The Ontario Superior Court of Justice issued a decision in the case of Heffernan Estate v. Lloyd’s Canada, ruling in favor of the insurer and declaring that it has no duty to defend a passenger harmed during a fatal boating accident.
Paul Heffernan crashed his motor boat into a dock on a July night in 2010, which ended his life and injured a passenger on board. The coroner’s report revealed that his blood alcohol level was three times the legal limit.
The passenger decided to sue Heffernan’s estate.
Heffernan’s insurer, Lloyd’s Canada, however, refused to defend or indemnify, citing a policy exclusion that it is not liable if the vehicle is “operated illegally.”
Justice Belobaba sided with Lloyd’s, arguing that navigating a boat while intoxicated is an egregious “criminal offense” that justifiably invalidates coverage. He differentiated this case from Kereluik v Jevco by noting that to drive with a BAC over .08 is a much more clear-cut and serious infraction than violating a minor technical statute.
“In my view, no insured would reasonably believe that insurance coverage would be available in a case of drunk driving and there is no public policy reason to suggest otherwise,” he writes in his decision.
Kereluik v Jevco, on the other hand, involved a licensing issue that was regulatory in nature and thus unrelated to the actual operation of the auto vehicle.
Also, the judge found that unlike most liability policies, Lloyd’s only had an agreement to indemnify, but no duty to defend. As a result, Justice Belobaba argued that Lloyd’s had no contractual obligation to defend every action.
“Counsel for M submits that the duty to defend is simply presumed from the duty to indemnify. I disagree. There must be, I conclude, a duty to defend set out in the policy of insurance, just as in any other contract. Any ambiguity may well be resolved in favour of the insured, but the duty, right, or obligation to defend must be specified,” Belobaba decided.
