O'Connell v. The Personal Insurance Company

[Indexed as: O'Connell v. Personal Insurance Co.]

Ontario Reports

Ontario Superior Court of Justice,

McNamara J.

March 24, 2014

119 O.R. (3d) 493 | 2014 ONSC 1469

Case Summary

Insurance — Automobile insurance — Statutory conditions — Insured permitting his 23-year-old girlfriend to drive his vehicle alone — Girlfriend not telling insured that she had G1 class driver's licence — Insured having seen girlfriend produce her driver's licence for identification and having been in car which she was driving — G class licence and G1 class licence being visually almost identical — Insured not breaching statutory condition by permitting unauthorized person to drive his vehicle as he took all reasonable and prudent precautions to ensure that statutory condition was not contravened.

The applicant permitted his 23-year-old girlfriend of five months, S, to drive his vehicle alone. She was involved in a motor vehicle accident on Highway 417. S had not told the applicant that she only had a G1 driver's licence, which did not permit her to operate a motor vehicle without a fully licensed driver in the car with her or to drive on a 400 series highway. When the applicant was sued as the owner of the vehicle as a result of the accident, the respondent, his automobile insurer, denied him a defence and indemnity on the basis that he had breached statutory condition 4(1) of O. Reg. 777/93 and s. 1.4.5 of the Ontario Automobile Policy by permitting an unauthorized person to drive his vehicle. The applicant brought an application for a declaration that the respondent owed him a defence and indemnification.

Held, the application should be allowed.

The applicant had seen S produce her driver's licence for identification, and had been in a car which she was driving. The G class licence and the G1 class licence were visually almost identical. The applicant acted as reasonably and prudently as any other average individual would act in similar circumstances. Consequently, it could not be said that he contravened the statutory condition. [page494]

Cases referred to

Miller (Litigation guardian of) v. Carluccio (2008), 91 O.R. (3d) 638, [2008] O.J. No. 1830, 2008 ONCA 370, 60 C.C.L.I. (4th) 168, 60 M.V.R. (5th) 176, [2009] I.L.R. I-4760, 165 A.C.W.S. (3d) 1096

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8 [as am.]

Rules and regulations referred to

O. Reg. 777/93 (Insurance Act), s. 4(1)

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14.05(3), 57.01(1)

APPLICATION by the insured for a declaration that the insurer owed him a defence and indemnification.

Jaye E. Hooper, for applicant.

Debbie Orth, for respondent.

MCNAMARA J.: —

Overview

[1] This is an application brought by Kristopher O'Connell pursuant to rule 14.05(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for a declaration that the respondent insurer owes him a defence and indemnification under a policy of the motor vehicle insurance and relating to litigation arising out of a motor vehicle accident that occurred on or about May 30, 2006.

Background/Facts

[2] The facts are not materially in dispute.

[3] The applicant in May of 2006 was 23 years of age and employed by the Canadian Imperial Bank of Commerce. At that time, he was dating a woman, Jessica Smith. Their relationship had begun some five months prior to the date of the accident.

[4] The applicant gave evidence both on discovery and in an affidavit filed in this proceeding that in May of 2006 he knew Ms. Smith had a driver's licence because he had seen her showing it to gain entry into bars and clubs when they would go out. She was apparently quite youthful in appearance and was often asked to show identification demonstrating that she was of age. The applicant does not remember if he ever asked her what type of licence it was and she never said anything to him. He also gave evidence that he had been in a car with her when she was behind the wheel, and she told him anecdotes over their time together where she was the driver of a vehicle. [page495]

[5] On May 30, 2006, Ms. Smith was moving from her old apartment to her new one. She had a cat and asked the applicant if she could borrow his car on moving day to transport the cat and some small incidental items as part of the move. The applicant agreed to lend her the car and it was arranged that she would drive him to work and then carry on with the car with the items to her new apartment.

[6] Later that day, Ms. Smith called to advise the applicant that she had been in an accident on Highway 417.

[7] Ms. Smith was examined under oath and testified that she did not tell the applicant at any time prior to the day of the accident, or in the immediate aftermath of it, that she only had a G1 driver's licence. It is common ground that G1 drivers cannot operate a motor vehicle without a fully licensed driver in the car with them, nor can they be on a 400 series highway. Her explanation on discovery for not telling the applicant about her class of licence was that she was embarrassed that at age 23 she still did not have a full licence.

[8] The evidence suggests that a full G class and a G1 class licence appear visually identical except for a small letter on the front of the licence.

[9] In May of 2008, the applicant was served with a statement of claim wherein an individual sought compensation as a result of the accident. He contacted the respondent, and provided a full statement. In due course, the respondent denied defence and indemnity on the basis that the applicant had breached s. 4(1) of O. Reg. 777/93 of the Insurance Act, R.S.O. 1990, c. I.8 and had breached s. 1.4.5 of the Ontario Automobile Policy (on or after June 1, 2005) ("OAP 1").

Position of the Parties

[10] The applicant argues that, taking a contextual approach to the evidence, Mr. O'Connell, prior to lending his vehicle, had taken reasonable and prudent precautions to see that the statutory condition was not contravened and in those circumstances, in law, he has met the onus on him and is entitled full defence and indemnity under the policy.

[11] The respondent argues that an insured must indeed take reasonable steps to ensure any driver driving his or her vehicle has a valid licence, that that involves taking proactive steps and that the applicant, on the facts, in essence took no steps.

Analysis

[12] O. Reg. 777/93 of the Insurance Act provides at s. 4(1) as follows: "The insured shall not drive or operate or permit any [page496] other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it."

[13] The OAP 1 provides at s. 1.4.5 as follows: "You agree not to drive or operate the automobile, or allow anyone else to drive or operate the automobile, when not authorized by law."

[14] In this case, the issue is, obviously, not whether the insured drove or operated the vehicle when not authorized by law to do so, but rather whether he permitted any other person to drive or operate the vehicle when that person was not authorized by law. The case law that has developed when that is the fact situation, much of which was supplied by counsel in their materials, indicates that the test to determine whether an insured permitted the use of their vehicle by an unauthorized driver, thus breaching the statutory condition, is whether the facts establish that the insured took all "reasonable and prudent precautions" to see that the statutory condition was not contravened. An insured would also, of course, contravene the condition if he or she knew the individual was not authorized to drive or was willfully blind to that fact.

[15] The matter was concisely put by the Ontario Court of Appeal in Miller (Litigation guardian of) v. Carluccio (2008), 91 O.R. (3d) 638, [2008] O.J. No. 1830, 2008 ONCA 370; at para. 6 of that decision, it provides, in part, as follows:

The corporate appellant is off coverage if it "permitted" Pat to drive the vehicle while he was not authorized by law to do so. We think the word "permits" connotes knowledge, wilful blindness, or at least a failure to take reasonable steps to inform one's self of the relevant facts: see Peters v. Saskatchewan Government Insurance Office, 1956 203 (SK CA), [1956] 18 W.W.R. 80 (Sask. C.A.); 2 D.L.R. (2d) 589 Co-Operative Fire & Casualty Co. v. Ritchie et al., 1983 155 (SCC), [1983] 2 S.C.R. 36.

[16] There is no evidence on this application that the applicant had knowledge or was willfully blind to the driver's licence status. The issue then, as is often the case, is whether the applicant took reasonable steps to inform himself as to whether or not the driver was authorized by law to operate or drive the vehicle. In terms of what are reasonable steps, the case law clearly establishes that that is a question of fact, and the relationship of the insured to the driver is an important factor.

[17] In this case, the applicant insured and the driver were boyfriend and girlfriend and had been for some five months. That, in my view, is a relationship of trust. The applicant knew Ms. Smith had a licence because he had seen her use that licence as a means of official identification, and it looked no different than his own licence. He had also been in a car when she was the driver, and had heard anecdotes involving driving. Very significantly, she never informed him at any time pre-accident, including the day she borrowed the car, that her licence had limitations. There is no evidence he had any basis to suspect that she would withhold that crucial information from him, and it would be reasonable for him, in their circumstances, to assume she would not do that.

[18] Having regard to the facts, it is my view that the applicant acted as reasonably and prudently as would any other average individual in similar circumstances. In consequence, it cannot be said the applicant contravened the statutory condition.

[19] I have reviewed the costs submissions of both parties. The applicant having succeeded on the motion is entitled to costs. Taking into account the factors in rule 57.01(1), I am of the view that an award of costs of $15,000 plus HST and disbursements would be reasonable and proportionate.

Application allowed.

End of Document