Whether there is coverage for a loss depends on its cause: did the roof collapse because of snow or wind? Was the plaintiff injured because of the insured’s negligent driving or because of some other act? Insurers issue policies that set out the type of risk they are willing to insure, and exclude those perils for which they have no appetite. In the real world, though, losses are often brought about by more than one cause. Sometimes one of these events precipitates another, such as faulty wiring that causes a fire. Some losses, however, are caused by the confluence of two discrete events, neither of which could, on its own, have caused it. This article examines how Canadian courts have dealt with situations where a loss is caused, not by one event, but by the combination of two or more events which occur independent of one another, one of which is covered, and one excluded from coverage.

Below I will review the leading decision of the Supreme Court of Canada in this area, as well as its judicial history of and some examples of facts which appear similar but which have been distinguished by subsequent courts. I will then, with reference to recent case law, distinguish situations where there are multiple causes of a loss but where one is the proximate cause, where the causes are not independent from those where the causes are truly parallel and independent of each other. Finally, I set out some lessons that can be learned for those investigating losses caused by multiple concurrent perils to accurately identify whether a loss is truly a result of parallel, independent causes, or whether the causes are serial.

Concurrent Causes: Legal Framework and Developments

Issues of insurance causation most often come before the courts in two types of situations: coverage disputes and loss distribution disputes. Courts are accustomed to applying causation principles to claims in negligence; however, causation as it relates to insurance coverage is distinct from causation as it relates to negligence. Causation in negligence law seeks to answer whether the damages claimed were brought about by a particular act or omission of an alleged tortfeasor – for example, if a plaintiff in a trip and fall claim alleges that a property owner was negligent in maintaining the handrail on a set of stairs because the supports are rotted and would not bear the weight of a normal person, they would be obliged to demonstrate to a court that the inadequate maintenance of the handrail caused or contributed to their fall. If the plaintiff’s arms were full when they fell, for example, or they made no effort to reach for the handrail, the owner’s failure to maintain it had no impact on the plaintiff’s injuries. By contrast, insurance causation is concerned only with whether the damage suffered by the insured occurred as a result of a peril for which they were covered under the terms of their policy.

In the past, where more than one factor could be pointed to as the cause of a loss, courts have looked to the proximate, or dominant, cause to determine whether it is a covered peril. Courts have described proximate cause as the “real effective cause of what has happened.”¹ The Supreme Court adopted this approach in Saindon in 1976:²

Ever since that case in 1918 it has been settled in insurance law that the ’cause’ is that which is the effective or dominant cause of the occurrence, or, as it is sometimes put, what is in substance the cause, even though it is more remote in point of time, such cause to be determined by common sense…

In its decision in Derksen,³ however, the Supreme Court charted a different path, acknowledging that there are some situations in which no one factor can fairly be said to have been the primary cause of a loss and that there exist some situations where two concurrent causes will operate in concert to cause the harm complained of. In Derksen, an employee of a contractor was tasked with removing a sign and loading the sign’s base plate in the back of a truck. The employee failed to secure the base plate in place, instead leaving it on top of another piece of equipment that had already been loaded in the vehicle. While he was driving, the base plate fell out of the rear of the truck, smashing the windshield of a school bus, killing one child and injuring several others. The court found that the tragedy was the result of two concurrent causes: the negligent cleanup of the work site and the negligent operation of the truck in which the plate had been loaded. The question to be answered by the court was whether the loss was covered under the contractor’s commercial liability policy, which covered his negligence in cleaning up the job site, but excluded losses arising from the use and operation of an automobile, or the auto policy, which covered only those losses arising out of the use and operation of the automobile. In rejecting the proximate cause approach in this case, the court held that “it is undesirable to attempt to decide which of two concurrent causes was the ‘proximate’ cause” of the loss.⁴ Rather, the court held:⁵

…there is no compelling reason to favour exclusion of coverage where there are two concurrent causes, one of which is excluded from coverage. A presumption that coverage is excluded is inconsistent with the well-established principle in Canadian jurisprudence that exclusion clauses in insurance policies are to be interpreted narrowly and generally in favour of the insured in case of ambiguity in the wording (contra preferentum).

The court held that the loss was the result of both the worker’s negligent work-site cleanup and his negligent operation of the automobile, with both causes concurrently causing the loss, meaning that both the automobile and commercial general liability policies were obliged to respond.

As a result of the new approach to concurrent causes set out in Derksen, situations where there is coverage for at least one concurrent cause will attract coverage even though another of the causes may be excluded under the responding policy, at least for that portion of the loss that can be attributed to the covered peril, absent specific wording in the policy clearly stating that any loss caused in part by an excluded peril will be excluded entirely. The court adverted to the exclusion clause that was in play in the case in Ford Motor Co. of Canada, which read:⁶

There shall in no event be any liability hereunder in respect to

(c) Loss due to physical damage to the property insured caused by cessation of work or by interruption to process or business operations or by change in temperature, whether liability in respect thereto is specifically assumed now or hereafter in relation to any other peril or not.

The Ontario Court of Appeal distinguished Derksen in the face of apparently similar facts in Done Right Roofing, finding that there was no possibility of coverage under the defendant’s commercial general liability policy.⁷ In that case, a contractor loaded a ladder into their truck in the course of cleaning up their work site, but neglected to secure the ladder to the vehicle. As the contractor was driving, the ladder fell off of the vehicle and struck a motorcyclist who was driving behind him, causing serious injury. The defendant sought defence and indemnity from the insurer, arguing that the plaintiff’s claim alleged concurrent causes of action: the negligent cleanup of the worksite and the contractor’s negligent operation of the automobile. The exclusion in the commercial general liability policy was identical to that in Derksen, and so, seemingly, were the facts underlying the claim. The court held, however, that the true nature of the statement of claim was that the loss was caused by the contractor’s failure to secure the ladder to the truck, and not by his cleanup of the worksite. The Court of Appeal upheld the trial judge’s finding that “Those portions of the Statement of Claim that plead facts relating to the clean up of the work site…all link the act of cleaning up inextricably to the act of loading the ladder onto the truck and failing to secure it.”⁸ Therefore, the claim did not plead a cause of action related to the clean up of the work site, but related solely to the use and operation of the automobile.

 

Serial vs. Independent Causes

The British Columbia Court of Appeal summarized the distinction identified in Done Right Roofing in Coast Capital Savings:⁹

…Derksen does not stand for the proposition that merely showing that a loss is the result of concurrent causes will deprive an exclusion clause of force. The important factor in Derksen was that the concurrent cause that was not excluded from coverage (the negligent clean-up of the construction site) was independent of the concurrent cause that was excluded (operation of the motor vehicle). Where two concurrent causes are closely intertwined, an exclusion clause applicable to one will also serve to exclude liability under the other.

The question to be answered, then, is not whether multiple causes of a loss are concurrent, but rather whether they are independent of one another: if the causes are serial, with the excluded peril precipitating the covered peril, the exclusion will apply to exclude coverage. Conversely, if an excluded peril is precipitated by one that is covered, the entire loss will be covered. This was the case in O’Byrne, the Ontario Court of Appeal found that damage caused by an oil leak from a furnace was excluded from coverage, as it was not caused parallel, independent factors. Instead, the court held that the leak was caused by a “chain of events set in motion by the tenant’s insertion of a piece of cardboard…” The tenant’s actions had the effect of bypassing the furnace’s thermostat “…which forced the furnace to run at an excessively high temperature, causing the ignition component to fail and oil to be pumped continuously without burning.”¹⁰ The policy contained an exclusion for mechanical or electrical breakdown or derangement. The court held the mechanical breakdown of the furnace was not an independent cause of the oil damage, but was the result of the tenant’s interference with the proper operation of the furnace, and not a defect in the furnace itself.

In Sher-Bett Construction,¹¹ the Manitoba Court of Appeal applied this principle, finding that, though surface damage to a newly-poured concrete floor was brought about by multiple causes, the causes were serial and not independent, and so the principle identified in Derksen did not apply. In that case, a subcontractor was hired to pour a concrete floor in a commercial building. After the floor was poured, another contractor working in the area noticed that the floor was slippery due to cold weather conditions, and applied de-icer to the floor to insure that the workers would be safe. The de-icer included a warning that it should not be applied to concrete that was less than one year old, as it may have the effect of increasing the number of freeze-thaw cycles which could accelerate surface damage. The owner made a claim under their policy, which was denied pursuant to an exclusion, which excluded loss or damage “caused directly or indirectly…by frost or freezing…unless caused directly by a peril not otherwise excluded in this Form.”¹² that the damage to the floor was caused by one or all of the improper pouring and finishing of the concrete, in adequate curing and the application of the de-icer. The trial judge held that, regardless of the quality of the pour or the care taken in the curing process, the increase in the number of freeze-thaw cycles caused by the application of the de-icer was the direct cause of the loss. The court upheld the trial judge’s finding that “…there were two concurrent, interdependent causes of the damage to the floor: freezing; and the application of the de-icer. These two causes came together to cause the loss where each on its own would not have done so.”¹³ As such, the exception to the exclusion (“unless caused directly by a peril not otherwise excluded”) was found to apply to the loss, and the court held that the loss was covered.

In Belwood Poultry, the Ontario Superior Court of Justice considered a situation where a barn roof collapsed, allegedly as a result of the concurrent factors of snow load and windstorm. Under the responding policy, loss caused by windstorm was covered, but that caused by snowload was excluded. Nothing in the exclusion stated that any loss caused in part by an excluded peril would be excluded entirely, as in Ford Motor Co. The roof in Belwood Poultry collapsed despite there being relatively minor wind gusts and below-average snow accumulation.¹⁴ The insured alleged that it was the confluence of the two events that caused the loss, with the wind blowing snow towards the leeward side of the roof, causing greater snow load than had it been distributed more evenly across the structure. However, the court rejected the insured’s argument, citing a lack of evidence of snow accumulation and no measurements or first-hand observations of drifted snow onto particular portions of the roof. As a result, the court rejected the notion that the wind and snow operated concurrently to cause the loss, finding that the available evidence pointed to snowload as the cause of the roof collapse. As such, the loss was excluded from coverage.

Conclusion

In conclusion, the principle set out in Derksen is an important development in the law regarding insurance causation where a loss is caused by multiple perils, but does not stand for the proposition that an exclusion clause, or even an exception to an exclusion, is meaningless if one of the causes is a covered peril. Where a loss is brought about by multiple concurrent, parallel, independent perils, at least one of which is a covered peril, there will likely be coverage for at least that portion of the loss which is not excluded, and possibly for the entire loss. However, if the policy contains wording similar to that described in Ford Motor Co. stating that, where a loss is caused in part by an excluded peril, the entire loss will be excluded, the exclusion will apply. However, it is important to determine whether the concurrent causes of a loss are truly independent: if they are serial, with one cause being the result of another, the proximate cause analysis will still apply to the loss. In the case of Belwood Poultry for example, the plaintiff alleged that wind (a covered peril) was the proximate cause for the collapse of the roof caused by snowload (an excluded peril). Had the plaintiff been in a position to demonstrate that wind gusts blew snow onto particular areas of the roof, creating unbalanced loading and greater weight from snowload than would an even distribution of snow, the wind may well have been found to have been the proximate cause for the loss. The plaintiff was unable to support this position, however, due to the lack of contemporary firsthand evidence they were able to adduce: they did not retain their engineering expert until long after the loss, and did not record any observations about snow drifting either on the roof or in other areas of the property. Had they been able to present contemporaneous observations that would support their theory, the court may have accepted their position that the multiple causes of the loss were serial, with the covered peril being the proximate cause.

In Done Right Roofing, the court held that, though the ladder which injured the plaintiff had been improperly loaded onto the vehicle by the contractor in the course of cleaning up the worksite, it was the improper loading of the vehicle, and not the worksite cleanup, that was the cause of the loss as pleaded. As such, coverage under the commercial general liability policy was excluded.

This suggests important lessons for those investigating a loss caused by multiple perils: one should act promptly to retain an expert where their evidence may be needed, as evidence regarding the potential interplay between the causes may be altered over time. Take care to observe, and take note of, conditions not only in the area of the loss, but also other areas nearby, such as snow drifts, wind direction, water pooling, etc. Consider the way in which a claim is framed, as this may well dictate whether there is a possibility of coverage which would trigger a duty to defend. And importantly, be sure to bear in mind the precise wording of policy exclusions and exceptions to those exclusions in assessing whether there is likely to be coverage under a responding policy.

Lucas Ostrowski

[1] Leyland Shipping Co. Ltd. v Norwich Union Fire Insurance Society Ltd., [1918-19] All ER Rep. 443, at p 453.

[2] Co-operative Fire & Casualty Co. v. Saindon, [1976] 1 S.C.R. 735.

[3] Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398.

[4] Ibid, at para 36.

[5] Ibid, at para 46.

[6] Ford Motor Co. of Canada v Prudential Assurance Co., [1959] SCR 539.

[7] Cumis General Insurance Co. v 1319273 Ontario Ltd. (c.o.b. Done Right Roofing), [2008] OJ No 1268.

[8] Ibid, at para 15.

[9] Coast Capital Savings Credit Union v Liberty International Underwriters, [2017] BCJ No 2074.

[10] O’Byrne et al v Farmers’ Mutual Insurance Company (Lindsay), [2014] ONCA 543, at para 36.

[11] Sher-Bett Construction (Manitoba) Inc. v Co-Operators General Insurance Co., [2021] MJ No 35.

[12] Ibid, at para 2.

[13] Ibid, at para 79.

[14] Belwood Poultry Ltd. v Kent & Essex Mutual Insurance Co., [2007] OJ No 1693.