Mujagic v. State Farm Mutual Automobile Insurance Company [Indexed as: Mujagic v. State Farm Mutual Automobile Insurance Co.]

97 O.R. (3d) 474

Ontario Superior Court of Justice,

Divisional Court,

Ramsay J.

August 27, 2009

Insurance -- Automobile insurance -- Statutory accident benefits -- Plaintiff's mother involved in car accident while plaintiff was in car -- Plaintiff bringing action against mother's statutory accident benefits insurer alleging that mother suffered total breakdown as result of defendant's negligence and bad faith in denying benefits and that plaintiff lost her care and guidance -- Motion judge dismissing motion to strike pleadings -- Leave to appeal granted -- Good reason existing to doubt correctness of decision.

The plaintiff's mother was involved in a car accident while the plaintiff was in the car. The plaintiff sued her mother's statutory accident benefits insurer, arguing that the defendant acted negligently and in bad faith in denying her mother's claim for benefits, that her mother had a total breakdown as a result and that the plaintiff lost her mother's care and guidance. A motion by the defendant to strike portions of the pleadings was dismissed. The defendant applied for leave to appeal.

Held, the application should be granted. [page475]

There was good reason to doubt the correctness of the motion judge's finding that the defendant could be liable to the mother for damages for mental distress for breach of contract as this was a contract for peace of mind and that, as an insured person within the meaning of s. 270 of the Insurance Act, R.S.O. 1990, c. I.8, the plaintiff was in the same position as her mother. The motion judge's interpretation of s. 270 also informed his decision that the plaintiff had adequately pleaded an action in tort on the basis of bad faith. A duty of good faith was owed to the plaintiff in contract for the administration of her own claim, not her mother's claim. There was good reason to doubt the correctness of the motion judge's finding that the statement of claim adequately pleaded negligence leading to pecuniary loss. The harm alleged was not foreseeable. Finally, there was no independent action in tort upon which to found the plaintiff's Family Law Act, R.S.O. 1990, c. F.3 claim.

APPLICATION for leave to appeal an order dismissing a motion to strike parts of a statement of claim.

Cases referred to 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd's of London, 2000 5684 (ON CA), [2000] O.J. No. 866, 184 D.L.R. (4th) 687, 130 O.A.C. 373, [2000] I.L.R. I-3826, 95 A.C.W.S. (3d) 556 (C.A.); Armaral (Litigation guardian of) v. Canadian Musical Reproduction Rights Agency Ltd., 2007 46701 (ON SC), [2007] O.J. No. 4266, 63 C.C.E.L. (3d) 244, 161 A.C.W.S. (3d) 654 (S.C.J.); Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79, 206 D.L.R. (4th) 193, 277 N.R. 113, [2002] 1 W.W.R. 221, J.E. 2001-2153, 160 B.C.A.C. 268, 96 B.C.L.R. (3d) 36, 8 C.C.L.T. (3d) 26, 110 A.C.W.S. (3d) 943; Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3, [2006] S.C.J. No. 30, 2006 SCC 30, 271 D.L.R. (4th) 1, 350 N.R. 40, [2006] 8 W.W.R. 1, J.E. 2006-1316, 227 B.C.A.C. 39, 57 B.C.L.R. (4th) 1, [2006] R.R.A. 525, 53 C.C.E.L. (3d) 1, 39 C.C.L.I. (4th) 1, [2007] CLLC Â210-015, [2006] I.L.R. 4521, 148 A.C.W.S. (3d) 902, EYB 2006-107056; Latulippe v. Bank of Montreal, [1985] O.J. No. 1675, 8 C.C.E.L. 32, 4 C.P.C. (2d) 102, 32 A.C.W.S. (2d) 212 (H.C.J.); McCartney v. Warner (2000), 2000 5629 (ON CA), 46 O.R. (3d) 641, [2000] O.J. No. 30, 183 D.L.R. (4th) 345, 129 O.A.C. 96, 16 C.C.L.I. (3d) 8, 48 C.C.L.T. (2d) 19, 50 M.V.R. (3d) 108, 93 A.C.W.S. (3d) 1016 (C.A.); Mujagic v. State Farm Automobile Insurance Co. (2009), 2009 9424 (ON SC), 95 O.R. (3d) 624, [2009] O.J. No. 889, 71 C.C.L.I. (4th) 93, [2009] I.L.R. I-4818 (S.C.J.); Sulz v. Canada (Attorney General), [2006] B.C.J. No. 121, 2006 BCSC 99, 263 D.L.R. (4th) 58, 54 B.C.L.R. (4th) 328, 48 C.C.E.L. (3d) 92, 37 C.C.L.T. (3d) 271, [2006] CLLC Â230-005, 146 A.C.W.S. (3d) 72; Vanek v. Great Atlantic & Pacific Co. of Canada (1999), 1999 2863 (ON CA), 48 O.R. (3d) 228, [1999] O.J. No. 4599, 180 D.L.R. (4th) 748, 127 O.A.C. 286, 93 A.C.W.S. (3d) 268 (C.A.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, s. 61(1) [as am.], (2) Insurance Act, R.S.O. 1990, c. I.8, s. 270 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 62.02 Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96, s. 2 [as am.]

L.A. Ferro, for plaintiff, responding. Susan Chapman and D.N. Patton, for defendant, moving party. [page476]

[1] Endorsement of RAMSAY J.: -- The defendant moves for leave to appeal to the Divisional Court from the ruling of Fedak J. (2009), 2009 9424 (ON SC), 95 O.R. (3d) 624, [2009] O.J. No. 889 (S.C.J.) dismissing its motion to strike portions of the pleadings.

[2] Rule 62.02 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] provides,

62.02(4) Leave to appeal shall not be granted unless, (a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or (b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[3] The defendant is the statutory accident benefits insurer of the plaintiff's mother. The mother was involved in a car accident while the plaintiff was in the car. The defendant denied benefits to the mother. The plaintiff pleads that in so doing, the defendant acted negligently and in bad faith. The mother, it is pleaded, suffered a total physical and mental breakdown. The plaintiff pleads that as a result of the loss of her mother's care and guidance at the age of 11, she "lost her way in life", was put into foster care, went from an A student to a dropout, irretrievably compromised her education and ruined her life. She does not plead a recognizable psychiatric illness of her own.

[4] The daughter is an insured person under the mother's policy by operation of s. 270 of the Insurance Act, R.S.O. 1990, c. I.8. It provides,

270. Any person insured by but not named in a contract to which section 265 or 268 applies may recover under the contract in the same manner and to the same extent as if named therein as the insured, and for that purpose shall be deemed to be a party to the contract and to have given consideration therefor.

[5] She was also an insured within the definition of the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg 403/96 [s. 2(1)]:

"insured person", in respect of a particular motor vehicle liability policy, means, (a) the named insured, any person specified in the policy as a driver of the insured automobile, the spouse of the named insured and any dependant of the named insured or spouse, if the named insured, specified driver, spouse or dependant, [page477] (i) is involved in an accident in or outside Ontario that involves the insured automobile or another automobile, or (ii) is not involved in an accident but suffers psychological or mental injury as a result of an accident in or outside Ontario that results in a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother, sister, dependant or spouse's dependant . . .

[6] The daughter, then, even though she did not sign the contract, was entitled by law to recover accident benefits under the insurance policy as a dependant occupying the vehicle or as a dependant who suffered psychological or mental injury as a result of physical injury to the mother.

[7] The plaintiff has not claimed on either basis. She is claiming for loss of her mother's care and guidance caused by the wrongful refusal of the mother's claim for accident benefits.

[8] The motion judge ruled that the pleadings were adequate insofar as they claimed relief in contract, in tort and under the Family Law Act, R.S.O. 1990, c. F.3. Breach of Contract

[9] The motion judge held that the defendant could be liable to the mother for damages for mental distress for breach of contract, because this was a contract for peace of mind. The Supreme Court of Canada said in Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3, [2006] S.C.J. No. 30, 2006 SCC 30 (at para. 49):

We conclude that the "peace of mind" class of cases should not be viewed as an exception to the general rule of the non- availability of damages for mental distress in contract law, but rather as an application of the reasonable contemplation or foreseeability principle that applies generally to determine the availability of damages for breach of contract.

[10] The motion judge went on to hold that, as an insured person within the meaning of s. 270 of the Insurance Act, the plaintiff was in the same position as her mother.

[11] In my view, there is good reason to doubt the correctness of the proposition that this was a contract for peace of mind. The contractual provisions in question were imposed on the parties by statute. Furthermore, even assuming that this was a contract for peace of mind, there is good reason to doubt the correctness of the proposition that the plaintiff was in the same position as her mother.

[12] The plaintiff was an insured in that she was an occupant of the vehicle and a dependant of the mother. She therefore has the right to claim defined accident benefits on the basis of her own or her mother's injuries. Section 270 of the Insurance Act [page478] does not go so far as to put her into the same position as the mother for the purpose of claiming damages for wrongful refusal of the mother's claim. There is good reason to doubt the correctness of the proposition that the daughter was, in effect, a party to a contract for peace of mind. If she was not a party to a contract for peace of mind, she cannot claim for mental distress arising out of a breach of the contract. The Tort of Bad Faith

[13] The motion judge held that the plaintiff had adequately pleaded an action in tort on the basis of bad faith.

[14] Any duty to act in good faith toward the plaintiff was contractual in nature: 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd's of London, 2000 5684 (ON CA), [2000] O.J. No. 866, 130 O.A.C. 373 (C.A.). A duty of good faith was owed to the plaintiff in contract for the administration of her own claim, not her mother's claim. In my view, the judge's interpretation of s. 270 of the Insurance Act informed his decision on liability for tort as well as contract. Negligent Infliction of Mental Distress

[15] The motion judge held that the statement of claim adequately pleaded the tort of negligent infliction of mental distress. There is no such tort: Armaral (Litigation guardian of) v. Canadian Musical Reproduction Rights Agency Ltd., 2007 46701 (ON SC), [2007] O.J. No. 4266, 63 C.C.E.L. (3d) 244 (S.C.J.) (contra: Sulz v. Canada (Attorney General), [2006] B.C.J. No. 121, 2006 BCSC 99). There is a tort of negligent infliction of psychiatric damage: Vanek v. The Great Atlantic & Pacific Co. of Canada (1999), 1999 2863 (ON CA), 48 O.R. (3d) 228, [1999] O.J. No. 4599 (C.A.). But the plaintiff has not pleaded mental distress to herself that amounts to a recognized psychiatric illness. Negligent Infliction of Pecuniary Loss

[16] The motion judge held that the statement of claim adequately pleaded negligence leading to pecuniary loss. The plaintiff pleads that the defendant negligently or maliciously denied benefits to the mother, and that this caused the mother's recognized psychiatric illness, which in turn caused the plaintiff to lose her mother's care and guidance. The defendant could owe the plaintiff a duty of care not to cause foreseeable harm, if their relationship was sufficiently proximate and there are no residual policy reasons negating the duty of care: Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79. But the harm alleged was not foreseeable. A person of reasonable robustness and fortitude, a term used by the Court of Appeal in [page479] the Vanek case, would not be likely to suffer psychiatric injury from denial of an accident benefits claim, even if accompanied by acts of bad faith. Consequent damage to the injured person's dependants is one step further removed from foreseeability. The Family Law Act

[17] The motion judge held that the claims under the Family Law Act for loss of earning capacity and loss of income (including future income) were adequately pleaded.

[18] Section 61(1) of the Act provides that the child of a person who is injured by the fault or neglect of another, in circumstances where the injured person is entitled to damages, is entitled to recover his or her pecuniary loss. Section 61(2) of the Act lists types of pecuniary loss that may be compensated. Claims for loss of income are not confined to those specifically provided for in the subsection: McCartney v. Warner (2000), 2000 5629 (ON CA), 46 O.R. (3d) 641, [2000] O.J. No. 30 (C.A.).

[19] The "fault or neglect of another", however, has to be a tort, not a breach of contract: Latulippe v. Bank of Montreal, [1985] O.J. No. 1675, 8 C.C.E.L. 32 (H.C.J.) (Osborne J.). I have noted with respect to tort that the mother's mental collapse was not foreseeable. On the pleadings, there is no independent cause of action in tort upon which to found the Family Law Act claim. Conclusion

[20] I find that there is good reason to doubt the correctness of the decision from which the appeal would be taken, insofar as the motion judge declined to strike those portions of the statement of claim that seek relief on behalf of the plaintiff for refusal of her mother's claim.

[21] The proposed appeal involves matters of such importance that, in my opinion, leave to appeal should be granted. The decision under appeal would extend the liability of accident benefits insurers significantly. The governance of automobile accident insurance is a matter of public importance.

[22] I grant leave to appeal. On consent, to the extent to which I have not dealt with costs of this motion, costs are reserved to the panel that hears the appeal.

Application granted.