Enterprise Rent-A-Car Canada Ltd. v. Intact Insurance Co.

Citation: 2019 ONCA 916 | 148 O.R. (3d) 413

Indexed as: Enterprise Rent-A-Car Canada Ltd. v. Intact Insurance Co.

Court: Ontario Court of Appeal

Judges: Rouleau, Huscroft and Nordheimer JJ.A.

Date: November 21, 2019

Case Summary

Insurance — Automobile insurance — Rental Vehicles

Appeal by Enterprise from decision finding it was first loss insurer dismissed. A person involved in a car accident while driving a car rented from appellant was a listed driver under an automobile insurance policy issued to her father by respondent but not a named insured. Coverage under respondent's policy for rental vehicle was only available if the vehicle was rented by a named insured. In absence of rental vehicle coverage, priority rules established in Insurance Act had no relevance in this case.

Parties and Counsel

Appellant: Ontario Corporation Number 1009329 c.o.b. as Enterprise Rent-A-Car and/or Enterprise Rent-A-Car

Respondent: Intact Insurance Company

Counsel for Appellant: Robert Love and Taha Hassan

Counsel for Respondent: Jonathan Heeney and Sean Cheskes

Counsel for Intervenors Aviscar Inc., Budgetcar Inc. and ACCRO Rental Systems, Inc. o/a ACCRO Services: Brigette A. Morrison

Counsel for Intervenors Hertz Canada Limited and Dollar Thrifty Automotive Group: Reine Reynolds

Counsel for Intervenor New Horizons Car & Truck Rental Ltd. o/a Discount Car & Truck Rentals Ltd.: Alexander B. Paul

Background

[1] Adi Perets was involved in a car accident while driving a rental car owned by the appellant Enterprise Rental Car ("Enterprise"). At the time, she was living with her parents and was a "listed driver" under a standard Ontario Automobile Policy ("OAP1") issued to her father by the respondent, Intact Insurance ("Intact"). The policy covered two vehicles that she drove regularly. She was not a "named insured" on her father's policy.

[2] Ms. Perets was named as a defendant in the action arising from the 2013 accident. There was a priority dispute as to whether Enterprise's insurer or Intact was the "first loss" insurer. Enterprise and Intact entered into a reservation of rights agreement pursuant to which Enterprise agreed to defend Ms. Perets in the action until the priority dispute was resolved. In October 2017 the action settled and Enterprise paid $30,000 towards the settlement on behalf of Ms. Perets. Enterprise then sought $30,000 plus $17,483 in legal fees from Intact, resuming its claim that Intact was the first loss insurer.

[3] The application judge dismissed Enterprise's claim on the basis that coverage under the OAP1 issued by Intact was not available to Ms. Perets for a rental car and that the priority provision in the Insurance Act, R.S.O. 1990, c. I.8 did not apply as a result. Hence, liability fell to Enterprise's insurer, not Intact, as the first loss insurer. The Divisional Court upheld the decision on appeal.

Decision

[4] The appeal is dismissed for the reasons that follow.

Standard of Review

[5] This appeal concerns the interpretation of the Insurance Act and the provisions of a standard form contract of insurance. The standard of review is correctness: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, 2016 SCC 37.

Analysis

[6] The thrust of Enterprise's argument, supported by the interveners, is that the OAP1 is in conflict with the Insurance Act. They argue that the OAP1, unlike s. 277(1.1)2 of the Insurance Act, provides no coverage for a listed driver when driving a rental car and that the Insurance Act prevails as a result.

[7] This argument was rejected by the application judge and the Divisional Court. We see no error in their analysis.

[8] There is no doubt that the purpose of the amendments to the Insurance Act, introduced in 2005 by Bill 18, Budget Measures Act, 2005 (No. 2), S.O. 2005, c. 31, was to reduce the financial exposure of car rental companies by making the car rental company's insurance the policy of last resort on the priority ladder. But the short answer to this appeal is that priorities under the Insurance Act depend on the existence of coverage under the policy of insurance, and in this case no coverage is available to Ms. Perets under the Intact policy.

Section 277(1.1) of the Insurance Act

[9] Section 277(1.1) of the Insurance Act provides as follows:

(1.1) Despite subsection (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.

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)

[10] As the highlighted terms emphasize, although s. 277(1.1) establishes priorities amongst insurers, it does not create insurance coverage where none is available. The operation of s. 277(1.1) depends on insurance being available under a contract: Enterprise Rent-a-Car Canada Ltd. v. Meloche Monnex Financial Services Inc., 2010 ONCA 277, at para. 20. Put another way, the priorities of insurance coverage established in s. 277(1.1) do not come into play unless there is insurance coverage, and that is a matter that must be determined in accordance with the terms of the insurance contract.

Application to the Facts

[11] Whether insurance is available to Ms. Perets depends on s. 2.2.4 of the OAP1. That section provides liability coverage for rental vehicles, but only when the vehicle is rented by "you" -- the named insured -- or a spouse who lives with the named insured. The named insured in this case is Adi Perets' father. Ms. Perets is neither the named insured nor his spouse, and as a result is not covered by the OAP1 when driving rental vehicles.

[12] In the absence of rental vehicle coverage, it follows that the priority rules established in s. 277(1.1)1 and 277(1.1)2 have no relevance in this case. Consequently, as the application judge and Divisional Court concluded, responsibility to provide coverage fell to Enterprise's insurer under s. 277(1.1)3.

[13] This interpretation is confirmed, in our view, by the existence of a separate optional endorsement providing rental vehicle coverage, the OPCF 27, which was not purchased in this case. This endorsement covers listed drivers who drive, rent, or lease other vehicles, and so would have covered Ms. Perets. As the application judge concluded, there would be no reason for this endorsement if, as Enterprise submits, listed drivers were already covered. It would be redundant coverage.

Disposition

[14] Accordingly, the appeal is dismissed.

[15] The respondent is entitled to costs from the appellant fixed in the agreed amount of $5,000, inclusive of taxes and disbursements. This amount includes costs of the leave application.

[16] No costs are awarded to or against the interveners.

Appeal dismissed.