Intact Insurance Company of Canada v. American Home Assurance Company of Canada
[Indexed as: Intact Insurance Co. of Canada v. American Home Assurance Co. of Canada]
Ontario Reports
Ontario Superior Court of Justice,
Perell J.
April 24, 2013
115 O.R. (3d) 708 | 2013 ONSC 2372
Case Summary
Insurance — Automobile insurance — Interpretation and construction — "Lessee" — A. leasing car using credit card provided by his employer — "Lessee" of vehicle for purposes of s. 277 of Insurance Act being A. and not his employer — Privity of contract being between A. and car rental company — Employment law and agency law concepts not relevant to interpretation of "lessee" in s. 277(1.1) of Act — Insurance Act, R.S.O. 1990, c. I.8, s. 277.
A. leased a vehicle using a credit card provided by his employer, and was reimbursed by the employer for the expense. While driving that car in the course of his employment, A. collided with another vehicle and injured a passenger in that vehicle, who sued him for damages. The applicant was A.'s personal automobile insurer, and the respondent was his employer's insurer. On an application to determine which insurer was responsible under s. 277 of the Insurance Act to respond to the personal injury claim, the applicant argued that the de facto "lessee" of the vehicle for the purposes of s. 277 was A.'s employer.
Held, the application should be dismissed.
The privity of contract was between A. and the car rental company. There was no reason to give s. 277 of the Act a reading that would introduce the concept of "de facto lessee" and encourage factual and legal disputes between insurers about how employment law, agency law, corporate law, partnership law and the law of contract might apply to cast doubt on who is a lessee under s. 277. A., and not his employer, was the "lessee" of the vehicle for the purposes of s. 277. [page709]
Coachman Insurance Co. v. Lombard General Insurance Co. of Canada (2011), 105 O.R. (3d) 475, [2011] O.J. No. 1236, 2011 ONSC 1655, [2011] I.L.R. I-5125, 19 M.V.R. (6th) 312, 96 C.C.L.I. (4th) 113 (S.C.J.); Morrison v. Ashley (2012), 108 O.R. (3d) 663, [2012] O.J. No. 435, 2012 ONSC 745, [2012] I.L.R. I-5242, 7 C.C.L.I. (5th) 143, 213 A.C.W.S. (3d) 191 (S.C.J.); Nguyet v. King, [2010] O.J. No. 4418, 2010 ONSC 5506, [2011] I.L.R. I-5066 (S.C.J.), consd
Statutes referred to
Insurance Act, R.S.O. 1990, c. I.8, s. 277 [as am.], (1.1)
APPLICATION to determine which insurer was responsible for responding to a claim.
Joseph Lin, for applicant.
Bronwyn M. Martin, for respondent.
[1] PERELL J.: — This is an application to determine which of two insurance companies is responsible under s. 277 of the Insurance Act, R.S.O. 1990, c. I.8 to respond to a personal injury claim arising from a motor vehicle accident. The contest is between the applicant, Intact Insurance Company of Canada, the personal automobile insurer of Shahram Ashrafi, and American Home Assurance Company of Canada, the insurer of WorleyParsons, formerly Colt Engineering, which is Mr. Ashrafi's employer.
[2] The specific issue to be determined is which of Mr. Ashrafi or his employer was the "lessee" of a vehicle rented from Budget Car Rental. The rented vehicle was driven by Mr. Ashrafi on February 4, 2008, and it collided with another vehicle, injuring the passenger in that vehicle, who sued Mr. Ashrafi. In this application, Intact submits that the lessee of the vehicle was in fact and law Mr. Ashrafi's employer and that the employer's insurer, American Home, is the first loss insurer for the automobile negligence claim. This submission is denied by American Home.
[3] The dispute between Intact and American Home is about the application of s. 277 of the Insurance Act, which determines the order in which the third party liability provisions of any available motor vehicle liability policies shall respond in respect of liability arising from the use or operation of an automobile. Section 277 states:
Other insurance
277(1) Subject to section 255, insurance under a contract evidenced by a valid owner's policy of the kind mentioned in the definition of "owner's policy" in section 1 is, in respect of liability arising from or occurring in connection with the ownership, or directly or indirectly with the use or operation of an automobile owned by the insured named in the contract and within the description or definition thereof in the policy, a first loss [page710] insurance, and insurance attaching under any other valid motor vehicle liability policy is excess insurance only.
Order in which policies are to respond
(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:
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.
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.
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.
Lessee defined
(4) In this section,
"lessee" means, in respect of an automobile, a person who is leasing or renting the automobile for any period of time, and "leased" has a corresponding meaning.
[4] The background facts are that Colt Engineering (WorleyParsons) has a commercial general liability insurance policy with American Home. This policy provides automobile accident coverage if an employee is involved in [a] motor vehicle accident in the course of his or her employment.
[5] Mr. Ashrafi, an employee of Colt Engineering in Calgary, came to Toronto for business purposes. He rented a 2008 Jeep from Budget Car Rental using a personal credit card provided to him by Colt Engineering for which he was reimbursed for the rental expense.
[6] The car rental agreement with Budget Car Rental was signed by Mr. Ashrafi. He used a personal American Express credit card that had been purchased for him by Colt Engineering. Mr. Ashrafi was entitled to use the credit card for business and personal expenses. Under Colt Engineering's corporate policy, Mr. Ashrafi was responsible for his credit card charges, but he was entitled to be reimbursed for his business expenses. [page711]
[7] Colt Engineering's policy about its corporate credit card program is set out in a memorandum which states:
As everyone should be aware, we have a corporate policy requiring the use of your Corporate American Express (AMEX) Card when travelling on Colt business. Your card should be used for expenses such as airline tickets, car rentals, hotel and meal expenses whenever possible. This program was implemented to enable the tracking of travel costs as well as providing costs savings, particularly in the area of CDW Insurance on rental vehicles, and to provide additional security and convenience while doing business for Colt. As indicated in the Employee Reference Manual, AP-103, Section 5.11, Rental Cars, anytime a vehicle is rented in the name of Colt (or Cord) the Collision Damage Waiver (CDW) is to be waived as the Colt Corporate AMEX card provides CDW coverage.
Attached is a summary of the coverage provided on rental vehicles and the process to follow in case of accident. This information should be kept in a convenient location should you need it.
Most rental vehicles for our normal business practices should fall into this category. If, for whatever reason, you choose to use your own credit card to reserve and pay for a rental vehicle when doing business on behalf of Colt, it is your responsibility to ensure that you have adequate coverage in place. Should you decide to take the CDW coverage as provided by the rental company, please be aware that this is not a reimburseable cost by Colt or our clients.
[Emphasis in original]
[8] For the purposes of this application, it is common ground that Mr. Ashrafi was working when his rented vehicle was involved in an accident with another vehicle. The passenger of the other vehicle has sued Mr. Ashrafi and Colt Engineering.
[9] As noted above, Intact, which is Mr. Ashrafi's insurer, submits that Mr. Ashrafi was not the "lessee" under s. 277 of the Insurance Act because the genuine lessee was Colt Engineering, on whose behalf Mr. Ashrafi was engaged on business when he signed the contract with Budget Car Rental and from which he would be and from which he was in fact reimbursed for the expense of renting the car.
[10] Intact argues that Colt was the lessee of the car rented from Budget Car Rental. It states, in para. 6 of its supplemental factum:
Intact submits that Colt was the de facto lessee of the Jeep on February 4, 2008. Colt set the terms of rental for Mr. Ashrafi. Colt controlled the type of vehicle being rented, the way in which the vehicle was rented, the place the vehicle was rented, and what Mr. Ashrafi could and could not charge pertaining to the rental vehicle.
[11] Intact argues that it is necessary to identify the genuine lessee in order for s. 277(1.1) to operate, because s. 277(1.1) identifies three insurance policies and three categories of insured person; i.e., (1) insurance under which the lessee (Colt) is [page712] entitled to an indemnity; (2) insurance under which the driver (Mr. Ashrafi) is entitled to an indemnity; and (3) insurance under which the owner of the vehicle (Budget Car Rental) is entitled to an indemnity.
[12] Intact submits it would not make for a sensible operation of the section if a driver, who would be second in the ordering provided by s. 277(1.1), was to move to the position of first loss insurance when the driver was renting the vehicle for his or her employer's purposes. Intact also submits that there is something unfair in the circumstances when American Home, which agreed to provide insurance for Colt Engineering's employees, is not the first loss insurer.
[13] In support of its argument, Intact relies on Morrison v. Ashley (2012), 2012 ONSC 745, 108 O.R. (3d) 663, [2012] O.J. No. 435 (S.C.J.) and Coachman Insurance Co. v. Lombard General Insurance Co. of Canada (2011), 2011 ONSC 1655, 105 O.R. (3d) 475, [2011] O.J. No. 1236 (S.C.J.).
[14] American Home submits that the definition of lessee in s. 277(1.1) is clear and specific and Mr. Ashrafi is a lessee. It submits that there is no reason to delve into who is the de facto lessee and to interpret lessee by reference to inquiries about the purpose of the rental of the vehicle or about the manner of payment or reimbursement for the car rental expense. It submits that there is no reason to depart from the ordinary meaning of the term "lessee", and its plain and ordinary meaning is that it includes the person who enters into a car rental agreement with a car rental company.
[15] American Home relies on Nguyet v. King, [2010] O.J. No. 4418, 2010 ONSC 5506 (S.C.J.) in support of its argument.
[16] The case at bar, is a matter of first impression. I do not find the cases cited by the parties helpful in resolving the dispute between the parties. The cases do not deal with the definition of lessee, and while they deal with s. 277 of the Insurance Act, they address different problems that are not helpful to discuss.
[17] As a matter of first impression, I agree with American Home's argument. I see no unfairness in a straightforward interpretation of the section, and I see no reason to give s. 277 a reading that would introduce the concept of "de facto lessee" and encourage factual and legal disputes between insurers about how employment law, agency law, corporate law, partnership law and the law of contract might apply to cast doubt on who is a lessee under s. 277 of the Insurance Act.
[18] Who is the lessee can be tested and determined by asking the following question: Who can the lessor (Budget Car Rental) sue to enforce the car rental contract? In the case at bar, the [page713] answer to this question is Mr. Ashrafi. In the case at bar, the privity of contract was between Budget Car Rental and Mr. Ashrafi. This is not a case where Colt Engineering signed a car rental contract; this is a case where Mr. Ashrafi signed a car rental contact. As it happens, Mr. Ashrafi is entitled to be reimbursed for the rental expense by Colt Engineering but that is a matter between him and Colt Engineering. There is no privity of contract between Budget Car Rental and Colt Engineering.
[19] I see no unfairness in this straightforward analysis, and I do not understand how the fact that Intact as the insurer of a driver would rank second under s. 277(1.1) means that Intact as the insurer of a lessee should not rank as first loss insurer under s. 277(1.1).
[20] I, therefore, dismiss Intact's application.
[21] If the parties cannot agree about the matter of costs, they may make submissions in writing, beginning with American Home within 20 days of the release of these reasons for decision followed by Intact's submissions within a further 20 days.
[22] Order accordingly.
Application dismissed.
End of Document