CITATION: Zheng v. Certas Home and Auto Insurance Co., 2019 ONSC 2753

COURT FILE NO.: DC-18-63

DATE: 20190502

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

BETWEEN:

Jinna Zheng

Appellant

– and –

Certas Home and Auto Insurance Co.

Respondent

Ron Folkes, for the Appellant

Murray MacDonald, for the Respondent

HEARD: April 5, 2019

REASONS FOR JUDGMENT

[On appeal from a Decision of the Small Claims Court at Brampton]

PETERSEN J.

Introduction

[1] Ms. Zheng appeals from the decision of Deputy Judge Da Silva, dated July 30, 2018, which dismissed her Small Claims Court Action against Certas Home and Auto Insurance Company.

[2] Ms. Zheng was involved in a motor vehicle accident. She was not at fault. Her vehicle was damaged as a result of the collision. She was insured at the time of the accident under a standard Ontario Auto Policy (OAP). She made a claim to Certas, her insurer. The physical damage to her vehicle was repaired at Certas’s expense. She was initially not entirely satisfied with the work because of a slightly misaligned engine hood but that problem was promptly rectified.

[3] Ms. Zheng has no complaints about the repairs, but she seeks to recover additional money from Certas for the diminished value of her vehicle. She asserts that the value of her car depreciated by the mere fact of the collision, despite it having been properly repaired. She commenced her Small Claims Court Action against Certas after it denied this aspect of her claim.

Statutory Auto Insurance Compensation Scheme

[4] Ms. Zheng’s action is based on the terms of the standard OAP under which she was insured at the time of the accident. That OAP forms part of this province’s statutory no-fault insurance scheme, as set out in the Insurance Act, R.S.O. 1990, c.I.8 (hereafter, “the Act”).

[5] There is no dispute that Ms. Zheng met the pre-conditions for direct compensation stipulated in s.263(1) of the Act, namely: her vehicle suffered damage arising from the operation of another automobile, the collision occurred in Ontario and both vehicles were insured at the time of the collision. She is therefore entitled, pursuant to s.263(2) of the Act, “to recover for the damages to [her] automobile and its contents and for loss of use from [her] insurer under the coverage described in subsection 239(1) as though [she] were a third party.” The Act does not define the meaning of “damages”.

[6] The coverage described in subsection 239(1) of the Act consists of “loss or damage arising from the ownership or use or operation of the vehicle and resulting from bodily injury to or the death of any person and damage to property.”

[7] Under ss.263(5)(a) and 263(5)(b) of the Act, Ms. Zheng had no right to bring an action against the driver of the other vehicle, who was at fault, and Certas has no right of subrogation against that driver for payments made to Ms. Zheng. As the Court of Appeal explained in Clarendon National Insurance v. Candow, (2007) 2007 ONCA 680, 87 O.R. (3d) 728 at para.7:

Section 263 of the Insurance Act replaced the tort system that resolved automobile damage claims prior to its enactment. In the new statutory scheme, insureds can no longer sue the tortfeasor driver whose negligence has caused damage to their cars. Rather, their own liability insurer pays for the damage, to the extent that they were not at fault, under the third party liability section of their motor vehicle liability policies. Insureds can recover the at-fault portion of their damage by purchasing collision coverage. Insurers have no right of subrogation for payments to their own insureds, but, on the other hand, do not have to pay the subrogated claims previously brought by other insurers in the tort system. The result is that the statutory regime eliminates the transactions costs that were inherent in the tort system.

[8] Subsection 263(6) of the Act states: “This section does not affect an insured’s right to recover in respect of any physical damage coverage in respect of the insured automobile.”

[9] Section 6 of the OAP, which is mandated by the legislature, sets out the scope of coverage afforded to automobile owners who are entitled to direct compensation from their own insurer for property damage:

6.2 What we will cover

We will pay the cost of damage to the automobile, its equipment, contents and for loss of use of the automobile or contents arising from an accident for which another person would have been legally responsible in the absence of section 263 of the Insurance Act (Ontario). Section 23 takes away your right to sue the other person for these losses. We will pay no more to repair or replace the automobile or property than its actual cash value at the time it was damaged, less the applicable percentage of the deductible shown on your Certificate of Automobile Insurance.

6.6 Our Right to Repair, Replace or Rebuild the Automobile

We have the right to repair, replace or rebuild the automobile rather than pay for the damage. If we choose to do this, we will let you …know in writing within seven days of receiving notice of the claim. We will complete the work within a reasonable time using parts of similar kind and quality.

Trial Decision

[10] The trial record and the decision of Deputy Judge Da Silva establish the following facts, which are undisputed.

[11] The accident occurred on July 18, 2015. Ms. Zheng’s vehicle was towed from the accident scene to an auto body shop of her choice. She contacted Certas to report the accident and initiate a claim. Certas advised her that they would send an appraiser to assess the extent of the damage to the car and provide an estimate of the cost of repair. They offered her a certified repair facility, but she declined. She expressed a preference to have any repairs performed by the body shop where the car had been towed.

[12] Certas emailed her on July 19, 2016, acknowledging the phone call, assigning a claim number and confirming the auto body shop chosen by her. The email message also advised Ms. Zheng that “the fault in the accident has been assessed at 0%”, the “damages to your vehicle are covered” and “the deductible has been waived”.

[13] Certas assigned an appraiser to assess the damage to the vehicle. On July 21, 2016, the appraiser recommended that the car be repaired and provided Certas with an estimate for the cost. Certas then contacted Ms. Zheng, informed her that the vehicle was repairable and advised her of the cost. On July 22, 2016, Certas issued a cheque in the amount of $9,198.26 to Ms. Zheng to pay for the repairs. Ms. Zheng authorized her selected body shop to do the repairs. Once the work was completed to her satisfaction, she endorsed the cheque over to the body shop.

[14] Based on the testimony of an expert witness and other evidence submitted by Ms. Zheng at trial, Deputy Judge Da Silva found that Ms. Zheng’s vehicle had diminished in value by $9,750 due to the accident. He held that the calculation of diminished value must be done as of the date of the satisfactory completion of the repairs. He rejected Certas’s argument that the calculation of diminished value should be discounted because Ms. Zheng continues to drive the vehicle.

[15] However, Deputy Judge DaSilva did not award Ms. Zheng damages for diminished value. He noted that s.6.6 of the OAP gives an insurer the right to repair a vehicle “rather than pay for the damage”. He interpreted the word “rather” in s.6.6 to mean “either or”. He held that Certas had the “right to repair rather than pay damages.” He found that there was no ambiguity in s.6.6. He held that Ms. Zheng could not have had a reasonable expectation of being entitled to compensation for damages for diminished value in circumstances where her insurer exercised its option to repair.

[16] Moreover, Deputy Judge Da Silva concluded that Certas had in fact exercised its right to repair Ms. Zheng’s vehicle:

Although the defendant did not provide written notice of a formal election to repair to the plaintiff, that the plaintiff states it must do, I find that it is perfectly clear that even before the requisite 7-day period after the accident, the defendant had actually elected to repair the vehicle. It authorized the plaintiff’s chosen shop to repair and paid the repair bill.

[17] Ms. Zheng’s claim against Certas was dismissed on that basis.

[18] Deputy Judge Da Silva also concluded that “diminished value, although it exists in reality, is not included in s.263(2) of the Insurance Act. Similarly, it is not in s.6.2 of the OAP.” Thus even if he had not found that Certas elected to repair the vehicle, he still would have dismissed Ms. Zheng’s action on the basis that Certas was not liable for diminished value under the coverage provided by the OAP.

[19] Finally, Deputy Judge Da Silva ruled that the issue was of sufficient importance to the people of Ontario and the insurance industry to warrant no award of costs.

Appeal and Cross-Appeal

[20] Ms. Zheng raises the following grounds for appeal:

a) the trial judge erred by concluding that Certas had elected to repair her vehicle pursuant to s.6.6 of the OAP; and

b) the trial judge erred in denying her payment for recovery of diminished value as a component of the “damages” and “cost of damage” to the vehicle, pursuant to s.263(2) of the Act and s.6.2 of the OAP.

[21] Ms. Zheng seeks the following orders:

a) Judgment against Certas in the amount of $9,750;

b) Her costs of the one day trial in the amount of $1,000, inclusive of HST, plus disbursements.

c) Her costs of this appeal in the amount of $1,500, all inclusive.

[22] Certas seeks to have the appeal dismissed. It also brings a cross-appeal, arguing that Deputy Judge Da Silva erred in accepting the evidence of Ms. Zhen’s expert witness, in finding that diminished value is a type of economic loss, and in finding that Ms. Zheng’s vehicle diminished by an amount of $9,750 in value as a result of the accident. Certas also argues that the trial judge erred in finding that the issue was of sufficient public importance to warrant no award of costs.

[23] Certas seeks the following orders:

a) Dismissal of Ms. Zheng’s appeal

b) Its costs of the one day trial in the amount of $2,500, all inclusive.

c) Its costs of the appeal in the amount of $2,500, all inclusive.

d) In the event that Ms. Zheng’s appeal is allowed and the decision of Deputy Judge Da Silva is set aside, variation of the trial judgment to remove the finding of diminished value or in the alternative, an order that a new trial be conducted with respect to the calculation of diminished value.

Standard of Review

[24] Appellate courts do not retry cases. Rather, they review for error.

[25] The standard of review on an appeal from a Small Claims Court decision is correctness for a question of law and palpable and overriding error for a question of fact. For questions of mixed fact and law, the standard is palpable and overriding error, unless there is an inextricable legal principle at issue, in which case the standard is correctness: Zeitoun v. Economical Insurance Group, 2009 ONCA 415 at para.1; Housen v. Nikolaisen, 2002 SCC 33, at paras.1-37; Baichoo v. Taylor, 2019 ONSC 268, at para.3; Singh v. PCPO, 2018 ONSC 203 (Div.Ct.) at para.24.

Analysis of Issues

[26] The first question for me to decide is whether Deputy Judge Da Silva erred in concluding that Certas exercised its option, pursuant to s.6.6. of the OAP, to repair Ms. Zheng’s vehicle. Both parties submit that this is a question of fact and that the appropriate standard of review is palpable and overriding error.

[27] On questions of fact, it is not the role of an appellate court to substitute its views for the views of the trial judge according to what the appellate court thinks the evidence establishes on the balance of probabilities: Underwood v. Ocean City Realty Ltd. (1987), 1987 2733 (BC CA), 12 B.C.L.R. 199 (B.C.C.A.), at p.204; Housen, at para.3. My task is not to weigh the evidence and reach my own factual conclusion, but rather to determine whether Deputy Judge Da Silva made a palpable and overriding error when he found that Certas had exercised its option to repair the vehicle.

[28] “Palpable error” means that the trial judge’s finding of fact is “clearly wrong” and the error is “plain to see”: Housen, at paras.5-6; L.(H.) v. Canada, 2005 SCC 25, at paras. 4, 55 and 69. The test for “palpable error” is met if the trial judge’s finding of fact is unsupported by the evidence. An appellate court must refrain from interfering with a finding of fact “if there was some evidence upon which [the trial judge] could have relied to reach that conclusion”: L.(H.), at para.56; Housen, at paras.1 and 22.

[29] Even where a palpable error has been made, an appellate court is not free to interfere with a trial judge’s erroneous factual conclusion unless the error was “overriding” in the sense that it discredits the result: L.(H.), at paras.55 and 69.

[30] In this case, there is evidence to support Deputy Judge Da Silva’s factual finding that Certas elected to repair Ms. Zheng’s vehicle. As a result of Ms. Zheng’s claim, Certas assigned an appraiser to evaluate the extent of damage to her car. The appraiser recommended to Certas that the car be repaired. Based on that recommendation, Certas decided to effect the necessary repairs at its own expense. That decision was then communicated to Ms. Zheng. Certas approved Ms. Zheng’s choice of auto body shop and Ms. Zheng authorized that body shop to do the work. In short, Ms. Zheng enjoys the benefit of a completely and properly repaired vehicle as a result of Certas’s actions, which were taken in response to her claim. In these circumstances, the trial judge’s factual finding that Certas elected to repair the vehicle cannot be characterized as a palpable error.

[31] Ms. Zheng argues that Certas clearly did not elect to repair her vehicle because it did not provide her with formal notice in writing of such an election, which she submits is required by s.6.6 of the OAP. She further argues that Certas did not take control of the vehicle and the repair process, which would have been expected had Certas elected to repair, rather than pay for the damage. She submits that s.6.6 of the OAP requires Certas to “complete the work” if an election to repair is made, but instead Certas paid for her selected auto body shop to complete the work.

[32] These arguments involve an interpretation of s.6.6 of the OAP and therefore raise questions of mixed fact and law.

[33] The OAP is not an ordinary contract negotiated between private parties. It is a standard contract imposed by the provincial legislature upon the automobile insurance industry and members of the Ontario public who own motor vehicles. It is not a typical contract of insurance drafted by the insurer. Certas did not select the wording used in the OAP. For that reason, Deputy Judge Da Silva ruled that the principle of contra proferentem should not be applied in interpreting the OAP.[^1] Ms. Zheng conceded the correctness of that ruling at the appeal hearing.

[34] The primary rule of construction in interpreting any contract (including an insurance contract) is to give effect to the intention of the parties, as expressed by the words they have used in the contract: Consolidated-Bathurst v. Mutual Boiler, 1979 10 (SCC), [1980] 1 SCR 888 at p.899. According to this rule, courts must interpret contract language in the manner that best promotes the shared intent of the parties at the time of entry into the contract.

[35] In the case before me, where the provisions of the insurance contract are mandated by law, a search for the contracting parties’ intention would be a meaningless exercise. Interpretation of the OAP is more akin to statutory interpretation than contract interpretation in so far as it necessitates consideration of legislative intent. The OAP must be construed in a manner consistent with the purposes of the Insurance Act pursuant to which it was enacted. Those purposes include reduction in automobile insurance premiums by eliminating the transaction costs that were inherent in the tort system prior to the introduction of no-fault insurance in Ontario: Clarendon National Insurance, at para.7.

[36] Interpreting the OAP is not, however, a pure exercise in statutory interpretation. Some of the established rules of contract construction still apply, notwithstanding that the OAP is a mandated standard policy. Specifically, there are a number of interpretive principles that courts have developed to address a concern for consumer protection in the insurance industry. In particular, a person who purchases insurance ought to know the scope of the coverage for which they are paying. The Supreme Court of Canada has therefore ruled that words in insurance contracts must be given their plain and ordinary meaning. The OAP must be construed as it would be understood by the average person applying for insurance: Co-operators Life Insurance Co. v. Gibbens, 2009 SCC 59, [2009] 3 SCR 605 at para.21.

[37] As noted above, Deputy Judge Da Silva concluded that Certas exercised its right to repair Ms. Zheng’s vehicle. My task is to determine whether that conclusion reflected an erroneous interpretation of s.6.6 of the OAP, contrary to the applicable rules of construction. This is a question of mixed fact and law.

[38] Questions of mixed fact and law lie along a spectrum. The stringency of the applicable standard of review depends upon where the question falls along that spectrum. As the Supreme Court of Canada stated in Housen, at para.32, “the numerous policy reasons which support a deferential stance to the trial judge's inferences of fact, also, to a certain extent, support showing deference to the trial judge's inferences of mixed fact and law.” However, where a legal principle is not readily extricable from the factual inferences to be drawn, then the matter is subject to the more stringent standard of correctness. “The general rule is that, where the issue on appeal involves the trial judge's interpretation of the evidence as a whole, it should not be overturned absent palpable and overriding error.” Housen, at para.36.

[39] The question for me to determine is not simply whether Deputy Judge Da Silva erred in his assessment of the evidence as a whole when he reached the factual conclusion that Certas had exercised its option to repair Ms. Zheng’s vehicle. That factual issue is intertwined with the legal question of whether Deputy Judge Da Silva applied the proper principles of construction to the OAP. If he erred in his interpretation of the OAP – a statutorily mandated insurance policy -- then he committed an error of law that was inextricably linked to his factual finding. The higher standard of correctness therefore applies to my review of this issue.

[40] For the reasons that follow, I find that the trial judge correctly interpreted the OAP and correctly determined that Certas had exercised its right to repair Ms. Zhen’s vehicle, within the meaning of s.6.6 of the OAP.

[41] Certas concedes that it did not provide Ms. Zheng with written notice of its decision to repair her vehicle. Section 6.6 of the OAP states that the insurer “will let [the insured] know in writing within seven days of receiving notice of the claim” if it chooses to repair, replace or rebuild the automobile rather than pay for the damage.

[42] Ms. Zheng argues that Certas’s failure to provide her with formal written notice of an election is evidence that Certas did not in fact make an election to repair. This argument conflates the issue of whether an election was made with the issue of whether notice was given of that election. The plain meaning of the words in s.6.6 of the OAP make it clear that these are two distinct issues.

[43] Section 6.6 does not stipulate that written notice is a pre-condition to the insurer’s exercise of its right to repair a vehicle. The ordinary meaning of the words in s.6.6 make it clear that the requirement for written notice arises only after an insurer has made an election to repair. In that regard, the wording in s.6.6 of the OAP may usefully be contrasted with the wording of s.1.7.3, which states:

In case of non-payment of premium, we may give you a notice in writing. We must give you ten days notice if we deliver the notice in person, or 30 days notice by sending the notice by registered mail to your last known address. The 30-day period starts on the second day after we mail the registered letter. The notice will inform you that you have until noon of the business day before the last day of the notice period to pay the arrears, plus an administration fee, failing which the policy will automatically be cancelled effective at 12:01 a.m. on the last day of the notice period. If you pay the arrears and the administration fee in time, then your policy will not be cancelled

[44] Section 1.7.3 uses the word “must” to underscore the mandatory nature of the insurer’s obligation to provide written notice within the specified time period as a pre-condition to cancellation of a policy of insurance for non-payment of premium. Similar language is not employed in s.6.6, which simply states, “If we choose to do this [i.e., to repair the vehicle], we will let you … know in writing …”. The word “must” does not appear in s.6.6. Moreover, the insurer’s undertaking to provide written notice of its election plainly relates to notice of the election after it has been made. Written notice is not a pre-condition to the election taking effect.

[45] Deputy Judge Da Silva therefore correctly concluded that Certas’s right to repair Ms. Zheng’s vehicle was not vitiated by its failure to comply with the written notice requirement in s.6.6 of the OAP.

[46] It should be noted that Ms. Zheng was in no way prejudiced by Certas’s failure to provide her with formal written notice of its election to repair her vehicle. Despite the absence of written notice, she did receive actual notice of the election within the seven day period after the accident. Certas verbally communicated to Ms. Zheng its decision to repair her vehicle. During her examination-in-chief, Ms. Zheng recalled the first telephone conversation that she had with a Certas representative after the accident. She testified that she was told she would not need to pay the deductible because the accident was not her fault. She recalled that she was also told that “they would be – try to fix my vehicle”. A few days later, Certas advised Ms. Zheng of the appraiser’s conclusion that the vehicle was repairable. Certas confirmed that the repairs would be undertaken at Certas’s expense and Ms. Zheng authorized the work to be done by the body shop.

[47] Ms. Zheng submits that an insurer’s election to repair a vehicle requires the insurer to “take control of the vehicle and get it repaired themselves” because s.6.6 of the OAP states, “We will complete the work within a reasonable time …”. She argues that Certas did not take control of her vehicle and did not complete the repair work on her vehicle, hence it must not have made an election to repair pursuant to s.6.6 of the OAP.

[48] This proposed interpretation of s.6.6 is not one that an ordinary person would adopt. Ordinary people are well aware that insurance companies are not in the business of conducting auto body work or mechanical automotive repairs. An ordinary purchaser of automobile insurance would not reasonably interpret the final sentence of s.6.6 to mean that their insurer would actually take possession or control of their vehicle and complete any necessary repairs.

[49] For the above reasons, I reject Ms. Zheng’s submissions regarding the interpretation of s.6.6 of the OAP. Deputy Judge Da Silva did not employ an incorrect interpretation of s.6.6 when he concluded that Certas had exercised its right of repair. He did not commit an error of mixed fact and law.

[50] Ms. Zheng argues that even if Deputy Judge Da Silva correctly concluded that Certas exercised its option to repair her vehicle that does not preclude her claim for damages for diminished value. I disagree. Deputy Judge Da Silva correctly interpreted the word “rather” in s.6.6 of the OAP to mean “either or”. Once Certas elected to exercise its right to repair Ms. Zheng’s vehicle “rather than pay for the damage”, it was only responsible for the cost of the repairs, up to a maximum of the actual cash value of the vehicle at the time of the accident (per s.6.2 of the OAP). Its contractual obligation was simply to repair the vehicle, which it did.

[51] Ms. Zheng’s first ground of appeal therefore fails.

[52] It is unnecessary for me to consider Ms. Zheng’s second ground of appeal, namely whether Deputy Judge Da Silva incorrectly interpreted s.6.2 of the OAP and s.263(2) of the Act to exclude diminished value. I have upheld the trial judge’s decision that Certas elected to repair the vehicle rather than pay for the damage. Consequently, there is no need to determine whether the trial judge erred in concluding that a claim for diminished value could not have succeeded under the OAP even if Certas had not made that election. The issue of the correct interpretation of s.6.2 of the OAP and of s.263(2) of the Act does not arise on the facts of this case.

[53] I therefore express no opinion on the correctness of the trial judge’s ruling that diminished value is not a component of the “cost of damage to the automobile” covered by s.6.2 of the OAP. Nor do I express an opinion on the correctness of his ruling that diminished value does not form part of the “damages to the insured’s automobile” within the meaning of s.263(2) of the Act.

[54] I make no finding on the issues raised in Certas’s cross-appeal with respect to the trial judge’s ruling that Ms. Zheng’s vehicle diminished in value by an amount of $9,750 as a result of the accident. Given my dismissal of Ms. Zhen’s appeal, the issues raised in the cross-appeal are moot, except for the issue of costs at trial.

[55] Certas asks this court to overrule Deputy Judge Da Silva’s decision not to award costs at trial. Costs are discretionary. As such, a decision with respect to costs should be set aside only in circumstances where the trial judge has made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27; Singh, at para.62. Deputy Judge Da Silva made no error in principle and his decision is not plainly wrong. There is therefore no basis to interfere with the decision on costs at trial.

[56] For all of the above reasons, the appeal and the cross-appeal are both dismissed.

[57] Although I share Deputy Judge Da Silva’s view that the issues raised in this case are of significant public importance, there were no grounds to appeal his decision, so the respondent Certas should be awarded its costs of the appeal. The amount of costs proposed by Ms. Zheng is more reasonable and proportionate than the amount sought by Certas. I therefore order Ms. Zheng to pay Certas’s costs of the appeal in the amount of $1,500, all inclusive.

Petersen J.

Released: May 2, 2019

CITATION: Zheng v. Certas Home and Auto Insurance Co., 2019 ONSC 2753

COURT FILE NO.: DC-18-63

DATE: 20190502

ONTARIO

SUPERIOR COURT OF JUSTICE

(FAMILY/CIVIL SMALL CLAIMS COURT APPEAL)

B E T W E E N:

Jinna Zheng

Appellant

– and –

Certas Home and Auto Insurance Co.

Respondent

REASONS FOR JUDGMENT

[On appeal from a Decision of the Small Claims Court at Brampton]

PETERSEN J.

Released: May 2, 2019

[^1]: The contra preferentem rule dictates that ambiguity in the language of a contract must be resolved against the party who was responsible for drafting the ambiguous clause if the choice is between that party and the other party to the contract who did not participate in its drafting: McClelland & Stewart Ltd. v. Mutual Life, 1981 53 (SCC), [1981] 2 SCR 6, at p.15.