Enterprise Rent-a-Car Canada Limited v. Meloche Monnex Financial Services Inc.

Enterprise Rent-a-Car Canada Limited v. Meloche Monnex Financial Services Inc. [Indexed as: Enterprise Rent-a-Car Canada Ltd. v. Meloche Monnex Financial Services Inc.]

102 O.R. (3d) 87

2010 ONCA 277

Court of Appeal for Ontario,

Sharpe, Rouleau and Epstein JJ.A.

April 15, 2010

Insurance -- Automobile insurance -- Priorities -- Renter of vehicle injured in single vehicle accident while travelling as passenger in rented vehicle -- Renter insured under standard automobile policy -- [page88 ]Priority provisions of s. 3.3.5. of OAP 1 and s. 277(1) of Insurance Act applying only if insurance is "available" -- Renter's policy not "available" with respect to tort claim brought by him against driver and owner of rented vehicle -- Priority provisions not making renter's insurer first insurer to respond to renter's claim -- Insurance Act, R.S.O. 1990, c. I.8, s. 277(1).

L was a passenger in a vehicle which he had rented when he and another passenger, K, were injured in a single vehicle accident. L was insured by Meloche under a standard automobile policy. The driver of the vehicle, who was driving with L's consent, was uninsured. The owner of the vehicle brought an application for an order declaring Meloche to be the first insurer to respond to L and K's claims and requiring Meloche to defend and indemnify the owner and the driver for those claims. The application was granted. Meloche appealed.

Held, the appeal should be allowed.

The priority provisions of s. 3.3.5 of the OAP 1 and s. 277(1) of the Insurance Act apply only if insurance is "available". The Meloche policy was not "available" with respect to a tort claim brought by L and K against the driver and owner of the vehicle L rented. The policy provided coverage where a liability claim was asserted against the renter either as driver or, where the vehicle was being driven by someone else with the renter's consent, as the renter. The policy would provide coverage for L with respect to any claims brought against him arising from the negligence of the driver of the rented vehicle, but it provided no coverage with respect to other claims. Although the policy would be "available" to L should a claim be brought against him, it was not available in this action as no claim asserted was capable of triggering an obligation on the part of Meloche to respond.

APPEAL from the judgment of J.P. Moore J. of the Superior Court of Justice dated July 16, 2009 granting a declaration that the appellant was the first insurer to respond to the claim.

Statutes referred to Highway Traffic Act, R.S.O. 1990, c. H.8, ss. 191.9, 192(3) Insurance Act, R.S.O. 1990, c. I.8, ss. 239(1), 277(1), (1.1) Authorities referred to Ontario Automobile Policy, ss. 2.2.4, 3.3.5

Suzanne Courtlander and David L. Silverstone, for appellant. Michael S. Schmidt and Jiku J. Elamathail, for respondent.

The judgment of the court was delivered by

[1] SHARPE J.A.: -- This appeal involves the availability and priority of automobile insurance with respect to a tort claim against the owner and driver of a rented vehicle as a result of a single car accident brought by the renter of the vehicle, who was a passenger in the rented vehicle at the time of the accident. [page89 ]

Facts

[2] The application arises out of a single vehicle accident. The vehicle involved in the accident was owned by Enterprise Rent-a-Car Canada Limited ("Enterprise") and insured under a policy issued by ACE INA. Paul Lee, the individual who had rented the vehicle from Enterprise, was a passenger at the time of the accident. Both Lee and another passenger, Annie Koo, were injured in the accident. Lee and Koo brought a tort claim against Enterprise, as the owner of the vehicle, and against the driver of the vehicle, Ya Nan Zhou. Zhou was driving the vehicle with Lee's consent.

[3] Lee holds a standard automobile policy for his own vehicle issued by the appellant, Meloche Monnex Financial Services Inc. ("Meloche Monnex"). Zhou has no automobile insurance policy.

Policy Provisions and Legislation

[4] This appeal deals with the interpretation of amendments to standard Ontario Automobile Policy ("OAP 1"), ss. 2.2.4 and 3.3.5; the Insurance Act, R.S.O. 1990, c. I.8, s. 277(1.1); and the Highway Traffic Act, R.S.O. 1990, c. H.8, s. 192(3), introduced in 2006 to make renters liable for damages sustained by reason of negligence in the operation of a rented vehicle and to relieve the insurer of the owner of a rented vehicle from being the first-loss insurer where other insurance is available to the renter or driver of the rented vehicle.

[5] Section 192(3) of the Highway Traffic Act makes a "lessee", defined in s. 191.9 as including persons who rent vehicles for any period of time, liable in the following terms:

192(3) A lessee of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway, unless the motor vehicle or street car was without the lessee's consent in the possession of some person other than the lessee or the lessee's chauffeur.

[6] Lee's Meloche Monnex OAP 1 policy provides as follows with respect to rented and leased vehicles:

2.2.4 Other Automobiles that are Rented or Leased

For convenience in this subsection we use the terms rented and renting as equivalent to leased and leasing.

In addition to the coverages referred to in subsection 2.2.3, the following coverage applies to rented automobiles if a premium is shown for the coverage on the Certificate of Automobile Insurance for a described automobile:

Liability

Automobiles, other than a described automobile, are covered as described in this subsection when rented by you, or by your spouse who lives with [page90 ]you, for periods of not more than 30 days, but only with respect to the liability of the person renting the automobile arising from the negligence of the driver of that automobile, and only if the driver is not an excluded driver under this policy. . . . . .

3.3.5 Rented and Leased Automobiles

For convenience in this subsection we use the terms rent, renter and rented as equivalent to lease, lessee and leased.

This policy provides coverage for persons who rent an automobile, as described in the definitions of automobile in Section 2, as a result of liability imposed by law arising from the negligence of the driver of that automobile.

If a liability claim is made against a driver, renter or owner of a rented automobile, coverage may be available under more than one motor vehicle liability policy. The following rules govern the order in which the policies will respond: 1. If insurance is available to the person who rented the automobile, the policy providing that insurance responds first. 2. If insurance is available to the driver of the rented automobile, the policy providing that insurance responds next. 3. If insurance is available to the owner of the rented automobile, the policy providing that insurance responds last.

We have no liability for such claims in excess of the limit of liability coverage specified in the Certificate of Automobile Insurance and do not have the responsibility to defend such claims against anyone other than you, your spouse who lives with you, or the persons mentioned in subsections 2.2.3(6) and 2.2.4(6). (Emphasis added)

[7] The corresponding provisions of the Insurance Act are as follows:

277(1.1) . . . if an automobile is leased, the following rules apply to determine the order in which the third party liability provisions of any available motor vehicle liability policies shall respond in respect of liability arising from or occurring in connection with the ownership or, directly or indirectly, with the use or operation of the automobile on or after the day this subsection comes into force: 1. Firstly, insurance available under a contract evidenced by a motor vehicle liability policy under which the lessee of the automobile is entitled to indemnity as an insured named in the contract. 2. Secondly, insurance available under a contract evidenced by a motor vehicle liability policy under which the driver of the automobile is entitled to indemnity, either as an insured named in the contract, as the spouse of an insured named in the contract who resides with that insured or as a driver named in the contract, is excess to the insurance referred to in paragraph 1. [page91 ] 3. Thirdly, insurance available under a contract evidenced by a motor vehicle liability policy under which the owner of the automobile is entitled to indemnity as an insured named in the contract is excess to the insurance referred to in paragraphs 1 and 2. (Emphasis added)

Decision of the Application Judge

[8] The application, brought by Enterprise, asked for an order declaring Meloche Monnex to be the first insurer to respond to the claims of Lee and Koo and requiring Meloche Monnex to defend and indemnify Enterprise and Zhou for these claims.

[9] The application judge granted the declarations sought on the basis of both OAP 1 and s. 277(1.1) of the Insurance Act.

[10] The application judge rejected Meloche Monnex's argument that as no claim for vicarious liability was advanced against Lee, his Meloche Monnex policy was not "available". The application judge concluded, accordingly, that the Meloche Monnex policy stood as the first insurance to cover the claims made against Enterprise and Zhou.

Issue

[11] While a number of grounds of appeal were raised in the notice of appeal and factum, we were advised by the parties that those issues have been now resolved or can otherwise be dealt with if we determine the following issue: is Meloche Monnex the first insurer to respond to the claims of Lee and Koo against Enterprise and Zhou?

Analysis

[12] It is clear from the language of s. 3.3.5 of the policy and from s. 277(1.1) of the Insurance Act that if Lee's Meloche Monnex policy is "available", it is the first to respond.

[13] The real issue is whether Lee's Meloche Monnex policy is "available" with respect to a tort claim brought by him and Koo against the driver and owner of the vehicle he rented. In my view, the answer to that question is no.

[14] The claim is certainly one, in the words of s. 3.3.5 of OAP 1, for "liability imposed by law arising from the negligence of the driver of that automobile". However, with respect to rented vehicles, the same policy provides coverage, in the words of s. 2.2.4, "only with respect to the liability of the person renting the automobile arising from the negligence of the driver of that automobile" or, in the words of s. 3.3.5, "for persons who rent an automobile . . . as a result of liability imposed by law arising from the negligence of the driver of that automobile". [page92 ]

[15] Simply put, the policy provides coverage where a liability claim is asserted against the renter either as driver or, where the vehicle was being driven by someone else with the renter's consent, as the renter. The policy would provide coverage for Lee with respect to any claims brought against him arising from the negligence of the driver of the rented vehicle, but it provides no coverage with respect to other claims. In other words, although the policy would be "available" to Lee should a claim be brought against him, it is not available in this action as no claim asserted is capable of triggering an obligation on the part of Meloche Monnex to respond.

[16] We were not referred to any other provision in Lee's Meloche Monnex policy or in the Insurance Act that provides coverage for Enterprise and Zhou with respect to these claims.

[17] An individual, such as Zhou, who drives an automobile with the owner's consent is covered by the owner's policy by virtue of s. 239(1) of the Insurance Act, but that coverage only applies where that person is driving the automobile described in the owner's policy. Section 239(1) reads as follows:

239(1) Subject to section 240, every contract evidenced by an owner's policy insures the person named therein, and every other person who with the named person's consent drives, or is an occupant of, an automobile owned by the insured named in the contract and within the description or definition thereof in the contract, against liability imposed by law upon the insured named in the contract or that other person for loss or damage, (a) arising from the ownership or directly or indirectly from the use or operation of any such automobile; and (b) resulting from bodily injury to or the death of any person and damage to property. (Emphasis added)

[18] Accordingly, if Lee had been a passenger in his own vehicle, the "automobile owned by the insured named in the contract", and injured as a result of Zhou's negligence as the driver, Meloche Monnex would have been obliged to provide Zhou with coverage for Lee's tort claim. However, there is nothing in OAP 1 or the Insurance Act extending that coverage to vehicles rented by the insured.

[19] The claims advanced by Lee and Koo against Zhou and Enterprise, as presently framed, are simply not covered by the "Other Automobiles that are Rented or Leased" provision of the Meloche Monnex policy.

[20] The priority provisions of s. 3.3.5 of the OAP 1 and s. 277(1) of the Insurance Act apply only if "insurance is available". As Lee's Meloche Monnex policy does not provide coverage for the claims asserted, it is not "available" and the priority provisions cannot render Meloche Monnex liable to provide coverage. [page93 ]

Conclusion

[21] For these reasons, I would allow the appeal and set aside the judgment, with costs to the appellant fixed at $5,000, inclusive of disbursements and GST.

Appeal allowed.