Winch v. Keogh et al. [Indexed as: Winch v. Keogh]

82 O.R. (3d) 472

Court of Appeal for Ontario,

Simmons, Armstrong and LaForme JJ.A.

August 4, 2006

Insurance -- Automobile insurance -- Action against insurer -- Plaintiff not entitled to recover directly from defendant's insurer under s. 258(1) of Insurance Act unless insured could have been entitled to recover under his policy -- Sections 258(2) and (5) of Act applying only after possibility of indemnity to insured has been established -- Insurance Act, R.S.O. 1990, c. I.8, s. 258.

The plaintiff was involved in a motor vehicle accident with the defendant. At the time of the accident, the defendant was not driving his own vehicle, but rather was driving a cube van with a manufacturer's gross weight rating of more than 4,500 kilograms. The defendant was insured under an automobile insurance policy which included a provision providing for coverage for other vehicles driven by the insured. Coverage did not extend to vehicles with a manufacturer's gross weight rating of more than 4,500 kilograms. On a motion to determine a point of law, the motion judge found that the insurer was not obliged to compensate the plaintiff under s. 258(1) of the Insurance Act, which permits an injured third party, in certain circumstances, to enforce a motor vehicle insurance contract directly against the insurer of the person who caused a motor vehicle accident. The plaintiff appealed.

Held, the appeal should be dismissed.

The motion judge was correct in holding that there can be no recovery by a third party beneficiary under s. 258(1) of the Act unless the insured could have been entitled to recover under a motor vehicle liability policy, and that ss. 258(2) and (5) apply only after the possibility of indemnity to the insured has been established.

APPEAL from the judgment of Perell J. (2005), 2005 40561 (ON SC), 78 O.R. (3d) 468, [2005] O.J. No. 4759 (S.C.J.), on a motion to determine a point of law.

Cases referred to Joachin v. Abel, 2002 79667 (ON SC), [2002] O.J. No. 2869, [2002] O.T.C. 529, 39 C.C.L.I. (3d) 267, [2002] I.L.R. ÂI-4130, 115 A.C.W.S. (3d) 484; Walker v. Allstate Insurance Co. of Canada (1989), 1989 4121 (ON CA), 67 O.R. (2d) 733, [1989] O.J. No. 710 (C.A.), consd Other cases referred to Ashton v. Tu (1998), 1998 1766 (ON CA), 40 O.R. (3d) 690, [1998] O.J. No. 2239, 160 D.L.R. (4th) 446, [1998] I.L.R. ÂI-3583, 37 M.V.R. (3d) 1 (C.A.) (sub nom. Laurentian Casualty Co. of Canada v. State Farm Mutual Automobile Insurance Co.); Campanaro v. Kim (1998), 1998 5925 (ON CA), 41 O.R. (3d) 545, [1998] O.J. No. 3518, 164 D.L.R. (4th) 400, [1998] I.L.R. Â1-3591, 36 M.V.R. (3d) 186 (C.A.) [page473] Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 258(1), (4), (5)

James M. Regan, for appellant CAA Insurance Co. Saiyed F. Ahmed, for respondent Royal & Sun Alliance Insurance Company.

[1] BY THE COURT: -- The main issue on this appeal concerns the proper interpretation of s. 258(1) of the Insurance Act, R.S.O. 1990, c. I.8, which permits, in certain circumstances, an injured third party to enforce a motor vehicle insurance contract directly against the insurer of the person who caused a motor vehicle accident.

Background

[2] On April 2, 2000, the plaintiff, Ms. Winch, was involved in a motor vehicle accident with the defendant, Mr. Keogh. At the time of the accident, Mr. Keogh was not driving his own vehicle. Rather, he was driving a cube van, with a manufacturer's gross weight rating of more than 4,500 kilograms.

[3] Prior to the accident, Royal & Sun Alliance Insurance Company issued a policy of automobile insurance to Mr. Keogh. Royal's policy included a provision providing coverage for other vehicles driven by the insured. However, it also contained a provision indicating that coverage did not extend to vehicles with a manufacturer's gross weight rating of more than 4,500 kilograms.

[4] On a motion to determine a point of law, Perell J. found that Royal is not obliged under s. 258(1) of the Insurance Act to compensate Ms. Winch. In reaching this conclusion, the motion judge relied on Walker v. Allstate Insurance Co. of Canada (1989), 1989 4121 (ON CA), 67 O.R. (2d) 733, [1989] O.J. No. 710 (C.A.). The motion judge determined that Walker stands for two points that are significant in this case: first, there can be no recovery by a third party under s. 258(1) "unless the insured could have been entitled to an indemnity under the insurance policy"; and second, ss. 258(4) and (5) of the Insurance Act apply only after the possibility of indemnity to the insured has been established.

[5] On appeal, CAA Insurance Company submits that the motion judge erred in his interpretation of s. 258. [page474]

Relevant Statutory Provisions

[6] The relevant portions of s. 258(1) of the Insurance Act are as follows:

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 therefore 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 . . . . . . . .

(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 the Part or of the terms of the contract;

(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).

(5) It is not a defence to an action under this section that an instrument issued as a motor vehicle liability policy by a person engaged in the business of an insurer and alleged by a party to the action to be such a policy is not a motor vehicle liability policy, and this section applies with necessary modifications to the instrument.

Discussion

[7] CAA contends that the decision in Walker was premised on the language of the standard form policy of motor vehicle accident insurance in effect at the time that case was decided and that there are important differences between that language and the language contained in the current standard form policy.

[8] At the time Walker was decided, the relevant policy provided as follows:

Consent of owner: No person shall be entitled to indemnity or payment under this policy who is an occupant of an automobile which is being used without the consent of the owner.

[9] Currently, rather than speaking of entitlement to "indemnity or payment" under the policy, the standard form policy [page475] ("OAP1") speaks to the issue of coverage. CAA submits that while the issue of coverage under a policy is a matter to be determined as between the insured and the insurer, that is a separate issue from the issue of whether s. 258(1) has been triggered. While, on its face, the policy in Walker precluded indemnity and therefore the application of s. 258(1), OAP1 speaks about coverage and does not expressly exclude indemnity.

[10] Relying on Campanaro v. Kim (1998), 1998 5925 (ON CA), 41 O.R. (3d) 545, [1998] O.J. No. 3518 (C.A.), Ashton v. Tu (1998), 1998 1766 (ON CA), 40 O.R. (3d) 690, [1998] O.J. No. 2239 (C.A.) and Joachin v. Abel, 2002 79667 (ON SC), [2002] O.J. No. 2869, [2002] O.T.C. 529 (C.A.), CAA submits that the threshold issue in determining whether s. 258(1) applies is whether the insurer issued a motor vehicle liability policy that provides an indemnity to the insured. Here, the threshold was met because Royal issued a motor vehicle policy to Mr. Keogh.

[11] CAA contends that once the threshold is met, the only exceptions to the requirement under s. 258 to indemnify an innocent victim are (i) where the insured did not consent to the motor vehicle being operated and (ii) where a policy does not exist due to cancellation prior to the date of loss.

[12] Further, CAA submits that given the legislative intent demonstrated generally under the Insurance Act to define liability coverage broadly, s. 258(1) should be interpreted to provide compensation to innocent third parties, even if coverage is not provided as between the insured and the insurer.

[13] We do not accept CAA's submissions. In our view, the motion judge was correct in holding that there can be no recovery by a third party beneficiary under s. 258(1) unless the insured could have been entitled to recover under a motor vehicle liability policy and that s. 258(4) and (5) apply only after the possibility of indemnity to the insured has been established.

[14] On a plain reading of s. 258(1), it is triggered only when a person has a claim against an insured for which indemnity is provided by a motor vehicle policy (emphasis added). Where, as here, the policy does not provide coverage for the claim that is advanced, there is no possibility of indemnity. Accordingly, on the plain language of s. 258(1), the section does not apply. It is only once a possibility of indemnity is found to exist, because there is a claim for which indemnity is provided under a motor vehicle policy, that s. 258(1) is triggered.

[15] In our view, there is nothing inconsistent in these reasons with the cases on which the appellant relies. Those cases did not address the effect of the scope of the insuring agreement, i.e., the coverage issue, on the operation of s. 258(1). [page476]

[16] Moreover, in our view, the motion judge was correct in his interpretation of Joachin, in which this court said [at para. 23], "the word aeindemnity' in s. 258(1) is used not to create a precondition but as part of a description".

[17] The motion judge observed [at para. 23] that the effect of Joachin is to recognize that " aeindemnity' in s. 258(1) is descriptive of when the third party beneficiary has a claim but the indemnity itself does not have to exist". As was stated in Joachin, the descriptive class of persons for whom s. 258(1) operates is persons "with claims . . . for which indemnity is provided by a contract evidenced by a motor vehicle policy" [at para. 23]. In Joachin, the court also observed that it is unnecessary that the indemnity be enforceable for s. 258(1) to apply. In our view, the reasoning in Joachin is entirely consistent with our conclusion concerning the proper interpretation of s. 258(1).

Disposition

[18] Based on the foregoing reasons, the appeal is dismissed. In accordance with the agreement of the parties, costs of the appeal are to the respondent on a partial indemnity basis fixed at $5,000 inclusive of disbursements and applicable GST.

Appeal dismissed.