Neutral Citation: 2000 ONFSCDRS 174

FSCO A00-000167

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JUAN TRONCOSO

Applicant

and

CO-OPERATORS GENERAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

John Wilson

Heard:

By written submissions completed July 23, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Carlos A. Castro for Mr. Troncoso

Bruce A. Keay for Co-operators General Insurance Company

Issues:

The Applicant, Juan Troncoso, was injured in a motor vehicle accident on November 14, 1997. He applied for and received statutory accident benefits from Co-operators General Insurance Company ("Co-operators"), payable under the Schedule.¹ Co-operators refused to pay weekly income replacement benefits. The parties were unable to resolve their disputes through mediation, and Mr. Troncoso applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

1. Is Mr. Troncoso precluded from proceeding to arbitration with his claim for income replacement benefits ("IRBs") due to the fact that he was driving without a valid licence at the time of the accident, as provided for by subsection 30(1)(b) of the Schedule?

Result:

1. Mr. Troncoso is precluded from proceeding to arbitration due to the fact that he was driving without a valid licence at the time of the accident.

At the pre-hearing of this matter, which took place by teleconference on May 30, 2000, at the request of Co-operators, I ordered that a preliminary issue hearing be held to determine if Mr. Troncoso is barred from claiming income replacement benefits due to the suspension of his driving licence at the time of the accident. The parties at the pre-hearing agreed that there should be a written hearing, and agreed to the time-lines set at the pre-hearing for all written submissions.

Co-operators filed their brief with the Commission on June 12, 2000, together with an affidavit of service of the brief, upon Mr. Troncoso's counsel. Neither Mr. Troncoso nor his counsel filed a response to the Insurer's submissions by July 4, 2000, the date set in my order. In fact, no response has ever been received from the Applicant or his counsel.

EVIDENCE AND ANALYSIS:

Although Mr. Troncoso did not file any evidence or submissions in this preliminary issue hearing, Co-operators has the burden of proving its allegations that he is statute-barred from proceeding with his IRB claim.

In support of its position, Co-operators filed an affidavit by Ivan Luxenberg, a solicitor with the firm of Malach and Fidler, counsel for Co-operators. Attached as Exhibit "A" to Mr. Luxenberg's affidavit is a copy of the driving record for Mr. Troncoso, dated December 2, 1997. Under the heading "status", the document lists "unlicensed, suspended". It notes that the licence was suspended November 13, 1997 "Re unpaid fine". The date of the accident that is the subject of this arbitration was November 14, 1997, one day after the suspension was alleged to have occurred.

Although driving without a valid licence is an offence under the Criminal Code, as well as under the Highway Traffic Act, the act of the suspension of the licence is usually an administrative matter, without recourse to either the courts or a hearing.

In Mr. Troncoso's case, the Insurer alleges, in the affidavit of Mr. Luxenberg, that his licence was suspended on November 13, 1997, and not re-instated until December 12, 1997. This statement is supported by a copy what purports to be the Ontario Driving Record, which includes the comment; "unlicensed, suspended" under the heading "status".

Subsection 30(1)(b) of the Schedule provides:

The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 20, 21, or 22 in respect of a person who was the driver of an automobile at the time of the accident,..

(b) if the driver was driving the automobile without a valid driver's licence.

It would appear that, if the information contained in Mr. Luxenberg's affidavit is correct, Mr. Troncoso's licence was not valid at the time of the accident, on November 14, 1997.

Invoking Subsection 30(1)(b)

Subsection 30(1)(b) of the Schedule, as an exclusionary clause, must be pleaded by the Insurer, who alone bears the onus of proving that its requirements have been met. Although the elements being alleged constitute an offence under the Criminal Code, the Insurer must only prove on the balance of probabilities that Mr. Troncoso falls within the excluded class. Given the nature of the accusation and its potential consequences, a court may demand, in the words of Lord Denning in Bater v. Bater, [1950] 2 All E.R. 458, "...a degree of probability which is commensurate with the occasion."

It is important to consider the elements necessary for this exclusion to apply. Co-operators is not alleging that Mr. Troncoso knew that his licence was suspended and drove, nonetheless, but that he merely drove during a period that included an administrative suspension of his driver's licence, and that an accident occurred during that time.

Co-operators further submits that the subsection 30(1)(b) exclusion is "...not concerned with the state of mind of the driver regarding their licencing status at the time of the accident...", and that they are not required to adduce evidence that Mr. Troncoso was even aware, or should have been aware of his suspension."

Over the years the courts have dealt with the question of persons driving while under administrative suspension. The majority of the decisions examining this issue have been in the criminal field, arising out of Criminal Code charges, or Highway Traffic Act offences.

In Regina v. Finn, 1972 CanLII 1956 (ON CA), [1972] 3 O.R. 509, Gale C.J.O., in a brief oral judgement, stated:

While it was proven in evidence that on the four occasions in which the appellant was stopped his licence was under suspension by the provincial authorities pursuant to the provisions of the Motor Vehicle Accident Claims Act, R.S.O. 1970, c. 281, there was no admissible evidence on the record that the appellant had ever been notified of the fact of the suspension of his licence and his uncontradicted evidence was that he was not aware it was suspended. In my view s. 238(3) imports not strict liability but the necessity for mens rea; in other words, an offence is not created under s. 238(3) where an accused is ignorant of the fact that there has been a legal suspension or cancellation of his licence:

By contrast, the same allegations made in the context of the Highway Traffic Act do not appear to attract the presumption of mens rea. Offences arising out of the regulation of driving privileges are in essence regulatory offences, and such matters could traditionally be prosecuted without the need to prove mens rea. In R. v. Sault Ste. Marie, 1978 CanLII 11 (SCC), [1978] 2 S.C.R. 1299, however, the Supreme Court opened the door to defences to strict liability charges in such matters. The court confirmed that in offences of strict liability, as opposed to offences of absolute liability, a defence would be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he or she took all reasonable steps to avoid the happening of the event in question.

Even so, an accusation of driving while under suspension under the Highway Traffic Act offers few of the safeguards available to a defendant under the Criminal Code offence. As Langdon J. observed in R. v. Robertson, [1984] O.J. No. 2289:

The real difficulty in this case is to be found in s. 35(3) of the Highway Traffic Act, which provides that the driver's licence of a person who is convicted of an offence under s.35(1) is thereupon suspended for a period of six months in addition to any other period for which the licence is suspended, and consecutively thereto.

In the circumstances of this case, the operation of s. 35(3) is Draconian and wholly disproportionate to the character of the appellant's offence, which was an offence of omission rather than one of commission. That she genuinely believed that she had the right to drive is beyond dispute. Were it not so, surely she would not have called the police to investigate an accident that was otherwise not even reportable. However, the court is entirely powerless to avoid the operation of s. 35(3), notwithstanding that it appears to operate in the circumstances of this case in an oppressive and unjust manner.

As McDonald D.C.J. noted in Ratajczak v. Hemstra, ([1985] O.J. No. 1784, March 7, 1985) "[I]t seems that there is no onus upon the Ministry to notify persons like the defendant, Michael Hemstra, when their licence [has been] suspended for non-payment of fines."

Although in a variety of civil cases courts have professed to treat a finding of driving while suspended as a strict liability matter, requiring only proof of suspension and no mens rea, the state of mind of the insured has continued to be a factor in deciding whether an insurer can avoid payment on a policy for driving under suspension.

In Prentice v. Co-operators General Insurance Co., (1984 CanLII 6008 (ON HCJ), 4 C.C. L. I. 237), the court held that knowledge of a suspension is not an element in the statutory condition of driving while disqualified. Notwithstanding that finding, the judge went on to conclude that the insured ought to have known he was suspended, and only his own negligence in giving an incorrect address prevented the suspension from coming to his attention.

The Court of Appeal dismissed an appeal of the matter with a short endorsement agreeing that the appellant ought to have known that his driver's licence was suspended for non-payment of a fine. It did not comment on the strict liability aspect of the statutory condition.

Ratajczak v. Hemstra (supra), a case arising from statutory conditions forbidding the use of a vehicle by any person whose licence is suspended, involved a son, whose licence had been suspended, driving his father's car. The son had been suspended from driving for a period ending February 26, 1983. At the end of that period, he recommenced driving, notwithstanding the fact that he had not received a new licence, or notice of reinstatement from the Ministry.

The court held that there was an obligation on the father to enquire into the status of his son's licence before letting him drive. Knowledge was available, both to the father and the son, that the licence was still suspended at the time that the son recommenced driving. It should be noted, however, that the initial suspension was known to both the father and the son in this case. Clearly, the potential availability of the knowledge, together with the actual knowledge of the original suspension, worked in tandem to deny their claim for indemnity from State Farm.

In Cecconi v. State Farm Mutual Automobile Insurance Co., [O.J.] No. 1050 June 19, 1991, Scott J. dealt with the case of a refusal of an insurer to pay for the damages to a motor vehicle involved in an accident when its driver was under an administrative suspension. In this matter, the driver had paid the outstanding fine, but was not aware of the administrative charge of $12.50 which was not paid. As a result, his licence remained suspended, although he professed not to be aware of the continued suspension. The judge held that the word "knowingly" could not be imported into the statutory conditions of the policy. In the result, State Farm was ordered to pay the driver's father for the damage to the vehicle, but the driver, his son, was ordered to repay State Farm the same amount.

In Henckel v. State Farm Mutual Automobile Insurance Co., (1997 CanLII 12129 (ON CTGD), 33 O.R. (3d) 253), a 1997 case involving a son suspended from driving, and the application of the statutory conditions of the policy, McWilliam J. agreed that "knowingly" could not be imported into the statutory conditions, but found that the father was required to take all reasonable and prudent precautions to see that his son did not contravene the statutory condition. McWilliam J. commented:

I am satisfied that on the facts of this case the steps taken by the father were reasonable in all the circumstances. He made inquiries of his son respecting not drinking and driving carefully. Those inquiries would certainly bring to the son's mind that his father was not treating this consent use of his truck lightly. Counsel admitted that the father was not obligated to ask the son point blank if his licence was valid. It was a question she said of what was reasonable and prudent in the circumstances.

It is clear that the courts, notwithstanding their unwillingness to read "knowingly" into the statutory conditions concerning suspended drivers, consider both the state of mind of the insured, and the knowledge available to the insured in their findings.

Decisions involving similar statutory conditions, while instructive, may not always fully reflect the somewhat different basis of statutory accident benefits.

The Statutory Accident Benefits scheme in its present form is the third revision of a no-fault initiative that drastically re-shaped Ontario's approach to automobile insurance claims. The traditional foundations of tort liability were to a large degree discarded and replaced with a scheme that allowed even strangers to the insurance contract to access benefits without regard to the fault of the insured.

Even the new scheme, however, recognized some traditional limitations on claims. Under the Bill 68 scheme, section 17 enumerated a variety of reasons that excused an insurer from the obligation to pay income benefits. Subsection 17(1)(d) specifically relieved the obligation to pay "if the driver was not authorized by law to drive the automobile;". Subsection 17(2) went on to provide specifically that "Clause (1)(d) does not apply to a driver who is not authorized by law to drive an automobile only by reason of a suspension of a licence for failure to pay a fine." The subsequent Bill 164 scheme, in subsection 58(1)(d) reiterated substantially the same provisions.

The Bill 59 Schedule, which applies to accidents after November 1, 1996, including Mr. Troncoso's, made some substantial changes to no-fault practice. Still, section 30, dealing with exclusions, remains remarkably similar to its predecessors. Significantly however, the saving provision in subsection 17(2) of the original Schedule is absent from the current version. In addition, the phrase "...not authorized by law..." was changed as well to "...driving the automobile without a valid licence." (my emphasis)

The Insurer, in its submissions, asserts that the removal of this provision indicates: "...the legislature deliberately removed that provision for the purpose of arriving at the result that a person who was not validly licenced to drive (or not authorized by law to drive) was not entitled to payment of income replacement benefits."

Ruth Sullivan in Driedger on the Construction of Statutes (Butterworth's, Toronto, 1994) at page 368 discusses the presumption against implicit alteration of law:

It is presumed that the legislature does not intend to change existing law or to depart from established principle, policies, or practices. In Goodyear Tire and Rubber Company v. T. Eaton Co., Fauteux J. wrote:

...a legislature is not presumed to depart from the general system of the law without expressing its intentions to do so with irresistible clearness, failing which the law remains understood.

Any presumption, however, is rebuttable. In this case, by expressing its intentions with "irresistible clearness", the legislature can depart from the previous law. I find that a reading of the changes, especially the deletion of the saving provisions of the earlier subsection 17(2), reveals the clear intention of the legislature to make driving while suspended a strict liability offence that would give rise to a forfeiture of the right to indemnity for income-related benefits. In doing so, they made accident benefit claims more consistent with the rest of Insurance law and jurisprudence.

While the legislature clearly intended to remove the exception for administrative suspensions due to non-payment of fines, I find that there was not a clear intention to make driving while suspended a matter of absolute liability.

As noted previously, the Supreme Court in the Sault Ste. Marie (supra) case has found that strict liability does not preclude an insured from raising elements of his or her state of mind as a defence. It merely provides that the insurer need not prove knowledge of the suspension. It does not preclude the insured from arguing that he relied upon a mistake of fact or had taken all reasonable steps to avoid the situation.

In addition, I note the decision of Arbitrator Leitch in Bodo and Royal Insurance Company of Canada (OIC A96-001102, October 23, 1997) in which the arbitrator finds that "...the insurer must, unless it is admitted, prove that the Minister or his/her delegate did suspend the Applicant's driver's licence so as to remove the Applicant's authority to drive in law." Hence a defence of invalidity or irregularity of the suspension would potentially remain available to an insured.

Mr. Troncoso did not file any evidence or submissions in this preliminary issue matter. Even though his licence may have been suspended only the day prior to the accident, I have no evidence that he can avail himself of any of the defences available to him.

Co-operators has tendered a photocopy of Mr. Troncoso's driving record that states that Mr. Troncoso's licence was suspended at the time of the accident. I find that the certificate, and the affidavit of Mr. Luxenberg, comprise at least prima facie evidence of the suspension of the licence.

In the absence of any submissions or evidence from Mr. Troncoso, I accept that his licence was validly suspended on the date of the accident, and that the Insurer may rely upon the exclusion contained in subsection 30(1)(b) of the Schedule to deny Mr. Troncoso's claim.

I find that Mr. Troncoso is precluded from proceeding to arbitration with his claim for income replacement benefits due to the fact that he was driving without a valid licence at the time of the accident.

EXPENSES:

I exercise my discretion to award Co-operators its expenses incurred in this preliminary issue hearing. Mr. Troncoso's failure to reply to the requests for submissions, or to otherwise participate in this preliminary issue hearing, which was ordered on consent of both parties, has delayed the disposition of this matter. Had he intended to simply withdraw his application, he should have done so before the Insurer was put to the expense of preparing for this hearing.

In light of the important issue raised, and the need to keep the arbitration process open to applicants, however, I fix Co-operators expenses at a nominal $100, which shall be payable by Mr. Troncoso forthwith.

September 25, 2000

John Wilson Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 174

FSCO A00-000167

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JUAN TRONCOSO

Applicant

and

CO-OPERATORS GENERAL INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Troncoso is precluded from proceeding to arbitration due to the fact that he did not possess a valid driving licence at the time of the accident, pursuant to subsection 30(1)(b) of the Schedule.

2. Mr. Troncoso shall pay to Co-operators the sum of $100 as expenses forthwith.

September 25, 2000

John Wilson Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.