Court File and Parties
DATE: 20020226
DOCKET: C36050
COURT OF APPEAL FOR ONTARIO
WEILER, ABELLA AND GOUDGE JJ.A.
B E T W E E N:
FACILITY ASSOCIATION
J. D. Timothy Pinos And Helena Jankovic for the appellant
Applicant/Respondent
- and -
TTC INSURANCE COMPANY LIMITED
Robin B. Cumine, Q.C. for the respondent
Respondent/Appellant
Heard: February 6, 2002
On appeal from the judgment of Justice Nancy L. Backhouse dated March 1, 2001.
Reasons for Decision
1The Compulsory Automobile Insurance Act, R.S.O. 1990, c.C.25 (the Act) requires the Toronto Transit Commission (TTC), like any other vehicle owner, to have a contract of automobile insurance covering its motor vehicles. That contract must be with an insurer licenced under Ontario's Insurance Act, R.S.O. 1990, c.I.8. For that purpose, TTC incorporated a wholly owned subsidiary, TTC Insurance Company Ltd. (TTC Insurance) which has been licenced under the Insurance Act.
2Under its licence, TTC Insurance is restricted to issuing a policy of insurance with respect to the automobile insurance risks of TTC. TTC Insurance is exempted by order-in-council from the capital and unimpaired surplus requirements of the Insurance Act, on condition that TTC provides it with an indemnity for the costs and expenditures of TTC Insurance. As a backstop to this, the Municipality of Metropolitan Toronto is required to guarantee TTC's obligations under the indemnity.
3TTC pays an annual premium of $1.00 to TTC Insurance.
4The Act requires TTC Insurance, like every licensed automobile insurer, to be a member of the Facility Association and to help pay for it. The Facility Association arranges for high-risk drivers, who cannot otherwise do so, to obtain automobile insurance with certain designated automobile carriers. It also funds the costs of that insurance to the extent that these costs exceed the premiums charged to the high-risk drivers.
5As required by the Act, the Facility Association maintains a Plan of Operation which, broadly speaking, provides that each member shares those costs in the proportion which the "direct earned premiums" it receives bears to the provincial total of such premiums received by all members.
6In this application, Backhouse J. determined that for the purpose of calculating its share of the cost of the Facility Association, the direct earned premiums received by TTC Insurance encompassed both the $1.00 paid by TTC and the amount paid out by TTC in fulfillment of its indemnity obligation to TTC Insurance.
7TTC Insurance appeals from this decision.
Analysis
8In our view, Backhouse J. reached the correct conclusion and I agree with her clear and succinct reasons. Thus, I need only respond in short measure to the four specific arguments raised by the appellant.
First Argument: Risk Allocation
9First, the appellant argues that because of its arrangement with TTC, TTC Insurance bears no risk and the direct earned premium it receives should properly be limited to the $1.00 paid to it by TTC.
10I disagree. While TTC may discharge its indemnity obligation by sending cheques to injured parties in payment of claims payable under the TTC Insurance policy, these payments are the statutory obligation of TTC Insurance. TTC Insurance bears the risk of such claims in return for which TTC each year pays $1.00 and an amount pursuant to its indemnity. This reality is not altered because claimants receive their payments not from TTC Insurance, but from TTC on behalf of TTC Insurance. It is simply not correct to say TTC Insurance bears no risk.
Second Argument: Definition of Premium
11Second, the appellant says that Backhouse J. erred in finding that the payments by TTC pursuant to the indemnity were "consideration" for the insurance provided and hence were within the definition of "premium" in the Insurance Act. That definition provides that "premium" includes "dues, assessments … and other considerations" (emphasis added).
12In our view, the statutory definition was not meant to exclude what the insured pays to the insurer to obtain coverage. Quite the reverse. Here what TTC is required to pay pursuant to its indemnity is the largest part of its true annual cost of obtaining insurance. It is part of its premium, and within the definition of that term in the Insurance Act.
Third Argument: Direct and Earned Premiums
13Third, the appellant says that Backhouse J. determined only that these payments pursuant to the indemnity were part of the premium but did not determine that they were direct and earned.
14In our view, there is no merit to this argument. These payments are plainly a direct cost to TTC of receiving the insurance coverage it is required to maintain. They are earned as the coverage year elapses, as are all other premiums.
Fourth Argument: Judicial Interpretation
15Finally, the appellant challenges the respondent's right to obtain a judicial interpretation of the phrase "direct earned premiums" in the Facility Association's Plan of Operation if that means looking behind the premium of $1.00 which the insurer reports receiving. Again, I disagree. The proper interpretation of "direct earned premiums" as it applies to TTC Insurance requires a consideration of all the relevant circumstances, not just the premium that is reported by the insurer.
Disposition
16In the result, the appeal is dismissed with costs.
Released: February 26, 2002 “KMW”
“S.T. Goudge J.A.”
“I agree K.M. Weiler J.A.”
“I agree R.S. Abella J.A.”