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Exclusion clauses in the case of concurrent causes

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This book was written by Michael Dew, a Vancouver lawyer who practices civil litigation, including representing persons who have been denied coverage under property insurance policies, or liability insurance policies. If you have been denied insurance coverage and require assistance with making a claim against your insurer call Michael at 604 895 3160.
Difficult questions can arise when a loss occurs due to two causes and one of the causes is excluded but the other is not: should the loss be excluded in those circumstances?
There used to be a rule that in such cases the court should consider which cause was the “proximate” cause of the loss and if that cause was excluded then the loss would not be covered. However, due to difficulties with determining which causes were “proximate” courts have abandoned that rule and now apply a rule that losses caused by both an excluded cause and a covered cause are covered unless there is wording in the policy that says that the loss is excluded even if the excluded cause is only one contributing cause.
In C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814 a ship sank because of a sudden ingress of sea water caused by:
  • the failure of cap screws due to corrosion; and,
  • the failure to close a particular valve. 
The marine insurance policy that applied in that case, read with the Insurance (Marine) Act, provided coverage for “perils of the sea”, but excluded losses arising from “ordinary wear and tear”.  It was held that there were two negligent acts that caused the loss i.e. failing to close the valve and failing to use the correct screws so that corrosion would not occur. The insurer argued that the failure of the screws fell within the ordinary wear and tear exclusion to coverage, but the Supreme Court of Canada held that the failure of the screws was not ordinary:
There was nothing ordinary about the failure of the cap screws.  Their failure was extraordinary, resulting, as the trial judge found, from the negligent act of the repairers who installed them.  As stated in Arnould's Law of Marine Insurance and Average, vol. II, (16th ed. 1981), ordinary wear and tear is "merely the result of ordinary service conditions operating upon the hull or machinery, as for example when the relevant part wears out. . . ."  Ordinary corrosion might well fall within this definition.  But corrosion caused extraordinarily by the negligent use of the wrong materials does not.
(C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814).
The Supreme Court of Canada also rejected an argument that the inherent vice exception applied, and then went on to hold that even if those exclusions did apply the ship would not have sunk absent the negligent leaving open of the valve, and because that cause was not excluded by any exclusion cause the loss would be covered:
[I]t does not matter if one of the causes of the loss is ordinary wear and tear or inherent vice, provided that an efficient or effective cause of the loss -- one without which the loss would not have occurred -- was fortuitous.  That is certainly so in the case at bar.  It is not disputed that had the valve been closed, as it should have been, the vessel would not have sunk.  Thus the loss, viewed in all the circumstances of the case, was fortuitous.  The trial judge was right to take the view that he need not analyze which of the two causes of the loss was proximate, given that it was clear on his findings that the sinking of the ship would not have occurred but for the unusual and fortuitous event of the valve being negligently left open.
(C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814, emphasis added).
The Supreme Court of Canada pointed out that trying to figure out which was the proximate cause of an accident can lead to metaphysical debates:
The question of whether insurance applies to a loss should not depend on metaphysical debates as to which of various causes contributing to the accident was proximate. Apart from the apparent injustice of making indemnity dependent on such fine and contestable reasoning, such a test is calculated to produce disputed claims and litigation.
(C.C.R. fishing ltd. v. British reserve insurance Co., [1990] 1 SCR 814).
The Supreme Court of Canada directed that one should simply ask whether a fortuitous cause was an effective cause of the loss, and if so there will be coverage:
I am of the view that regardless of how the cause of the loss is analyzed, the loss here was the result of a "fortuitous accident" related to or "of the sea", and hence within the coverage for perils of the sea.  Having said that, it is my view that in determining whether a loss falls within the policy, the cause of the loss should be determined by looking at all the events which gave rise to it and asking whether it is fortuitous in the sense that the accident would not have occurred "but for" or without an act or event which is fortuitous in the sense that it was not to be expected in the ordinary course of things.  This approach is preferable, in my view, to the artificial exercise of segregating the causes of the loss with a view to labelling one as proximate and the others as remote, an exercise on which the best of minds may differ.  On this approach, the loss here at issue falls within the policy because it would not have occurred but for the negligent act of leaving open the valve.
(C.C.R. Fishing Ltd. v. British Reserve Insurance Co., [1990] 1 S.C.R. 814).
In Derksen v. 539938 Ontario Ltd., 2001 SCC 72 a worker placed a metal plate on a bar connecting a trailer to a truck, and when the truck was later driven the plate flew off causing personal injury. One of the insurance policies in question contained an exclusion for negligent operation of a motor vehicle. The placing of the plate on the bar was found to not be operation of a motor vehicle, but merely negligent workmanship. Driving with the plate unsecured was found to be negligent operation of a motor vehicle. Therefore, the loss was caused by one covered cause and one excluded cause. The Supreme Court of Canada held that where the loss is caused by concurrent causes there will be coverage unless the policy expressly states that there will not be coverage in such circumstances:
I decline to adopt the presumption that where there are concurrent causes, all coverage is ousted if one of the concurrent causes is an excluded peril.  If an insurer wishes to oust coverage in cases where covered perils operate concurrently with excluded perils, all it has to do is expressly state it in the insurance policy.
(Derksen v. 539938 Ontario Ltd., 2001 SCC 72 at para. 48).
In the earlier case of Pavlovic v. Economical Mutual Insurance Co., 1994 CanLII 2834 (BCCA) the court referred to certain policy wording which was clear enough to exclude coverage where there were concurrent clauses, but since that clear wording was not used in the policy being considered in the case before the court it was found that a loss caused by a covered cause and an excluded cause was covered. In Pavlovic the exclusion clause in the policy excluded damage “caused by seepage or leakage of water”.  A water pipe connection from the public street burst causing water seepage that moved the soil supporting the foundation of a building. The court held that the loss was initiated by the rupture of the water service line and the seepage of water was an indirect cause of the loss or one of the contributing causes. Since the language of the exclusion clause in the policy stated “caused by” it was held that on the facts it was impossible to state definitively that the loss was caused by the leakage of water. The wording of the exclusion clause was held to be ambiguous and consequently, construed against the insurer:
[T]he meaning of exclusion (12) is, at best, ambiguous. It leaves open the question whether the loss is excluded where seepage or leakage is a “contributing cause”, as opposed to the only cause. Apt language to achieve the end argued for by the insurer is seen in the policies considered in some other cases. Similar exclusion clauses have used language such as “cause directly or indirectly”, or “caused by, resulting from, contributed to or aggravated by”. One exclusion clause read:
We do not insure for such loss regardless of the cause of the excluded event, other causes of the loss, or whether other causes acted concurrently or in any sequence with the excluded event to produce the loss;
These examples simply show that it was possible for the insurer to choose language which would not have left the meaning of the exclusion clause open to doubt.
(Pavlovic v. Economical Mutual Insurance Co., 1994 CanLII 2834 at para. 23 – 24 (BCCA)).
The above indicates that where a loss is caused by an excluded cause the insured should consider whether another contributing cause is covered and not excluded. If so, and there is no wording in the policy that says that the loss is excluded even if the excluded cause is only one contributing cause, then there may be an argument in favour of there being coverage.