DATE: 2005-06-03 DOCKET: C42225

COURT OF APPEAL FOR ONTARIO

GOUDGE, FELDMAN AND BLAIR JJ.A.

B E T W E E N :

DANIEL ORLANDO SORIANO, minor by his Litigation Guardian, Marina De Jesus Ruiz Hiraeta, MARINA DE JESUS RUIZ HIRAETA, personally, JOAQUIN SORIANO-CORTEZ, JAMIE SORIANO, minor, LUZ NOEMI SORIANO, minor, SARITA SORIANO, minor and DANIELLA SORIANO, minor by their Litigation Guardian, Marina De Jesus Ruiz Hiraeta

Plaintiffs (Appellants)

• and -

NATIVIDAD MERCEDES PALACIOS and WAWANESA MUTUAL INSURANCE COMPANY

Defendants (Respondents)

Counsel: Paul Bates and Charles Gluckstein for the appellants Daniel Soriano et al. Donald G. Cormack and Derek V. Abreu for the respondent Wawanesa Mutual Insurance Company

Heard: March 16, 2005

On appeal from the judgment of Justice Andromache Karakatsanis of the Superior Court of Justice dated May 19, 2004, reported at [2004] O.J. No. 2178.

GOUDGE J.A.:

[1] On November 21, 1999, five-year-old Daniel Soriano was struck by a car owned and operated by Natividad Mercedes Palacios. Unfortunately, Daniel was badly injured.

[2] The accident happened in the garage of Ms. Palacios’s residence in Montreal, Quebec. Ms. Palacios was looking after Daniel while his mother was visiting relatives in the United States. At the time of the accident, Daniel and his family were residents of Ontario.

[3] Daniel and his family were insured under an automobile policy issued in Ontario to his father by Wawanesa Mutual Insurance Company. The Sorianos commenced an action in Ontario to recover for Daniel’s injuries. They sued both Ms. Palacios and Wawanesa.

[4] The relevant Ontario legislation, the Insurance Act, R.S.O. 1990, c. I.8 requires every policy to which it applies to provide uninsured motorist coverage. The relevant Quebec legislation provides for a “no fault” system of compensation for those involved in automobile accidents. Under the Automobile Insurance Act, R.S.Q. 1990, c. A-25, no action can be brought to recover damages from an at-fault driver for bodily injuries caused by an automobile accident in Quebec. Rather, the accident victim receives compensation from the Societé de l’assurance du Québec regardless of who is at fault.

[5] Wawanesa moved for summary judgment to have the action against it dismissed, arguing that the Quebec legislation barred the Sorianos’ claim. In clear and careful reasons, the motion judge granted the order. She found that Quebec substantive law applies to this tort action and that she had no discretion to apply Ontario law. Since the parties agreed that the action would be statute-barred if the substantive law of Quebec applied, she ordered that the action against Wawanesa be dismissed. However, she went on to indicate that, had she had the discretion, she would have exercised it in this case to apply Ontario law and to permit the action to proceed.

[6] Daniel and his family appeal from the order of the motion judge. The appellants challenge the finding that there is no discretion to apply Ontario law in this case, but also make a number of arguments not raised below. However, in my view, the motion judge was correct in finding that she had no discretion and none of the new arguments can succeed either. I would therefore dismiss the appeal.

ANALYSIS

[7] The legislative provision at the heart of this appeal is s. 265(1) of Ontario’s Insurance Act. It reads:

265.(1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that,

(a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile; [emphasis added]

[8] This section makes it mandatory that every Ontario automobile insurance policy provide basic coverage for damage caused by an uninsured automobile. An insured has the option of obtaining additional uninsured automobile coverage by paying the additional premium for the family protection coverage provided in Endorsement OPCF 44R.

[9] The appellants’ arguments focus on the phrase “legally entitled to recover from the owner or driver of an uninsured automobile…”. Their arguments proceed on the assumption that Ms. Palacios’s car was “an uninsured automobile” as that term is defined in s. 265(2) of the Insurance Act. While that is contested by the respondent Wawanesa, for present purposes I am prepared to proceed on the same assumption.

[10] The task then is to determine what sums, if any, the appellants are “legally entitled to recover” as damages from Ms. Palacios. The appellants offer two reasons why this determination should be made pursuant to the laws of Ontario and not the laws of Quebec.

[11] First, they say that because s. 265(1) sets out a statutory term of their insurance contract with Wawanesa, the legal entitlement it provides must be determined by the proper law of the contract, namely the law of Ontario.

[12] In my view, this argument can be disposed of easily. The appellants’ legal entitlement to recover from Ms. Palacios is to be determined in the tort action they have commenced against her. They have no contractual relationship with Ms. Palacios. Rather it is the law governing the tort action that must determine whether they are legally entitled to recover damages from Ms. Palacios, not the law of their contract with Wawanesa.

[13] Second, the appellants argue that if the applicable law is the law governing their tort action against Ms. Palacios, there is a discretion that should be exercised here to apply Ontario law rather than Quebec law.

[14] Again I think there is a definitive answer. In the leading case of Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022, after detailed analysis, La Forest J. for the majority decided not only that the substantive law to be applied in tort cases is generally the law of the place where the activity occurred, but that in domestic litigation, where the activity occurred in another province, there can be no exceptions to the application of the lex loci delicti. This court has clearly reiterated this principle in a number of cases. See for example, Leonard v. Houle (1997), 1997 1218 (ON CA), 36 O.R. (3d) 357 (C.A.) and Wong v. Lee (2002), 2002 44916 (ON CA), 58 O.R. (3d) 398 (C.A.). In my view, Lau v. Li (2001), 2001 28058 (ON SC), 53 O.R. (3d) 727 (Sup. Ct.), which finds that there is discretion not to apply the lex loci delicti in an inter-provincial tort action, is wrongly decided.

[15] The appellant’s third argument is that even if their legal entitlement to recover from Ms. Palacios must be determined by the substantive law of Quebec (because Daniel was injured there) they must simply show that Ms. Palacios was at fault or negligent and establish the amount of their damages.

[16] For this they rely primarily on Chambo v. Musseau (1993), 1993 8680 (ON CA), 15 O.R. (3d) 305 (C.A.). In that case, this court was dealing with s. 231(1) of the Insurance Act, R.S.O. 1980, c. 218, which is in exactly the same terms as the present s. 265(1). The court concluded that to recover from his or her own insurer under the mandatory uninsured motorist coverage, an insured person must show only the fault or negligence of the uninsured driver and the resulting damage suffered by the insured. The insured is not barred by failing to obtain a judgment against the uninsured driver or by failing to commence an action against that driver within the applicable limitation period. The appellants say that Chambo permits them to show legal entitlement for the purposes of s. 265(1) simply by proving both Ms. Palacios’s fault pursuant to the law of negligence applicable in Quebec, and the damages they have suffered.

[17] In my view this argument must be rejected. It ignores the existence of Quebec’s Automobile Insurance Act, which completely eliminates the appellant’s legal entitlement to recover damages from Ms. Palacios, whether or not she was at fault.

[18] Several cases make this clear. The most recent is Somersall v. Friedman, 2002 SCC 59, [2002] 3 S.C.R. 109. In that case, the Somersalls were struck and injured by an underinsured motorist. By way of settlement with that motorist, they recovered as much of their damages as they could from the motorist’s insurer, and then sought to recover the remainder from their own insurer pursuant to the optional underinsured driver coverage which they had purchased. That coverage was contained in an endorsement to the Somersalls’ policy known as “SEF 44”, the predecessor to the present optional coverage found in Endorsement OPCF 44R. According to both SEF 44 and its successor, a plaintiff must be “legally entitled to recover” damages from an uninsured or underinsured driver in order to be able to recover against his or her own insurer under the endorsement. The court was therefore called on to address the same requirement that exists in s. 265(1) as a precondition to accessing the mandatory uninsured motorist coverage.

[19] Writing for the majority, Iacobucci J. held that the assessment of whether the Somersalls were “legally entitled to recover” from the underinsured driver requires a consideration of all the laws in force that are relevant to the legal entitlement, and also that the assessment must be made as of the time of the accident. Where that assessment yields the conclusion that the insured can make out a claim in tort against the uninsured or underinsured driver as of the time of the accident, the insured is legally entitled to recover damages from that driver, and the precondition for accessing the uninsured driver coverage is met. Consistent with this reasoning, Iacobucci J. concluded that neither the subsequent expiry of the limitation period for suing the uninsured driver (as in Chambo) nor the subsequent agreement with that driver to limit recovery from him or his insurer (as in Somersall) could stand in the way of a finding that the “legally entitled to recover” requirement is met. In both cases, all of the conditions necessary for the insured to make out a claim in tort against the uninsured driver were there as of the moment of the accident. The insured therefore met the test of being “legally entitled to recover” damages from the uninsured driver.

[20] The court’s reasoning in Somersall leads to the opposite result in this case. Legal entitlement must be determined as of the time of the accident and must take account of all the relevant laws of Quebec, not just the law of negligence. In particular, Quebec’s Automobile Insurance Act prevented the appellants from making any claim for damages against Ms. Palacios right from the moment the accident occurred. It was never possible for the appellants to make out a claim in tort against her. They are therefore not legally entitled to recover damages from her for Daniel’s injuries, and are thus unable to meet the requirement for accessing the mandatory uninsured driver coverage in their Wawanesa policy.

[21] Charron J.A. came to the same conclusion in her decision in this court in Somersall itself, (2000), 2000 3628 (ON CA), 183 D.L.R. (4th) 396 (Ont. C.A.). In disposing of an argument made by the insurer there (but apparently not made and therefore not commented on in the Supreme Court of Canada) she explained (at para. 29):

The determination of “fault” must be made in the context of all applicable laws. In my view, an insured could not successfully argue that an uninsured or underinsured motorist is “at fault” if the injuries caused by such alleged “fault” were sustained in a motor vehicle accident occurring in a jurisdiction governed by a “no-fault” regime, unless the insured can meet the requirements under the particular regime. Indeed, one of the cases relied upon by [the insurer] is consistent with this approach. See MacKenzie v. Zurich Insurance Co. (1990), 1990 6837 (ON SC), 65 D.L.R. (4th) 765 (Ont. H.C.J.) where the court held that no claim lies in Ontario on an underinsured motorist endorsement unless the person responsible for the accident is “legally liable”. Since the accident occurred in the Province of Quebec and Quebec law provided for a no fault compensation scheme, the underinsured motorist was not liable and the endorsement did not apply.

[22] Cronk J.A. agreed with this reasoning in Craig v. Allstate Insurance Co. of Canada (2002), 2002 44956 (ON CA), 59 O.R. (3d) 590 (C.A.). In that case, the insureds sought access to their underinsured motorist coverage after settling with the driver of the Florida school bus that collided with them for the maximum permitted by the Florida sovereign immunity legislation that protected that driver. In concluding that the insureds met the requirement of being legally entitled to recover damages from the underinsured Florida driver, Cronk J.A. distinguished this situation from one in which a no-fault regime precluded all tort claims against the underinsured driver. She explained (at para. 26):

Thus, Florida’s sovereign immunity law does not establish absolute immunity from suit in favour of the state. It does not establish a statutory bar to an action against an insured tortfeasor. It does not prevent an injured motorist from obtaining a judgment for damages against a tortfreasor. It does not preclude all tort claims by injured motorists in deference to, or support of, an alternative tort compensation scheme. It is to be contrasted, in this regard, to the type of no-fault insurance legislation in the Province of Quebec referred to in the following cases relied upon by Allstate: MacKenzie v. Zurich Insurance Co. (1990), 1990 6837 (ON SC), 71 O.R. (2d) 690, 65 D.L.R. (4th) 765 (H.C.J.); Buchan v. Non-Marine Underwriters, Lloyd’s London (1999), 1999 14807 (ON SC), 44 O.R. (3d) 685, 45 C.C.L.T. (2d) 207 (S.C.J.) and Thai v. Dao (1998), 1998 14839 (ON SC), 39 O.R. (3d) 791, 5 C.C.L.I. (3d) 96 (Gen. Div.). Those cases involve legislation which removes liability. This case concerns a limit or restriction on liability. Accordingly those cases are of little precedential value in relation to the issues on this appeal.

[23] In summary, in this case the Quebec no-fault legislation entirely precludes a tort claim by the appellants to recover damages from Ms. Palacios for Daniel’s injuries. The appellants therefore cannot meet the condition for accessing the mandatory uninsured motorist coverage in their Wawanesa policy.

[24] This conclusion is not affected by the fact that in 1979, when the predecessor of s. 265(1) was first enacted in Ontario, a person injured in a car accident in Quebec could recover in tort. As the Supreme Court of Canada held in Somersall, the question of legal entitlement must be determined according to all relevant laws in force at the time of the accident. In this case that includes the present no-fault scheme in Quebec.

[25] Nor is this conclusion affected by the fact that the “legally entitled to recover” concept appears in the OPCF 44R endorsement as well as the Insurance Act. Unlike s. 265(1), the endorsement also expressly excludes accidents occurring in Quebec for which compensation is payable under the Quebec Automobile Insurance Act. However, this addition, for added certainty, does not affect the interpretation to be given to the threshold condition for accessing the uninsured motorist coverage in the standard policy and the endorsement. The requirement is in the same terms in both cases, namely that the insured be legally entitled to recover damages from the uninsured motorist for the injury suffered. The case law has approached the interpretation of the “legally entitled to recover” language in the same way whether dealing with the mandatory standard policy (as in Chambo) or the optional endorsement (as in Somersall).

[26] Finally, this conclusion does not give the Quebec legislation extra-territorial effect contrary to the principles of constitutional law. Its impact on this litigation is due to the combined effect of s. 265(1) of the Ontario statute and the choice of law rule for tort law first articulated in Tolofson. It is not due to any extra-provincial reach found in the language of the Quebec legislation itself.

[27] Thus I agree with the conclusion of the motion judge. Because of the Quebec Automobile Insurance Act, the appellants are not legally entitled to recover damages from Ms. Palacios for Daniel’s injuries, and they therefore cannot succeed in a claim made under the mandatory uninsured motorist coverage in their own automobile policy. On this basis alone there is no genuine issue for trial against the respondent Wawanesa. There is no need to address the issue of whether Ms. Palacios is properly considered an uninsured driver for the purposes of s. 265(1).

[28] The appeal is dismissed. The respondent is not asking for costs and none are ordered.

RELEASED: June 3, 2005 “STG”

“S. T. Goudge J.A.”

“I agree K. Feldman J.A.”

“I agree R. A. Blair J.A.”