A FSCO arbitrator has ruled that an insurer’s denial of a catastrophic impairment application does not trigger a limitation period to dispute that determination. And in any event the prescribed OCF-9 form for denying the CAT determination was deficient.
In Do v. Guarantee, the claimant was injured in a motor vehicle accident on October 9, 2005. In December 2006, he submitted an application to Guarantee for a determination that he sustained a catastrophic impairment. Guarantee arranged a series of multidisciplinary insurer examinations. On May 2, 2007, Guarantee determined that the claimant did not sustain a catastrophic impairment and sent him an Explanation of Benefits form (OCF-9), as well as information about his right to obtain a rebuttal report.
After receiving a rebuttal report and a further addendum from the IME doctor, Guarantee sent the claimant an OCF-9 on April 10, 2008. It reiterated its position that the claimant had not sustained a catastrophic impairment. Accordingly, the claimant applied for mediation and subsequently arbitration at FSCO.
Guarantee raised a preliminary limitation issue. Counsel agreed that the sole issue for the arbitrator to determine was whether the OCF-9 form in May 2007, or that in April 2008, triggered the limitation period. If the limitation period was triggered in May 2007, as Guarantee alleged, the claimant’s applications for mediation and arbitration were time barred. If it was triggered in April 2008, on the later date, as the claimant alleged, both applications were timely.
Arbitrator Alves concluded that that neither the May 2007 nor the April 2008 OCF-9 forms triggered the commencement of the limitation period. The basis for the arbitrator’s conclusion is as follows:
- Section 281.1 of the Insurance Act prescribes a two-year limitation period for commencing a mediation or arbitration application from the refusal of a benefit. That period is extended by a further 90 days from the date of the Report of Mediator, if the mediation is commenced within the two-year period.
- According to the arbitrator, the insurer’s determination that the insured person did not sustain a catastrophic impairment is not a “refusal of a benefit”.
Interestingly, the arbitrator considered a previous arbitration decision in Wry v. Aviva, where a different arbitrator held that the limitation provisions in the Insurance Act apply to determinations of entitlement to catastrophic impairment, and that the triggering event for the running of a limitation period is the insurer’s determination that the insured person did not sustain a catastrophic impairment. She advised that she disagreed with the arbitrator in Wry.
The decision in Do now means that a claimant who is denied a catastrophic impairment designation can dispute that determination more than two years after the determination. It also means that there are conflicting decisions on the issue at FSCO.
Also of note, the arbitrator held that neither OCF-9 form that Guarantee used clearly communicated to the claimant that the two year limitation period ran from the date of the refusal of catastrophic impairment. She held that the prescribed form (for accident before September 1, 2010) stated nothing about a limitation period from a refusal of a determination of catastrophic impairment. It did not specifically tell the claimant that he had two years from the date Guarantee refused to agree that he was catastrophically impaired, to commence mediation or arbitration.
The OCF-9 is no longer prescribed for use as an explanation of benefits form, so this finding might have limited application going forward. But it is worth noting that this is the second decision of 2012 where Arbitrator Alves has found that a prescribed form – which the Superintendent of Insurance mandates that insurers must use – was deficient.
Do v. Guarantee is available on the FSCO Web site.What happened?
The Court of Appeal has upheld the lower court decision in Hurst v. Aviva Insurance Company (2012 ONCA 837) that Applications for Mediation received by FSCO that have not been mediated within 60 days are deemed failed. A Report of Mediator is not required for an insured to commence litigation.
What does this mean?
This has serious repercussions for the tens of thousands of Applications for Mediations stuck in backlog at FSCO. Essentially, all the Applications that were filed in excess of 60 days may proceed directly to litigation should the insured so choose. This in turn will likely overwhelm the arbitrations unit and devour already limited court resources.
The Case:
A number of insureds wanted to commence litigation circumventing the condition precedent of receiving a Report of Mediator. Their Applications for Mediation had been filed at FSCO and the 60 day limitation period had lapsed. No mediations were held in these cases due to a considerable backlog.
The issue: when can an insured person commence an action against his or her insurer for accident benefits?
Section 281(2) of the Insurance Act prevents insured persons from commencing actions against their insurer unless they first sought mediation at the Financial Services Commission of Ontario. Provisions regarding these mandatory mediations are set out in s. 280. Of note, s. 280(4) requires the mediations to be conducted within the "prescribed time". Section 280(7) states that mediations have failed when the mediator has given notice to the parties that the mediation will fail or when the prescribed or agreed time for mediation has expired and no settlement has been reached. Section 10 of O. Reg 664 - Automobile Insurance prescribes the time to be 60 days:
10. A mediator is required, under subsection 280(4) of the Act, to attempt to effect settlement of a dispute within 60 days after the date on which the application for the appointment of a mediator is filed.
FSCO had been taking the position that the time limit does not start ticking until an Application for Mediation had been marked as "complete". Thus a backlog of cases was allowed to build up. At the time of the release of the decision the backlog is approximately 36,000.
Juriansz J.A. held that this view is contrary to the legislative purpose of providing a speedy mediation process. Further, the court noted that the DRPC definition of "filed" does not require any action by FSCO for a document to be "filed", as per the reasons of Arbitrator Jeffrey Rogers in State Farm Mutual Automobile Insurance v. Leone (FSCO A11-002196). The 60 day time limit is an "integral part of the legislative scheme that aims to provide a speedy mediation process". It was further held that an insured person need not even wait to receive the Report of Mediator confirming that the mediation had failed. The failure of FSCO to perform a statutory duty did not extinguish a person's right granted by the statute. Finally, the court dismissed the concern that the absence of a Report for Mediator would allow for a perpetual limitation (s. 281.1(2)(b) permits a 90 day extension following the issuance of a Report of Mediator) as "more imaginary than real" since the issuance of a Mediator's Report is necessary for the 90 day extension. Changes to the regulation could be made to remedy this situation. Ultimately, if parties do not agree to extend the time line for Mediation as per Rule 19 of the Dispute Resolution Practice Code, then it could be inferred that the insured persons have chosen to commence an action and the time limit is still two years from the denial of the benefit.
The Superior Court has found another “sufficient nexus” in a battle between two insurance companies.
In Zurich v. Chubb, the claimant was driving a Ford Windstar that she had rented from Wheels4Rent, a car rental agency. She had an accident and was injured. No other vehicle was involved.
Wheels4Rent offered an optional accident policy providing coverage in the event of accidental loss of life and injury. Chubb was the insurer of the optional policy. The claimant declined the optional policy. After the accident, the claimant applied for benefits under the optional policy. Chubb declined to provide benefits on the basis that the optional policy was not a motor vehicle policy, but rather was a commercial policy. In other words, Chubb refused to accept her application on the basis that it was not an automobile insurer with respect to her claims.
The claimant then applied for accident benefits to Zurich, which insured Wheels4Rent. Zurich administered the claim on a “without prejudice” basis. Zurich took the position that Chubb was the first insurer under Ontario’s statutory accident benefits scheme and should have paid first, pursuant to section 2 of O. Reg. 283/95.
At arbitration, the arbitrator found that that Chubb was not an insurer for the purposes of the Insurance Act and O. Reg. 283/95. Her wrote:
Based on the facts agreed upon by the parties, and as set out in the documentary evidence, that at no time did Chubb ever issue a motor vehicle liability policy to either Wheels4Rent or Ms. Singh, I am of the opinion that there was no nexus or connection between Chubb and Ms. Singh, such that Chubb was obligated under Regulation 283/95 to pay statutory accident benefits to Ms. Singh as a result of the September 23, 2006 accident.
On appeal, the judge disagreed with the arbitrator’s finding that Chubb was not an insurer or that there was no nexus/connection between Chubb and the claimant. The judge found that the arbitrator erred in finding that the optional policy was not a “motor vehicle liability policy” under the Insurance Act. He found that the policy was specifically intended for car rental companies and their customers. The obvious intent was to provide extra insurance for renters.
With respect to the nexus argument, the judge held that the arbitrator erred buy applying a “remoteness” test instead of an “arbitrariness” test:
The connection between Ms. Singh and Chubb may have been remote, but it was not arbitrary. Ms. Singh rented a vehicle from Wheels4Rent. Wheels4Rent was insured by Chubb. Chubb made the optional policy available to Ms. Singh through Wheels4Rent. Although Ms. Singh did not take up the optional policy, the obvious inference that the parties agree can be drawn is that she learned of it through Wheels4Rent when she rented the vehicle.
This decision highlights two important points:
Firstly, insurers who purport to issue “commercial policies” might unknowingly be also issuing motor vehicle liability policies, which could obviously expose them to additional risks and costs.
Secondly, the “sufficient nexus” test is subjective. As long as the claimant has a reason for applying to her choice of company there will almost always be a sufficient nexus. Which begs the question: Why would a reasonable claimant apply for benefits to a company issuing an optional policy that she declined to buy?
See Zurich Insurance v. Chubb Insurance, 2012 ONSC 6363 (CanLII)
A Superior Court judge has allowed an appeal in a loss transfer matter considering the "weight" of a vehicle for loss transfer purposes.
In Republic Western v. Economical, the claimant was driving a 4-door Toyota insured with Economical when she was struck from behind by a U-Haul Ford El-G truck insured with Republic Western. She applied for and received accident benefits from Economical, which then sought loss transfer indemnification from Republic Western. But Republic Western denied that the U-Haul was a heavy commercial vehicle (i.e., a vehicle with a gross vehicle weight of at least 4,500 kilograms).
According to an investigative report, the truck, which was empty at the time of the accident, would have weighed approximately 3730 kilograms. The arbitrator determined that the truck would not have come close to weighing 4,500 kilograms at the time of the accident. The capacity of the truck, according to the manufacturer, was 4989.5 kilograms.
The arbitrator determined that “gross vehicle weight” meant capacity weight, not actual weight at the time of the accident. The crux of the arbitrator's reasons for choosing the capacity weight was that it made good business sense: He found that using capacity weight would make business dealings simple, direct, and comprehensive. He found that weighing a vehicle after an accident to determine actual weight might be problematic or impossible, such as after a vehicle fire.
This meant that Republic Western, the insurer of the truck, had to indemnify Economical pursuant to section 275 of the Insurance Act.
On appeal, the judge held that the arbitrator erred in using the capacity weight instead of the actual weight at the time of the accident. The judge held that if the objective of the loss transfer scheme is to allocate accident benefit payouts in a more equitable way, then using actual weight would account for damage actually, rather than theoretically caused by heavy commercial vehicles that might not actually weigh more than 4,500 kilograms. The judge also held that it would make no sense to adopt a definition of “gross vehicle weight” for the purposes of one specific portion of the Regulation that is at odds from the definition used in a case that has been specifically approved by the Court of Appeal and in three statutes concerned with closely related regulatory matters.
So it appears that in less obvious cases we will continue spending time at truck weigh stations to determine the weight of smaller trucks, where available.
See Republic Western Insurance v. Economical Mutual Insurance, 2012 ONSC 5952 (CanLII)
The Court of Appeal has just released its decision in Kingsway v. Gore and Security National v. Markel dealing with regular use issues. Both matters dealt with similar facts, namely:
A truck driver (contractor, sole proprietor) owns a truck and enters into an owner/operator agreement with a trucking company to deliver items, etc. for the trucking company. Under the usual agreement, the contractor agrees to operate the truck exclusively for the trucking company's business and not to use if for personal use. The truck then becomes a specified vehicle on the trucking company's policy.
The issue is whether the vehicle that is insured under the trucking company's policy is being made available for the driver's (who was often the contractor/owner of the truck) regular use for the purpose of section 66 of the SABS.
In Axa v. Markel (1996), which was upheld on appeal, the arbitrator held that it was the contractor making the vehicle available for the trucking company's regular use, not the other way around. Accordingly, the arbitrator held that the driver of the truck at the time of the accident was not a "deemed named insured" under the trucking company's insurance policy that insured the truck.
Arbitrators have been following Axa v. Markel ever since, finding that the regular user of the truck is not a deemed named insured under the policy insuring the truck. However, for reasons summarized below, the Superior Court held on September 27, 2010 that Axa v. Markel was wrong and that a regular user in these circumstances can be a deemed named insured under the truck's policy.
In Kingsway v. Gore, the arbitrator distinguished Axa v. Markel and subsequent cases on the basis that they involved an individual making a vehicle available to a trucking company, while in the case before him the owner/operator contract was between a "sole proprietor and the hauling company". Although the judge agreed with the arbitrator's conclusion (that the driver was a deemed named insured under the truck's policy), he disagreed with the distinction, finding that a contract with a sole proprietor is the same as a contract with an individual. He held the arbitrator was correct in arriving at the ultimate conclusion that a sole proprietor making a vehicle available to himself was not disqualified from the scope of s. 66 (1) of the SABS.
In Security National v. Markel, the arbitrator was of the opinion that under s. 66 (1) of the SABS, an insured vehicle cannot be made available for an individual's use by a sole proprietorship when the individual is the sole proprietor. In his opinion, to accept this possibility is to put a strain on the wording of the Regulation that it cannot reasonably bear. Accordingly, the arbitrator held that the driver was not a "deemed named insured" because the vehicle was not being made available for his regular use by a sole proprietorship, corporation, etc. On appeal, the judge disagreed, finding that there is no reason not to give s. 66 (1) its plain meaning that admits of the possibility that an individual who is a sole proprietor may make an insured vehicle available to himself and then be deemed to be a named insured under the policy insuring the vehicle.
The Court of Appeal agreed with the Superior Court and dismissed the appeals. In a relatively lengthy decision, the Court held that the regular use provisions under the SABS permits an insured vehicle to be made available for an individual’s regular use by the individual’s sole proprietorship. This is evident from the language of the provision (section 66 of the Old SABS; section 3 (7)(f) of the New SABS) and its legislative purpose. The Court of Appeal held that the intent of the regular use provisions is that the commercial insurer should be responsible for the accident benefits arising from the operation of the commercial vehicle.
In short, based on the Court of Appeal’s decision, the law in Ontario (overturning Axa v. Markel) is now that pursuant to the regular use provisions under the SABS, a sole proprietor can make a vehicle available for his/her regular use. If the evidence supports this finding, the individual will have coverage under the policy insuring that vehicle.
In other words, an owner/operator of a vehicle that is insured with a third party's insurer can be deemed to be a named insured under the third party's policy if they meet the requirements under the regular use provisions of the SABS, namely, that the vehicle is being made available by a "sole proprietorship, joint venture, etc.". So the distinction between a contractor as an individual (not a business entity) and the contractor as a sole proprietor (business entity) is now moot. It is also clear that the business entity that is making the vehicle available for one's regular use need not be the named insured under the policy insuring the vehicle.
This is a good decision because, as the Court of Appeal found, it makes sense. When a truck driver has an accident while operating his truck in the course of transporting goods, why should he/she have to go back to their own personal vehicle insurance to claim benefits, when their personal vehicle had nothing to do with the accident?
See Security National Insurance Company v. Markel Insurance Company, 2012 ONCA 683.
On September 20, 2012, Justice Stevenson of the Ontario Superior Court of Justice in the decision of Wen v. Unifund Assurance Company, ordered that the insureds in this case "must take responsibility for their own actions and for their own misrepresentations" thereby denying their right to recover indemnity from Unifund Assurance Company.
On December 6, 2006, Han Wen was operating
a 2002 Acura RSX when she collided with a pedestrian, Mr. Yang, who suffered injuries as
a result of that accident. Yang, et al. brought an action claiming damages for
personal injury arising out of the accident. Wen was the registered owner of
the Acura at the time of the accident. She and her common-law spouse,
Jie Shen, were the defendants in the action initiated by Yang for personal
injury. Unifund was a statutory third-party, having denied coverage to both
defendants in that action. State Farm Mutual Automobile Insurance Company
provided insurance coverage to Yang, and State Farm was added as a defendant in the action after Unifund
denied coverage to Wen and Shen. State Farm was named as a defendant in the
companion action for the purpose of claiming, if necessary, uninsured/underinsured coverage in the event that
one or both of Wen and Shen are found to be uninsured without a right of
indemnity from Unifund.
With respect to this action, the plaintiffs, Wen and Shen, assigned their rights to State Farm pursuant to an Assignment of Rights Agreement. State Farm and Unifund both contended that the other must respond to the claims for personal injury brought by Yang, et al. in the other action. Notably, Justice Stevenson made sure to acknowledge that Yang's tort recovery would be the same regardless of which insurer must respond to the claim.
Facts
In 2005, Wen purchased the 2002 Acura. Unifund issued an Owner’s Policy to Shen with respect to a 2000 BMW 540. That policy was in effect for the period December 14, 2005 to January 1, 2007. Shen also had a policy with Unifund insuring his Toyota Previa motor vehicle which had a policy in effect for the period from June 1, 2007 to June 1, 2008. On the date of Wen's accident with Yang on December 6, 2006, Wen did not have any insurance with respect to the Acura and produced a fraudulent pink slip to the police officer attending at the scene of the accident. On December 7, 2006, the day after Wen’s accident, Shen called Johnson (Unifund’s broker) requesting the addition of the Acura to the BMW policy. A Certificate of Automobile Insurance (Ontario) was issued for the period December 1, 2006 to January 1, 2007. Johnson’s employee, Stewdell D'Acres added the Acura to the BMW policy.
Unifund alleges that Shen and Wen contravened a term of the contract and/or a committed fraud due to their failure to disclose Wen's accident of December 6, 2006, and the proper owner of the vehicle to Unifund such that their right to recover against Unifund was forfeited. They also contended that Shen failed to advise of a material change in risk and did not have an insurable interest in the Acura when he added it to his existing policy with Unifund.
Issues at Trial
1 Did Shen have an insurable interest in the Acura when he added it to his insurance policy?
2 Did Shen and Wen contravene a term of the contract and/or commit fraud or willfully make a false statement in respect of a claim so that their right to recover against Unifund is forfeited?
3 Did Shen fail to advise Unifund of a material change in the risk?
For the purpose of this article, Justice Stevenson's reasons under issues (1) and (2) will be highlighted.
With respect to whether or not Shen had an insurable interest in the Acura at the time he added it to his policy, Justice Stevenson applied the law as set out in Kosmopoulos v. Constitution Insurance Co.2. In that case it was found that an insurable interest is "to have a moral certainty of advantage or benefit, but for those risks or dangers”, or “to be so circumstanced with respect to the subject matter of the insurance as to have benefit from its existence, prejudice from its destruction". He found that Shen did not have an insurable interest because it was clear from his testimony that he did not have any monetary interest in the vehicle nor did benefit from the Acura's existence or was prejudiced from its destruction. He noted Shen's specific words at trial: “Because she had an accident she should handle it by herself.” Justice Stevenson felt that there was no demonstration of concern by Shen nor any suggestion that he felt affected or prejudiced by the accident.
Taking into consideration the applicable statutory provisions (sections 233 and 258 of the Insurance Act), Justice Stevenson found that Shen and Wen’s right to recover indemnity from Unifund was forfeited based on their actions. State Farm, not Unifund, must therefore respond to the claims for damages brought by Yang, et al. in the action arising out of the motor vehicle accident.
He noted that there were several instances of intentional misrepresentations made by both Shen and Wen. The consequence being that their right to recover against Unifund was forfeited. In Justice Stevenson’s opinion, Wen and Shen had devised a scheme that was meant to intentionally defraud Unifund as they both knew had the accident been disclosed it would have affected Unifund’s decision to add the Acura to the existing policy.
In discussing the issue of the backdated policy, Justice Stevenson was of the opinion that D’Acres would not have done this unless Shen requested that it be backdated. Therefore, State Farm could not rely upon the argument that an insurer issuing an instrument of insurance that purports to be a motor vehicle liability policy cannot validly defend an action on the basis of any misrepresentation by the named insured or that there is no exemption that allows an insurer to avoid the absolute liability flowing from the issuance of a policy and a pink slip, even when backdated, if the claim arises during the coverage period.
Of note, Unifund had already advanced the minimum limits of $200,000.00 to Yang, acknowledging that the absolute liability provisions in the Insurance Act applied in this case.
The Lesson
Insurers need to ensure that their brokers/agents are being diligent when dealing with applications for insurance and/or additions to existing policies. While, thanks to Justice Stevenson, insurers can take some comfort in the fact that undeniable misrepresentations made to an insurer when adding an additional vehicle to a policy will invoke the protection of section 233 of the Insurance Act, it is less clear that omissions by an insured would bring about the same result if they were unintentional. Had Justice Stevenson believed Shen's evidence that D'Acres did not ask about the ownership of the vehicle or whether the vehicle had been involved in an accident and he had not requested the policy to be backdated, this case may have had a completely different outcome (of note many insurers/brokers now record telephone requests for policy amendments perhaps for this reason).
For now however, the general duty of an insured to disclose material facts under a contract of insurance has been upheld and insurers can breathe a little bit easier with the knowledge that insureds will be held responsible for their actions if they are found to be intentionally attempting to deceive their insurer.
See Wen v. Unifund Assurance Company, 2012 ONSC 5274 (CanLII).
The Court of Appeal for Ontario has released its decision in Pastore v. Aviva, allowing the appeal and restoring the Director’s Delegate’s order.
In Pastore, the claimant was involved in a car accident on November 16, 2002. She suffered a fractured left ankle. She had numerous surgeries and ultimately applied for a catastrophic determination. The issue in dispute was whether the claimant was catastrophically impaired due to a mental or behavioural disorder, under subsection 2(1.1)(g) of the SABS.
The CAT issue proceeded to arbitration. The arbitrator accepted that the assessment of a Class 4 impairment in one area of function was sufficient to meet the definition of “catastrophic impairment”. This was the only area of function she reviewed in detail. On this basis, she concluded that Pastore had suffered a catastrophic impairment.
On appeal, the Director’s Delegate agreed with the Arbitrator that a Class 4 impairment was required in only one of four areas of functioning to establish a CAT impairment.
The Divisional Court disagreed with FSCO and granted the insurer’s application for judicial review. The Court found that the Director’s Delegate had failed to properly appreciate the effect of the incorporation of the Guides into the SABS. The Guides are incorporated into the SABS and must be treated as part of the legislative scheme. A plain reading of the words in s. 2(1.1.)(g) bearing in mind the context and purpose of the legislation and taking into account the FSCO Guidelines makes it clear that all four areas of function are to be accounted for in an assessment of catastrophic impairment.
Justice Matlow disagreed in part. He found there was nothing in the Guides which required more than a single finding and there was no requirement that every assessment allot a mental impairment class to each of the four areas of functional limitations before an impairment can be found to qualify. He held that the Guides are not “part of the legislation” and are only guidelines.
The Court of Appeal held on standard of review principles, the Divisional Court failed to give the Director’s Delegate sufficient deference. The Court of Appeal held that the decision of the delegate, in which he concludes that the use of “a” in the definition of “catastrophic impairment” in cl. (g) refers to a single, functional impairment due to mental or behavioural disorder at the marked level, constituting a catastrophic impairment, is a reasonable decision. The reasoning process was logical and transparent and the result is within the range of reasonable, acceptable determinations.
Of note, this is the second decision in a matter of weeks where the Court of Appeal has overturned a decision of the Divisional Court on an application for judicial review of FSCO.
There is always controversy regarding the approval of novel treatment modalities, and medical marijuana is no different. At first blush it seems sensational that marijuana would be approved as a reasonable and necessary treatment, as was decided in T.N. and Personal Insurance Company of Canada (FSCO A06-000399, July 26, 2012). In that case, the applicant suffered a head injury resulting in a catastrophic designation. Amongst other claims, the applicant sought payment of $1,200.00 per month from December 14, 2005 onward for marijuana. She claimed that she required this drug to alleviate pain, anxiety, insomnia and poor appetite. Her treating neuropsychiatrist prescribed marijuana, having decided that narcotic medication was inappropriate. The applicant also gave evidence that narcotics were not effective in providing relief without significant side effects. On the face of it would appear that marijuana could be reasonable and necessary in this instance. It is, after all allowable in law.
But is the ruling really that shocking? Yes, but not because it is marijuana, but rather the arbitrator’s rationale that led to the conclusion that the treatment was not caught by the experimental treatment exemption as per s. 14(3) of the predecessor SABS. The prescribing neuropsychiatrist admitted that the treatment was considered experimental by governments and insurers, and that he did not have a systematic knowledge of its use. The evidence of two other neuropsychiatrists also agreed that the use of marijuana was to be treated with caution. One confirmed that it was experimental. The other would not prescribe it at all. There was no evidence of credible evidence of independent research to suggest that its use was indicated, or even safe in this instance, particularly because the applicant was drinking large quantities of beer daily.
The arbitrator chose to view the claim through the prism of remedial legislation and whether the treatment is proven effective in the individual case. The arbitrator felt that despite the evidence presented, the insurer did not sufficiently assert that it was experimental. It was held that the most the insurer demonstrated was that the evidence did not prove that it was an effective treatment. This is a frustrating comment since it suggests that insurers must prove that an experimental treatment is not effective, an almost impossible task. In the end, self-report won the day: the claimant claimed relief and the prescribing neuropsychologist agreed.
Juliet Bratanov's 18 year old grandson used her van to run-down and kill Kevin Persaud after a drug deal gone bad. Persaud's family consequently commenced an action against Bratanov claiming that Bratanov was vicariously liable for the actions of her grandson simply by virtue of her ownership of the van. They additionally claimed that Bratanov was negligent in having entrusted her van to her grandson's father in a situation where she knew or ought to have known that the van would be used by her grandson who was a poor, incompetent, and incapable driver, as well as a danger and menace to society. Bratanov, in response, moved for summary judgment, arguing that the claims made against her could not succeed and there was consequently no genuine issue for trial.
Bratanov's motion required consideration of two separate issues:
- Was there a genuine issue requiring a full trial to determine whether Bratanov was vicariously liable for the plaintiffs' damages simply by virtue of her ownership of the van?
- Was there a genuine issue requiring a full trial to determine whether Bratanov was liable for the plaintiffs' damages as a result of her allegedly negligent entrustment of her van to her grandson's father?
Justice Campbell, in addressing these issues, provided a useful summary of the leading case with respect to summary judgment motions, being Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1 (C.A.); leave granted: [2012] S.C.C.A. No. 47 and 48., having determined that the necessary "'full appreciation of the evidence and issues' required to render a dispositive finding in relation [to the above-noted issues could] be fairly and justly achieved by way of this summary judgment motion, without need of a full trial".
Issue 1: Vicarious Liability
The issue of Bratanov's vicarious liability turned on the proper interpretation of section 192(2) of the Highway Traffic Act, R.S.O. 1990, c. H.8. Why? Because it was apparent from that section that vicarious liability for the plaintiffs' damages could only be imposed if the negligent operation of Bratanov's van took place on a "highway". In this particular case, Bratanov's grandson had been driving in a park. It was Bratanov's consequent position that a park is not a highway and liability could not be imposed. Justice Campbell, having considered the common sense interpretation of the term "highway", the application of the ejusdem generis rule of statutory interpretation, and the governing judicial authorities, agreed with Bratanov's position.
Issue 2: Negligent Entrustment
As explained by Justice Campbell, judicial authorities suggest that each of the following elements must be established in order to find a defendant liable for negligent entrustment: (1) the entrustment of a chattel by its owner to the entrustee; (2) incompetence, inexperience or recklessness on the part of the entrustee; (3) the entruster must have known or ought to have known of the entrustee's condition or proclivities; (4) the entrustment must have created an appreciable risk of harm to the plaintiff and a coincident relational duty of care on the part of the defendant/entruster; and (5) the entrustee's negligence must have been the proximate or legal cause of the damages suffered by the plaintiff.
In this particular case, Bratanov admitted to having entrusted her van to her grandson's father; however, the plaintiffs could not establish the remaining elements set out above. As stated by Justice Campbell, Bratanov could not be found liable in the absence of any negligence on the part of her grandson's father. Second, the relationship between Bratanov and the plaintiffs did not provide a sufficient degree of reasonable foreseeabiltiy and proximity to establish a duty of care on the part of Bratanov. And third, as the plaintiffs' damages were not reasonably foreseeable, any potential negligence on the part of Bratanov could not properly be said to have been a proximate cause of the plaintiffs' damages. As explained by Justice Campbell, while Bratanov "should reasonably have foreseen the possibility that her vehicle might be used by her grandson, and that he might have driven her vehicle carelessly and/or negligently on a highway, and thereby might accidentally have caused harm to other users of the highway - motorists or pedestrians", she "could not reasonably have anticipated that her grandson would use her vehicle as a weapon in a public park to criminally take the life of a fleeing pedestrian".
In the result, Bratanov's summary judgment motion was granted and the claims made against her were dismissed in their entirety.
A recent Ontario Court of Appeal decision has addressed the extent to which a lessee is covered by a lessor’s auto insurance policy for property damage that the lessee incurred to its cargo in an accident.
In Siena-Foods Ltd. v. Old Republic Insurance Company (2012 ONCA 583), Sienna-Foods was appealing the decision of the Superior Court motions judge, which declared that a lessor’s auto policy did not provide coverage for a lessee’s property damage incurred in an auto accident. The motion was for a determination of an issue of law before trial.
Siena had rented a truck from Ryder Canada to transport Siena’s machine designed to vacuum seal food products. The rental agreement between Siena and Ryder included a liability protection plan, however this plan included a clause, which stated that the plan would not apply to loss or damage to property contained in the vehicle. Siena also indicated to Ryder that the truck would be used to transport “produce”, rather than equipment.
Ryder held a policy of auto insurance with Old Republic in respect of the truck. The truck was transporting the machine when it was involved in a head on collision with a third party automobile, which had crossed the centre line of the road. Old Republic acknowledged that the accident was not the fault of the Siena driver. As a result of the accident, the machine was badly damaged.
The Court of Appeal addressed the same questions as the motions judge:
(1) is Old Republic the “insurer” of Siena-Foods for the purposes of s. 263(2) of the Insurance Act?;
(2) if
(3) if Siena-Foods
misrepresented to Ryder the type of cargo it was carrying, does this impact its
recovery from
In its decision, written by Justice Laskin, the Court of Appeal allowed the appeal, and answered “yes”, “no” and “no” to each question, respectively.
S. 247 of the Insurance Act (Third-Party Liability Coverage), s. 3.5.1 of the policy (Property Not Covered), and endorsement OPCF 5C all state that the insurer will not be liable for damage to property damage incurred in an accident. However, the Court of Appeal noted that these sections were only applicable in the context of third-party “Liability Coverage” (i.e. where the insured is sued by a third party for damaging the third-party’s property), and were not relevant in Siena’s claim – a first party claim.
Rather, in order to answer question 1, the Court of Appeal applied s. 263 of the Insurance Act. This section was designed to replace the common law tort regime for property damage, by allowing insured’s to apply to their own insurer to indemnify them for property damage, proportionate to the extent to which the insured was not at fault for the accident.
The Court determined that Siena was considered an “insured” under the Ryder/Old Republic policy, because the policy contained an endorsement (OPCF-5) which extended coverage to lessees. Since Siena was an “insured” under that policy, it could be indemnified for the damaged machine.
In addressing question 2, the Court held that the terms and conditions of the agreement between Siena and Ryder had no impact on Siena’s ability to recover on the Old Republic Policy, as Old Republic was not a party to this rental agreement. In answering question 3, the Court held that even if the misrepresentation was a breach of Ryder’s insurance policy, Siena’s right to recover under s. 263/s. 6.1 would be unaffected, as Siena is to be treated as a third party. Further, Siena’s conduct alone could not automatically terminate coverage.
The Court of Appeal overturned the motion judge’s decision, and determined that Siena was entitled to recover for damage to the machine from Old Republic. This case provides a good analysis of the property damage coverage regime for a lessee in respect of lessor’s auto insurance policy.
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