The Ontario Court of Appeal has released its decision in the case of Garratt v. Orillia Power Distribution Corporation on May 29, 2008 . The decision is significant as it deals with the analytical approach required in determining the issue of reasonable foreseeability in negligence actions.

The action arose out of a bizarre accident which occurred on Highway 11 near Orillia. As the Plaintiff was driving her car underneath the Memorial Avenue overpass, a blue spider rope dropped from above and wrapped around her driver’s side mirror. While travelling 95 km/hr, she alleged that the rope wrapped around her mirror and caused her car to stop ”on a dime” approximately 80-100 feet north of the overpass. Even though her driver’s side mirror sustained only superficial damages, and the expert evidence that it was physically impossible for the rope to slow, let alone stop the car, the trial judge accepted the Plaintiff’s description of the accident and found that her injuries had been caused by the accident. Her damages were assessed at approximately $260,000.00.

The spider rope had been tied to a wooden guardrail post on the overpass by an Orillia Power work crew. The crew was in the process of installing new hydro lines in the area, and was using the spider ropes to string electrical conductors through the new hydro poles. On the day of the accident, the crew took its lunch break and tied four spider ropes to the post using bowline knots and a shackle. The trial judge specifically found that the rope had gotten loose not because it had been tied improperly, but because a vandal had tampered with the ropes and had allowed one to fall upon the highway. However, despite the fact that the accident was directly caused by the actions of an unknown vandal, the trial judge imposed liability on Orillia Power for failing to take better measures to prevent the actions of a vandal.

In an unanimous judgment, the Ontario Court of Appeal set aside the trial judge’s finding of liability, and dismissed the action with costs.  The Court found that the trial judge had erred in finding  that Orillia Power had breached its “own standards” since there was no evidence presented at trial of any industry standard for the securing of spider ropes when a work crew is absent from a job site. Further, the standard referred to by the trial judge was a general statement contained in the EUSA Rule book which simply stated the legal requirements for the standard of care at common law. Finally, even if there was such an industry standard (which was not proven), the trial judge erred by treating an industry standard as dispositive of a breach of the standard of care, thus amounting to a finding of strict liability.

The key to the Appeal Court’s decision was that nothing indicated the possibility, let alone the likelihood, of any acts of vandalism and hence the loss was not reasonably foreseeable. The Court noted that the act of mischief by the unknown vandal occurred in broad daylight, immediately beside a public roadway, and on a highway overpass frequently travelled by vehicles but rarely, if at all, by pedestrians. The project had been ongoing for several months without any previous acts of vandalism. Finally, the three Orillia Power lineman had a combined experience of over 60 years, and had never encountered any previous incidents of vandalism.

The Court of Appeal’s decision in Garratt is significant as it confirms that hydro utilities, and by extension construction companies, telecommunication companies, and other similarly situated entities, are not insurers against the acts of vandals. Further, it is a case of significance for the insurance bar in general, as it raises the bar with respect to the foreseeability of the acts of vandals and makes it clear that such a scenario will need to at least be a probable occurrence before the court will entertain a finding of liability.

At trial, Orillia Power was represented by myself. On appeal, it was represented by Alan Mark of Ogilvy Renault. The Court of Appeal’s decision can be found at: Garratt v Orillia Power OCA

Raj K. Datt

I have previoulsy commented on Leo Deluca v. Lombard, [2008] O.J. No. 1230, an insurance coverage case arising out of the hydro blackout in 2003. In that case, the motion judge denied indemnity under an All Risks policy on the basis of two exclusion clauses. However, in Caneast Foods v. Lombard, [2008] O.J. No. 1811, the Ontario Court of Appeal, interpreting the same two exclusions, came to the opposite conclusion. In Caneast, the hydro blackout caused the spoilage of a substantial quantity of the Plaintiff’s goods. The first exclusion clause excluded losses caused by changes in temperature. However, the clause contained an exception which stated that if the loss was caused directly by a peril insured and not otherwise excluded, then the exclusion did not apply. Since this was an All Risks policy, the blackout was a peril insured. As well, hydro blackouts were not expressly excluded in the policy. Hence, the Court of Appeal affirmed the motion judge’s decision that the exclusion did not apply. The motion judge’s decision in Leo Deluca only gives an excerpt of the change in temperature exclusion clause, but since both cases involved the same insurer, it would be surprising if the exclusion wordings were not similar. The second exclusion dealt with losses caused by mechanical or electrical breakdown or derangement. Unlike in Leo Deluca, the Court of Appeal held that this exclusion only applied to an internal problem in a machine, and not when the machine fails to operate due to an interruption in its power supply. In fact, the Court of Appeal remarked that the motion judge in Leo Deluca had erred in his interpretation.

Raj K. Datt

In Boliden Ltd. v. Liberty Mutual Insurance Co., [2008] O.J. No. 1438, Liberty issued a liability policy to Boliden, which included coverage for its directors and officers. During the coverage period, the directors and officers were indemnified by Boliden for defence costs they incurred in connection with class actions brought against them by shareholders for prospectus misrepresentation. The class actions were commenced in the wake of an environmental disaster at a zinc mine in Spain that was owned by a Boliden subsidiary. Liberty denied coverage under the policy based on a pollution exclusion clause. The class actions settled, and Boliden brought an action against Liberty to recover its defence costs and applied for summary judgment. The motion judge found that the pollution exclusion clause applied to some but not all of the losses arising from the allegations of misrepresentation by the directors and officers. He awarded judgment in favour of Boliden for 80 per cent of the defence costs.

On appeal, Liberty argued that the class action represented a single claim for failing to disclose information in the prospectus about the dam deficiencies, which deficiencies involved the threat of the seepage or escape of pollutants. The class action, it submitted, was therefore a claim in respect of a pollution loss and the exclusion clause applied. The Court of Appeal rejected this argument. It upheld the motion judge’s finding that the pollution exclusion clause excluded pollution-related losses, not pollution-related claims. The clause was ambiguous concerning whether it applied to pollution related claims, and hence this was to be resolved in favour of the insured. The interesting part of the decision is the Appeal court’s rejection of Liberty’s characterization of the class action. The class actions, looked at broadly, essentially arose out of losses sustained from the escape of pollutants. However, the Court of Appeal agreed with the motion judge’s approach of looking at whether or not the pollution exclusion clause applied to each of the specific allegations in the claim.

Raj K. Datt