Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 5

FSCO A05-002209

BETWEEN:

LISA DAMUDE

Applicant

and

THE AUTOMOBILE INSURANCE COMPANY OF HARTFORD, CONNECTICUT

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: David Muir

Heard: October 27, 2006, in Hamilton, Ontario.

Appearances: J. Ivan Marini for Ms. Damude Julian R.G. Thomas for The Automobile Insurance Company of Hartford, Connecticut

Issues:

Ms. Damude, a single mother of three, was involved in a motorcycle accident on July 19, 2001. Ms. Damude applied for statutory accident benefits from The Automobile Insurance Company of Hartford, Connecticut ("Automobile"), payable under the Schedule.¹ Ms. Damude made claims to income replacement and housekeeping benefits.²

Automobile took the position from the outset that it was not required to pay her these benefits and relied upon section 30 of the Schedule which provides that an insurer is not required to pay benefits in a number of different circumstances.

In February 2000 Ms. Damude met Mr. Bartok and began a relationship with him. Amongst their common interests were motorcycles. Both owned a Harley-Davidson at the time, although Ms. Damude had taken hers off the road for about a year prior to her and Mr. Bartok meeting.

In part because Mr. Bartok wanted someone to ride with and Ms. Damude needed insurance, Mr. Bartok transferred his insurance for a second bike that he had recently sold, to Ms. Damude and her bike. More accurately put, Mr. Bartok added Ms. Damude and her bike to his policy of insurance. Mr. Bartok paid the extra premium required for this arrangement, about $240. The nub of the issue between the parties is whether or not Mr. Bartok led Ms. Damude to believe that he paid Ms. Damude's insurance premium for the following year, the year in which the accident took place. Unravelling the truth of what occurred in the early months of 2001 is complicated by the fact that the relationship between Ms. Damude and Mr. Bartok was at, or nearing its end when the critical transactions are said to have occurred. Whatever happened between these two individuals, the insurance premiums on Ms. Damude's bike were not paid and accordingly she was uninsured when involved in the motorcycle accident on July 19, 2001.

At issue here is section 30(1)(a) which provides that an insurer is not required to pay a number of benefits including income replacement and housekeeping benefits where:

... The driver knew or ought to have known that he or she was operating the automobile while it was not insured under a motor vehicle liability policy.

The parties have been to date, unable to resolve their disputes and Ms. Damude 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 can be stated as follows:

Is Automobile entitled to not pay Ms. Damude a benefit solely because of section 30(1)(a) of the Schedule?

Result:

Automobile is not entitled to rely upon section 30(1)(a) of the Schedule.

EVIDENCE AND ANALYSIS:

Ms. Damude and Mr. Bartok tell two quite different stories concerning the events surrounding the dying days of their relationship and the insurance renewal, which occurred at about the same time in the early weeks of 2001. Credibility is at the heart of this dispute.

As indicated, Ms. Damude and Mr. Bartok were lovers. They met for the first time in early 2000 at the Belmont Hotel. The Hotel holds karaoke nights on the weekends. Ms. Damude is a regular on karaoke nights and it was at such an event that the two met.

The relationship was somewhat one-sided. Mr. Bartok was clearly smitten by Ms. Damude and wished to marry her. He readily admits that he was madly in love with her. Ms. Damude was somewhat less keen, although apparently attracted to the attentions paid to her by Mr. Bartok including the lavishing, in her words, of gifts on her over the course of their relationship.

The relationship was on again off again, according to Mr. Bartok and there were periods of weeks when they would not see each other. This characterization of the relationship is consistent with Ms. Damude's evidence. Indeed in early November 2000 Ms. Damude left Ontario for British Columbia with some intention of living there. She apparently changed her mind. Mr. Bartok flew out to Vancouver and brought Ms. Damude back to Ontario on December 16, 2000. Mr. Bartok paid for Ms. Damude's return flight. The two spent the weekend of December 16th and 17th together. Mr. Bartok gave Ms. Damude a number of gifts that weekend, including according to Ms. Damude, an engagement ring. Mr. Bartok claims that he gave her the ring in October. Whenever it was given, Ms. Damude kept the ring throughout the time in question, returning it to Mr. Bartok sometime after March 28, 2001.

It is at this point that the two narratives begin to diverge more significantly. Ms. Damude left Mr. Bartok's home on December 18, 2000. It is not entirely clear on what terms she left. Mr. Bartok claims that she ended the relationship that day. Ms. Damude left the impression that it was somewhat more ambiguous than that, although it is clear that the relationship had entered an "off" phase as the two were agreed that they had only occasional contact with each other after December 18.

As regards the insurance renewal transaction the truth is even harder to tease out. Ms. Damude claims that she ran into Mr. Bartok at the Belmont Hotel on a karaoke night in January. It was not a planned meeting, but because Ms. Damude was a regular on karaoke nights, Mr. Bartok knew that she might be there and in her mind at least, he would come to meet her there. On the evening in question Ms. Damude claims that Mr. Bartok presented her with a certificate of insurance for her bike and a red rose. He said, she claims, "here is your insurance." Ms. Damude testified that when she got home that evening, she placed the insurance certificate in the front pouch of her bike and thought nothing more about it until after the accident in July.

Mr. Bartok tells a quite different story. He claims that Ms. Damude called him in early January and asked to meet at the Belmont Hotel. He agreed to meet her there and saw it as an opportunity to deal with the insurance issue. He claims that when they met he asked her for payment of approximately $400 as Ms. Damude's share of the joint policy of insurance - her share of the renewal of the existing policy. Ms. Damude was said to have responded that she did not carry that kind of money around with her and asked if she could give it to him later, and according to Mr. Bartok, he agreed that she could bring it to his home in the following two weeks. This version of events was not put to Ms. Damude and after Mr. Bartok gave this evidence in chief it was objected to on the basis that it violated the principle in Browne v. Dunn³ I agreed and accordingly I can not rely upon this evidence. However, even if admitted I would place little or no weight on it as I find that this conversation did not take place in the way that Mr. Bartok remembers it.

In any case Mr. Bartok testified that when Ms. Damude failed to bring the money, he waited another two weeks and then went to the insurance broker to have Ms. Damude removed from the shared policy. He attended the brokerage on February 19, 2001 and was told by Cheryl Wells at the brokerage that he could not do so without written or oral permission from Ms. Damude. He then asked if he could be removed from the shared policy and given a new one. This was in fact what was done. Ms. Wells confirmed this transaction. She also confirmed that Mr. Bartok had told her that he and Ms. Damude had broken up. What she did not confirm, and indeed she denied that Mr. Bartok had told her that all further correspondence respecting Ms. Damude's policy should be sent to her at Sherkston Family Go Karts, a business operated by Ms. Damude's father. Ms. Wells had no recollection of Mr. Bartok telling her that and there is no note in the file to that effect. Moreover, on the very day that Mr. Bartok attended the brokerage she wrote a letter to Ms. Damude at Mr. Bartok's address asking for new contact information. The fact that Ms. Wells would write this letter, strongly suggests that Mr. Bartok had not told her where to send correspondence to Ms. Damude.

Because Ms. Damude made no efforts to advise the brokerage of her changed circumstances and apparently neither had Mr. Bartok, the insurance certificates as well as every other piece of correspondence respecting Ms. Damude's policy of insurance was mailed to him. He admits receiving and opening the letter containing the insurance certificates, but claims that he put it, intact but opened, into a plastic bag with some other of Ms. Damude's belongings. When asked about subsequent notices to Ms. Damude including the notice of cancellation, Mr. Bartok claims that these were put into another bag which disappeared for a year and then was thrown out.

Mr. Bartok suggests although he never says so expressly, that Ms. Damude would have come into possession of the insurance slips and the other contents of the envelope including a billing notice when he gave her the first plastic bag which would have also contained the keys to her bike, her license sticker and other personal belongings. Mr. Bartok was unsure when this would have occurred but thought it was perhaps April or May, 2001.

Automobile submits that Mr. Bartok's evidence should be preferred because he has no interest in the matter and therefore no reason to dissemble or mislead.

I do not agree.

Both Ms. Damude and Mr. Bartok gave flawed versions of these critical events. Both had behaved, in different ways, badly towards each other and as a result spun their imperfect recollections to cast themselves in the best light possible. And in fairness to them both, these events occurred almost 6 years ago. All of that said I have concluded that there are more serious problems with Mr. Bartok's recollections than Ms. Damude's.

Although, not directly interested in the outcome of this proceeding Mr. Bartok is not entirely without motivations for spinning the story in a certain way. If what Ms. Damude says is true, Mr. Bartok’s actions in this matter do not reflect well on his character. Avoiding being seen in that light is motive enough. Morever, the materials filed in exhibit 1 include several letters in which counsel for Ms. Damude threaten possible legal actions against Mr. Bartok over his role in the events surrounding Ms. Damude’s insurance. It is incorrect in my view to suggest that Mr. Bartok has no interest in the outcome of the preliminary issue hearing. More importantly it is clear that his story is not entirely accurate, particularly as it relates to key facts. For example, he clearly did not tell Ms. Wells that correspondence respecting Ms. Damude’s insurance should no longer be sent to his address, but, to the Damude family business in Sherkston. This did not happen, I accept Ms. Wells testimony in that regard. I also note, that despite claiming to have advised the brokerage to send her mail elsewhere, Mr. Bartok acknowledges, that he continued to receive several pieces of correspondence from the insurer for Ms. Damude after meeting Ms. Wells at the brokerage, but took no steps to correct the situation.

Mr. Bartok’s recollection of his dealing with the several letters coming to his home for Ms. Damude was unpersuasive. It has the sense of a story contrived to explain how Ms. Damude came into possession of the insurance slips, but not any of the subsequent material, all of which would have arrived in his mail prior to when he claims that he would have delivered the bag containing the insurance slips to Ms. Damude.

Most significantly the centre piece of Mr. Bartok's description of events lacks the ring of truth. When he related his story in chief, he was responding to a call from Ms. Damude and saw it as an opportunity to ask her for the money to renew the policy. In the circumstances not implausible and as he said it would save them both some money. In chief he did not mention that he also gave her a rose that evening. When it was suggested to him in cross that he gave Ms. Damude a rose at the same time the change in demeanour was palpable. The rose was true, the rest of the story less so. Moreover, when it was put to him that he had in fact given the insurance slips to Ms. Damude and nothing else (other than the rose), he did not deny the suggestion, but instead deflected the question by suggesting that the slips would not have been of any use to Ms. Damude as he had the keys to her bike, etc. He was asked the same question later and responded in a similar fashion.

There are of course difficulties with Ms. Damude's version of events. Clearly the meeting where the insurance slips were given to her did not take place in January, as they did not exist until after February 19th and likely would not have been delivered to Mr. Bartok until early March. Moreover, Ms. Damude has a clear and direct pecuniary interest in the outcome of this proceeding. I have also considered that the logic of Ms. Damude's position includes the possibility that Mr. Bartok deliberately mislead her into believing that her insurance had been renewed which seems somewhat out of character. I need not make that finding to conclude that Ms. Damude's story rings true and given my impression that both key witnesses were holding back important pieces of the tale of their failed relationship, I think it unlikely. That said, even on Mr. Bartok's version of events he behaved dishonourably in making no efforts to ensure that Ms. Damude was receiving the communications from the insurer after March 1.

At the end of the day I find that these two played their parts as they had since meeting a year or so earlier. Mr. Bartok was unprepared to give her up easily and in an attempt to win her back gave Ms. Damude the insurance slips and left her with the impression that he had yet again "taken care of it." Ms. Damude enjoying his continued pursuit of her, was happy to take advantage of Mr. Bartok's generous gift without much thought at all, even though the relationship was effectively over at the time.

Automobile takes the position that whatever happened between Ms. Damude and Mr. Bartok, Ms. Damude was wilfully blind to the fact that she was not insured. It also submits that "wilful blindness" is an objective standard.

I do not agree on either point.

In considering this issue I was assisted by the views expressed by L'Heureux-Dube J. in R. v. Hinchey, 1996 CanLII 157 (SCC), [1996] 3 S.C.R. 1128:

Wilful Blindness

The mental requirement of the crime may also be satisfied by applying the concept of wilful blindness. Glanville Williams in his textbook Criminal Law: The General Part (2nd ed. 1961), at pp. 157-58, explained the wilful blindness approach in these words:

. . . the rule is that if a party has his suspicion aroused but then deliberately omits to make further enquires, because he wishes to remain in ignorance, he is deemed to have knowledge. . . .

In other words, there is a suspicion which the defendant deliberately omits to turn into certain knowledge. This is frequently expressed by saying that he "shut his eyes" to the fact, or that he was "wilfully blind."

He observed that Lord Hewart C.J. expressed it by saying that:

the respondent deliberately refrained from making inquiries the result of which he might not care to have.

In R. v. Jorgensen, 1995 CanLII 85 (SCC), [1995] 4 S.C.R. 55, at p. 111, Sopinka J. noted that a finding of wilful blindness involves an affirmative answer to the question: "Did the accused shut his eyes because he knew or strongly suspected that looking would fix him with knowledge?" He went on to state: "The determination must be made in light of all the circumstances."

In Sansregret, supra, this Court held that the circumstances were not restricted to those immediately surrounding a particular offence but could be more broadly defined to include past events. McIntyre J. distinguished wilful blindness from recklessness and quoted with approval a passage from Glanville Williams with regard to its application (at pp. 584 and 586):

Wilful blindness is distinct from recklessness because, while recklessness involves knowledge of a danger or risk and persistence in a course of conduct which creates a risk that the prohibited result will occur, wilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant. The culpability in recklessness is justified by consciousness of the risk and by proceeding in the face of it, while in wilful blindness it is justified by the accused's fault in deliberately failing to inquire when he knows there is reason for inquiry.

The rule that wilful blindness is equivalent to knowledge is essential, and is found throughout the criminal law. It is, at the same time, an unstable rule, because judges are apt to forget its very limited scope. A court can properly find wilful blindness only where it can almost be said that the defendant actually knew. He suspected the fact; he realized its probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone, is wilful blindness. It requires in effect a finding that the defendant intended to cheat the administration of justice. Any wider definition would make the doctrine of wilful blindness indistinguishable from the civil doctrine of negligence in not obtaining knowledge.

Wilful blindness is most often considered in the criminal law concept, but it has application in civil disputes as well.

It is clear from the above passages that "wilful blindness" is not an objective standard, rather it is subjective having to do with what the person knew or did not know. It imputes knowledge to a person who deliberately declines to make enquiries because they do not want to know the truth. That is not the situation here.

The positive fact Automobile can rely upon in this regard is that the address on the insurance slip is not that of Ms. Damude. She conceded that she was aware of this. She should have, it was submitted, taken steps to ensure that Automobile was aware of her proper address and as well to find out whether or not her premiums had been paid. It is true that Ms. Damude took no steps to do either thing and if "wilful blindness" were akin to negligence, Automobile would be correct.

To my mind the question is not what Ms. Damude ought to have done to ensure that the insurer know where to contact her, but what did she reasonably believe about her insurance coverage. More directly did she deliberately avoid facts that might have led her to believe that she was not covered by a policy of insurance beginning in late February 2001?

Flowing from the findings above, I concluded that Ms. Damude reasonably believed that Mr. Bartok had taken care of her insurance for another year. To say that she was wilfully blind to the fact that Mr. Bartok had not made the necessary arrangements for her insurance coverage in 2001 requires that she deliberately avoided facts contrary to that understanding. On the evidence before me there is no basis for that finding.

EXPENSES:

I exercise my discretion to award Ms. Damude her expenses incurred in this preliminary issue hearing.

January 8, 2007

David Muir Arbitrator

Date