General Accident Assurance Company of Canada v. Gurpal Singh and Satinderpal Singh, 2000 ONFSCDRS 144

Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2000 ONFSCDRS 144

Appeal P99-00057

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA

Appellant Respondent on Cross-Appeal

and

GURPAL SINGH AND SATINDERPAL SINGH

Respondents Appellants on Cross-Appeal

Before:

Susan Naylor, Director’s Delegate

Counsel:

Alan L. Rachlin (for General Accident)

Ian A. Little (for Gurpal Singh and Satinderpal Singh)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal on behalf of General Accident Assurance Company of Canada is dismissed. The cross-appeal on behalf of Gurpal Singh and Satinderpal Singh¹ is allowed. The arbitrator’s order dated October 18, 1999 as amended on November 2, 1999, is rescinded.

2. Gurpal Singh is not an excluded driver under the contract of insurance evidenced by Policy No. APM 5282302 issued in the name of Satinderpal Singh. Section 58(1)(e) of the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93 as amended, has no application to the claims of Mr. Singh or Mrs. Singh.

3. Mr. and Mrs. Singh are entitled to their expenses on the arbitration hearing on the preliminary issue.

4. Mr. and Mrs. Singh are entitled to their appeal expenses.

August 1, 2000

Susan Naylor Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal concerns the effect of an excluded driver endorsement (O.E.F 28A) purportedly naming Gurpal Singh as an excluded driver under his wife’s policy with General Accident Assurance Company of Canada (“General Accident”). At the relevant time, Mr. Singh was not a named insured under any policy.

Mr. and Mrs. Singh were involved in two accidents - the first on February 11, 1995, the second two months later on April 13, 1995. On both occasions, Mr. Singh was driving. The issue at the arbitration hearing was whether the endorsement was binding on Mr. and Mrs. Singh and whether it barred their entitlement to certain statutory accident benefits under the terms of s. 58(1) of SABS-1994.²

The arbitrator found that the endorsement was valid but that it only took effect after the first accident, and, therefore, only precluded claims relating to the second accident. She held that, under the terms of s. 58(1)(e), Mr. Singh was disqualified from receiving further income replacement benefits relating to the April accident but that the disqualification did not apply to Mrs. Singh.

General Accident appeals the disposition of Mr. Singh’s claims, arguing the arbitrator erred in concluding that the endorsement applied only to the second accident. Mr. and Mrs. Singh cross appeal, submitting that she should not have found the endorsement effective at all.³

II. BACKGROUND

The facts surrounding the signing of the endorsement were hotly contested. There is no transcript of the testimony given at the hearing. The arbitrator heard testimony from Mr. and Mrs. Singh who acknowledged that it is their signatures on the endorsement. She also heard from Valerie Samuel, the broker who handled the matter at Neilson Insurance Brokers Inc. (“Neilson”), and Bridgette Mark, an employee at General Accident. The case was complicated by several factors. It was not until well into the arbitration process - three years after the events in issue - that General Accident raised the issue of the endorsement, the existence of which had apparently been overlooked. Mr. Singh, who notified General Accident of a claim within days of the February accident, received income replacement benefits for some eighteen months until they were terminated for other reasons in August 1996.⁴ Not only were the memories of witnesses dulled by time, but General Accident’s original file, which might have shed light on the timing of events, could not be located.

English is not Mr. and Mrs. Singh’s first language. According to the arbitrator’s decision, Mrs. Singh is less fluent than her husband.

Mrs. Singh had her own policy of insurance with General Accident. At the time she took it out, she was separated from her husband. They later reconciled and around November 22, 1994, one or both of them approached Neilson with a view to adding Mr. Singh as a second driver on the policy and to report a change of address.

Neilson forwarded the request to General Accident. Rather than adding Mr. Singh as a driver, General Accident sought to exclude him from driving under his wife’s insurance because of his poor driving record.

General Accident sent Neilson an excluded driver endorsement form (O.E.F. 28A) for Mr. and Mrs. Singh to sign. On the same day, it prepared an amended certificate of insurance, reflecting the exclusion. The draft endorsement was backdated to November 22, 1994. At the arbitration, the Singhs argued, unsuccessfully, that these actions nullified the endorsement.

There was a conflict in the evidence about the events leading up to the signing of the endorsement. According to the arbitrator’s findings, Ms. Samuel wrote to Mrs. Singh enclosing the endorsement form and also spoke to both Mrs. Singh and Mr. Singh by telephone. Mr. and Mrs. Singh denied receiving Ms. Samuel’s letter or having a telephone conversation with her and, according to the arbitrator, never explained how their signature came to be on the endorsement. The arbitrator accepted Ms. Samuel’s account, in all material respects, over Mr. and Mrs. Singh’s version.

In testifying about the telephone call, Ms. Samuel recalled her frustration in trying to explain General Accident’s request to Mrs. Singh because of language difficulties. Mrs. Singh then put her husband on the line. The arbitrator accepted Ms. Samuel’s testimony that she explained the endorsement to Mr. Singh. Based on this and other factors relating to Mr. Singh’s credibility, the arbitrator explicitly found that Mr. Singh “understood the nature and effect of the endorsement which he signed” (decision, p. 5).

Her findings in regards to Mrs. Singh were more succinct. At p. 6, she stated:

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.

The Singhs signed the document and returned it to Ms. Samuel. However, it was completed incorrectly. Mrs. Singh signed where her husband was supposed to sign as the excluded driver, and Mr. Singh signed where the named insured was supposed to sign. In her reasons, the arbitrator concluded that nothing turned on this mistake, a conclusion challenged by Mr. and Mrs. Singh on appeal. The arbitrator also rejected the argument that, because of General Accident’s delay, it was estopped from relying on the endorsement.

The remainder of the arbitrator’s reasons deal with effective date of the endorsement. The arbitrator held that the endorsement was not retroactive to November 22, 1994 and that it took effect once the signed endorsement had been received by General Accident. She concluded, based on Ms. Mark’s testimony, that delivery of the document to Neilson was not sufficient. Since she was not satisfied that the signed endorsement had reached General Accident’s offices by the time of the first accident (although it was in Neilson’s hands), she concluded that it did not affect Mr. and Mrs. Singh’s rights to benefits relating to that accident. These findings form the basis of General Accident’s appeal. General Accident argues that the arbitrator should have given effect to the endorsement according to its terms, or at a minimum, accepted that it took effect once delivered to the broker. It sought to introduce a copy of its broker contract to show the scope of Neilson’s authority. For reasons that follow, it is unnecessary to deal with these grounds of appeal.

III. ANALYSIS

Naming someone as an excluded driver has serious ramifications. The statutory provisions and consequences relating to the excluded driver endorsement are discussed in Toulouse v. Makadebin (1999), 6 C.C.L.E.(3d) 68 (Gen Div).⁵ Under s. 249 of the Insurance Act,⁶ a named insured may stipulate by endorsement that any person named in the endorsement is an excluded driver under the contract. The insurer has no liability for loss or damage occurring while an excluded driver is driving, except in regards to accident benefits.⁷ A policyholder who gives consent to an excluded driver to operate his or her automobile is exposed to personal liability for the damages suffered by others, without indemnity from the insurer. While driven by the excluded driver (unless he or she has another policy), the vehicle is deemed to be an uninsured vehicle under the Compulsory Automobile Insurance Act and the Motor Vehicle Claims Act. The insurer remains liable to pay statutory accident benefits except in respect of the excluded driver whose right to certain benefits, including income replacement benefits, is taken away.

It is fundamental that exclusions to a policy such as this are to be construed strictly and that the onus of showing that the exclusion applies lies squarely on the insurer who relies on it.

The starting point is the endorsement on which General Accident relies to exclude Mr. Singh as a driver under the policy. The O.E.F. 28A is the form of endorsement approved by the Financial Services Commission of Ontario by which a named insured may list a person as an excluded driver under the contract of insurance. Pursuant to s. 227 of the Insurance Act, any endorsement must be in approved form. The document completed in this case reads as follows:

Excluded Driver Endorsement

1. Except for those accident benefits required to be paid as outlined in Part B, it is agreed that all insurance provided by this policy is eliminated while

Gurpal Singh [SIN Number] [Date of Birth]⁸

Excluded driver

drives the following automobile(s) and any newly acquired automobile as defined in the policy.

Vehicle Model Year Make VIN

All Vehicles

2. Acknowledgment of excluded driver

I acknowledge that if I drive 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.

Signature of excluded

driver

Note: By signing this form you will be without some insurance for some accidents.

[The signature line was signed by Satinderpal Singh, who is not the excluded driver but the named insured.]

3. Acknowledgement of named insured

I acknowledge that if Gurpal Singh 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.

Signature of named insured

Note: By signing this form you will be without some insurance for some accidents.

[The signature line was signed by Gurpal Singh, who is not the named insured but the excluded driver.]

Except as otherwise provided in this endorsement, all limits, conditions, provisions, definitions and exclusions of the policy shall have full force and effect.

Attached to and forming part of Policy #APM 5282302

Issued to Satinderpal Singh

This endorsement shall be effective from 94 11 22 from 12.01 am local

Y M D A.M. P.M.

time or as stated in the Certificate of Insurance to which this endorsement is attached.

neilson Insurance Brokers Inc. [sic]

The arbitrator concluded that the endorsement, as signed, was prima facie evidence of an agreement to exclude Mr. Singh. She then dealt with the defence of non est factum. Lastly, she turned her mind to whether the fact Mr. and Mrs. Singh signed in the wrong place voided an otherwise valid agreement.

In my view, the arbitrator erred in approaching the endorsement, as signed, as prima facie evidence of a valid exclusion, subject to the defence of non est factum. The doctrine of non est factum comes into play only when the parties have, to all intents and purposes, manifested their assent by apparently duly signing an agreement. The defence - and the onus is on the party raising it - is available to a party who is mistaken as to nature and character of the document they signed, but only if they were not careless or negligent in the particular circumstances in signing.

This is based on the principle that the risk that an innocent third party may rely on a duly signed document is placed on the party who signed it.

General Accident seeks to rely on the form of the endorsement, as signed, as effecting a change to the contract of insurance. There is, however, a problem with the document. Mrs. Singh did not sign the endorsement in the place she was supposed to. On its face, it does not evidence agreement on Mrs. Singh’s part to name her husband as an excluded driver.

Mrs. Singh signed under the acknowledgement meant for the excluded driver, purportedly acknowledging that if she drove the vehicle, she would be without coverage. This was wrong, since the exclusion deletes coverage only if the excluded driver was driving. Mrs. Singh is not the excluded driver. The arbitrator concluded that nothing turned on the misplaced signatures. I respectfully disagree. Mrs. Singh’s signature cannot be viewed as reflecting her consent to having her husband excluded as a driver, since it purportedly acknowledges that she is the excluded driver and does not acknowledge there is anything wrong in having her husband drive.

General Accident relies on the Toulouse v. Makadebin decision, in which Mr. Justice deP. Wright held that the essential elements of the endorsement were completed even though some details such as the policy number and effective date were not filled in. In my view, however, the nature of the omission or error was quite different in that case. The scope of the risk covered is an essential element of an insurance contract. Presumably because of its serious ramifications, the approved form of endorsement requires both the named insured and the excluded driver to sign an acknowledgement that they understand the consequences of the endorsement. The named insured’s acknowledgement of the consequences flowing if the person named as an excluded driver operates the vehicle is at the core of the prescribed content of the endorsement. There is no such acknowledgement on Mrs. Singh’s part.

“Contract depends on agreement. There must be consensus ad idem.”⁹ It is for the insurer to show, based on properly admissible evidence, that the parties, through an endorsement in approved form, reached a valid agreement to exclude Mr. Singh. The Singhs argue that the arbitrator erred in considering extraneous evidence of their understanding. Where a contract has been reduced to writing, the parol evidence rule precludes extrinsic evidence to modify or interpret it.¹⁰ The rule is not “a rule of evidence....It is a rule of substantive contract law, viz., that extrinsic statements do not affect the parties obligations.”¹¹ There are a number of exceptions to the rule. A party may have recourse to extrinsic evidence to clarify the parties’ intent if the document wording is ambiguous. I am prepared to accept that the document in issue is ambiguous, in that it refers elsewhere to Gurpal Singh as the excluded driver. However, even assuming extraneous evidence is admissible here, that evidence does not help General Accident.

The arbitrator concluded that Mr. Singh understood the nature and effect of the document which he signed, and that his testimony to the contrary, all things being considered, was not credible. Her findings rested on her assessment of credibility, and her preference for Ms. Samuel’s testimony over Mr. Singh’s. Although Mr. Singh tried to impugn the weight the arbitrator gave to Ms. Samuel’s testimony, in my view, this was a matter squarely for her judgement.

However, Mrs. Singh is another matter. General Accident urges me to view the arbitrator’s conclusions in regards to Mrs. Singh in the context of the arbitrator’s overall credibility findings. It submits that the arbitrator’s decision sets out facts upon which she reasonably could have inferred that Mrs. Singh, in fact, directly or indirectly, understood the nature and effect of the excluded driver endorsement.

However, that is not the finding made by the arbitrator. She dismissed Mrs. Singh’s defence of non est factum not on the basis that she really intended to sign a document excluding her husband, but on the basis that she signed such a document carelessly or negligently and therefore must bear the consequences of having signed the document.

The arbitrator’s findings focus on Mr. Singh. She did not find that his knowledge could be fairly imputed to his wife. To the extent she preferred Ms. Samuel’s testimony to that of Mrs. Singh, it might be inferred that she made adverse credibility findings against Mrs. Singh. However, the critical point is her acceptance of Ms. Samuel’s testimony that there was a significant language barrier affecting Mrs. Singh’s comprehension. Given the arbitrator’s findings, and the fact that the onus here is on the insurer, not, as in the defence of non est factum, on Mrs. Singh, there is no reasonable basis on which I can infer that Mrs. Singh had the requisite intent to exclude her husband under the policy. Therefore, the endorsement does not effect a valid change to the insurance contract. If the endorsement is not binding on Mrs. Singh, it is not binding on Mr. Singh.

Given my conclusion in regards to the validity of the endorsement, it is unnecessary to deal with Mr. and Mrs. Singh’s remaining arguments or with General Accident’s appeal.

For the foregoing reasons, the arbitrator’s order ruling that Gurpal Singh is an excluded driver under the insurance contract is rescinded. Mr. and Mrs. Singh are entitled to their appeal expenses. The arbitrator remitted expenses of the preliminary arbitration hearing to the hearing arbitrator to decide. Given the Singhs’ success on the appeal, this order is reversed.

August 1, 2000

Susan Naylor Director’s Delegate

Date

Footnotes

1. 1Satinderpal Singh was referred to as Satinderpaul Singh in the arbitrator’s order and reasons.
2. 2Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, as amended.
3. 3General Accident does not appeal the arbitrator’s ruling in regards to Mrs. Singh.
4. 4According to the material in the Commission’s file, Mr. Singh apparently sustained soft tissue injuries in both accidents. His benefits were terminated on the basis that he was no longer disabled from work. The arbitrator’s order was limited to further benefits, presumably because of the way the issues developed. General Accident has since instituted proceedings in court to recover benefits paid to date.
5. 5See generally O’Donnell, A., Automobile Insurance in Ontario, (Butterworths, 1991, Toronto), chapter 11.
6. 6References are to the Insurance Act, R.S.O. 1990,c. I.8, as amended by the Insurance Statute Law Amendment Act, 1993, S.O. 1993, c. c.10.
7. 7Section 240.
8. 8These details have been omitted for privacy reasons.
9. 9Fridman G.H.L., The Law of Contract in Canada, (3rd ed.) (Carswell, Toronto, 1994) at p. 247.
10. 10Fridman. p. 455; Waddams S.M. The Law of Contracts (4th ed.) (Canada Law Book, Toronto, 1999) at para. 320.
11. 11Waddams, para 320.