence of tools, uninstalled equipment
and abandoned or unused materials, or occurring elsewhere if caused by an
employee of the insured while engaged in the performance of his duties for the
insured in connection with the work at such locations.
The rug here in question was damaged by the
presence of rust in the equipment used by the insured in the process of
cleaning it. There would appear to be no doubt that if the foregoing provision
was alone relevant the respondent should recover. The appellant, however,
contends that its liability thereunder is excluded by the last of a number of
[Page 176]
exclusion clauses lettered (a) to (g),
and particularly because of the words “care, custody or control” in the latter.
The clause reads:
(g) to damage to or
destruction of property owned, rented, occupied or used by or in the care,
custody or control of the insured.
In support of its contention that the rug, while
being cleaned, was in the care, custody or control of respondent, reliance was
placed upon the evidence that respondent, while following its usual practice at
King’s home, was in “complete charge or control of the furniture and rug in
order to clean them” and that upon this occasion, though Mrs. King was at
home, she did not in any way interfere with the work. In the course of the
evidence the following questions and answers appear:
Q. And you and your associate took complete
charge of the front room and did the furniture and the rug in the room?—A. That
is correct.
Q. And of course Mrs. King was the
lady of the house, and, if she told you that she did not want you there any
more—“Go out about your business”, you would have stopped and gone away?—A.
Absolutely.
It was a wall-to-wall rug “tacked down all
around by the quarter-round.” Neither of the parties to the cleaning contract
contemplated that it would be, nor was the rug, in fact, moved throughout the
process of cleaning it, which was effected by the operation of a machine
thereon. It was the first time respondent had used the machine and the unknown
presence of rust caused the damage, which was not discovered until the rug had
dried.
The appellant relied upon a number of cases
decided in the United States under exclusion clauses containing somewhat
similar provisions. Hardware Mutual Casualty Co. v. Mason‑Moore-Tracey,
Inc., though
dealing with an exclusion clause identical in language, is quite
distinguishable upon its facts. There the insured, in the course of its
business of moving machinery and equipment, was moving a heavy piece of
machinery out of a building and, at the material time, was using the elevator
to effect that end. The elevator was damaged and because it was being “used by”
the insured in moving the machinery it was within the exclusion clause. It is,
therefore, quite distinguishable, as there the insured was not employed in
respect to the elevator which, however, he used to carry out his contract to
move the heavy machinery.
[Page 177]
In State Automobile Mutual Insurance Co. v.
Connable Joest, the
insured operated a garage. A customer left his automobile with the insured to
have it greased and the oil changed some time during the day and when the work
was finished he was to be notified. While the employees, in the course of their
work, had the automobile elevated on a hoist it crashed to the floor. The
insured carried a public garage liability insurance policy which contained an
exclusion clause reading as follows:
For damages to or destruction of property
owned, rented, leased, in charge of, or transported by the assured.
The insured, while the automobile was at its own
garage for the specified purpose, was held to be “in charge” thereof.
In Guidici v. Pacific Automobile
Insurance Co., an
automobile, while at the insured’s, garage for repair, was destroyed by fire.
It was held that while at his garage it was “in charge” of the insured.
In Monroe County Motor Co. v. Tennessee
Odin Ins. Co., one
driving an automobile upon a public highway was held to be “in charge” thereof,
although its owner was seated beside him. It is the driver who is in actual
physical control of an automobile.
The phrase “in charge,” as construed in the last
three mentioned cases, means that one who can be properly so described must
have either physical possession or control of the chattel.
The respondent described its business as an “on
location cleaning service.” The cleaning equipment is taken to the home or
premises of the customer and the work of cleaning completed on his premises. If
the above-quoted evidence to the effect that the respondent took complete
charge of the front room and did the furniture and rug therein is construed as
the appellant contends it should be, then in its submission the respondent had
in this case “care, custody or control” of everything in the room and,
therefore, so far as this and, one would gather, the great majority of its
cleaning jobs are concerned the respondent would have no coverage,
notwithstanding the comprehensive character of the language used in Coverage B,
and particularly the phrase “arising out of the work of the insured.” Such a
[Page 178]
construction would largely, if not completely,
nullify the purpose for which the insurance was sold—a circumstance to be
avoided, so far as the language used will permit. Cornish v. The
Accident Insurance Co., where
at p. 456 Lindley L.J. stated:
The object of the contract is to insure
against accidental death and injuries, and the contract must not be construed
so as to defeat that object, nor so as to render it practically illusory.
While in the construction of each exclusion
clause effect must be given to the language thereof, it is of some assistance
to observe the general nature of the provisions of these clauses as set out in
the policy under the heading “Exclusions.” Apart from those dealing with
liability assumed by the insured, bodily injuries to employees and claims under
the Workmen’s Compensation Act, they contain certain provisions with respect to
property damage. Clause (d) excludes liability in respect to.
“property damage caused by any escalator elevator, hoist, or the appliances
thereof… at premises owned, rented, or controlled in whole or in part by the
insured…”; then in (e) “property damage caused by the ownership,
maintenance or use of: (1) aircraft…(2) boats or dogs… (3) draft or saddle
animals…”: In (f) it is provided that “property damage resulting from
work performed for the insured by any independent contractor or independent
sub-contractor” shall be excluded.
These clauses are directed to damage caused by factors
that are quite separate and distinct from those which would usually arise out
of a contract for cleaning furniture and rugs upon the premises of their owner.
In fact they emphasize what is apparent from a perusal of the policy as a whole
that it was prepared as a general policy and not directed to any specific
undertaking such as that of the respondent, a feature which often creates
difficulties in construing the language as applied to a particular coverage.
Whether, in such a context, the parties to the
contract, in the words “care, custody or control” of clause (g), have
excluded the respondent’s recovery for damages resulting
[Page 179]
from the cleaning of the rug here in question
must be determined by construing the words upon a reading of the contract as a
whole and with particular reference to the coverage purchased by the insured.
If clause (g), as suggested, be
divided into three parts, first, “property owned, rented, occupied,” second,
property “used by,” third, property “in the care, custody or control of the
insured,” support is found for the view that the clause here in question, under
the third heading, will only apply where the insured has at least had
the chattel in his possession.
Reference to the Oxford Dictionary discloses
that these words, as commonly used, possess a variety of meanings. A study
thereof does indicate that as here used “care” would include a measure of
protection and preservation, “custody” of safekeeping and protection and
“control” of direction or domination.’ Respondent and his customer King
contemplated that the rug, in the process of cleaning, would not be
moved. In the circumstances respondent had but a permission to go upon the rug,
to move the furniture and to place thereon such equipment as might be necessary
for the cleaning thereof. In the course of his work respondent would have a
duty to use due care, much as any other person who might have permission to
walk thereon. It does not appear that here the respondent has assumed any
responsibility in respect to preservation, safekeeping, protection, direction
or domination, as contemplated in the phrase “care, custody or control” as used
in clause (g).
When regard is had to the possible meanings of
the words “care,” “custody” and “control” as they are here used as part of
general provisions prepared without reference to the particular coverage
purchased by the respondent, together with what is perhaps the more important
consideration that, if construed as the appellant submits, these words would
largely, if not entirely, nullify the usefulness of the insurance purchased, it
is difficult to determine the precise meaning that ought to be attributed to
these words.
It is, in such a case, a general rule to
construe the language used in a manner favourable to the insured. The basis for
such being that the insurer, by such clauses, seeks to impose exceptions and
limitations to the coverage he
[Page 180]
has already described and, therefore, should use
language that clearly expresses the extent and scope of these exceptions and
limitations and, in so far as he fails to do so, the language of the coverage
should obtain. Lord Justice Lindley stated:
In a case on the line, in a case of real
doubt, the policy ought to be construed most strongly against the insurers;
they frame the policy and insert the exceptions. Cornish v. The
Accident Insurance Co., supra, at p. 456.
See also Blackett v. Royal Exchange
Assurance Co.; Hawthorne
and Boulter v. Canadian Casualty and Boiler Insurance Co. Furthermore, the language of Lord Greene in
Woolfall & Rimmer, Ltd. v. Moyle, is appropriate. He there states:
I cannot help thinking that, if
underwriters wish to limit by some qualification a risk which, prima facie,
they are undertaking in plain terms, they should make it perfectly clear what
that qualification is.
In my view the respondent did not have in its
care, custody or control the rug here in question within the meaning of clause (g)
and the appellant is liable to the respondent under Coverage B.
The appeal should be dismissed with costs.
LOCKE J.:—I would dismiss this appeal with costs
for the reasons stated by Mr. Justice Laidlaw in delivering the unanimous
judgment of the Court of Appeal, with
which I respectfully agree.
CARTWRIGHT J. (dissenting):—The facts and the
terms of the policy of insurance so far as they are relevant to the question
before us are stated in the reasons of my brother Kerwin.
The facts being undisputed, the question which
we have to decide depends on the construction of the policy. We are
particularly concerned with the words of “Exclusion” (g), as the
appeal was argued on the assumption that the appellant was liable unless
relieved by this clause.
No authority is required for the propositions,
that the policy must be construed as a whole, and, that the words used are to
be understood in their plain, ordinary and popular sense. It is stated in the
policy that the trade,
[Page 181]
business or work covered by the policy is
“General Household Cleaning Service (including cleaning of walls, floors,
furniture, etc).” The work being done by the respondent at the time the rug was
damaged was the sort of work described in the policy and was being carried on
in the usual way, that is to say, the owner, having agreed with the respondent
as to the articles which it was to clean, left it to the respondent to carry
out the work of cleaning in its own way. The contract between the owner of the
rug and the respondent appears to fall within the description of “locatio
operis faciendi” contained in the text books; see, for example, Halsbury,
2nd Edition, Vol. 1 at page 766:—
“Hire of Work and Labour.” This class of
bailment (locatio operis faciendi) is a contract in which one of the two
contracting parties undertakes to do something to a chattel, e.g., to carry it
or repair it, in consideration of a price to be paid to him. It is essential to
constitute a valid contract of this description that there should be some work
to be performed in connection with a specified chattel, and that money should
be agreed to be paid as the price of the labour.
However, I do not find it necessary to determine
whether there was technically a bailment of the rug. I do not read the words of
clause (g) as covering only cases in which the owner of the
property damaged has, in contemplation of law, transferred the possession of
such property to the respondent. In my opinion, in the circumstances of this
case a person in the situation of the parties would have regarded the rug and
the other articles of furniture which the respondent had agreed to clean as being
in the care or control of the respondent so long as the cleaning operation was
in progress. The words “care”, “custody” and “control” are used disjunctively
in clause (g) and it seems to me that interpreting the words in
their plain, ordinary and popular sense the respondent, at the time the damage
was done, had both the care and control of the rug and that had the owner taken
it out of the respondent’s control before the work of cleaning was finished he
would have thereby committed a breach of contract.
I agree with Mr. Shaver’s submission that
resort can properly be had to the maxim “Verba chartarum fortius accipiuntur
contra proferentem” only if the Court is unable
[Page 182]
to determine the meaning of the words it is
called upon to construe after calling in aid all relevant rules of
construction.
I would dispose of the appeal as proposed by my
brother Kerwin.
Appeal dismissed with costs.
Solicitors for the appellant: Shaver,
Paulin & Branscombe.
Solicitors for the respondent: Joliffe,
Lewis & Osler.
Email this Content