Neutral Citation: 1999 ONFSCDRS 201

FSCO A97-000363

BETWEEN:

GURPAL SINGH and SATINDERPAUL SINGH

Applicants

and

GENERAL ACCIDENT ASSURANCE CO. OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Suesan Alves

Heard:

June 9 and 10, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Ian A. Little for Mr. Singh and Mrs. Singh

Alan L. Rachlin for General Accident Assurance Co. of Canada

Mr. Gurpal Singh and Mrs. Satinderpaul Singh were injured in two motor vehicle accidents in 1995. They signed an excluded driver endorsement with respect to Mrs. Singh's automobile insurance policy. General Accident Assurance Co. Of Canada, ("General Accident") alleges that the effect of this endorsement was to exclude Mr. Singh from driving Mrs. Singh's car.

Mr. Singh was the driver of Mrs. Singh's car at the time of each accident. General Accident alleges that Mr. and Mrs. Singh are not entitled to further statutory accident benefits. The Applicants dispute that the endorsement has this effect. If it did, they submit that General Accident is estopped from asserting this defence, and they remain entitled to statutory accident benefits.

The preliminary issue is:

What is the effect of the excluded driver endorsement on the Applicants' claims for further statutory accident benefits?

The endorsement has no effect on Mrs. Singh's entitlement to further statutory accident benefits. General Accident is not required to pay Mr. Singh further income replacement benefits as a result of the April 13, 1995 accident. His other claims for statutory accident benefits are not affected by the excluded driver endorsement.

Exclusion endorsements

Generally, when an insurer believes that a named insured will allow a driver who poses an unacceptable risk to operate the insured vehicle, it will seek to have that driver excluded from driving the vehicle by using an excluded driver endorsement. The endorsement is a standard form document, which is signed by the named insured and by the driver who is to be excluded. Both agree that the excluded driver will not drive the specified car or cars.

Section 240 of the Insurance Act, R.S.O. 1990, c.I.8. as amended, provides that if the excluded driver drives the car, the insurer is not liable to any person under the contract or under the Act or the Regulations for any loss or damage that occurs, except as provided in the Schedule. Section 58 of the Schedule specifies those statutory benefits which an insurer is not required to pay.¹

Mrs. Singh arranged her own automobile insurance policy with General Accident in 1993. At the time, she was separated from her husband. At some point they reconciled, and Mrs. Singh agreed that her husband could drive her car. On or about November 22, 1994, she or her husband, or likely both of them approached Neilson Insurance Brokers Inc. ("Neilson") to have Mr. Singh added as a second driver and to record their change of address. Neilson conveyed their request to General Accident.

General Accident did a driver record search on Mr. Singh. The number of violations shown on the search report caused General Accident to conclude that he presented an unacceptable risk. General Accident wished Mr. Singh excluded from driving Mrs. Singh's vehicle, and sent an excluded driver endorsement, O.E.F. 28A, to Neilson for signature by Mr. and Mrs. Singh. On the same day, General Accident also issued an amended certificate of insurance which showed Mr. Singh to be an excluded driver.

Mr. and Mrs. Singh identified their signatures on a copy of the excluded driver endorsement to Mrs. Singh's policy. According to the endorsement, it took effect on November 22, 1994. The motor vehicle accidents in question occurred on February 11, 1995 and on April 13, 1995. The parties agree that Mr. Singh was driving Mrs. Singh's vehicle at the time of both accidents. General Accident has therefore produced prima facie evidence that an exclusion endorsement was in effect at the time of the motor vehicle accidents and the agreement was breached.

The Applicants dispute that they are bound by the exclusion endorsement. They allege that they did not understand the nature of the document, that each signed the endorsement in the wrong place, that the endorsement contravened the provisions of the Compulsory Automobile Insurance Act, and that General Accident unilaterally changed the contract before obtaining Mrs. Singh's agreement. Despite these arguments, I find that the endorsement which Mr. and Mrs. Singh signed was valid for the following reasons.

A document of a different nature

Ms. Valerie Samuel, the broker who handled the exclusion endorsement, testified at the hearing. She testified that she wrote to Mrs. Singh, stating that her husband's driving record was not satisfactory to the Insurer, and that Mr. Singh was to be excluded from driving the car. She enclosed a copy of Mr. Singh's driver's record and the endorsement for their signature. Mr. and Mrs. Singh both deny receiving this letter.

Whether or not they did, Ms. Samuel testified that she spoke with Mrs. Singh by telephone. English is not the first language of either Applicant, although Mr. Singh is more fluent than his wife. Ms. Samuel testified that she recalled her frustration in trying to explain General Accident's request to Mrs. Singh. Ms. Samuel testified that Mrs. Singh then put Mr. Singh on the phone, and that she was able to speak with him in English. Ms. Samuel recalls telling Mr. Singh what an excluded endorsement was, talking about his driving record and telling him that if he drove the car he would not have any coverage. Ms. Samuel testified that Mr. Singh told her he understood and that he did not drive the car. Mr. and Mrs. Singh deny such a conversation.

Mr. and Mrs. Singh signed the excluded driver endorsement. Ms. Samuel testified that she does not recall whether they did so in the broker's office, or whether they delivered the signed document. Mr. and Mrs. Singh offered no explanation as to how their signatures came to be on the endorsement. I find it implausible that their signatures would appear on an endorsement they did not receive.

Ms. Samuel testified that she worked with Neilson between November 1994 and March 1995. The broker with whom she is currently employed has no affiliation with General Accident. She is therefore an independent witness. Ms. Samuel testified that she recognized Mr. and Mrs. Singh when she saw them downstairs in the complex where the Commission's offices are located.

Although Neilson was a busy brokerage, Ms. Samuel testified that the only exclusion endorsement she handled while she worked there was that of Mr. and Mrs. Singh. She did not recall some details around the signing of the endorsement, for example whether her telephone conversation with Mr. and Mrs. Singh took place before or after she wrote Mrs. Singh. The endorsement is straightforward. I found Ms. Samuel's testimony (that she explained the endorsement, and that Mr. Singh told her he understood) credible. I prefer Ms. Samuel's evidence on these points, and therefore conclude that Mr. Singh understood the nature and effect of the endorsement which he signed.

In weighing the conflicting evidence, I have tested the harmony of the testimony with the preponderance of the probabilities that a practical and informed person would recognize as reasonable in the circumstances.² Had Mr. Singh stated that he still wished to drive the vehicle, I find it likely that Ms. Samuel would have determined whether there were other insurers who were prepared to insure Mr. Singh, or perhaps Mr. and Mrs. Singh, the cost of doing so, and the financial impact of terminating coverage with General Accident. This would provide good customer service, and could result in additional premiums being generated for the brokerage.

Mr. Singh testified that he would never have driven had he known that he did not have insurance. I have to balance that testimony against his prior conviction in 1992, of driving without automobile insurance. I do not agree with the suggestion that Mr. and Mrs. Singh got nothing from signing the endorsement. Mrs. Singh continued to have insurance coverage at no additional cost. Mr. Singh testified that although he was the driver of his wife's car in February 1995 and again in April 1995, he made no attempt on either occasion to conceal that he was the driver of his wife's car.

I accept Ms. Samuel's evidence with respect to her difficulty in communicating with Mrs. Singh. Mrs. Singh testified that when she signed the endorsement, she believed she was signing a document which would provide insurance coverage for her husband. I have to consider this evidence in light of her testimony that she would sign any document which is placed in front of her. This approach is akin to wilful blindness. A plea of non est factum is of limited scope; it does not assist someone who will carelessly or blindly sign any document. Having signed the document, Mrs. Singh is bound.

Misplaced signatures

Mr. and Mrs. Singh submit that they each signed where the other should have, and the endorsement is therefore invalid. I do not agree. The operative words of the paragraphs which the named insured and the excluded driver sign are identical. Each in signing acknowledges that if the excluded driver "drives the above automobile(s), there is no coverage for (i) property damage and bodily injury caused to others, (ii) damage to the above automobile(s), and (iii) accident benefits, except for those accident benefits required to be paid." There is a line for signature, underneath which is the following note, in bolded type "Note: By signing this form you will be without some insurance for some accidents."

The only difference between the two paragraphs is that in paragraph 2 the excluded driver, Mr. Singh, acknowledges that these consequences will occur if he drives, while in paragraph 3, the named insured, Mrs. Singh, acknowledges that if the excluded driver Mr. Singh drives, the identical consequences will occur. In these circumstances I am not persuaded that anything turns on the fact that Mrs. Singh signed where Mr. Singh should have signed and vice versa.

Retroactivity

The exclusion endorsement does not show a date on which it was signed. The endorsement states that it is effective November 22, 1994, as does the amended certificate of insurance. Counsel for the Insurer submitted that endorsements are routinely backdated to the inception date of the policy. However, since Mr. Singh had been driving the car, making this change retroactive was a fiction. I agree with the submission of counsel for the Applicants, that in the absence of an exclusion agreement, Mr. Singh could legitimately drive the vehicle with Mrs. Singh's consent, and have insurance coverage while doing so since she was the named insured. As an excluded driver, Mr. Singh would have been required to have an insurance card in his possession while driving Mrs. Singh's vehicle.³

Counsel for the Applicants stressed that a contract is a consensual agreement; however, the documents prepared by General Accident and Neilson state the exclusion was in force months before Mr. and Mrs. Singh's signed the endorsement. I find that Mr. and Mrs. Singh signed the endorsement by February 7, 1995, the date of the broker's covering letter enclosing the O.E.F. 28A endorsement to General Accident. While I question whether it should have been made retroactive, in my view it is not fatal to the validity of the exclusion endorsement. In my view, two things were required for the excluded driver endorsement to take effect. Mr. and Mrs. Singh had to agree to it by signing the endorsement, and their acceptance had to be conveyed to the offeror, General Accident. If the exclusion did not take effect, then Mr. and Mrs. Singh would be entitled to full coverage under the policy.

Communication of acceptance

I find that General Accident rejected Mr. and Mrs. Singh's offer to add Mr. Singh as a second driver, and made a counter-offer that it would exclude Mr. Singh in order to maintain Mrs. Singh's coverage. An agreement is made by offer and acceptance. Communication of acceptance is generally required.⁴ I find that communication of acceptance was required in the circumstances of this case. General Accident would need to know whether Mr. and Mrs. Singh agreed to the endorsement, failing which it would take steps to cancel the policy based on a material change of risk, or, charge a higher premium. Since General Accident viewed Mr. Singh as an unacceptable risk, the former was the more likely course.

The means of acceptance is prescribed by the offeror.⁵ In this case, there are three possibilities of when Mr. and Mrs. Singh's communicated their acceptance, and the contractual change was effected: when Mr. and Mrs. Singh gave the signed endorsement to Neilson; when Neilson gave the endorsement to an insurance courier; or when General Accident received it.

Counsel for the Insurer submitted that Neilson was the agent of General Accident, and that delivery to Neilson was communication of acceptance. While the evidence establishes that Neilson had authority to forward and receive applications for insurance, and to bind coverage, I have no evidence that the scope of Neilson's authority was such that its receipt of the endorsement was a communication of acceptance to General Accident.

Ms. Mark, an employee of General Accident, testified that General Accident's policy is that such endorsements take effect when General Accident receives them. On this basis, I find that General Accident had determined that it required actual receipt of the endorsement to effect the contractual change.

I was advised that General Accident's original file is missing. Some of the file documents had been microfilmed. Ms. Mark testified that such documents are ordinarily date stamped when received by the underwriting department, then stamped a second time when an employee in the underwriting department acts on the document. That employee affixes a date stamp with his or her name on the document. In this case the only stamp which appears on the exclusion endorsement is that of the employee who acted on the endorsement on February 17, 1995. General Accident may have received it earlier; however, General Accident was not in a position to provide direct evidence of when it actually received the signed endorsement.

Ms. Samuel testified that she believes that the endorsement was likely sent from Neilson to General Accident on February 7, 1995, the date of her letter, or the next day, via insurance courier. She testified that ordinarily this would mean that delivery would occur within a very short time. Ms. Mark testified that delivery would ordinarily take place the next day. In this case the timing is critical because the first of the motor vehicle accidents took place within days of the date of the broker's memo enclosing the signed endorsement.

Some of the documents sent between the Insurer and broker were filed as exhibits. Those documents show that the period between the dates when documents are stated to have been created at one end, and likely received by the other, are much longer than 24 hours. For example, the memo from General Accident's underwriting department to the broker enclosing the exclusion endorsement for signature is dated January 19, 1995. Ms. Samuel testified that a document like this would have made its way to her desk the same day it was received. Although it was a busy office, documents such as those in issue in this case would be important, given priority, and handled expeditiously. The date of Ms. Samuel's letter to Mrs. Singh was February 2, 1995.

Similarly, the amended insurance certificate stating that Mr. Singh was excluded is stated to have been prepared by General Accident on January 19, 1995, and was date stamped by the broker on January 26, 1996. These gaps suggest that in the absence of specific evidence that General Accident received the endorsement, it would be unsafe for me to infer or find on a balance of probabilities that General Accident received it prior to February 11, 1995, the date of the first accident.

I am not persuaded that General Accident can rely on the endorsement in relation to the first motor vehicle accident which took place on February 11, 1995. However, since General Accident has established that it received the exclusion agreement before the second accident on April 13, 1995, it is entitled to rely on the endorsement with respect to the second motor vehicle accident, unless the Applicants succeed in establishing the defence of estoppel.

Effect of the endorsement

Section 58 of the Schedule provides :

58.—(1) The insurer is not required to pay income replacement benefits under Part II, education disability benefits under Part III, disability benefits under Part V or loss of earning capacity benefits under Part VI in respect of a person who was the driver of an automobile at the time of the accident,...

(e) if the driver is an excluded driver under the contract of automobile insurance; or...

The issue before me is the effect of the excluded endorsement on Mr. and Mrs. Singh's future claims for statutory accident benefits. I find that if the endorsement is given effect, General Accident would not be required to pay Mr. Singh further income replacement benefits as a result of the second motor vehicle accident. Mr. Singh's further claims for other statutory accident benefits would be unaffected by the exclusion endorsement.

General Accident paid Mrs. Singh caregiver benefits. Section 58(1) of the Schedule is directed at drivers of vehicles; not at owners such as Mrs. Singh. None of the remaining subsections of Section 58 appear to cover Mrs. Singh. Accordingly, I find that the endorsement has no effect on Mrs. Singh's claims for any future statutory accident benefits.

Counsel for the Insurer submitted that I should remedy the obvious legislative omission and find that it would be unfair and unreasonable to construe the exclusions to permit Mrs. Singh to recover further caregiver benefits. I do not agree that I can or should do so. Firstly, this would offend the presumption of legislative perfection, that is to say, that legislation is drafted accurately and correctly. Secondly, exclusions are to be narrowly construed, not extended. Thirdly, the legislature has afforded the recipients of caregiver benefits different treatment at several points in the Schedule. For example, recipients of caregiver benefits may elect to change their benefit, and are entitled to continue receiving caregiver benefits pending resolution of a dispute after a report of residual earning capacity from a designated assessment centre is received, unlike recipients of income replacement benefits. For these reasons, I reject the submission that there is a legislative omission.

Estoppel

Mr. Singh was injured in two motor vehicle accidents in February 1995, and in April 1995. He signed an excluded endorsement in February 1995. General Accident received Notice of Claim on February 13, 1995, and the endorsement by February 17, 1995. General Accident paid Mr. Singh income replacement benefits as a result of each of the accidents, and terminated those benefits as of August 7, 1996. General Accident first indicated that it intended to rely on the exclusion endorsement approximately three years after the accidents and two years after it ceased to pay Mr. Singh income replacement benefits.

The explanation for General Accident's delay in relying on the exclusion endorsement was that the initial adjuster failed to check the relevant computer screen and so missed that Mr. Singh was an excluded driver. A number of outside adjusters then handled the file, and it was only when another inside adjuster was given carriage of the file, apparently in 1998, that the relevant computer screen was checked, and the exclusion endorsement detected.

Ms. Mark testified that General Accident received a Notice of Loss sheet prepared by the broker on behalf of Mr. and Mrs. Singh on February 13, 1995 via its intake worker. I heard no evidence as to how this document was transmitted and it was not made an exhibit. The difficulty with this explanation is that there would have been no record of the endorsement on General Accident's computer system before February 17, 1995. There is no evidence that the excluded endorsement was placed on the relevant computer screen prior to either accident. Whatever took place, General Accident had knowledge of the endorsement, and issued several amendments to the policy showing this exclusion.

Mr. Singh alleges that General Accident is estopped from relying on the exclusion endorsement. Mr. Singh has the burden of proving the defence which he has raised. "The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position."⁶

Without determining whether Mr. Singh meets other aspects of the test, I find that Mr. Singh cannot succeed because he has not adduced evidence of detrimental reliance. For these reasons, I conclude that General Accident is not estopped from relying on the exclusion endorsement with respect to the second accident in relation to Mr. Gurpal Singh.

EXPENSES:

Mr. and Mrs. Singh's expenses in respect of the preliminary issue hearing are in the discretion of the hearing arbitrator.

October 18, 1999

Suesan Alves Arbitrator

Date