Smith v. Smith et al. [Indexed as: Smith v. Smith]

112 O.R. (3d) 475
2012 ONSC 5872

Ontario Superior Court of Justice

McCarthy J.
October 16, 2012

Insurance -- Automobile insurance -- Priorities -- Plaintiff suing lessor of motor vehicle for damages sustained by plaintiff in single-vehicle accident -- Plaintiff claiming in part that defendant was vicariously liable in its capacity as owner of vehicle -- Defendant's motion for summary judgment dismissed with respect to vicarious liability part of claim -- Right of action in vicarious liability not displaced by operation of s. 267.12 of Insurance Act -- Insurance Act, R.S.O. 1990, c. I.18, s. 267.12.

In an action for damages for personal injuries arising out of a single-vehicle car accident, the plaintiff sued the driver and lessor of the rented vehicle. The plaintiff claimed that the lessor (a) was negligent in the maintenance or outfitting of the vehicle; and (b) was vicariously liable to the plaintiff in its capacity as owner of the vehicle. The lessor brought a motion for summary judgment dismissing the plaintiff's claim against it. It argued that (a) the plaintiff had failed to present evidence which could support a finding of mechanical defect in the vehicle; and (b) the new priority rules in the Insurance Act, which would govern the accident date in question, served to absolve it from the obligation to pay out any judgment that the plaintiff might obtain.

Held, the motion should be granted in part.

The plaintiff could not succeed at trial on the negligence aspect of its claim. That part of the claim was dismissed.

On the issue of vicarious liability, legal liability for the accident and legal liability to pay the claim were, at this time, different considerations. Section 257.12 of the Insurance Act clearly contemplates the continuing legal exposure of a lessor for vicarious liability. That part of the defendant's motion for summary judgment failed.

MOTION by the defendant for summary judgment.

Cases referred to
Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764 , 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 211 A.C.W.S. (3d) 845, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17; Enterprise Rent-a-Car Canada Ltd. v. Meloche Monnex Financial Services Inc. (2010), 102 O.R. (3d) 87, [2010] O.J. No. 1498, 2010 ONCA 277 , 93 M.V.R. (5th) 15, 261 O.A.C. 7, [2010] I.L.R. I-4971, 319 D.L.R. (4th) 176 [page476]

Statutes referred to
Highway Traffic Act, R.S.O. 1990, c. H.8 [as am.]
Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 267.12, (1), (3)

Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.04(2) (a)

J. Nisker, for plaintiff.
E. Pullan, for defendant Enterprise Rent-A-Car Canada Limited.

Endorsement

[ 1 ] Endorsement of MCCARTHY J.: -- This is a motion for summary judgement brought by the defendant Enterprise Rent-A- Car Canada Limited ("Enterprise").

[ 2 ] Subrule 20.04(2) (a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 now provides that the court shall grant summary judgment if the court is satisfied that there is "no genuine issue requiring a trial" with respect to a claim.

[ 3 ] The Court of Appeal has established the "full appreciation test" as the guide for judges on such motions. That test can be summarized as follows: "can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of trial?" (See Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764 .)

[ 4 ] The plaintiff maintains the present action against Enterprise on two very distinct bases: firstly, that Enterprise was negligent in the maintenance or outfitting of the Nissan motor vehicle (the "Nissan") that was involved in the subject motor-vehicle accident; secondly, that Enterprise, in its capacity as owner of the Nissan, will be found vicariously liable to the plaintiff.

Factual Background

[ 5 ] This is a relatively straightforward claim for damages for personal injuries arising out of a single motor-vehicle accident which occurred on January 3, 2010. The plaintiff was a passenger in the Nissan being operated by his spouse, the defendant Andrea Smith. The defendant Smith had rented the vehicle from Enterprise on December 28, 2009. The plaintiff commenced this claim in the usual fashion, naming both the owner and operator of the Nissan together with the road authority, in this case Her Majesty the Queen in Right of Ontario ("HMQ"). [page477]

Enterprise's Position

[ 6 ] Enterprise argues that the plaintiff has failed to present evidence which could support a finding of mechanical defect in the Nissan. Examinations for discovery took place in October 2011. The defendant Smith had secured a report from an engineer. At discoveries, this defendant maintained a claim of litigation privilege over the report but did disclose particulars of the findings and opinions within it. The plaintiff has failed to retain the services of an engineer and has not put forward any evidence in support of its allegations. This motion is now before the court nearly one year after the oral discoveries took place.

[ 7 ] In respect of the allegation of vicarious liability, Enterprise contends that the new priority rules in the Insurance Act, R.S.O. 1990, c. I.8 , which would govern the accident date in question, serve to absolve Enterprise from the obligation to pay out any judgment that the plaintiff might obtain. Those provisions, found at s. 267.12(1), would require that automobile insurance policy owned by the defendant Smith and issued by the Personal Insurance (the "Personal") must respond to pay the claim of the plaintiff in priority to the policy of insurance in place for Enterprise. The Personal policy carried with it third liability coverage of $1 million. Enterprise cannot legally be exposed to any judgment because of the operation of s. 267.12(3), which essentially limits the maximum amount of exposure of a lessor to $1 million less the coverage available under a policy in priority to the Enterprise policy. In this case, that effectively leaves the exposure of Enterprise at zero because the Personal policy, responding to defend and indemnify the defendant driver in priority to Enterprise's insurance, carries with it third party liability coverage of $1 million.

[ 8 ] The purpose of the legislative amendments in the Insurance Act has been clarified by the Ontario Court of Appeal in Enterprise Rent-a-Car Canada Ltd. v. Meloche Monnex Financial Services Inc. (2010), 102 O.R. (3d) 87, [2010] O.J. No. 1498, 2010 ONCA 277 . The court found that the amendments were clearly intended "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" (see para. 4).

The Plaintiff's Position

[ 9 ] The plaintiff argues that there was evidence given at discoveries to support the allegations in respect of mechanical [page478] deficiency of the automobile. Enterprise conceded that the Nissan may have been equipped with different sized tires than were standard on that make and model of vehicle. In addition, the Nissan was admittedly not outfitted with snow tires, in spite of the request made by the plaintiff upon renting the vehicle. According to the conclusions of the engineer retained by defendant Smith (as extracted from counsel for this defendant at the discoveries), speed was the principal factor resulting in the collision. Weather was a contributing factor. The use of winter snow tires may have prevented the collision. These facts, if accepted, could serve as an evidentiary basis for a finding of negligence against the owner of the vehicle, Enterprise.

[ 10 ] On the issue of vicarious liability of the Enterprise, the plaintiff contends that a distinction needs to be drawn between the legal issue of vicarious liability and the legal issue of obligation to pay a judgment. While the plaintiff concedes that the purpose of the legislative amendments was to protect car rental companies and their insurers from exposure to claims, the provisions in the Highway Traffic Act, R.S.O. 1990, c. H.8 , establishing both the vicarious liability of an owner and joint and several liabilities between drivers and owners, remain fundamentally undisturbed. The addition of lessees into both the vicarious and the joint and several liability mix simply advanced the purpose of the Insurance Act amendments which was to make the lessee's own insurer the first payor. If the legislature had wished to abolish the vicarious liability of owners, it would have expressly done so.

The Personal Policy

[ 11 ] The defendant Smith (insured by the Personal) has refused to agree that (a) the plaintiff will have $1 million available to him from the Personal policy at the conclusion of the trial of this action; (b) the Personal will not take an "off-coverage" position with respect to its insured, Andrea Smith, at any time; and (c) the Personal will be estopped from asserting any prejudice if Enterprise is released from the action.

Analysis

[ 12 ] I agree with the position of the plaintiff that legal liability for the accident and legal liability to pay the claim are, at this time, distinct considerations. The former depends on a finding of liability for the accident against the lessee/ operator. By virtue of the provisions of the Highway Traffic Act , this would most assuredly result in an accompanying finding of vicarious liability against Enterprise, as owner and lessor of the Nissan. [page479]

[ 13 ] From a practical standpoint, and as things now stand, there can be no recovery against Enterprise or its insurer in light of the "liability of lessors" section of the Insurance Act, s. 267.12(1) . It remains possible (although by no means likely) that Enterprise, and by extension its insurer, will be legally liable to pay the claim in the event that there is no other policy in priority to that of Enterprise to act as first payor on the claim. This exposure could come about by the Personal taking an off-coverage position, leaving the defendant Smith uninsured or underinsured (i.e., without the $1 million worth of third party liability coverage which would serve to entirely offset the maximum amount that the lessor is liable to pay under any circumstances).

[ 14 ] The Personal will not commit to abandoning its potential right to take an off-coverage position under its own policy and the Insurance Act . Nor will it agree to abandon its potential right to assert prejudice in the event that the insufficiency of insurance coverage of a tortfeasor forces the plaintiff to seek payment from the Personal as an underinsured carrier. Until it does, the potential exists for Enterprise to find itself at the front of the line for payment of the plaintiff's claim.

[ 15 ] Section 267.12 of the Insurance Act clearly contemplates the continuing legal exposure of a lessor for vicarious liability, for it contains within it the following phrasing: "the maximum amount for which the lessor or lessors of the motor vehicle are liable in respect of the same incident in their capacity as lessors of the motor vehicle".

[ 16 ] The plaintiff clearly has a right of action lying in vicarious liability against the defendant Enterprise. Such a right of action is not displaced by the operation of s. 267.12 . In fact, by referencing the liability of the lessor for an incident, that wording serves to acknowledge that right.

[ 17 ] Therefore, the provisions of the Insurance Act in question do not prevent the plaintiff from maintaining an action against Enterprise for vicarious liability. That part of the defendant's motion seeking judgment against the plaintiff must fail.

[ 18 ] I find, however, that I am capable of making a full appreciation of the evidence as it pertains to the allegations against Enterprise for improper state of mechanical repair of the Nissan. By any stretch of the imagination, the plaintiff will not be able to make out a case against Enterprise in that regard. The plaintiff has failed to adduce any evidence that the differential in tire size may have caused or contributed to the accident in question. The questions asked by counsel at discoveries and the answers given on that subject do not constitute [page480] an evidentiary basis upon which a court could find negligent repair or maintenance against the defendant Enterprise. While there is some evidence that snow tires might have served to prevent the accident in question, I was not directed to any evidence that suggested that Enterprise had contracted to outfit the Nissan with snow tires or that Enterprise had represented in any way that the vehicle was equipped with snow tires. On the contrary, the plaintiff conceded in her discovery evidence that she was well aware of the fact that the vehicle did not have snow tires when she rented it. I was not referred to any authority, statute or regulation which would legally compel the defendant Enterprise to equip its rental vehicle with snow tires. In the absence of that kind of evidence, and having regard to the full appreciation test, I find that the plaintiff could not succeed at trial on that aspect of its claim. That is not a genuine issue requiring a trial.

Disposition

[ 19 ] There shall be summary judgment in favour of the defendant dismissing the plaintiff's claim as set out at paras. 7(B)(a), (b) and (c) of the statement of claim. The balance of the defendant's motion is dismissed.

[ 20 ] There has been divided success on the motion. If the parties are unable to agree on the issue of costs, then I order that the parties shall make written submissions on costs. The defendant Enterprise shall have until November 12, 2012 to make its submissions, limited to two pages. The plaintiff shall have until November 26, 2012 to make its submissions, limited to two pages. The defendant shall have until December 3, 2012 to make reply submissions, if necessary, limited to one page.

Motion granted in part.