Security National Insurance Company v. Markel Insurance Company Kingsway General Insurance Company v. Gore Mutual Insurance Company [Indexed as: Kingsway General Insurance Co. v. Gore Mutual Insurance Co.]
112 O.R. (3d) 1
2012 ONCA 683
Court of Appeal for Ontario,
Simmons, R.P. Armstrong and Pepall JJ.A.
October 11, 2012
Insurance -- Automobile insurance -- Priorities -- Deemed insured -- Section 66(1)(a) of Statutory Accident Benefits Schedule permitting insured vehicle to be made available for individual's regular use by individual's sole proprietorship -- Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96, s. 66(1)(a).
In Security National Insurance Company v. Markel Insurance Company, M, carrying on business as a sole proprietorship, entered into an agreement with a transport company, P Ltd., to perform transportation services using a truck owned by M's sole proprietorship. M was injured when he tried to jump on his moving truck. He was not a named insured or a listed driver on P Ltd.'s motor vehicle liability policy, issued by Markel. His own automobile insurer paid him statutory accident benefits, but instituted a claim that the obligation to pay those benefits rested with Markel. Under s. 66(1) of the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 ("SABS"), a person is deemed to be the named insured under the policy insuring an automobile at the time of an accident if the insured automobile was being made available for his or her regular use by a corporation, incorporated association, partnership, sole proprietorship or other entity. The arbitrator found that M and his sole proprietorship were in essence one and the same entity and that it would strain the wording of s. 66(1) of the SABS to say that the truck was made available to M. He also found that there was no evidence of a joint venture between M and P Ltd. or "other entity" for the purposes of s. 66(1). Therefore, M was not a deemed insured under the Markel policy, and M's insurer was required to pay the statutory accident benefits. In Kingsway General Insurance Company v. Gore Mutual Insurance Company, T Ltd. operated a transport company and Kingsway issued a fleet policy in favour of T Ltd. as named insured. H owned a tractor and worked as a self-employed owner/operator for T Ltd. pursuant to an agreement between his sole proprietorship and T Ltd. H was injured while driving the tractor. Kingsway paid him statutory accident benefits, but served H's own automobile insurer with a notice of dispute between insurers. The arbitrator held that H was a "deemed named insured" under s. 66(1) of the SABS because the tractor was made available to him by (a) his sole proprietorship or (b) another entity, [page2 ] namely, the joint venture comprised of his sole proprietorship and T Ltd. As a result, Kingsway was the priority insurer responsible to pay H's accident benefits. The unsuccessful insurers in both arbitrations appealed. The appeal judge dismissed the appeal in Kingsway General and allowed the appeal in Security National. Markel and Kingsway appealed.
Held, the appeals should be dismissed.
Section 66(1)(a) of the SABS permits an insured vehicle to be made available for an individual's regular use by the individual's sole proprietorship. In both cases, the sole proprietorships regularly made the insured vehicles available to M and H. There was nothing in the parties' commercial relationship with the trucking companies that precluded such a result. Both M and H were deemed insureds for the purposes of s. 66(1). The insurers of the commercial vehicles were therefore responsible for payment of their accident benefits.
APPEALS from the orders of Perell J., [2010] O.J. No. 4074, 2010 ONSC 5309 (S.C.J.) allowing an appeal from Arbitrator Samis dated November 20, 2009; and (2010), 104 O.R. (3d) 61, [2010] O.J. No. 4073, 2010 ONSC 5308 dismissing an appeal from Arbitrator Bialkowski dated October 15, 2009.
Cases referred toAxa Insurance v. Markel Insurance Co. of Canada, 1997 26862 (ON CJ), [1997] O.J. No. 2186, 37 O.T.C. 78, 43 C.C.L.I. (2d) 306, [1997] I.L.R. I-3481, 71 A.C.W.S. (3d) 954 (Gen. Div.), affg (December 9, 1996), Arbitrator Fidler, consd Other cases referred to Axa Assurance Co. v. ING Insurance Co. of Canada (May 25, 2006), Arbitrator Samis; Axa Insurance Co. v. Markel Insurance Co. of Canada, 2001 24143 (ON CA), [2001] O.J. No. 294, 140 O.A.C. 109, 26 C.C.L.I. (3d) 199, [2001] I.L.R. I-3967, 9 M.V.R. (4th) 74, 102 A.C.W.S. (3d) 793 (C.A.), revg [1999] O.J. No. 5724 (Gen. Div.), revg (December 18, 1998); Certas Direct Insurance Co. v. Insurance Corp. of British Columbia (June 2009), Arbitrator Shari Novick; Co-operators General Insurance Co. v. Cigna Insurance Co. of Canada (January 7, 2000), Court File No. 755/98 (Ont. Div. Ct.), affg (October, 26, 1998), Arbitrator Robinson; Co-operators Insurance Co. v. Oppenheim (August 2002), Arbitrator Guy Jones; Markel Insurance Co. of Canada v. State Farm Mutual Automobile Insurance Co. (April 12, 2000), Arbitrator Drew Hudson; TD General Insurance Co. v. Pilot Insurance Co. (May 31, 2007), Arbitrator Torrie Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17 [as am.] Business Names Act, R.S.O. 1990, c. B.17, s. 2(2) Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 268 [as am.], (2) [as am.] Rules and regulations referred to Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96, ss. 2 [as am.], 66 [as am.], (1) [as am.], (a) Authorities referred to VanDuzer, J. Anthony, The Law of Partnerships & Corporations, 3rd ed. (Toronto: Irwin Law, 2009)
J. Claude Blouin, for appellant Markel Insurance Company. [page3 ] Harry P. Brown, for appellant Kingsway General Insurance Company. George Frank, for respondent Security National Insurance Company. Mark Donaldson, for respondent Gore Mutual Insurance Company.
The judgment of the court was delivered by
PEPALL J.A.: --
Introduction
[1] These two appeals involve priority disputes between insurers arising from the interpretation of s. 66(1) of the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 ("SABS"), enacted pursuant to the Insurance Act, R.S.O. 1990, c. I.8.
[2] Section 66(1) deems certain persons to be named insureds for the purposes of s. 268(2) of the Insurance Act. This affects the priority in which insurers are to pay statutory accident benefits under s. 268 of the Act.
[3] Section 66 is headed "Company Automobiles and Rental Automobiles". Section 66(1) states:
(1) An individual who is living and ordinarily present in Ontario shall be deemed for the purpose of this Regulation to be the named insured under the policy insuring an automobile at the time of an accident if, at the time of the accident, (a) the insured automobile is being made available for the individual's regular use by a corporation, unincorporated association, partnership, sole proprietorship or other entity[.] (Emphasis added)
[4] In cases with comparable facts, two arbitrators interpreted s. 66(1) differently and therefore reached different legal conclusions. Those awards were appealed to the Superior Court of Justice. Perell J. (the "appeal judge") overturned one and upheld the other. The unsuccessful insurance companies now appeal to this court. For the reasons that follow, I would dismiss the appeals.
Background Facts
(A) Security National Insurance Co. v. Markel Insurance Co.
(a) Contractual relationship
[5] Pinnacle Transport Ltd. ("Pinnacle") operated a transport company. Markel Insurance Company ("Markel") issued a motor [page4 ]vehicle liability policy to Pinnacle as named insured, which provided coverage for all vehicles owned, registered, leased and/or operated on behalf of the named insured.
[6] Duncan McKerchar carried on business as a sole proprietorship with the business name "The Tidy Scot". Mr. McKerchar bought a 1998 GMC truck from Pinnacle and paid for it in biweekly instalments.
[7] Pinnacle and The Tidy Scot entered into an independent contractor agreement, dated September 14, 2005 (the "agreement"). It provided that
(i) The Tidy Scot, as an independent contractor, would perform such transportation and ancillary services, including loading and unloading as requested by Pinnacle. The Agreement expressly provided that the relationship was not one of master/servant, principal/agent or employer/employee.
(ii) Pinnacle agreed to use the truck that was owned or leased by The Tidy Scot, but The Tidy Scot agreed to update the truck when and if required by Pinnacle and/or the Insurance Company. (The Insurance Company was not identified in the Agreement.)
(iii) During the term of the Agreement, The Tidy Scot would have full control and possession of the truck and assumed total responsibility for the operation, supervision and maintenance of the truck in a safe and proper working condition and in appearance satisfactory to Pinnacle. The Tidy Scot agreed to pay and to indemnify Pinnacle for all expenses arising out of the operation, maintenance and repair of the truck.
(iv) If required by Pinnacle, The Tidy Scot was to affix Pinnacle's logo/identification to the truck.
(v) The Tidy Scot agreed to enrol in Pinnacle's fleet public liability and property damage and cargo insurance coverage. The Tidy Scot was responsible for the deductibles and was to pay $145 per pay period for the insurance coverage.
(vi) Pinnacle would buy the licence plate for the truck but The Tidy Scot would pay for it.
(vii) The Tidy Scot was not to use the truck as a personal vehicle and was not to operate the truck for any other carrier or operator while it was being operated under Pinnacle's licence and insurance.
(viii) The Tidy Scot received 75 per cent of the revenues generated by the truck each pay period and Pinnacle received 25 per cent.
[8] The vehicle registration shows Duncan R.B. McKerchar/ The Tidy Scot as the owner of the vehicle but Pinnacle is listed as the owner on the plate portion of the registration.
[9] Consistent with the terms of the agreement, the truck was never used by The Tidy Scot for anybody other than Pinnacle. Pinnacle issued a "Professional Driver Manual" setting out the rules and guidelines applicable to drivers. Pinnacle also assigned pickups and deliveries. Pinnacle's name and logo were [page5 ]affixed to the doors and the rear panel of the truck. The Tidy Scot's $145 biweekly insurance payment amounted to approximately $3,770 annually, and Pinnacle deducted this amount from the cheques it issued to The Tidy Scot. Similarly, Pinnacle recovered the entire cost of the plates from The Tidy Scot.
(b) The accident
[10] On April 4, 2006, Mr. McKerchar was injured. He attempted to jump on to his moving truck, which was being operated by another driver, fell under it and was run over. Mr. McKerchar was not a named insured nor a listed driver on the Markel policy of insurance issued to Pinnacle. He claimed statutory accident benefits from Security National Insurance Company ("Security National"), the insurer of his personal-use vehicle. Security National paid the statutory accident benefits but instituted a claim that the obligation to pay these benefits rested with Markel as the insurer of Pinnacle's fleet of vehicles.
(c) Arbitration
[11] The parties remitted the dispute to Arbitrator Lee Samis in accordance with the Arbitration Act, 1991, S.O. 1991, c. 17. Among other things, he was required to consider whether Mr. McKerchar was deemed to be a named insured under the Markel policy. If the truck that was insured by Markel was "being made available" for Mr. McKerchar's regular use at the time of the accident by a sole proprietorship or other entity, Mr. McKerchar would be deemed to be a named insured under the Markel policy.
[12] In his award dated November 20, 2009, Arbitrator Samis found that there was no de facto difference between Mr. McKerchar and The Tidy Scot. In essence, they were one and the same entity. The arbitrator also concluded that Mr. McKerchar was an occupant of the truck at the time of the accident.
[13] The arbitrator applied a line of authorities commencing with Axa Insurance v. Markel Insurance Co. of Canada (Arbitrator Fidler, December 9, 1996), affd 1997 26862 (ON CJ), [1997] O.J. No. 2186, 37 O.T.C. 78 (Gen. Div.). He concluded that it would strain the wording of s. 66 to say that the truck was made available by Mr. McKerchar/The Tidy Scot to Mr. McKerchar. Nor could he see any evidence of a joint venture between Mr. McKerchar and Pinnacle or "other entity" for the purpose of s. 66(1). Therefore, Mr. McKerchar was not a deemed named insured under the [page6 ]Markel policy. In the result, Security National was required to pay the statutory accident benefits.
(B) Kingsway General Insurance Co. v. Gore Mutual Insurance Co.
[14] Trowbridge Transport Ltd. ("Trowbridge") operated a transport company. Kingsway General Insurance Company ("Kingsway General") issued a fleet policy in favour of Trowbridge as named insured, which provided coverage for all vehicles owned and operated on behalf of the named insured.
[15] William Higgs owned a freightliner tractor. He worked as a self-employed owner/operator for Trowbridge. He had worked in this capacity since 2002, when he entered into the first of a series of owner/operator agreements between his sole proprietorship, "Bill Higgs & Sons", and Trowbridge. In August 2007, Mr. Higgs' registration of his business name expired.
[16] Trowbridge entered into an owner/operator agreement with Bill Higgs & Sons, dated January 1, 2008 (the "agreement"). It provided that
(i) Bill Higgs & Sons, as an independent contractor, was to lease its freightliner tractor to Trowbridge and perform haulage services for Trowbridge. The Agreement expressly provided that the relationship created was that of an independent contractor and was not an employment relationship.
(ii) Bill Higgs & Sons was obliged to equip its freightliner tractor in accordance with Trowbridge's standards. It was responsible for maintenance of the vehicle and Trowbridge was responsible for maintenance of any trailers.
(iii) Trowbridge would obtain and maintain in force policies of insurance. The policies would be purchased on behalf of Bill Higgs & Sons, which was responsible for payment of all deductibles.
(iv) Trowbridge would pay for the licence plate on behalf of Bill Higgs & Sons.
(v) Restrictions were placed on the use of alternate drivers and passengers were not permitted without Trowbridge's approval.
[17] Consistent with the terms of the agreement, Mr. Higgs'/ Bill Higgs & Sons' freightliner tractor was plated in the name of Trowbridge, and Trowbridge obtained vehicle insurance from Kingsway General. The freightliner tractor was a scheduled vehicle on the Kingsway General policy and Mr. Higgs was a listed driver but not a named insured on the policy.
(a) The accident
[18] In February 2008, Mr. Higgs was injured in an accident while he was driving the freightliner tractor. [page7 ]
[19] At the time of the accident, Mr. Higgs was the named insured under the automobile insurance policy issued by Gore Mutual Insurance Company ("Gore Mutual") for his 1996 Oldsmobile personal-use automobile.
[20] After the accident, Mr. Higgs applied to Kingsway General for statutory accident benefits. Kingsway General paid the accident benefits but served Gore Mutual with a notice of dispute between insurers. Kingsway General took the position that Gore Mutual should be the insurer liable to pay the accident benefits. Gore Mutual disagreed.
(b) The arbitration
[21] The two insurance companies proceeded with an arbitration before Arbitrator Bialkowski. He held that Mr. Higgs was a "deemed named insured" under s. 66(1) of the SABS because the freightliner tractor was made available to Mr. Higgs by (a) the sole proprietorship of Bill Higgs & Sons or (b) another entity, namely, the joint venture comprised of Bill Higgs & Sons and Trowbridge under the agreement. Arbitrator Bialkowski concluded that the legislative intent of s. 66(1) was to place the freightliner tractor insurer in priority to the individual's personal-use vehicle insurer in circumstances in which the accident involved the freightliner tractor in the course of the commercial arrangement between the parties. As such, he determined that Kingsway General, as the insurer of the freightliner tractor, was the priority insurer responsible to pay all accident benefits to Mr. Higgs.
Appeal to Superior Court
[22] The unsuccessful insurance companies in both arbitrations appealed the awards to the Superior Court of Justice.
[23] The appeal judge dismissed the appeal from Arbitrator Bialkowski and allowed the appeal from Arbitrator Samis. The appeal judge declined to apply the line of cases beginning with Axa Insurance v. Markel Insurance Co. of Canada. He held that an individual who is a sole proprietor may make an insured vehicle available to him or herself and be deemed to be a named insured, thereby satisfying the requirements of s. 66(1) of the SABS.
[24] As such, the sole proprietorship of The Tidy Scot made the truck available to Mr. McKerchar and Mr. McKerchar was therefore deemed to be a named insured under the Markel policy.
[25] Similarly, Mr. Higgs, as a sole proprietor, made the freightliner tractor available to himself and he was therefore [page8 ]deemed to be a named insured under the Kingsway General policy.
Issues
[26] There are two key issues to be considered.
[27] The first issue is whether an insured vehicle may be made available for an individual's regular use by that individual's sole proprietorship.
[28] The second issue is whether the agreements may be construed as creating joint ventures and, if so, does a joint venture constitute an "other entity" within the meaning of s. 66(1) of the SABS?
Positions of the Parties
(a) Sole proprietorship
[29] On the first issue, the insurers of the fleet vehicles, namely, Markel and Kingsway General, advance similar arguments.
[30] Firstly, they submit that there is extensive case law, including the 1996 Axa Insurance decision, that favours their position and the appeal judge should have shown deference to it. The appeal judge's decision will have serious ramifications in the insurance industry since it represents a change in the law which will affect the insurance premiums charged by commercial insurers and the way in which the commercial and personal insurers interact in priority disputes between insurers.
[31] Secondly, they argue that the appeal judge failed to take into account the commercial relationship of the parties to the insurance transactions and the agreements.
[32] Thirdly, they state that the appeal judge erred in his interpretation that an individual who was a sole proprietor may make an insured vehicle available to him or herself.
[33] In submitting that the appeals should be dismissed, on the first issue the insurers of the personal-use vehicles, Security National and Gore Mutual argue that the legislative intent was to place the risk on the insurer of the commercial vehicle. The commercial insurer should be responsible for accident benefits arising from a commercial operation.
[34] Secondly, in their submission there is nothing in the wording of s. 66(1) of the SABS that requires that the individual be a different individual from the operator of the sole proprietorship.
[35] Thirdly, they contend that a sole proprietorship is analogous to a single-person corporation and a corporation may make a vehicle available to that individual under s. 66(1). [page9 ]
[36] Lastly, they note that there are decisions that support the interpretation adopted by the appeal judge.
(b) Joint venture
[37] On the second issue relating to the joint venture, Markel supports Arbitrator Samis' conclusion that there was no joint venture and that the relationship between Pinnacle and The Tidy Scot consisted of two separate entities performing their respective obligations specifically without the creation of a new entity. Kingsway submits that the appeal judge erred in finding that a joint venture or commercial partnership existed between Mr. Higgs and Trowbridge and that there was no analysis by either the appeal judge or Arbitrator Bialkowski in reaching that conclusion.
[38] In contrast, the personal-use vehicle insurers, Security National and Gore Mutual, both support the interpretations applied by the appeal judge and Arbitrator Bialkowski, and also argue that there is case law that allows for a joint venture to constitute an "other entity" within the meaning of s. 66(1).
Analysis
(a) Context
[39] Section 2 of the SABS defines an "insured person" very broadly. Among other things, an insured person is the named insured or a person who is involved in an accident involving the insured automobile and, in respect of accidents outside Ontario, the person who is an occupant of the insured automobile and who was a resident of Ontario at some point during the 60 days before the accident. The term "named insured" is not defined but is understood to refer to someone who is identified or named as an insured in an insurance policy.
[40] In these appeals, both Mr. McKerchar and Mr. Higgs were named insureds in the policies for their personal-use vehicles. If, by virtue of s. 66(1), they were deemed to be named insureds under the policies insuring the trucks, a priority dispute could arise.
[41] Given the broad definition of insured under the SABS, an individual may fall within the definition of insured on more than one insurance policy and, as such, have access to a number of insurers for payment of accident benefits. For this reason, s. 268 of the Insurance Act addresses the priority of liability for payment of statutory accident benefits. The relevant subsections of s. 268 state: [page10 ]
268(2) The following rules apply for determining who is liable to pay statutory accident benefits: 1. In respect of an occupant of an automobile, i. the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured, ii. if recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant, iii. if recovery is unavailable under subparagraph i or ii, the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose, iv. if recovery is unavailable under subparagraph i, ii, or iii, the occupant has recourse against the Motor Vehicle Accident Claims Fund. . . . . .
(5) Despite subsection (4), if a person is a named insured under a contract evidenced by a motor vehicle liability policy or the person is the spouse or a dependant, as defined in the Statutory Accident Benefits Schedule, of a named insured, the person shall claim statutory accident benefits against the insurer, under that policy. . . . . .
(5.2) If there is more than one insurer against which a person may claim benefits under subsection (5) and the person was, at the time of the incident, an occupant of an automobile in respect of which the person is the named insured or the spouse or a dependant of the named insured, the person shall claim statutory accident benefits against the insurer of the automobile in which the person was an occupant.
[42] Accordingly, if the claimant is, or is deemed to be, a named insured under more than one policy, the claimant shall receive benefits from the insurer of the vehicle in which the person was an occupant. That is, the insurer of a vehicle in which a named insured was an occupant at the time of the accident is the insurer highest in priority to pay accident benefits to that insured. As Mr. McKerchar and Mr. Higgs were found to be occupants, the insurer of the commercial vehicles would be required to pay the statutory accident benefits if the two men were deemed to be named insured on the fleet policies.
[43] Arbitrator Samis described in some detail the historical and contextual background to the issue in dispute. In 1990, the Government of Ontario passed legislation that introduced the concept of "no fault" compensation for personal injury arising out of motor vehicle accidents. As he explained, since 1990, Ontario has operated in a "compensation environment of restricted tort [page11 ]access, operating in parallel with elaborate no fault benefits": p. 2. Now, injured persons claim their no fault benefits (statutory accident benefits) based on the contract between the insurer and the individual, or his or her family, and not necessarily on those arrangements governing the vehicle: p. 3.
[44] He discussed the company-car scenario and the purpose of s. 66, at pp. 3-4:
When the government changed the priority rules to bring claimants to a closer relationship with their own insurance company, by requiring payment of the statutory accident benefits by that company regardless of involvement of the insured vehicle, they had to recognize the existence of fairly common relationships that give rise to use of vehicles on a personal basis, but where the purchaser of the insurance is not the regular user of the vehicle. The traditional "company car" scenario involves situations where a business purchases a vehicle, and insurance for the vehicle, and then makes that vehicle available for the regular, personal, and frequent use of its employees or officers. Similarly, the practice of renting and leasing vehicles might result in the creation of a contract of automobile insurance in the name of a vehicle owner but which is truly the personal vehicle of someone other than the registered owner. Given the known frequency of these types of transactions, the legislature attempted to address how the new priority rules would apply to these situations. The result was regulation provisions, now embodied in section 66 of the SABS . . . . The apparent purpose of the regulation provision is to deem the person, for whom a vehicle is made available for regular use, to be a "named insured". This is clearly a recognition that in these types of transactions the regular user is in such a relationship with the vehicle and the vehicle insurer that that person should claim their benefits first from the insurer of the vehicle, rather than claim the benefits from some other insurance company. (Emphasis added)
[45] He also discussed, at p. 4, the situation, like the ones here, where the owner of the vehicle is not the named insured under the insurance policy:
The[r]e are cases where the true owner of the vehicle is not the named insured under the policy of insurance but is an additional named insured, or listed driver, at best. In these arrangements, it is common that the true owner of the vehicle has committed the vehicle to some commercial endeavour that includes obtaining insurance and other obligations in the business relationship. In these transactions, the policy of insurance is primarily a contractual relationship between the insurer and a non-owner. Given the commercial relationships in operation, the non-owner has some element of control, and some factual expectation of loss in the event of a liability claim. Accordingly, there is legitimate interest in procuring and maintaining adequate insurance with respect to the vehicle. The net result, however, is that a policy of insurance is effectively procured by someone who is not the owner of the vehicle.
[46] The leading case addressing the situation described by Arbitrator Samis is Axa Insurance. The case involved facts similar to those in the cases before this court. The individual in Axa Insurance [page12 ]was an independent contractor who had agreed to work for a transport company pursuant to an owner/ operator agreement whereby he transported loads using his own truck. Arbitrator Fidler determined that he was making his vehicle available for use by the transport company, not the other way around, and that the individual was not a deemed named insured. Accordingly, the injured trucker's personal vehicle insurer was responsible for paying his statutory accident benefits.
[47] In spite of his conclusion, Arbitrator Fidler was not very comfortable with the outcome, stating, at p. 7:
Unfortunately the decision that I have come to does not result in a common sense solution to this problem. It troubles me that when a truck driver has an accident while operating his truck in the course of transporting goods pursuant to an owner/operator agreement, that he should have to go back to his own personal vehicle insurance to claim, when his personal vehicle had nothing to do with the accident.
[48] Notwithstanding his concerns, Arbitrator Fidler felt bound by the wording of s. 91(4), the predecessor provision to s. 66(1).
[49] On appeal and in brief oral reasons, Day J. of the Ontario Court of Justice (General Division) upheld his decision [1997 26862 (ON CJ), [1997] O.J. No. 2186 (Gen. Div.)].
[50] A number of decisions have followed Axa Insurance. These include Markel Insurance Co. of Canada v. State Farm Mutual Automobile Insurance Co. (April 12, 2000, Arbitrator Drew Hudson); Axa Assurance Co. v. ING Insurance Co. of Canada (May 25, 2006, Arbitrator Samis); and Certas Direct Insurance Co. v. Insurance Corp. of British Columbia (June 2009, Arbitrator Shari Novick).
[51] The question in these cases differed from that before this court. The arbitrators in those cases had asked the question that is not before us, namely, whether the sole proprietor had made the vehicle available to the trucking company or whether the trucking company had made the vehicle available to the sole proprietor. They never asked whether, for the purposes of s. 66(1), the sole proprietorship could make the vehicle available to the individual who was the sole proprietor.
[52] In reaching a different conclusion from that reached by Arbitrator Fidler in the Axa Insurance decision, Arbitrator Bialkowski determined that the legislative intent behind s. 66(1) must have been to make the commercial insurer the insurer with liability priority.
I, like Arbitrator Fidler . . . am troubled when a truck driver has an accident while operating his truck in the course of transporting goods pursuant to an owner/operator agreement, that he would have to go to his own personal [page13 ]vehicle insurance to claim, when his personal vehicle had nothing to do with the accident. Insurance premiums are collected on the basis of the particular risk of being insured. The risks of operating a heavy commercial vehicle for distances far in excess of those normally driven by a private automobile should be borne by the insurer insuring the commercial vehicle. Those additional risks would be unknown to the private automobile insurer given the standard information contained in the application for insurance. I am fully satisfied that the legislative intent of Section 66(1)(a) is to have the commercial insurer responsible for accident benefit claims arising from the commercial operation.
[53] Arbitrator Bialkowski reviewed many arbitral decisions in which injured persons were deemed to be named insureds: TD General Insurance Co. v. Pilot Insurance Co. (May 31, 2007, Arbitrator Torrie); Co-operators General Insurance Co. v. Cigna Insurance Co. of Canada (October 26, 1998, Arbitrator Robinson), affd (January 7, 2000), Court File No. 755/98 (Ont. Div. Ct.); Co-operators Insurance Co. v. Oppenheim (August 2002, Arbitrator Guy Jones); Axa Insurance Co. v. Markel Insurance Co. of Canada (December 18, 1998), revd [1999] O.J. No. 5724 (Gen Div.), revd 2001 24143 (ON CA), [2001] O.J. No. 294, 140 O.A.C. 109 (C.A.).
[54] With this background in mind, I turn to s. 66(1)(a) itself. For the sake of convenience and given the importance of the wording, I repeat the provision:
66(1) An individual who is living and ordinarily present in Ontario shall be deemed for the purpose of this Regulation to be the named insured under the policy insuring an automobile at the time of an accident if, at the time of the accident, (a) the insured automobile is being made available for the individual's regular use by a corporation, unincorporated association, partnership, sole proprietorship or other entity[.] (Emphasis added)
[55] Unlike the Axa Insurance case, the question before this court is whether s. 66(1)(a) permits an insured vehicle to be made available for an individual's regular use by the individual's sole proprietorship.
[56] In my view, s. 66(1)(a) permits an insured vehicle to be made available for an individual's regular use by the individual's sole proprietorship. This is evident from the language of the provision and its legislative purpose.
(b) Language of s. 66(1)(a)
[57] First, I will consider the language of the section.
[58] The appeal judge found no problem with the language and considered that its meaning was plain. In contrast, Arbitrator Samis considered that the language directed one to look for a relationship between two parties and that the interpretation [page14 ]advanced by the personal-use insurer would place a strain on the wording of the provision.
[59] I start by observing that s. 66(1)(a) is not preclusive. There is nothing in subsection (a) that precludes a sole proprietorship from making a vehicle available to the sole proprietor.
[60] The first descriptive entity included on the list is a corporation. Certainly, there is nothing in s. 66(1)(a) that would preclude a one-person company from making a vehicle available to him or herself. The second entity on the list, an unincorporated association, does not have a separate legal status divorced from its members nor does a partnership, but under the subsection, both entities are permitted to make vehicles available to their members.
[61] A sole proprietorship is the entity in issue in this appeal. J. Anthony VanDuzer describes the nature of a sole proprietorship in his book The Law of Partnerships & Corporations, 3rd ed. (Toronto: Irwin Law, 2009), at p. 7. It is "the simplest form of business organization. It comes into existence whenever an individual starts to carry on business for her own account without taking the steps necessary to use some other form of organization, such as a corporation." From a legal and practical standpoint, "there is no separation between the sole proprietorship business organization and the person who is the sole proprietor". As a result, "all benefits from the business accrue to the sole proprietor and all obligations of the business are his responsibility".
[62] As with the other organizations, I see no legitimate reason why a sole proprietorship should not be permitted to make a vehicle available to the sole proprietor. The subsection contemplates that an individual operating a sole proprietorship can make a vehicle available to him or herself. Put differently, there is no requirement that the two parties be divorced from one another. In my view, on a plain reading of s. 66(1)(a), this is clear.
(c) Legislative intent
[63] This brings me to a discussion of the legislative intent. I agree with Arbitrator Bialkowski that the intent of the section is that the commercial insurer should be responsible for the accident benefits arising from the operation of the commercial vehicle.
[64] The substance of the subsection is consistent with that conclusion. The section is headed "Company Automobiles and Rental Automobiles". While not determinative, the heading does provide some context. As with a company or rental automobile, if [page15 ]a vehicle is made available for regular use by any of the listed entities, the risk is to be borne by the insurer of that vehicle. This, in my view, makes sense and should be so in spite of any past practice in the insurance industry.
[65] I therefore conclude that both the language and the evident intent of s. 66(1) permits an insured vehicle to be made available for an individual's regular use by the individual's sole proprietorship.
(d) Application to these cases
[66] In the two cases before me, both drivers operated as sole proprietors. Mr. McKerchar operated as a sole proprietorship using the name The Tidy Scot, and entered into the agreement with Pinnacle under that business name. Likewise, Mr. Higgs operated as a sole proprietorship using the business name Bill Higgs & Sons and entered into the agreement with Trowbridge under that business name. While Mr. Higgs' business name had expired several months before the accident, he nonetheless continued to carry on his business as a sole proprietorship. A sole proprietor may operate under his or her own name or may operate under a registered business name: VanDuzer, at p. 9. [See Note 1 below]
[67] Accordingly, in my view, it can be said that the sole proprietorships in both cases regularly made the insured vehicles available to Mr. Higgs and Mr. McKerchar. There was nothing in the parties' commercial relationship with the trucking companies that precluded such a result. In conclusion, both gentlemen are deemed insureds for the purposes of s. 66(1). The insurers of the commercial vehicles, Markel and Kingsway General, are therefore responsible for payment of their accident benefits.
(e) Joint venture
[68] While I agree with the appeal judge that a joint venture for business purposes may be an "other entity" for the purposes of s. 66(1), given my conclusion on the first issue, it is unnecessary to address the joint venture issue and I decline to do so. [page16 ]
Conclusion
[69] For the reasons given, I would dismiss the appeals. I would award Gore Mutual its costs of the appeal fixed, as agreed, in the amount of $7,500, inclusive of disbursements and applicable taxes. Similarly, I would award Security National the same amount in costs.
Appeals dismissed.
Notes
Note 1: While registration of a business is required if a sole proprietor is using a name other than his or her own, the question of whether Mr. Higgs ought to have been registered at the relevant time is not before this court: see Business Names Act, R.S.O. 1990, c. B.17, s. 2(2).