Benson et al. v. Walt et al.
[Indexed as: Benson v. Walt]
Ontario Reports
Court of Appeal for Ontario
Sharpe, LaForme and van Rensburg JJ.A.
February 22, 2018
141 O.R. (3d) 220 | 2018 ONCA 172
Case Summary
Insurance — Automobile insurance — Priorities
A driver involved in a motor vehicle accident while driving a car with the consent of the owner was covered under three insurance policies: the car owner's State Farm automobile insurance policy, the owner's State Farm personal liability umbrella policy, and the driver's own Economical automobile insurance policy. On a Rule 21 motion to determine the priorities in which those policies would respond to the plaintiff's claim, the motion judge ruled that the State Farm auto policy should respond first, then the Economical auto policy, and then the State Farm umbrella policy. Economical appealed.
The motion judge was not erring in finding that the State Farm umbrella policy was not an owner's first loss policy as defined by section 277(1) of the Insurance Act and that the Economical policy had to respond to the claim after the owner's automobile insurance policy and before the umbrella policy. The Economical policy remained primary insurance even though section 277(1) made it "excess" in relation to the State Farm automobile insurance policy. Section 277(2) of the Act did not apply to the Economical policy.
Insurance Act, R.S.O. 1990, c. I.8, s. 277(1), (2).
Facts
The defendant Walt was involved in a motor vehicle accident while driving a car with the consent of the owner. The car was insured under a State Farm automobile insurance policy. The owner was also insured under a State Farm personal liability umbrella policy ("PLUP"). Walt had his own automobile insurance policy issued by Economical. On a Rule 21 of the Rules of Civil Procedure motion to determine the priorities in which those policies would respond to the plaintiff's claim, the motion judge ruled that the owner's State Farm auto policy should respond first, then the Economical auto policy, and then the State Farm PLUP. Economical appealed.
Held: The appeal should be dismissed.
The State Farm PLUP was not an owner's first loss policy as defined by section 277(1) of the Insurance Act. It only responded after the limits of the required underlying policy were exhausted, or if the underlying insurance did not provide coverage for the loss. Section 277(1) deals with the priorities as between primary automobile insurance policies, and its reach does not extend to every other type of policy that might have to respond once the policy limits of applicable automobile policies were exhausted. The Economical policy and the State Farm PLUP were not both excess policies that, pursuant to section 277(2) of the Insurance Act, were only required to respond for their rateable proportion of any liability exceeding the State Farm auto policy limits. The Economical policy remained primary insurance even though section 277(1) made it "excess" in relation to the State Farm auto policy. Section 277(2) did not apply to the Economical policy.
Cases Referred To
Distinguished:
- Avis Rent A Car System, Inc. v. Certas Direct Insurance Co., 75 O.R. (3d) 421
- ING Insurance Co. v. Lombard General Insurance Co., 94 O.R. (3d) 669, affirmed 2009 ONCA 570, 98 O.R. (3d) 522
Other cases referred to:
- Keelty v. Bernique, 57 O.R. (3d) 803
- McKenzie v. Dominion of Canada General Insurance Co., 2007 ONCA 480, 86 O.R. (3d) 419
- Trenton Cold Storage Ltd. v. St. Paul Fire and Marine Insurance Co.
Statutes Referred To
Rules and Regulations Referred To
Appeal
APPEAL from the order of Shaughnessy J., [2017] O.J. No. 2996, 2017 ONSC 3612 (S.C.J.).
D. Zuber and D. Fiorita, for appellant Paul Robert Walt, by policy of insurance issued by Economical Insurance.
J. Schrieder and L. Furukawa, for respondent Paul Robert Walt, by policy of insurance issued by State Farm.
Judgment
The judgment of the court was delivered by SHARPE J.A.
Analysis
[1] Introduction
The issue on this appeal is the priority as between three insurance policies covering the driver of a motor vehicle involved in an accident.
[2] The Facts
The driver, the defendant Paul Robert Walt, was driving the car involved in the accident with the consent of the owner, the defendant Mary La Chapelle-Stenner. The car was insured under a State Farm automobile insurance policy issued to the owner (policy limit $300,000). The owner was also insured under a State Farm personal liability umbrella policy ("PLUP") (policy limit $1 million). Walt had his own Economical Insurance automobile insurance policy, with a policy limit of $1 million.
[3] The Motion Judge's Decision
On a Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 motion to determine the priority in which these policies would respond to the plaintiff's claim, the motion judge ruled that they would respond as follows: first the owner's State Farm Auto Policy, then the driver's Economical Insurance auto policy, and then the State Farm PLUP.
[4] Economical's Arguments on Appeal
Economical appeals that order, arguing that:
(1) pursuant to section 277(1) of the Insurance Act, R.S.O. 1990, c. I.8, the State Farm PLUP is an owner's "first loss insurance" that should respond before the Economical Insurance auto policy which is "excess" insurance and should respond only after the limits of the other two policies have been exhausted; and
(2) in the alternative, the Economical policy and State Farm PLUP policy are both excess insurance and that, pursuant to section 277(2), those policies are only required to respond for their rateable proportion of any liability exceeding the State Farm auto policy limits.
[5] Disposition of Appeal
For the following reasons, the appeal should be dismissed.
Analysis
(1) Is the State Farm PLUP an owner's first loss policy?
[6] Nature of Coverage Under the Policies
The State Farm and Economical auto policies are standard form OAP 1 policies covering listed vehicles and other automobiles driven by the insured. The defendant Walt was covered as the driver of the owner's vehicle under the State Farm auto policy and as the driver of another vehicle under his own Economical auto policy. Both the State Farm and the Economical auto policies are primary policies. Liability attaches under both policies immediately upon the occurrence of the insured event.
[7] Umbrella Policy Coverage
The State Farm PLUP provides a very different form of coverage. It covers general personal liability for personal injury or property damage exceeding the coverage provided by the required underlying insurance or losses not covered by the underlying policies. The required underlying policies include automobile, recreational motor vehicle, comprehensive personal liability and watercraft liability policies. In the case of a loss arising from an automobile accident, liability under a PLUP attaches only after the coverage provided by the required underlying automobile policy has been exhausted.
[8] Primary vs. Umbrella Policies
The difference between the nature of coverage provided by a primary policy and an umbrella policy was explained by Charron J.A. in Trenton Cold Storage Ltd. v. St. Paul Fire and Marine Insurance Co., at paragraphs 21-22, and relied upon by MacFarland J.A. in McKenzie v. Dominion of Canada General Insurance Co., 2007 ONCA 480, 86 O.R. (3d) 419, at paragraph 39. A primary policy "clearly provides for an obligation to pay and a duty to defend upon the happening of a specified occurrence without any reference to, or requirement that there be, underlying insurance". An umbrella policy, on the other hand, provides "coverage with respect to certain risks" but limits the insurer's "liability to the loss in excess to that which may be collected by the insured under any underlying insurance" and "the limits of the underlying policies . . . operate as a kind of deductible". Umbrella policies also provide "drop-down" coverage where there is no underlying insurance.
[9] Section 277(1) of the Insurance Act
Subsection 277(1) of the Insurance Act provides:
277(1) Subject to section 255, insurance under a contract evidenced by a valid owner's policy of the kind mentioned in the definition of "owner's policy" in section 1 is, in respect of liability arising from or occurring in connection with the ownership, or directly or indirectly with the use or operation of an automobile owned by the insured named in the contract and within the description or definition thereof in the policy, a first loss insurance, and insurance attaching under any other valid motor vehicle liability policy is excess insurance only.
[10] First Policy to Respond
It is not disputed that, pursuant to section 277(1), the first policy to respond is the State Farm auto policy insuring the owner of the vehicle involved in the accident.
[11] Economical's Submission
Economical submits that the State Farm PLUP is also an owner's first loss policy as defined by section 277(1).
[12] Definition of "Owner's Policy"
In the court's view, the motion judge correctly rejected this submission. While the State Farm PLUP would provide some coverage to the owner or operator of a motor vehicle in some circumstances, it is not, within the meaning of section 277(1), an "owner's policy of the kind mentioned in the definition of 'owner's policy' in section 1". That definition reads as follows:
"owner's policy" means a motor vehicle liability policy insuring a person in respect of the ownership, use or operation of an automobile owned by that person and within the description or definition thereof in the policy and, if the contract so provides, in respect of the use or operation of any other automobile.
[13] PLUP Does Not Fall Within Regulated Scheme
The State Farm PLUP does not, by its terms, provide primary insurance for liability arising from the use of an automobile. The State Farm PLUP, like the umbrella policy at issue in Keelty v. Bernique, 57 O.R. (3d) 803, does not fall within what the court described, at paragraph 25, as Ontario's "highly regulated" scheme of motor vehicle insurance. It only responds after the limits of the required underlying policy are exhausted, or if the underlying insurance does not provide coverage for the loss. Subsection 277(1) deals with the priorities as between primary motor vehicle insurance policies and its reach does not extend to any and every other type of policy that might have to respond once the policy limits of applicable motor vehicle policies are exhausted.
[14] Avis Case
In support of its submission that the State Farm PLUP is primary automobile insurance, Economical relies heavily on the decision of this court in Avis Rent A Car System, Inc. v. Certas Direct Insurance Co., 75 O.R. (3d) 421. That case involved a commercial umbrella insurance policy issued to Avis to provide coverage in excess of two other automobile insurance policies. The court held that on the facts of that case, the umbrella policy was an "owner's policy" within the meaning of section 277(1) and therefore responded as first loss insurance.
[15] Distinguishing Avis
In the court's view, the Avis decision is readily distinguishable from the case at bar. The umbrella policy at issue in Avis was issued in the United States by an American insurer. This court's decision that it was an "owner's policy" turned on the fact that the American insurer had filed an undertaking pursuant to section 226.1 of the Insurance Act agreeing to provide the minimum statutory coverage required by Ontario's automobile insurance scheme. The effect of the undertaking was to supersede the language of the policy and the coverage it provided and to replace it with the mandated terms of the standard Ontario automobile policy. That meant that when it came to determine how the policy responded in relation to other policies, the wording of the umbrella policy did not govern and the policy had to be treated as if it were an owner's policy within the meaning of the Ontario automobile insurance scheme.
[16] ING Case
Economical also relies on ING Insurance Co. of Canada v. Lombard General Insurance Co. of Canada, 94 O.R. (3d) 669, affirmed 2009 ONCA 570, 98 O.R. (3d) 522. That case involved an umbrella policy that incorporated a Standard Excess Automobile Policy SPF No. 7 endorsement, which provided coverage for excess loss related to the specific automobiles covered in the required underlying automobile insurance policies. The motion judge found that the endorsement brought the umbrella policy within the definition of an owner's first loss policy under section 277(1). The case at bar is distinguishable as it does not involve a Standard Excess Automobile Policy SPF No. 7 endorsement that alters the nature of the coverage provided by an umbrella policy.
[17] Conclusion on First Issue
Accordingly, the appeal from the motion judge's order that the Economical auto policy must respond before the State Farm PLUP policy should be dismissed.
(2) Are the Economical Auto Policy and the State Farm PLUP both excess policies that, pursuant to section 277(2), are only required to respond for their rateable proportion of any liability exceeding the State Farm auto policy limits?
[18] Economical's Alternative Argument
In the alternative, Economical submits that by the language of section 277(1), the Economical auto policy and the State Farm PLUP are both "excess insurance". Therefore, by virtue of section 277(2), Economical should respond only for its rateable proportion of any liability exceeding the State Farm auto policy.
[19] Section 277(2) of the Insurance Act
Subsection 277(2) provides as follows:
277(2) Subject to sections 255 and 268 and to subsection (1) of this section, if the insured named in a contract has or places any other valid insurance, whether against liability for the ownership, use or operation of or against loss of or damage to an automobile or otherwise, of the insured's interest in the subject-matter of the contract or any part thereof, the insurer is liable only for its rateable proportion of any liability, expense, loss or damage.
[20] Section 277(2) Does Not Apply to Economical Policy
In the court's view, section 277(2) does not apply to the Economical auto policy. Subsection 277(2) addresses the situation where there are overlapping non-primary policies. It does not refer to "excess insurance" in the sense of that term in section 277(1) but rather applies to "any other valid insurance" the insured "named in a contract" has or places. Even though the Economical auto policy is "excess insurance" in relation to the State Farm auto policy by virtue of section 277(1), it remains primary first loss insurance and does not fall within section 277(2). In the court's view"any other valid insurance" must refer to insurance other than that described in section 277(1). The language of section 277(2) -- "any other valid insurance, whether against liability for . . . or damage to an automobile or otherwise" -- is distinguished from the language of section 277(1) which uses the term "any other valid motor vehicle liability policy" when determining the priority in which those primary policies are to respond.
[21] Policy Wording and Statutory Provisions
As the motion judge correctly held, liability of the insurers turns on the wording of the policies as well as on the provisions of the Act. The Economical auto policy remains, by its terms, primary insurance even though section 277(1) makes it "excess" in relation to the State Farm auto policy. The State Farm PLUP only provides coverage after any other valid and collectible first loss insurance has responded in the priority established by section 277(1). The two policies provide very different coverage and they are not required to respond rateably as if they provided the same type of coverage.
[22] Conclusion on Second Issue
Accordingly, the court would not give effect to the argument that Economical is only required to respond rateably with the State Farm PLUP for any liability exceeding the limits of the State Farm auto policy.
Disposition
For these reasons, the appeal is dismissed with costs to the respondent State Farm in the amount agreed to by the parties, namely, $15,000, inclusive of disbursements and HST, for both the appeal and the motion.
Appeal dismissed.
End of Document
