Stolberg v. Pearl Assurance Company Ltd., [1971] SCR 1026

Supreme Court of Canada

Stolberg v. Pearl Assurance Company Ltd., [1971] S.C.R. 1026

Date: 1971-04-27

John Stolberg (Plaintiff) Appellant;

and

Pearl Assurance Company Limited (Defendant) Respondent.

1971: March 16; 1971: April 27.

Present: Martland, Ritchie, Hall, Spence and Laskin JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Insurance—Comprehensive liability policy—Appellant one of four named insured—Judgment obtained against appellant by widow of employee of another named insured—Claim for indemnity—Whether clause excluding liability arising out of bodily injury, including death resulting therefrom, sustained “by any employee of the insured” applicable.

On December 31, 1963, the respondent issued a comprehensive liability insurance policy insuring three related companies. On December 31, 1964, the policy was renewed for one year and an endorsement was added, the effect of which was to add the appellant in his personal capacity as an insured under the policy.

One of the insured companies (Stolberg Mill Construction Ltd.) had a contract to erect a warehouse and the appellant on behalf of the company was supervising the construction of the building. On April 7, 1965, the warehouse collapsed, resulting in the death of one K, an employee of the construction company. K’s Widow sued the appellant for negligence and in that action judgment was awarded against him for. $75,000 and costs.

The appellant brought an action for indemnity under the policy, which the respondent had denied on the ground that an exclusion clause applied. The action was dismissed at trial and the dismissal was upheld by a majority in the Court of Appeal. An appeal was then brought to this Court.

The sole question to be decided was whether the words in the exclusion clause “by any employee of the Insured” excluded from the coverage claims against the appellant arising out of the death of K who was employed by another named insured.

Held: The appeal should be allowed.

[Page 1027]

To deny recovery by the appellant it would be necessary to read the phrase “sustained by any employee of the Insured” as if it read “sustained by any employee of any of the Insured”.

The exception, in respect of any claim under the policy, must be construed in the same manner as the clause defining the coverage in respect of that claim, as it is an exception from that coverage. The “Insured” for the purpose of that exception must, in respect of such claim, be the same “Insured” as the one or the ones who rely upon the coverage. In respect of the present claim only the appellant was the “Insured” who had coverage under the policy. Consequently, in respect of this claim, he was the “Insured” who was referred to under the exception clause, and, that being so, the exception only applied if indemnity was sought by a person covered by the policy in respect of liability imposed upon him as a result of a claim made by his employee in respect of injuries sustained while engaged in his duties as such employee. This was not the situation in this case.

APPEAL from a judgment of the Court of Appeal for British Columbia[1], dismissing an appeal from a judgment of Wilson C.J.B.C., dismissing the plaintiff’s action for indemnity under a policy of liability insurance. Appeal allowed.

A.D. McEachern, for the plaintiff, appellant.

J.P. van der Hoop, for the defendant, respondent.

The judgment of the Court was delivered by

HALL J.—On December 31, 1963, the respondent issued a comprehensive liability insurance policy insuring Stolberg Mill Construction Ltd. and/or Stolberg Construction (1957) Ltd. and/or Stolberg Installation Ltd. being three related companies carrying on business at Richmond in the Province of British Columbia.

The coverage under the policy, in so far as it is relevant to the instant appeal, reads:

COVERAGE A—BODILY INJURY LIABILITY. To pay on behalf of the Insured all sums which the

[Page 1028]

Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured or assumed by the Insured under any agreement as hereinafter described, for damages including damages for care and loss of services, because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person during the Policy Period.

On December 31, 1964, the policy was renewed for one year and the following endorsement was added:

IT IS HEREBY UNDERSTOOD AND AGREED that the name of the Insured on the Policy to which this endorsement is attached is as follows and ceases to read as heretofore written.

“STOLBERG MILL CONSTRUCTION LTD. and/or STOLBERG CONSTRUCTION (1957) LTD. and/or STOLBERG INSTALLATION LTD. and/or JOHN STOLBERG, as their interests may appear.”

It is further understood and agreed that this said policy shall cover JOHN STOLBERG only with respect to liability arising out of the operations of STOLBERG MILL CONSTRUCTION LTD. and/ or STOLBERG CONSTRUCTION (1957) LTD. and/or STOLBERG INSTALLATION LTD.

This endorsement becomes effective on the 31st day of December, 1964, and terminates with the termination of the policy.

Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, agreements or limitations of the undermentioned policy, other than as above stated. This endorsement when countersigned by a duly authorized representative of the undermentioned Company and attached to policy No. 5-19506 issued to STOLBERG MILL CONSTRUCTION LTD. et al of Richmond, B.C. shall be valid and shall form part of said policy.

The effect of the endorsement was to add the appellant, John Stolberg, in his personal capacity as an insured under the policy. Stolberg was at all material times the president of Stolberg Mill Construction Ltd. and an officer and director of Stolberg Construction (1957) Ltd. and Stolberg Installation Ltd.

[Page 1029]

Stolberg Mill Construction Ltd. had a contract to erect a warehouse for MacMillan Bloedel Powell River Ltd. and the appellant on behalf of Stolberg Mill Construction Ltd. was supervising the erection of the warehouse. On April 7, 1965, the warehouse collapsed, resulting in the death of Arnold Frederick King, an employee of Stolberg Mill Construction Ltd. King’s widow sued Stolberg for negligence and in that action judgment was awarded against him for $75,000 general damages, $113.13 special damages and costs. He was also condemned to pay the costs of an appeal which was taken from that judgment to the Court of Appeal for British Columbia.

On being sued, Stolberg claimed to be indemnified under the policy in question. The respondent denied liability to Stolberg and refused to undertake the defence of the King action and refused to indemnify Stolberg for his liability under the judgment against him in favour of King’s widow and refused to pay or be responsible for any of the costs for which Stolberg was made liable and for his costs of the litigation.

The position taken by the respondent was that the policy did not cover the injury to and death of King. The respondent relied on Exclusion 6 of the policy which reads:

This Policy shall not provide insurance against liability:

UNDER COVERAGE “A”

Arising out of:

6. Bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any employee of the Insured while engaged in his duties as such, other than that assumed under any agreement as hereinafter described.

It is common ground that the deceased King was not an employee of the appellant, John Stolberg, but he was an employee of Stolberg Mill Construction Ltd. at the time of his death.

The sole and important question to be decided is whether the words “by any employee of the Insured” exclude from the coverage claims against Stolberg arising out of the death of King who was

[Page 1030]

employed by another named insured. Counsel for both the appellant and the respondent agree that the description of the named insured in the endorsement of December 31, 1964, should be read as meaning all of them or any one or more of them. The respondent’s position is that the words “any employee of the Insured” means an employee of any one of the four named insured even though not an employee of the insured claiming indemnity. Appellant’s position is that the clause was meant to exclude only claims by an employee against his own employer and that as King was not employed by appellant the exclusion clause has no application in the circumstances of this case.

At the trial Chief Justice Wilson of the Supreme Court of British Columbia held that appellant was within the wording of the exclusion clause and dismissed his action with costs. On appeal to the Court of Appeal for British Columbia the judgment of Chief Justice Wilson was upheld, Davey C.J.B.C. dissenting.

In his dissenting judgment, Chief Justice Davey said:

The learned Chief Justice rejected appellant’s construction because he could see no sensible reason for the exclusion clause being so restricted, and he thought it did violence to the words by interpreting them as meaning any employee of the claimant, instead of any employee of the insured.

In my respectful opinion there is no reason to be found in the permissible aids to construction for thinking that respondent’s construction is more in keeping with the purpose of the parties than appellant’s. If I were allowed to speculate, I could conceive of reasons why Stolberg should be covered in respect of claims by any employee of another named insured.

I agree with the learned Chief Justice that the effect of appellant’s submission is to interpret the exclusion clause as if it meant employees of the claimant, but with respect, I am unable to agree that does any violence to the language. In fact, it is in my opinion slightly to be preferred, although there is little to choose between the several meanings. I prefer appellant’s construction for two reasons. First, the endorsement adds the words, “as their

[Page 1031]

interests may appear” after the specification of the insured, so that the insured are Stolberg Mill Construction Ltd., Stolberg Construction (1957) Ltd., Stolberg Installation Ltd. and John Stolberg, or any one or more of them, as their interests may appear. Whatever else those words may mean, they indicate that those of the named insured, whose interests are involved in a particular claim are the insured in respect of it, which is equivalent to saying that the person who seeks the indemnity is the insured in respect of that particular claim. If that is so he is also the insured for the purpose of the exclusion clause, and it is only his liability to his own employee that is excluded.

I agree with the learned Chief Justice of the Court of Appeal for British Columbia. To deny recovery by appellant it would, in my opinion, be necessary to read the phrase “sustained by any employee of the Insured” as if it read “sustained by any employee of any of the Insured”. The “Insured” under the terms of the policy, as amended by the endorsement, is any one or more of four persons named in the endorsement. The policy insures the insured against liability imposed by law upon “the Insured”, i.e., any one or more of the four persons.

In the present case “the Insured” upon whom liability had been imposed by law was the appellant, and the appellant alone. No liability had been imposed by law upon any of the other three persons by reason of the death of King.

The exception, in respect of any claim under the policy, must be construed in the same manner as the clause defining the coverage in respect of that claim, as it is an exception from that coverage. The “Insured” for the purpose of that exception must, in respect of such claim, be the same “Insured” as the one or the ones who rely upon the coverage. In respect of the present claim only the appellant is the “Insured” who has coverage under the policy. Consequently, in respect of this claim, he must be the “Insured” who is referred to under the exception clause, and, that being so, the exception only applies if indemnity is sought by a person covered by the policy in respect of liability imposed upon him as a result of a claim made by his employee in respect of

[Page 1032]

injuries sustained while engaged in his duties as such employee. That was not the situation in this case.

I would, therefore, allow the appeal with costs in this Court and in the Courts below and hold that the appellant was entitled to be indemnified by the respondent in respect of the judgment obtained against him by King’s widow and for the costs awarded against him in that litigation, including the costs incurred by the appellant in the defence of the King action and of the appeal in that action.

Appeal allowed with costs.

Solicitors for the plaintiff, appellant: Russell & DuMoulin, Vancouver.

Solicitors for the defendant, respondent: Harper & Company, Vancouver.