Your client’s spouse steals your client’s car and crashes it. The policy excludes coverage for damage caused during theft of the car by someone living in the same house. Is your client covered?
Yes, said a recent Nova Scotia judge, who affirmed the decision of a small claims court.
Wawanesa Insurance v. Laybolt demonstrates the value of a broker going over a policy carefully on behalf of their clients, since some exclusions may not apply as the underwriter intended.
Morgan Farrell Laybolt’s husband, who did not have a driver’s license, took Laybolt’s 2011 Honda Civic out for a drive without her permission or consent on May 8, 2012. On the way to Truro, he lost control of the vehicle and rolled the car, destroying it.
Laybolt subsequently charged her husband with theft.
A judge in small claims court allowed Laybolt’s claim for coverage under the “collision or upset” provisions of the insurance policy for the replacement cost of the vehicle. The insurance company appealed the ruling to the Supreme Court of Nova Scotia.
Subsection 2 of the policy, entitled Collision or Upset, states: “The Insurer agrees to indemnify the insured against direct and accidental loss of or damage to the automobile, including its equipment caused by collision with another object or by upset.”
Subsection 3 of the policy, entitled Comprehensive, offers coverage for loss or damage arising from “any peril other than by collision with another object or by upset.”
Subsection 4 of the policy provides coverage for named perils.
A policy exclusion read as follows: “The insurer shall not be liable…under subsections 3 (Comprehensive) and 4 (Specified Perils) only, for loss or damage caused by theft by any person or persons residing in the same dwelling premises as the insured.”
The insurance company denied coverage, saying the exclusion applied to the entire policy.
But the courts said the exclusion clearly applied “under subsections 3 (Comprehensive) and 4 (Specified Perils) only.” In other words, it did not apply to subsection 2, which covered losses caused by upset.
