GMAC Leaseco Corp. v. Lombard Insurance

87 O.R. (3d) 513

Court of Appeal for Ontario,

MacPherson, Sharpe and Juriansz JJ.A.

September 27, 2007

Insurance -- Automobile insurance -- Insurer failing to comply with s. 232(3) of Insurance Act by failing to deliver copy of OPCF 28A Excluded Driver Endorsement to insured lessor of motor vehicle -- Delivery of certificate of insurance which noted that OPCF 28A Endorsement had been issued not constituting compliance with s. 232 -- Insurer precluded from relying on OPCF 28A Endorsement and required to defend and indemnify lessor in action against it as owner arising out of motor vehicle accident which occurred when excluded driver was driving its vehicle -- Insurance Act, R.S.O. 1990, c. I.8, s. 232.

The applicant was the owner and lessor of a motor vehicle insured by the respondent. The lessees of the vehicle arranged the insurance and were both named insured. One of the lessees was an excluded driver. Both lessees had signed an OPCF 28A Excluded Driver Endorsement form stating that there would be no coverage under the policy whenever the excluded driver was driving. The applicant was provided with certificates of insurance that noted that an OPCF 28A Excluded Driver Endorsement had been issued, but was not provided with a copy of the Endorsement. There was no evidence that the applicant knew that one of the lessees was an excluded driver. The applicant was sued as the owner of the vehicle in an action arising from an accident that occurred when the excluded driver was driving. The respondent denied coverage. The applicant sought an order requiring the respondent to defend the action. The application was dismissed. The applicant appealed.

Held, the appeal should be allowed.

Sections 232(3) and (5) of the Insurance Act are unambiguous and require an insurer to deliver or mail to its insured (1) the policy, or a certificate in an approved form, and (2) every endorsement. By failing to deliver to the applicant a copy of the OPCF 28A Endorsement, the respondent failed to comply with s. 232(3) of the Insurance Act. An insurer does not satisfy the statutory notice requirement by simply indicating on the certificate of insurance that an [page514] endorsement has been issued. The respondent was precluded from relying upon the terms of the OPCF 28A Endorsement because it had failed to comply with s. 232(3) and because there was no evidence that the applicant had any knowledge of the Endorsement. It followed that the respondent had a duty to defend and indemnify the applicant.

APPEAL from the order of Thorburn J., 2007 2938 (ON SC), [2007] O.J. No. 453, 48 C.C.L.I. (4th) 50 (S.C.J.), requiring an insurer to defend an action against the insured.

Cases referred to

Gore Mutual Insurance Co. v. 1443249 Ontario Ltd. (c.o.b. Enroute Towing) (2004), 2004 27736 (ON SC), 70 O.R. (3d) 404, [2004] O.J. No. 712, 8 C.C.L.I. (4th) 113 (S.C.J.), supp. reasons at 2004 95285 (ON SC), [2004] O.J. No. 6067, 29 C.C.L.I. (4th) 126 (S.C.J.); Maksoud v. Elias, [2004] O.J. No. 4008, 134 A.C.W.S. (3d) 145 (S.C.J.); Newcourt Financial Ltd. v. Bruno, [1999] O.J. No. 2363, 99 O.T.C. 363, [1999] I.L.R. ÂI-3709 (S.C.J.)

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8, ss. 232 [as am.], 258(14)

Donald G. Cormack and Derek V. Abreu, for appellant. Victor J. Paolone, for respondent.

The judgment of the court was delivered by

[1] SHARPE J.A.: -- This appeal concerns the rights of parties under a motor vehicle policy that is subject to an OPCF 28A Excluded Driver Endorsement and the interpretation of s. 232(3) of the Insurance Act, R.S.O. 1990, c. I.8, which requires insurers to provide copies of policies and endorsements to their insureds.

[2] The appellant, GMAC Leasco Corporation, was the owner and lessor of a motor vehicle insured by the respondent, Lombard Insurance. The lessees of the vehicle, Angelique Saweczko and Marc O'Neil Powell, arranged the insurance with the respondent and were both named insureds. Powell, however, was an excluded driver. Saweczko and Powell both signed an OPCF 28A Excluded Driver Endorsement form stating that there would be no coverage under the policy whenever Powell was operating the vehicle.

[3] The appellant was provided with certificates of insurance that noted that an OPCF 28A Excluded Driver Endorsement had been issued, but the appellant was never provided with a copy of the Endorsement nor was there any evidence that the appellant knew that Powell was an excluded driver.

[4] The appellant was sued as the owner of the vehicle in an action arising from an accident that occurred while Powell was [page515] driving. The respondent declined coverage under the policy, but had itself added to the action as a statutory third party pursuant to the Insurance Act, s. 258(14).

[5] The appellant sought an order requiring the respondent to defend the action. That application was dismissed by the application judge. For the following reasons, I conclude that the appeal should be allowed.

[6] The governing statutory provisions, ss. 232(3), (5) and (5.1) of the Insurance Act, provide as follows:

Insured entitled to copy

(3) Subject to subsection (5), the insurer shall deliver or mail to the insured named in the policy, or to the agent for delivery or mailing to the insured, the policy or a true copy thereof and every endorsement or other amendment to the contract. . . . . .

Certificate of policy

(5) If an insurer adopts a standard policy approved under subsection 227(5), it may, instead of issuing the policy, issue a certificate in a form approved by the Superintendent.

Effect of certificate

(5.1) A certificate issued under subsection (5) is of the same force and effect as if it were the standard policy, subject to the limits and coverages shown by the insurer on the certificate and any endorsements issued with or subsequently to the certificate.

[7] The application judge ruled that ss. 232(3) and (5) were ambiguous as to whether an insurer must provide a copy of an endorsement to an insured. She found that as the action was being defended by the respondent as a statutory third party and that as the appellant was entitled to a defence under a contingent lessor's motor vehicle liability policy, the application should be dismissed and the issue of the respondent's obligation to indemnify the appellant left to be resolved later on a more complete record.

[8] I respectfully disagree with the application judge's conclusion that ss. 232(3) and (5) are ambiguous. In my view, these provisions are clear: the insurer is normally required to deliver or mail a copy of (1) the policy and (2) every endorsement, but where it adopts a standard policy, it may issue a certificate in the prescribed form instead of a copy of the policy. Nothing in the language of s. 232(5) relating to the issuance of a certificate derogates from or limits the duty imposed by s. 232(3) to provide the insured with a copy of every endorsement. Thus, when read together in their ordinary and natural meaning, ss. 232(3) and (5) [page516] require an insurer to deliver or mail to its insured (1) the policy, or a certificate in an approved form, and (2) every endorsement. By failing to deliver to the appellant a copy of the OPCF 28A Endorsement, the respondent failed to comply with the Insurance Act, s. 232(3).

[9] The OPCF 28A Endorsement has the harsh effect of denying insurance coverage when an excluded driver operates the vehicle. To gain the benefit or protection of such an endorsement, an insurer must take appropriate steps to ensure that it is brought to the insured's attention: see Newcourt Financial Ltd. v. Bruno, [1999] O.J. No. 2363, [1999] I.L.R. ÂI-3709 (S.C.J.); Maksoud v. Elias, [2004] O.J. No. 4008, 134 A.C.W.S. (3d) 145 (S.C.J.); Gore Mutual Insurance Co. v. 1443249 Ontario Ltd. (c.o.b. Enroute Towing) (2004), 2004 27736 (ON SC), 70 O.R. (3d) 404, [2004] O.J. No. 712 (S.C.J.).

[10] I do not agree that the record before the application judge was insufficient to determine the issue raised by the application. The respondent offered no evidence that it had sent the OPCF 28A Endorsement to the appellant or the agent and rested its case upon the submission that the notation on the certificate of insurance was sufficient to put the appellant on notice. In my view, an insurer does not satisfy the statutory notice requirement by simply indicating on the certificate of insurance that an endorsement has been issued. Excluded driver endorsements may be issued with respect to any potential driver and the appellant was entitled to know that one of the lessees was an excluded driver. That information could not be gleaned from the certificate of insurance.

[11] I agree with the appellant's submission that the respondent is precluded from relying upon the terms of the OPCF 28A Endorsement because (1) the respondent failed to comply with s. 232(3), and (2) there is no evidence that the appellant had any knowledge of the Endorsement. It follows that the respondent has a duty to defend and indemnify the appellant.

[12] For these reasons, I would allow the appeal, set aside the order dismissing the application and, in its place, substitute an order declaring that the respondent has a duty to defend and indemnify the appellant in the proceedings bearing Court File No. 05-CV-285776 PD2. The appellants are entitled to costs below fixed at $4,200 and costs of the appeal fixed at $5,000, both figures inclusive of disbursements and GST.

Appeal allowed. [page517]