Causation in Canadian Insurance Law

Abstract

Causation issues frequently dominate insurance coverage disputes. If a house is insured and damaged by both wind and flood, but the insurance policy only covers losses caused by wind and not flood, does the insurance policy indemnify the insured homeowner? What if the wind caused the most damage to the house? If a daycare worker negligently fails to supervise some children while all are riding in the daycare’s van on the way a park, and one child is hurt by another child in the van, would the daycare worker’s commercial general liability insurance policy provide her with coverage if she is sued by the injured child’s parent? What if the policy excluded losses caused by automobile use? Or would her automobile liability insurance policy provide her with sufficient coverage instead? Is this a loss caused by automobile use? When solving challenging insurance causation questions, it is important to understand the primary purpose behind any causal language at issue in an insurance policy. Causation is used to delineate payout triggers for the insurer by attempting to define finite instances of insured and uninsured losses. The causal language can be located in a coverage clause or an exclusion clause. It can describe a broadly worded occurrence like providing coverage for liability arising from “your actions anywhere in the world.” Or instead it can attempt to define the limits of a particular insured risk by describing the causal mechanics that operated to bring about a loss, such as by excluding from liability insurance coverage those losses “caused intentionally” by an insured’s conduct. Because it is often a very nuanced exercise to describe in an insurance policy precisely how insurance causation affects insurance coverage, courts have had much difficulty in determining how insurance policies use causation to control insurance payouts. A coherent and predictable process for sorting through this causal inquiry would help to unify the jurisprudence and streamline the costly litigation around insurance causation issues. This article provides a framework for solving both simple and complex insurance causation issues that recur in Canadian insurance law. It proposes a method for sifting through the causal mechanics of a loss and locating relevant target causes on which to focus the analysis. The article also proposes a process for disentangling disputes about losses resulting from concurrent causes. Central to the framework is the notion that decisions about insurance causation need to follow a structured, predictable analytic process. Also central is the notion that causation in insurance necessarily operates in a fundamentally different manner than causation in tort – as a payout trigger, not a fault-based gatekeeper to compensation.