Court of Appeal for Ontario

Date: April 25, 2019 Docket: C65622 Judges: van Rensburg, Hourigan and Huscroft JJ.A.

Parties

Between

Michael Ruddell and Caroline Metcalfe Plaintiffs

and

Gore Mutual Insurance Company and Allstate Insurance Company of Canada Defendants

(Appellant / Respondent)

Counsel

For the Appellant: C. Kirk Boggs and Jennifer L. Hunter

For the Respondent: David F. Murray and Saro A. Setrakian

Hearing and Appeal

Heard: March 29, 2019

On appeal from: The judgment of Justice Shaun S. Nakatsuru of the Superior Court of Justice, dated June 22, 2018, with reasons reported at 2018 ONSC 3932.

Decision

Hourigan J.A.:

Introduction

[1] The plaintiffs, Michael Ruddell and Caroline Metcalfe, brought an action pursuant to s. 258(1) of the Insurance Act, R.S.O 1990, c. I.8, for the payment of insurance monies. The payment was sought to satisfy a judgment that arose from a settlement in an action for damages suffered by them as a result of a single vehicle accident. The issue below was which insurer, Gore Mutual Insurance Company ("Gore") or Allstate Insurance Company of Canada ("Allstate"), should satisfy the judgment. Gore was the insurer of the owner of the vehicle and Allstate was the insurer of Mr. Ruddell. All parties agreed that this issue could be determined on a summary judgment motion.

[2] The motion judge concluded that Gore was liable for the judgment. In so holding, he found that the owner of the vehicle had not breached Gore's insurance policy so as to forfeit the proceeds. In the alternative, he held that even if the policy was breached, the owner of the vehicle was entitled to relief from forfeiture.

[3] These reasons explain why I would dismiss the appeal. In summary, I conclude that the motion judge did not err in his analysis of whether the policy was breached by reason of lack of cooperation. Given this finding, it is unnecessary to consider the issue of relief from forfeiture. However, to be clear, these reasons should not be interpreted as endorsing the motion judge's brief treatment of that issue.

Facts

[4] The accident took place on June 23, 2008 and involved a vehicle driven by Alan Stewart. Mr. Ruddell, the passenger, sustained injuries in the accident. Gayle Bass, the mother of Mr. Stewart, was the owner of the car.

[5] Ms. Bass provided a statement to a claims adjuster on July 3, 2008, wherein she offered no information regarding the details of the accident. In that statement, she advised that she had sold her home in Wasaga Beach and stated that her son, who worked at different sites as a rigger in the entertainment industry, sometimes stayed at his girlfriend's house in Niagara Falls and other times with a friend. She did not provide addresses for either residence in her statement, but followed up later to provide contact information for her son. Ms. Bass also mentioned that she was temporarily staying with her daughter-in-law in Verdun, Quebec at that time, and she provided the address.

[6] As a consequence of the accident, Mr. Stewart pleaded guilty to dangerous driving causing bodily harm. At this sentencing hearing he stated, "I was going down a road I didn't know. I thought the speed limit was something it wasn't, and by the time I realized that the road ended I thought I could make the turn and tried. The car slid on gravel, I went sideways, flipped."

[7] The plaintiffs' statement of claim in the main action was issued on June 21, 2010 and served on Ms. Bass in August 2010 at an address in Saint-Marguerite-du-Lac-Masson, Quebec. On September 20, 2010, Gore sent a letter to Ms. Bass at the same address. Allstate does not dispute that the letter reached her at that address. The purpose of the letter was to put Ms. Bass on notice that the amounts claimed in the statement of claim exceeded her policy limit. She was also advised of her responsibility to cooperate in the defence of the action. In addition, she was told, "We ask you to keep us advised of any change of address."

[8] Counsel appointed by Gore served a statement of defence on behalf of Mr. Stewart and Ms. Bass on January 17, 2011 and on the same date wrote to Ms. Bass at her old Wasaga Beach address. Ms. Bass had informed Gore more than two years earlier that she had sold her home at that address.

[9] On April 27, 2011, a third party claim was issued against the St. Lawrence Seaway Authority, alleging that it had jurisdiction over the road on which the accident had occurred and that negligent design had caused or contributed to the accident.

[10] Efforts were made by defence counsel in September 2011 to reach Ms. Bass at various phone numbers without success. They also sent a letter to an address in Verdun, which was returned marked "Moved, address unknown". A driving record search listed her Wasaga Beach address and indicated that Ms. Bass' license had expired.

[11] In April 2012, defence counsel retained a skip tracer to locate Ms. Bass. In its May 21, 2012 report, the skip tracer advised that it had been unable to locate Ms. Bass.

[12] On June 19, 2012, a third party claim was issued on behalf of Mr. Stewart and Ms. Bass against the City of Thorold alleging that it was responsible for the road. Also named as a defendant in that action was Mick & Angelo's Eatery and Bar, which was alleged to have over-served Mr. Stewart immediately before the accident.

[13] Examinations for discovery were scheduled to take place in June 2013. During April and May, counsel for the defendants wrote repeatedly to Mr. Stewart at various addresses advising him of the upcoming discoveries. Counsel received no reply to that correspondence. On May 23, 2013, Gore instructed counsel to remove themselves as lawyers of record for the defendants in the action and third party claims. Counsel brought the necessary motions, serving Mr. Stewart and Ms. Bass at their last known addresses by substituted service. Mr. Stewart and Ms. Bass were eventually noted in default in the main action and Gore was added as a statutory third party. Apparently, Mick & Angelo's was also noted in default, but the third party claims against the Seaway Authority and the City of Thorold were dismissed.

[14] At an examination for discovery in 2016, an Allstate representative stated that an investigator hired by Allstate had located Ms. Bass at an address in Orangeville, Ontario as of October 2014.

[15] Before the motion judge, Gore argued that Ms. Bass breached the policy by failing to cooperate with Gore in defending the action brought by the plaintiffs. Specifically, Ms. Bass is alleged to have breached the policy by failing to assist in attempting to obtain her son's co-operation, in contravention of s. 5(3) of Statutory Conditions - Automobile Insurance, O. Reg. 777/93, a regulation made under the Insurance Act.

[16] The motion judge found that Gore failed to establish Ms. Bass's breach of the policy. In the alternative, he found that, even if she had breached the policy, Ms. Bass was entitled to relief from forfeiture. He therefore granted summary judgment and held that the plaintiffs were entitled to recover their judgment from Gore.

Issues

[17] The appeal raises the following issues:

(i) Whether the motion judge erred in finding that Ms. Bass did not breach the policy; and

(ii) Whether relief from forfeiture was available as a remedy and appropriately granted in this case.

Analysis

(i) Failure to Cooperate

[18] Gore relies on the above-mentioned statutory condition 5(3), which provides as follows:

The insured shall, whenever requested by the insurer, aid in securing information and evidence and the attendance of any witness and shall co-operate with the insurer, except in a pecuniary way, in the defence of any action or proceeding or in the prosecution of any appeal.

[19] Gore submits that the motion judge erred in his analysis of the duty to cooperate imposed by this statutory condition. It argues that the duty would be rendered meaningless if an insured may disappear without a trace and subsequently argue that he or she is not in breach of contract because the insurer did not try hard enough to locate him or her. Further, Gore submits that Ms. Bass' failure to cooperate prejudiced it because it resulted in Gore having insufficient evidence to maintain the third party claims.

[20] The language of statutory condition 5(3) is broad and imposes on an insured a general duty to cooperate in the defence of an action. It does not specifically require the insured to update its insurer regarding any change in address. The issue for the motion judge was whether Ms. Bass' failure to keep Gore apprised of her current address constituted non-cooperation that breached the policy.

[21] The parties have conflicting positions on the correct analytical approach for determining whether Ms. Bass breached the policy. Gore submits that if Ms. Bass failed to cooperate in any respect then she breached the policy and her only recourse is to seek relief from forfeiture. In contrast, Allstate's position is that there has to be a finding of substantial non-cooperation before Ms. Bass will be found to have breached the policy and will therefore be required to seek relief from forfeiture. This issue is particularly important in this case because Ms. Bass cannot be located and the onus to establish the breach is on the insurer, whereas the onus in an application for relief from forfeiture lies with the insured.

[22] In Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 30 O.R. (3d) 257 (C.A.), at p. 279, Weiler J.A. considered the nature of the duty to cooperate:

I have stated my view that the insured breached the duty of co-operation under the policy of insurance. In Travellers Indemnity Co. of Canada v. Sumner, supra, at p. 565. West J.A. stated:

The duty of the insured to co-operate with the insurer, being a condition precedent to his right to recover, requires him to assist willingly and to the best of his judgment and ability. If in this connection a breach occurs in some material respect the insurer is entitled even to refuse to defend an action. Lack of co-operation, however, must be substantial. No inconsequential or trifling breach of such obligation should serve to exonerate the insurer from his contractual liabilities under the policy.

The breach of the duty of co-operation in this case was substantial because it affected the insurer's assessment of the risks of the litigation.

[23] Clearly this court has accepted the analysis of the New Brunswick Supreme Court, Appeal Division, in Travellers Indemnity Co. v. Sumner Co. Ltd. and Fraser (1960), 27 D.L.R. (2d) 562 (N.B.S.C. (A.D.)), that a breach of the duty to cooperate must be substantial. This approach is consistent with the argument advanced by Allstate. The issue then becomes whether there was substantial non-cooperation by Ms. Bass.

[24] A breach of the duty to cooperate is different than, for example, a breach of statutory condition 6 (1)(c), which requires an insured to provide its insurer with a statutory declaration within 90 days of the date of the loss. Determining whether the latter condition has been complied with is relatively straightforward: either the statutory declaration was delivered on time or it was not. A consideration of an allegation of non-cooperation, by contrast, requires a qualitative analysis of the insured's conduct to determine whether it amounts to substantial non-cooperation. The court will necessarily conduct a review of all of the circumstances of the case, with particular emphasis on the interaction between the insured and the insurer. Whether an insured has engaged in substantial non-cooperation is, "a pragmatic question to be determined in each case in the light of the particular facts and circumstances": Reid v. Gore Mutual Insurance, [1980] O. J. No. 750 (H. Ct. J.), at para. 46.

[25] In concluding that Ms. Bass did not breach her obligation to cooperate, the motion judge found:

When first contacted by Gore or their representatives, she cooperated fully, providing a statement, and giving particulars about herself and her son. She continued providing information about the whereabouts of her son to Mr. Powell. It is important to recognize that Ms. Bass herself had little information to give that could assist in their defence of the action beyond assisting Gore in finding Mr. Stewart. When asked to do so, she did provide that information. There is nothing in the evidence to suggest that Ms. Bass was acting in concert with her son, encouraged him not to cooperate, or failed to assist Gore to locate Mr. Stewart. Mr. Stewart's actions do not touch or reflect upon Ms. Bass's cooperation. In the last contact with Ms. Bass in September of 2010, she was not asked about any information regarding her son's whereabouts. Given the circumstances of what appears to be Mr. Stewart's employment and what appears to be a peripatetic lifestyle, it is not unreasonable that Ms. Bass could not assist Gore any more than she did.

[26] In addition, the motion judge found that, although Ms. Bass did not provide her up to date address as requested in the September 20, 2010 letter, "this one request in the context of the whole of the history and circumstances of Ms. Bass' cooperation and the failure to try and locate her, does not meaningfully advance Gore's case."

[27] The information about Mr. Stewart's address in Ms. Bass' original statement was not specific and there was no evidence that the adjuster or Gore sought more detailed information either during that interview or in a later telephone discussion with Ms. Bass. It is also significant that nowhere in the September 20, 2010 letter does Gore seek information regarding Mr. Stewart's whereabouts. In these circumstances, where the only relevant information the insured could possibly have had was her son's current address, it was open to the motion judge to conclude that the failure of Ms. Bass to provide her own up-to-date address did not constitute a substantial failure to cooperate. Therefore, there is no basis for appellate interference with that finding.

(ii) Relief from Forfeiture

[28] Given my conclusion on the first issue, it is unnecessary to consider the question of whether the motion judge erred in his relief from forfeiture analysis. However, I would caution that the comments of the motion judge regarding relief from forfeiture, which were limited to the statement: "given the minor nature of any possible breach of the policy, I would have granted relief from forfeiture", do not adequately capture what is required in a proper relief from forfeiture analysis. A judge considering such an application must first determine if the remedy is available and then apply the test articulated by LaForme J.A. in Kozel v. The Personal Insurance Company, 2014 ONCA 130, 119 O.R. (3d) 55, at para. 59.

Disposition

[29] I would dismiss the appeal and award costs of the appeal to Allstate payable by Gore in the agreed-upon all-inclusive sum of $12,500.

Released: April 25, 2019

"C.W. Hourigan J.A."

"I agree. K. van Rensburg J.A."

"I agree. Grant Huscroft J.A."