Lockhard v. Quiroz and C.A.A. Insurance Company (Ontario) added by Order Pursuant to Section 258(14) of the Insurance Act, R.S.O. 1990, c. I.8 [Indexed as: Lockhard v. Quiroz]
83 O.R. (3d) 797
Court of Appeal for Ontario,
Feldman, Cronk and Blair JJ.A.
November 21, 2006
Insurance -- Automobile insurance -- Settlement -- Recovery of judgment against insured prerequisite to insurer's entitlement under s. 258(1) of Insurance Act to access available insurance moneys in absence of agreement to contrary between insured and insurer -- Insurer settling claim against its insured without consent of insured -- Insurer not entitled under s. 258(1) of Insurance Act to have insurance money applied to reimburse it for settlement of claim in absence of judgment against insured -- Insurance Act, R.S.O. 1990, c. I.8, s. 258(1).
The plaintiff sued the appellant in negligence following a motor vehicle accident which occurred when the appellant was driving the plaintiff's car with her permission. The appellant was an insured under the plaintiff's automobile insurance policy at the time of the accident. The insurer successfully obtained an order adding it as a third party, and then settled the plaintiff's claims without the consent of the appellant. The insurer moved for summary judgment [page798] under s. 258 of the Insurance Act for reimbursement of settlement moneys paid to the plaintiff. The motion was granted. The appellant appealed.
Held, the appeal should be allowed.
The motion judge erred in finding that the insurer was not required to obtain a judgment in order to have the right to recoup moneys paid to the plaintiff. The plain language of s. 258(1) provides for the application of insurance money in or towards the satisfaction of a judgment recovered against the insured. Absent an agreement between the insurer and the insured to the contrary, the recovery of such a judgment is a prerequisite to any entitlement under s. 258(1) to access available insurance moneys. Nothing in O.A.P. No. 1 constitutes an agreement by an insured to the reasonableness of a settlement made under s. 3.3.1 of O.A.P. No. 1. Section 254 of the Insurance Act did not assist the insurer, as that section contemplates an express non-waiver or reimbursement agreement between an insurer and its insured concerning amounts paid by the insurer to a third party in respect of a claim or judgment against the insured. No such agreement was entered into in this case.
APPEAL from the order of Lalonde J., [2006] O.J. No. 3290 (S.C.J.), granting summary judgment under s. 258 of the Insurance Act.
Cases referred to 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.); Co-operative Fire & Casualty Co. v. Ritchie, 1983 155 (SCC), [1983] 2 S.C.R. 36, [1983] S.C.J. No. 60, 61 N.S.R. (2d) 437, 150 D.L.R. (3d) 1, 50 N.R. 106, 133 A.P.R. 437, [1983] I.L.R. Â1-1697
Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 254, 258 [as am.]
David Cutler, for appellant Antonio Quiroz. Lianne Furlong, for respondent C.A.A. Insurance Company (Ontario).
[1] Endorsement BY THE COURT: -- The appellant appeals the motion judge's decision to grant the respondent insurer summary judgment under the provisions of s. 258 of the Insurance Act, R.S.O. 1990, c. I.8 for reimbursement of settlement moneys paid by the insurer to the plaintiff, who sued the appellant in negligence seeking damages for property and personal injury losses arising from a motor vehicle accident in which the appellant was driving the plaintiff's car with her permission. The plaintiff's insurer is the respondent insurance company. The appellant was an insured under the plaintiff's policy because he drove her car with her permission.
[2] In this case, the insurer successfully obtained an order adding it as a third party in the plaintiff's pending personal injury action against the appellant. Thereafter, the insurer settled all the [page799] plaintiff's claims. Although the insurer provided advance notice to the appellant of the intended settlement, the appellant neither consented to, signed, nor otherwise authorized the settlement.
[3] On consent, a judgment in favour of the plaintiff was obtained against the insurer as part of the settlement. However, no judgment was obtained against the appellant insured, the driver of the vehicle at the time of the accident in question.
[4] The motion judge held that the insurer had an absolute liability to settle the plaintiff's claims pursuant to s. 258(4) of the Act. He also concluded that the insurer was entitled under s. 258(13) to be reimbursed by the appellant driver for the settlement amount, costs and interest. In so holding, the motion judge stated [at para. 6]:
I reject Mr. Quiroz's argument that s. 258(1) refers to a requirement that CAA obtain a judgment in order to have the right to [recoup] monies paid to the Plaintiff Lockhard. The section refers to a person having a claim, as does s. 258(4).
(Emphasis in original)
[5] With respect, we disagree. Section 258(1) of the Act provides:
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)
[6] The plain language of s. 258(1) provides for the application of insurance money in or towards satisfaction of a judgment recovered against the insured, in this case, the appellant. Absent an agreement between the insurer and the insured to the contrary as, for example, concerning the application of insurance proceeds (see Co-operative Fire & Casualty Co. v. Ritchie, 1983 155 (SCC), [1983] 2 S.C.R. 36, [1983] S.C.J. No. 60), the recovery of such a judgment is a prerequisite to any entitlement under s. 258(1) to access available insurance moneys.
[7] No judgment was obtained against the appellant insured. The insurer argues that the authority provided to an insurer under O.A.P. No. 1, the standard motor vehicle policy then in use in Ontario, to settle a case without an insured's consent, is tantamount to a contractual agreement by the insured to reimburse the insurer for any settlement moneys paid. We reject this contention. Section 3.3.1 of O.A.P. No. 1 authorizes an [page800] insurer to settle directly a plaintiff's claims against an insured with or without an insured's consent. What it does not do is permit an insurer to thereby bind the insured to a judgment against the insured at the instance of the insurer itself for the amount of the settlement paid. Stated somewhat differently, nothing in O.A.P. No. 1 constitutes an agreement by an insured to the reasonableness of a settlement made under s. 3.3.1.
[8] The cases relied upon by the insurer do not assist its position. These cases were predicated on either a specific agreement between the insurer and the insured on the terms of settlement, or an actual or deemed judgment recovered against the insured: see Co-operative Fire & Casualty Co. v. Ritchie, supra, and Campanaro v. Kim (1998), 1998 5925 (ON CA), 41 O.R. (3d) 545, [1998] O.J. No. 3518 (C.A.). That is not this case.
[9] Nor does s. 254 of the Act assist the insurer on the facts here. That section contemplates an express non-waiver or reimbursement agreement between an insurer and its insured concerning amounts paid by the insurer to a third party in respect of a claim or judgment against the insured. But no such agreement was entered into in this case; nor, as we have indicated, do the terms of O.A.P. No. 1 constitute such an agreement concerning settlement moneys paid by an insurer in relation to a personal injury claim against an insured.
[10] In our view, the scheme envisaged by s. 258 of the Act, in combination with O.A.P. No. 1, contemplates the balancing of an insurer's right to minimize its exposure to a tort claimant with an insured's right, in the absence of an agreement between the insurer and the insured or a judgment against the insured, to be protected against unreasonable settlements by its insurer.
[11] In the circumstances of this case, therefore, summary judgment against the appellant was not available. The appeal is allowed. The summary judgment below is set aside with costs to the appellant, on the partial indemnity scale, here and below, fixed in the total amount of $13,500, inclusive of disbursements and GST.
Appeal allowed.