The insurance policy clause that saved this self-insurer

Clean Harbors Canada, one of largest hazardous waste haulers in North America, is not on the hook to pay the cost of first-party fire damage to a truck owned and operated by one of its contractors, an Ontario court has decided.

On a job hauling for Clean Harbors, a 2007 Volvo transport truck was damaged by an electrical fire that occurred on July 5, 2018. Owned by transport truck service provider Ontario Heavy Xpress Ltd. (OHX), the truck was driven by Gergley Jakab, the sole director and shareholder of OHX.

In October 2018, Jakab retained a lawyer to help him recover the value of the Volvo Truck and related losses from Clean Harbors or its insurer, Chubb Insurance Company of Canada.

Chubb denied coverage, stating “there is no comprehensive or all perils coverage under Clean Harbors’ policy” to cover the damage to Jakab’s truck. (Basically, Chubb insured third-party liability losses for the company, but not first-party physical damage losses, which Clean Harbors self-insured.)

Jakab told the court that, after he signed the contract (which he read, although English was not his first language), he inquired with Clean Harbors employees about whether their insurance covered him. He testified, although he did not call any witnesses, that someone told him he was “fully covered” under the policy. (It is unclear in the court decision whether a Clean Harbors staff member told him this or another truck driver.)

Regardless, the court found the “fully covered” phrase could have correctly meant Jakab did have the company’s third-party liability coverage, which is required by law to drive on Ontario’s roads. But that doesn’t mean the same thing as coverage for first-party fire losses to Jakab’s truck.

Jakab felt someone at Clean Harbors should have told him this before he signed the contract. But the court found if Jakab had read the document fully (which he claimed he had), he would have seen the following clause written in the insurance contract:

“Clean Harbors will make all insurance, except non-owned trailer legal liability coverage, available to the contractor for the purpose of insuring the equipment and the contractor under policies of insurance obtained and maintained by Clean Harbors [Emphasis added]….

“Clean Harbors makes no representation or warranty with respect to the extent or adequacy of the insurance coverage made available by it and assumes no responsibility for the adequacy of such insurance. The contractor shall be solely responsible to satisfy himself as to the adequacy of the coverage afforded by such insurance.”

Thus, the court found the onus was on Jakab, before he signed the contracting agreement with Clean Harbors, to make sure he was covered for first-party fire damage to his truck, which was worth about $30,000 at the time of the fire. But the court noted he had already signed the insurance contract before he made the inquiries.

Additionally, even if Clean Harbors had indicated in a casual conversation that by “fully insured,” it did not mean for first-party fire damage to the truck, that had no effect on the contract. The court noted the Clean Harbors insurance policy contained the following “entire contract” clause:

“This contract, including the schedules attached hereto, form the entire contract between the parties and cancels and supersedes any and all previous written or oral contracts between the contractor and Clean Harbors; however, it may be modified or amended from time to time provided such changes are agreed to in writing between Clean Harbors and the contractor.”

In other words, once signed, both parties to the contract were bound to the words written in the contract.

Discussions about what “fully covered” meant were casual conversations that happened outside the terms of the contract. They did not mean anything unless both parties agreed in writing to include these definitions and understandings in an amendment to the contract.

 

Photo courtesy of iStock.com/THEPALMER