D.O. v. Aviva Insurance Canada, 2019 CanLII 34612

In the matter of an Application pursuant to subsection 280(2) of the Insurance Act, RSO 1990, c I.8., in relation to statutory accident benefits.

Between:

D.O.

Appellant(s)

and

Aviva Insurance Canada

Respondent

DECISION

PANEL:

Matthew M. Létourneau, Member

APPEARANCES:

For the Applicant:

Ivy So, Paralegal

For the Respondent:

Amanda Fowler & Andrew P. Smith, Counsel

HEARD:

In person on November 5, 2018

OVERVIEW

1The applicant was injured in an accident on September 26, 2017 and sought income replacement benefits from the respondent pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 2016, O. Reg. 34/10 (the “Schedule”). The respondent refused to pay income replacement benefits on the basis that the Schedule excludes entitlement to any person who makes a material misrepresentation inducing the company to contract or intentionally fails to notify of a material risk to the insurance contract. The applicant applied to the Licence Appeal Tribunal - Automobile Accident Benefits Service (the “Tribunal”) for resolution of this dispute.

ISSUE

2Is the applicant entitled to income replacement benefits in the amount of $400.00 per week for the period of September 26, 2017 to November 21, 2017?

3Is the applicant entitled to interest?

4Is the applicant entitled to an award?

RESULT

5The applicant is entitled to income replacement benefits given the Tribunal’s finding that the applicant is not excluded from coverage, along with the parties’ agreement that the applicants’ injuries satisfy the relevant test for such benefits.

APPLICANT NOT EXCLUDED FROM COVERAGE

6The respondent claims that the applicant is excluded from receiving an income replacement benefit due to a general exclusion - found under paragraph 31(1)(b) the Schedule – which denies coverage to any person who makes a material misrepresentation inducing an insurer to contract or who intentionally fails to notify the insurer of a change in a risk material to the contract. For the reasons below, I find that paragraph 31(1)(b) of the Schedule does not apply to the applicant in this case as the respondent has not shown evidence sufficient to meet the criteria under this exclusion.

7The applicant is eligible for the income replacement benefit under section 5 of the Schedule, given that the parties agree that the injuries listed in the OCF-3 of October 2, 2017 constitute a substantial inability to perform the essential tasks of his employment at [A. D. S. I.] for the period of September 26, 2017 to November 21, 2017.

8The respondent initially denied the claimed income replacement benefit in its letter to the applicant of January 31, 2018. The respondent asserted that the applicant was not eligible for income replacement benefits due to the general exclusion under paragraph 31(1)(b) of the Schedule, which states the following:

PART VII

GENERAL EXCLUSIONS

Circumstances in which certain benefits not payable

(1) The insurer is not required to pay an income replacement benefit […]

(b) in respect of any person who has made, or who knows of, a material misrepresentation that induced the insurer to enter into the contract of automobile insurance or who intentionally failed to notify the insurer of a change in a risk material to the contract.

9It is the respondent who has the onus of showing what evidence supports its denial on the basis of a general exclusion under the Schedule. I must determine whether this general exclusion applies, and consider the evidence presented in making my determination.

10 Paragraph 31(1)(b) of the Schedule sets out particular circumstances in which a person is excluded from entitlement to income replacement benefits. If applicable, this section excludes any person, such as the applicant, from the general entitlement of an “insured person” as defined under subsection 3(1) of the Schedule, being “a person who is involved in an accident involving the insured automobile”. The Schedule is to be considered remedial and clauses in insurance policies providing coverage are to be interpreted liberally or broadly.¹ There must clear and consistent evidence in determining whether the respondent has met the high bar of excluding coverage from the Schedule, which is legislation intended to provide coverage to an injured person such as the applicant.

11The respondent states that this is a unique case where the applicant was given ownership documents as well as proof of insurance despite not owning the vehicle himself. He knew he was not listed on the ownership documents and that he did not have insurance to his name for this vehicle. He also would have known that he had previously been charged and convicted for insurance related offences. This, according to the respondent, means that the applicant is excluded as a person who failed to inform the insurer of being a beneficial owner with previous convictions. The respondent argues that all changes of driver, owner and risks are material and that the purpose of this exclusion is to deter fraud and protect people who pay proper premiums.

12The applicant submitted that he was not yet the owner of the vehicle and that the owner refused to sign ownership documents. He was aware that the vehicle was insured according to the owner and that he even tried to contact the insurer about the attempted change in circumstances, but was turned away. The applicant states he did not own the insurance contract, so he did not make any misrepresentation to induce the insurer into contracting and did nothing intentionally fail to notify the insurer of any material risk.

13The respondent’s explanation of benefits letter of January 31, 2018 explains that the reason for the denial of benefits was based on an interview with the applicant in which the respondent learned of the circumstances under which he came to drive the 2007 Suzuki GSX-R600 on the date of the accident, belonging to F.W. At the hearing, the applicant testified that he was in the process of purchasing this vehicle and produced a Purchase Agreement Letter to this effect. As discussed below, I find the applicant’s actions were in line with his intent to purchase the vehicle.

14In applying the first criteria for the general exclusion at paragraph 31(1)(b) of the Schedule, I cannot find, on the evidence before me, that the applicant made a material misrepresentation that induced the respondent to enter into the contract of automobile insurance. The insurance contract was established prior to the applicant’s attempt at purchasing the vehicle and the respondent cannot be said to have been induced in this instance.

15Regarding the further criteria under this exclusion, I find the applicant did not intentionally fail to notify the respondent of a change in a risk material to the contract. The evidence presented was that the applicant was in the process of purchasing the vehicle as of March 4, 2017 and, while he drove it much of the time, F. W. still had access to the vehicle and continued driving it as well. It was clear that the purchase was not complete at the time of the accident. The applicant stated that he believed F. W. to have all the required insurance necessary during this time. He believed he was compliant as he had the insurance card on him. In addition, the applicant’s uncontested evidence was that he called to inform the Respondent of the fact he was driving the vehicle, but they would not speak to him, as it was not his name on the policy. There was no evidence from the respondent to contradict this statement.

16The respondent claimed that the applicant’s intent was to avoid making his driving record known and his intent was to drive the vehicle while benefiting from cheaper insurance. During the hearing, the respondent cross-examined the applicant and showed that he had previous infractions, including speeding and failure to have an insurance card. The respondent claimed that the applicant knew this driving history would lead to higher premiums were the insurance policy have been transferred to his name. Therefore, the respondent claims the applicant knowingly delayed or failed to transfer the policy in his name, or, at least, knowingly did not make respondent aware that he was the primary driver. The respondent argues that this would constitute either a misrepresentation or an intentional failure to notify the respondent of a material risk to the contract.

17The applicant explained on cross-examination that he verily believed that the bike was insured by F.W. He started to drive the vehicle on or about March 4, 2017, around when he got his motorcycle licence, but had not fully paid for the vehicle. He stated his understanding to be that the vehicle required insurance, but that he did not personally require any prior to purchasing the vehicle. He agreed that he was charged for a failure to have an insurance card, but clarified that F.W. had not renewed in time and he understood that F. W., as the policy holder, had told him that he would take care of the insurance policy coverage and renewal.

18I interpret the Schedule to require clear and consistent evidence of an “intentional failure” to notify the respondent. This is due to the nature of the legislation and the serious consequence of barring someone from coverage. Clear evidence of an intentional failure is not present in this case. The intention shown in evidence was that the applicant, as a third party to the insurance contract, wished to purchase a vehicle, subsequent to which he would make necessary changes to ownership documents and insurance. The applicant states he called the respondent to inform them of this, but the insurer would not speak to him as he was not the contracting party. The applicant also stated his understanding to be that F.W. continued to manage his own policy for the vehicle which he still owned, meaning that any notice of change of circumstances would be his responsibility at the time, and not the applicant’s. This is the only direct evidence I was provided on intent, and I accept this evidence in absence of any other compelling scenario.

19The respondent relies on circumstantial and indirect evidence that the applicant’s intent was different. While the scenario may not have been the respondent’s preferred set of circumstances, the legislator requires clear evidence of the applicant intentionally failing to inform the respondent. Even if I find that the applicant failed to notify the respondent of a material risk, this must be shown to be intentional for the exclusion to apply. I find that the applicant made attempts to inform F.W. and the respondent of any material risk and that he did not intentionally fail to notify the respondent. F.W. was not called as a witness by either party to determine why he did not make efforts to contact the respondent, nor was there any witness from the respondent itself to confirm or deny what information it provided the applicant when he did call.

20Barring a claimant from benefits from the Schedule requires clear evidence meeting the criteria under paragraph 31(1)(b) of the Schedule in order for a general exclusion to apply. Given my finding that the exclusion does not apply in this case, the applicant is entitled to the income replacement benefit as claimed in this matter.

INTEREST

21As I find that the applicant is entitled to the income replacement benefit, he will be awarded interest on any overdue payments pursuant to section 51 of the Schedule.

AWARD

22I find that the denial was not unreasonable given the reasons and concerns raised in the interview with the applicant, as stated in the denial letter of January 31, 2018. The respondent is entitled to make denials based on the information that it receives as long as it has fairly assessed the situation. As submitted by the respondent in line with 702535 Ontario Inc. v Non-Marine Underwriters Members of Lloyd’s London, 2000 CanLII 5684 (ONCA), its duty of fairness does not mean that the decision ultimately be correct.

23The respondent did have information of a potential material risk to the contract. This did not lead to a finding in favour of the respondent, but this decision does not meet the threshold for making an award. Therefore, the applicant is not entitled to an award under section 10 of Regulation 664 of the Insurance Act.

Released: March 8, 2019

Matthew M. Létourneau

Adjudicator

Footnotes

See Belaidirect Insurance v Dominion of Canada General Insurance Company, 2017 ONSC 367 at paragraph 45.