Neutral Citation: 2003 ONFSCDRS 86

FSCO A02-000401

BETWEEN:

THOMAS MANZANARES

Applicant

and

PEMBRIDGE INSURANCE COMPANY (PAFCO INS. CO.)

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Fred Sampliner

Heard:

March 17, 2003, in Stoney Creek, Ontario.

Appearances:

Ben Fortino for Mr. Manzanares

Rinaldo DiVincenzo for Pembridge Insurance Company (Pafco Ins. Co.)

The Applicant, Thomas Manzanares, claims income replacement benefits under the Schedule¹ as a result of injuries in a December 18, 1999 automobile accident. His Insurer, Pembridge Insurance Company (Pafco Ins. Co.) ("Pembridge"), contends that subsection 30(1)(b) of the Schedule precludes Mr. Manzanares from receiving income replacement benefits because he was operating a vehicle without a valid driver's licence. The parties were unable to resolve their disputes through mediation, and Mr. Manzanares applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Manzanares excluded by subsection 30(1)(b) of the Schedule from receiving further income replacement benefits under Part II of the Schedule?
Did Pembridge waive its right to assert this exclusion?

Mr. Manzanares is excluded by subsection 30(1)(b) of the Schedule from receiving further income replacement benefits under Part II of the Schedule.
Pembridge did not waive its right to assert the exclusion.

The facts are simple. Mr. Manzanares had a valid G1 permit to operate a motor vehicle at the time of the December 18, 1999 accident. Under Ontario's graduated licencing system, he was required to have a fully licenced driver in the front seat with him all the time he drove. Mr. Manzanares violated the terms of his novice licence as he did not have another qualified driver with him at the time of the accident.

Exclusion:

Mr. Manzanares admittedly violated a condition on his licence under Ontario's Highway Traffic Act, R.S.O. 1990, c.H.8 ("HTA"). Pembridge maintains that his breach falls within one of the Schedule's exclusions, subsection 30(1)(b):

The insurer is not required to pay an income replacement benefit...if the driver was driving the automobile without a valid driver's licence; (my emphasis)

Driving an automobile on public highways is considered a privilege, which is granted under the HTA by the Ministry of Transportation to those persons who have shown the ability to safely operate vehicles.² Novice drivers must not violate the licence conditions or endorsements.³

The Divisional Court in Vanderwal⁴ excluded a motorcyclist from receiving weekly income replacement benefits under the Schedule, where he violated a conditional speed limitation on his licence. This decision is factually similar to the present case, but under the narrower language used in the exclusions of the1990 Schedule.⁵

The recent Sesay⁶ decision not only closely resembles the facts in the present case, but was decided under the same 1996 Schedule. The insured's violation of the restriction on his G1 permit by driving on a 400 series highway led Arbitrator Wilson to find the insured fell within the exclusion.

The logic in both Vanderwal and Sesay is that an insured's driving authority does not extend beyond the specified limitation imposed by the Ministry of Transportation. Like the Court in Vanderwal, Arbitrator Wilson explicitly supports the HTA provisions that attempt to ensure novice drivers' safe vehicle operation.

Mr. Manzanares argues that he meets the HTA definition of a valid licence ("not expired, cancelled or under suspension" ⁷). While the Schedule itself does not define a valid driver's licence, I am not persuaded that the drafters intended to import the HTA definition into the Schedule because there is nothing in either statute to indicate a comprehensive scheme.⁸ Thus, I do not accept that the HTA definition of a valid driver's licence is relevant to interpret subsection 30(1)(b) of the Schedule.

Common sense supports Mr. Manzanares' argument that he did not violate the ordinary meaning⁹ of the Schedule's words. The words "valid driver's licence" are clear and unambiguous in my view, and I agree with Mr. Manzanares that he falls outside the exclusion if the words are given their ordinary meaning because his licence was literally still valid and not under administrative suspension at the time of the accident.

However, the above cases recognize the Legislature's important public policy concern to discourage unsafe driving on public highways. The HTA imposes revocation on the novice driver who violates a licence restriction. Similarly, the intent of the Schedule to promote responsible driving is demonstrated through the provisions that deny an insured's ability to collect the important income replacement benefit when the automobile is uninsured to cover losses,¹⁰ or similarly when an insured is involved in a criminal act using the automobile or fails to provide a breath sample to detect if he or she is impaired by drugs or alcohol.¹¹

The facts in this case are indistinguishable from Sesay, and it would be wrong to narrowly interpret the words¹² so as to undermine the Legislature's intended purpose. I find that Mr. Manzanares' breach of his novice licence restriction constitutes operating a vehicle without a valid driver's licence within the meaning of subsection 30(1)(b) of the Schedule.

Waiver:

Waiver is defined as the intentional or voluntary relinquishment of a legal right.¹³

The evidence supports that Pembridge knew at the commencement of Mr. Manzanares' claim that he was violating his licence restriction at the time of the accident. Ms. Marita McKendry, the in-house adjuster, admitted in her evidence that she received the initial investigation report of Crawford Adjusters Canada in February 2000, but had no independent recollection of the contents.

The report of Mr. Robert Fiorido, the independent adjuster, explained the factual basis for his belief that Mr. Manzanares had violated his G1 novice licence and that he was driving without a valid licence in violation of the Schedule's subsection 30(1)(b) exclusion. He testified that he probably forgot to flag the coverage issue for Ms. McKendry in his second report a month later.

Despite Mr. Fiorido's advice in his first report that Mr. Manzanares was not entitled to income replacement benefits, Pembridge paid Mr. Manzanares $240.88 per week from December 25, 1999 to June 29, 2000. I find that in February 2000, Pembridge received Mr. Fiorido's first report on the accident and with that information knew or ought to have known that it could assert the subsection 30(1)(b) exclusion.

Ms. McKendry testified that she was very busy with many files, but would have flagged the issue because it was standard protocol to log coverage questions in the records. Her testimony and notes do not show she reviewed the report, identified the exclusion or discussed it with her supervisors. She clearly overlooked the exclusion when Pembridge was notified in February 2000.

None of this evidence suggests that Pembridge expressly abandoned the exclusion.¹⁴ There is nothing in the testimony of Mr. Fiorido, Ms. McKendry, their notes or correspondence and claims documentation to indicate Pembridge internally discussed the issue and intentionally relinquished its right. Neither is there any documentary or viva voce evidence that Pembridge told Mr. Manzanares or his representatives it waived the right to rely on the exclusion.

In the Budd¹⁵ case, the insurer paid benefits although it had issued an internal memorandum acknowledging that the claimant's vehicle coverage was deleted. However, payments and identification of the coverage question was insufficient to establish the insurer's intent to abandon the exclusion.

Similarly, Pembridge knew about this exclusion, and neglectfully paid benefits, but there is nothing in the evidence to imply an intention to abandon or give up the exclusion. I therefore find that Pembridge did not waive the subsection 30(1)(b) exclusion in the Schedule, and may assert that Mr. Manzanares was driving without a valid licence at the time of the accident.

EXPENSES:

The parties may apply for an assessment of expenses if they cannot agree.¹⁶

May 27, 2003

Fred Sampliner Arbitrator

Date