Joachin et al. v. Abel et al.

Joachin et al. v. Abel et al.; Halifax Insurance Company, Third Party; Superintendent of Financial Services on behalf of the Motor Vehicle Accident Claims Fund, Intervenor [Indexed as: Joachin v. Abel]

64 O.R. (3d) 475 [2003] O.J. No. 1484 Docket No. C38678

Court of Appeal for Ontario Doherty, Austin and Gillese JJ.A. April 29, 2003

Insurance -- Automobile insurance -- Indemnity -- Plaintiff's right of recovery from defendant's insurer under s. 258(1) of Insurance Act not dependent on defendant having right of indemnity under his insurance contract -- Plaintiffs making successful claim against defendant's insurer under s. 258(1) despite fact that insurer was not obliged to indemnify defendant as defendant had committed criminal act with motor vehicle -- Sections 258(1) and (4) of Act together creating absolute liability on part of insurer toward person injured by insured under automobile insurance policy -- Insurance Act, R.S.O. 1990, c. I.8, ss. 118, 258(1), (4).

The defendant, who had automobile insurance with H Co., intentionally operated his truck so as to strike and injure the plaintiffs. Two of the plaintiffs were insured under policies issued by C Co. that provided uninsured motorists' coverage. The third plaintiff was uninsured. The plaintiffs' claims against the defendant were settled, but the insurers could not agree on which of them was responsible for the first $200,000 of the amount owed to the plaintiffs as a result of the settlement. H Co. brought a motion to determine whether it was responsible. The motions judge found that H Co. was responsible pursuant to ss. 258(1) and (4) of the Insurance Act. H Co. appealed.

Held, the appeal should be dismissed.

As a result of the operation of s. 118 of the Act, H Co. was not obliged to indemnify the defendant as the defendant committed a criminal act with the intent of bringing about loss or damage. However, an innocent third party's right of recovery under s. 258(1) is a separate and distinct right that is not dependent on the insured having a right to indemnity under his or her contract. Section 258(4)(c) makes it clear that a criminal act of the owner or driver of a vehicle does not provide the insurer with a defence to a claim under s. 258(1). The word "indemnity" in s. 258(1) is used not to create a precondition but as part of a description. The defendant remained a person with a contract that provided for indemnity despite the fact that the right to indemnity was unenforceable as a result of his actions. The combined effect of ss. 258(1) and (4) of the Act is to create an absolute liability on the part of the insurer towards a person injured by an insured under a motor vehicle liability policy.

APPEAL by an insurer from an order of Sedgwick J. (2002), 39 C.C.L.I. (3d) 267 (S.C.J.) holding an insurer liable for the first $200,000 of damages and costs payable to the plaintiff.

Walker v. Allstate Insurance Co. of Canada (1989), 67 O.R. (2d) 733 (C.A.), affg (1986), 56 O.R. (2d) 11, 30 D.L.R. (4th) 321, [1986] I.L.R. 1-2099, 41 M.V.R. 236 (H.C.J.), consd Other cases referred to Campanaro v. Kim (1998), 41 O.R. (3d) 545, 164 D.L.R. (4th) 400, [1998] I.L.R. 1-3591, 36 M.V.R. (3d) 186 (C.A.), revg (1995), 24 O.R. (3d) 274, [1995] I.L.R. 1-3229, 16 M.V.R. (3d) 27 (Gen. Div.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 118, 251, 258

Stephen J. Kelly, for appellant. Kevin J. Mullington, for respondent The Co-operators General Insurance. Helmut R. Brodmann, for intervenor the Superintendent of Financial Services.

The judgment of the court was delivered by

[1] GILLESE J.A.: -- Halifax Insurance Company, the third party, appeals from the order of the motions judge that had the effect of holding Halifax responsible for the first $200,000 of damages and costs payable to the plaintiffs in this action, pursuant to ss. 258(1) and (4) of the Insurance Act, R.S.O. 1990, c. I.8, as amended (the "Act").

Background

[2] On August 19, 1998, Theron Abel intentionally operated his truck so as to strike and injure the plaintiffs, Eric Joachin, Alex Lapointe and San-Hep Phou.

[3] Abel had automobile insurance with Halifax at the date of the accident. The defendant, The Co-operators General Insurance Company, insured Joachin and Lapointe at the date of the accident under policies that provided uninsured motorists' coverage. All of the plaintiffs' claims arising from the accident have been resolved but Halifax and Co-operators cannot agree on which of them is responsible for the first $200,000 of the claims owed to the plaintiffs as a result of the settlement.

[4] Halifax brought a motion to determine whether it is responsible for the first $200,000 of damages and costs payable to the plaintiffs.

[5] The parties to the motion agreed that the following statements of fact were to be assumed for the purposes of the motion. The motor vehicle accident occurred when Abel, operating a truck that he owned and with the intention to cause injury, struck and injured the plaintiffs. Although the plaintiffs sued Abel for damages caused by the collision, Halifax was not required to defend those actions on Abel's behalf because Abel acted intentionally in causing the plaintiffs' injuries. Settlement of the plaintiffs' claims constitutes judgments for the purposes of the motion. Phou was uninsured at the date of the accident. Pursuant to the terms of settlement, a consent judgment was obtained as against Abel. If Halifax is not responsible for payment of Phou's settlement, the judgment will be payable by the Motor Vehicle Accident Claims Fund.

The Parties' Positions

[6] Halifax submits that there are two preconditions to recovery under s. 258(1) of the Act. First, as the insurer, Halifax must be obliged to indemnify the insured Abel. Second, insurance moneys must be payable under the contract. As a result of the operation of s. 118 of the Act, Halifax is not obliged to indemnify Abel. Thus, Halifax argues, the first precondition is not met and the plaintiffs cannot look to it, pursuant to s. 258(1), for the first $200,000 of the plaintiffs' judgments.

[7] Co-operators and the Fund argue that, while an insured may forfeit its right to indemnity in certain circumstances, an innocent third party's right of recovery under s. 258(1) is a separate and distinct right that is not dependent on the insured having a right to indemnity under his or her contract. Thus, they submit, Halifax is responsible for such moneys pursuant to the provisions of s. 258 of the Act.

Analysis

[8] On a plain reading of s. 118, an insured's right to indemnity under the insuring agreement is rendered unenforceable where the insured commits a criminal act with the intent of bringing about loss or damage.

118. Unless the contract otherwise provides, a contravention of any criminal or other law in force in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage, but in the case of a contract of life insurance this section applies only to disability insurance undertaken as part of the contract.

(Emphasis added)

[9] Subsection 258(1) gives injured third parties, such as the plaintiffs, a right of action for direct compensation from the insurer of the driver who struck them and caused their injuries.

258(1) Any person who has a claim against an insured for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, even if such person is not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the insured, have the insurance money payable under the contract applied in or towards satisfaction of the person's judgment and of any other judgments or claims against the insured covered by the contract and may, on the person's own behalf and on behalf of all persons having such judgments or claims, maintain an action against the insurer to have the insurance money so applied.

(Emphasis added)

[10] Subsection 258(4) prevents an insurer from defending a s. 258(1) claim on the basis of certain acts or defaults of the insured. [^1] Clause (c) of subsection 258(4) makes it clear that a criminal act of the owner or driver of a vehicle does not provide the insurer with a defence to a claim under s. 258(1).

258(4) The right of a person who is entitled under subsection (1) to have insurance money applied upon the person's judgment or claim is not prejudiced by,

(a) an assignment, waiver, surrender, cancellation or discharge of the contract, or of any interest therein or of the proceeds thereof, made by the insured after the happening of the event giving rise to a claim under the contract;

(b) any act or default of the insured before or after that event in contravention of this Part or of the terms of the contract; or

(c) any contravention of the Criminal Code (Canada) or a statute of any province or territory of Canada or of any state or the District of Columbia of the United States of America by the owner or driver of the automobile,

and nothing mentioned in clause (a), (b) or (c) is available to the insurer as a defence in an action brought under subsection (1).

(Emphasis added)

[11] The intent of s. 258(1) is to enable innocent, injured third parties to recover from the insurer of the driver who struck them and caused their injuries. The rights between the tortfeasor and his or her insurer are dealt with in different provisions, including s. 118. While an insurer can rely on s. 118 to deny an insured's claim for indemnity, s. 258(4) makes it clear that an innocent third party is not to be deprived of his or her remedy because of the criminal conduct of the insured.

[12] In my view, the word "indemnity" in s. 258(1) is used not to create a precondition but as part of a description. The provisions of s. 258(1) do not extend to provide for persons with claims against all insureds. Rather, it provides for persons with claims against a subgroup of the class of insureds, namely, those insureds "for which indemnity is provided by a contract evidenced by a motor vehicle liability policy". The fact that Abel may not enforce a claim for indemnity because of his actions does not make Abel an insured person without a contract providing for indemnity. Abel remains a person with a contract that provides for indemnity despite the fact that the right to indemnity is unenforceable as a result of his actions.

[13] Thus, in my view, the combined effect of subsections 258(1) and (4) is to create an absolute liability on the part of the insurer toward a person injured by a person insured under a motor vehicle liability policy. A plaintiff's action under s. 258(1) is independent of the insured's right of indemnification.

[14] Halifax's reliance on Walker v. Allstate Insurance Co. of Canada (1989), 67 O.R. (2d) 733 (C.A.) is misplaced. In Walker, a person drove a vehicle without the consent of the vehicle's owner and got into an accident. Because he did not have the owner's consent, the driver was not covered under the terms of his own motor vehicle policy. The court held that the plaintiffs, who had obtained judgment against the driver, were not entitled to recover under his policy.

[15] As this court stated in Companaro v. Kim (1998), 41 O.R. (3d) 545, 164 D.L.R. (4th) 400 (C.A.) at p. 560 O.R., consent is not an issue that is properly part of a s. 258 analysis. The court went on to confirm that Walker stands for the proposition that where a person is driving without the consent of the named insured, the insurer's obligation to pay an injured third party is controlled by the insuring agreement in the policy in question.

[16] Consent is not in issue in the case at bar which falls to be decided squarely under s. 258.

Disposition

[17] Accordingly, I would dismiss the appeal. Costs of the appeal, as per the agreement of the parties, are fixed in the amount of $12,500 to Co-operators and $7,500 to the Fund.

Appeal dismissed.

[^1]: Section 258(11) creates a limited exception to s. 258(4). Under s. 258(11), the insured can avail itself of any defence it is entitled to set up against the insured, despite (4), but only with respect to coverage in excess of the statutory minimum of $200,000 set out in s. 251.