Middleton et al. v. Pankhurst et al.; Aviva Canada Inc., Third Party

[Indexed as: Middleton v. Pankhurst]

Ontario Reports

Court of Appeal for Ontario

Hourigan, L.B. Roberts and Nordheimer JJ.A.

November 2, 2017

138 O.R. (3d) 161 | 2017 ONCA 835

Case Summary

Insurance — Automobile insurance — Interpretation and construction — "Authorized by law to drive" — Insured having valid driver's licence at time of accident but being in breach of terms of probation order which prohibited him from drinking and driving and from driving at night — Trial judge not erring in finding that insured was "person authorized by law" to operate motor vehicle pursuant to statutory condition 4(1) — O. Reg. 777/93, statutory condition 4(1).

The insured had a valid driver's licence at the time of a motor vehicle accident, but was in breach of the terms of a probation order which prohibited him from driving at night and driving with alcohol in his system. An action against the insured by his passenger was settled. The insured's insurer took the position that it was not obligated to pay any part of the settlement as the insured was not "authorized by law to drive" within the meaning of statutory condition 4(1) of O. Reg. 777/93 under the Insurance Act, R.S.O. 1990, c. I.8 at the time of the accident because he was in breach of his probation order. The trial judge found that the insured was authorized by law to drive at the time of the accident. She rejected the insurer's argument that the phrase "authorized by law" refers to not only the provincial licensing scheme operated by the Ministry of Transportation, but also to violations of court orders such as the insured's probation order. The insurer appealed.

Held: The appeal should be dismissed.

The phrase "authorized by law" was not intended to apply to breaches of the law not directly connected with violations of driving licence conditions, such as breaches of probation orders. The trial judge correctly noted that a broad interpretation of the phrase would be inconsistent with s. 118 of the Insurance Act, which provides that unless the contract otherwise provides, a contravention of any criminal or other law does not render unenforceable a claim for indemnity under a contract of insurance except where the contravention was committed with intent to bring about loss or damage. The insured was "authorized by law to drive" at the time of the accident.

Cases Referred To

Kereluik v. Jevco Insurance Co., 2012 ONCA 338, 111 O.R. (3d) 395 — applied

Other cases referred to:

Comairco Equipment Ltd. v. Breault, 52 O.R. (2d) 695

Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23

Statutes Referred To

Insurance Act, R.S.O. 1990, c. I.8, s. 118

Rules and Regulations Referred To

Statutory Conditions — Automobile Insurance, O. Reg. 777/93, s. 4(1)

APPEAL

From the judgment of Matheson J. (2016), 131 O.R. (3d) 249, [2016] O.J. No. 2542, 2016 ONSC 3157 (S.C.J.).

Counsel:

Donald H. Rogers, Q.C., and Meryl Rodrigues, for appellant.

Mark O'Donnell, for respondent.

The judgment of the court was delivered by

HOURIGAN J.A.:

Introduction

[1] The issue for determination on this appeal is whether the trial judge erred in finding that Cal Pankhurst was a "person authorized by law" to operate a motor vehicle pursuant to statutory condition 4(1) of O. Reg. 777/93 enacted under the Insurance Act, R.S.O. 1990, c. I.8.

[2] In my view, the trial judge did not err. She conducted a very thorough and careful analysis of the issue, specifically considering and rejecting the same arguments advanced by the appellant, Aviva Canada Inc. ("Aviva"), on this appeal. I am in substantial agreement with both her analysis and conclusion. Accordingly, I would dismiss the appeal.

Facts

[3] The factual background of the dispute is not controversial and may be briefly stated as follows.

[4] On January 24, 2009, Tyler Middleton and Mr. Pankhurst agreed to go ice fishing on Lake Simcoe. Later that day, Mr. Pankhurst travelled by snowmobile to meet Mr. Middleton at a remote location on the lake where some of their friends had ice huts.

[5] At the time, Mr. Pankhurst had a valid class G driver's licence, which was not subject to any restrictions. However, he was subject to a probation order arising from a guilty plea to careless driving in the fall of 2008. That order prohibited Mr. Pankhurst from driving at night and from driving with alcohol in his system.

[6] Both Mr. Middleton and Mr. Pankhurst consumed alcohol that night. In the early evening, Mr. Middleton left the ice huts by foot, while Mr. Pankhurst stayed behind. Later that evening, Mr. Middleton called Mr. Pankhurst's cellphone. He explained that he was lost and disoriented and asked Mr. Pankhurst to pick him up. Mr. Pankhurst believed that Mr. Middleton was in danger of freezing because he was not properly dressed. He drove his snowmobile on the lake, found Mr. Middleton and they drove to shore. They then proceeded on a road along the shore. While on that road, Mr. Pankhurst lost control of his snowmobile and both he and Mr. Middleton were ejected. Mr. Middleton hit a telephone pole and suffered significant injuries.

[7] Mr. Middleton and his mother, Susan, brought a personal injury claim against Mr. Pankhurst. The parties reached a settlement agreement pursuant to which Mr. Pankhurst would pay $900,000 to the Middletons. Mr. Pankhurst was insured by Aviva, and Ms. Middleton was insured by Unifund Assurance Company ("Unifund"). Ms. Middleton's insurance policy provided coverage for under or uninsured claims.

[8] Statutory condition 4 applies to all Ontario automobile insurance contracts, including Mr. Pankhurst's policy with Aviva. Statutory condition 4(1) reads:

4(1) The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.

[9] Aviva took the position that it was not obliged to pay any part of the settlement on the basis that Mr. Pankhurst was not authorized by law to drive at the time of the accident, because he had been drinking and driving at night, in breach of his probation order.

[10] Justice David Brown (as he then was) ordered that the settlement funds be paid in full to the Middletons -- 50 per cent paid by each insurer -- with provision to have the successful insurer repaid by the unsuccessful insurer after the coverage issue was determined. He further ordered a trial of an issue, namely, whether Mr. Pankhurst was entitled to insurance coverage from Aviva.

Decision of the Trial Judge

[11] The trial judge found that Mr. Pankhurst was authorized by law to drive at the time of the accident because he had a valid driver's licence that was not subject to any restrictions imposed by the Ministry of Transportation ("MTO"). She rejected Aviva's argument that the phrase "authorized by law" refers to not only the provincial licensing scheme operated by the MTO, but also to violations of court orders, such as Mr. Pankhurst's probation order.

[12] In so ruling, the trial judge relied on this court's decision in Kereluik v. Jevco Insurance Co., 2012 ONCA 338, 111 O.R. (3d) 395. In that case, Cronk J.A. found that the phrase "authorized by law" was not intended to apply to breaches of the law not directly connected with violations of driving licence conditions. The trial judge also held that Aviva's position was inconsistent with s. 118 of the Insurance Act.

Analysis

[13] The appellant advances three main arguments on appeal:

(i) this case is distinguishable from Kereluik because in the present case, the restrictions imposed relate directly to the operation of a motor vehicle;

(ii) section 118 of the Insurance Act, which is relied upon by the trial judge, is not applicable to the facts of this case; and

(iii) the policy goal of ensuring the broadest possible insurance coverage for tort victims should not trump the rule of law, specifically, the sanctity of court orders.

[14] This case involves the interpretation of a standard form contract of insurance. Accordingly, the standard of review is correctness: see Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 46.

[15] I will deal with each of the arguments advanced by the appellant. In summary, despite Mr. Rogers' very able submissions, I am not persuaded that the trial judge made any error in her analysis.

(i) Kereluik

[16] In Kereluik, the insured had been released from custody on an impaired driving charge. He was required to give a personal undertaking to abstain from the possession and consumption of any alcohol. A breach of the undertaking would constitute a criminal offence. The insured drove again while impaired and was involved in another accident. Mr. Kereluik's insurer denied coverage on the basis that he was not authorized by law to drive because he had breached the undertaking.

[17] This court rejected that argument. Justice Cronk held, at para. 15, that the phrase "authorized by law" was not intended to apply to breaches of the law "not directly connected with violations of driving licence conditions". She also noted a broad interpretation of the phrase would be inconsistent with s. 118 of the Insurance Act. Justice Cronk concluded that compliance with statutory condition 4 depended only on the insured's possession of a valid driver's licence and compliance with its terms -- not the terms imposed on driving pursuant to any other law.

[18] The appellant submits that Kereluik is distinguishable because in that case the insured was subject to a broad restriction related to his consumption of alcohol that was not limited in scope to his operation of a motor vehicle. In contrast, in the case at bar, the restriction is directly related to the insured's operation of a motor vehicle. There is, the appellant argues, no meaningful distinction between a condition imposed on a licence by the MTO and a restriction on driving imposed by a court order.

[19] I would not give effect to this argument for the following reasons.

[20] First, it does not matter that the undertaking in Kereluik was broader in scope than the probation order in the present case. The focus of the analysis is the same for both the undertaking and the probation order, being whether they disqualify a driver under statutory condition 4. That was what this court considered in Kereluik. The fact that the undertaking in that case had broader application is of no import.

[21] Second, in Kereluik, at para. 13, after reviewing a number of authorities on the point, Cronk J.A. concluded, "[t]hese authorities suggest that the legal authority to drive, at any given time, depends on the existence of a valid licence issued by the responsible regulatory authority and compliance with the conditions attaching to the licence". In other words, the determination of whether an insured is authorized to operate a motor vehicle is restricted to a consideration of any restrictions imposed by the MTO. That finding was necessary for her analysis in that case, and is binding on this court.

[22] Finally, if Kereluik is effectively overturned, insurers could potentially deny coverage in any number of situations where there has been a criminal law violation. In considering this result, regard should be had to the historical evolution of statutory condition 4. Earlier versions of the Insurance Act prohibited insured individuals from operating an automobile while impaired. This wording was later amended so an innocent third party would not be precluded from receiving compensation for the losses caused by an impaired driver: see Comairco Equipment Ltd. v. Breault, 52 O.R. (2d) 695, at paras. 27-28.

[23] In my view, such a technical interpretation of statutory condition 4 would be contrary to the apparent intention of the legislature in making the amendment, such that any breach of a court order would result in the loss of insurance coverage. As Cronk J.A. stated in Kereluik, at para. 17, "[s]uch a sweeping interpretive result should not be countenanced absent a clear expression of such intention by the legislature".

(ii) Section 118 of the Insurance Act

[24] As noted above, both the trial judge and Cronk J.A. in Kereluik relied on s. 118 of the Insurance Act in support of their conclusion that the phrase "authorized by law" does not include a consideration of whether the insured is subject to criminal law prohibitions that impact his or her ability to drive. That section provides, in part:

118. Unless the contract otherwise provides, a contravention of any criminal or other law in force in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage[.]

[25] In the case at bar, the appellant submits that s. 118 is not applicable because Mr. Pankhurst violated a court order and not a statute or any other law. It submits that it is not arguing that there is no coverage by the "fact alone" of a criminal offence. Rather, that as a result of the violation, the insured is not a person authorized by law to operate a motor vehicle pursuant to statutory condition 4(1).

[26] I would not give effect to these arguments for the following reasons.

[27] There is, in my view, no meaningful distinction between a court order and "any criminal or other law in force in Ontario" in this context. Both can operate to restrict the operation of a motor vehicle.

[28] More importantly, however, the appellant's interpretation of s. 118 is inconsistent with the policy objective to provide insurance protection for negligent tortfeasors who do not intend to cause harm, and to their victims. As Cronk J.A. stated in Kereluik, at para. 21:

By enacting s. 118 of the Act, by repealing former statutory conditions under the Act that expressly precluded the operation or use of an automobile while under the influence of alcohol (i.e., former Statutory Condition 2(1)(a), above-cited), and by not incorporating a coverage exclusion in the current standard form automobile insurance policy pertaining to drunk drivers, the legislature must be taken as having elected to protect the potential of tort compensation for innocent victims of drinking and driving.

[29] If the appellant's submission were accepted, the policy underlying s. 118 would be negated. It would mark a return to a fault-based analysis of insurance coverage. A tortfeasor who has not broken the law has coverage, whereas a tortfeasor who has broken the law has no coverage. The problem with this fault-based analysis is that it ignores the policy imperative underlying the enactment of s. 118 of ensuring that there is coverage available for the claims of innocent tort victims.

(iii) Court Orders

[30] The appellant submits that the public policy of providing insurance coverage for innocent tort victims must accede to the need to respect court orders. It is argued that statutory condition 4 must be interpreted in a manner that gives effect to court orders.

[31] In my view, this is a straw man argument. The respondent is not arguing that court orders are to be ignored or that a breach should not result in legal consequences. There are, of course, legal consequences in the criminal law for the breach of a court order.

[32] There is nothing in the trial judge's reasons to suggest that court orders should not be respected nor is that the consequence of her decision. What is in issue on this appeal is whether the breach of such an order should operate to restrict the availability of insurance coverage. That analysis does not impact the effectiveness of court orders, as there is no conflict between the proper interpretation of statutory condition 4 and the proper operation of court orders.

Disposition

[33] I would dismiss the appeal. I would award Unifund its costs payable by Aviva in the agreed-upon all-inclusive amount of $15,000.

Appeal dismissed.

End of Document