Xu, by his Litigation Guardian Huang, et al. v. Mitsui Sumitomo Insurance Company Limited et al.

[Indexed as: Xu (Litigation Guardian of) v. Mitsui Sumitomo Insurance Co. Ltd.]

Ontario Reports

Ontario Superior Court of Justice,

McEwen J.

April 8, 2014

119 O.R. (3d) 587 | 2014 ONSC 167

Case Summary

Insurance — Automobile insurance — Leases — Section 267.12 of Insurance Act precluding lessee from coverage under lessor's insurance policy beyond $1 million cap — Insurance Act, R.S.O. 1990, c. I.8, s. 267.12.

The applicant was a passenger in a vehicle leased and operated by L when he was injured in a collision with a vehicle operated by T. He commenced an action against L, T and the lessor of L's vehicle, TCCI. L and T's insurers had each offered to admit liability for the accident of at least one per cent and had each offered to tender their policy limits of $1 million. The applicant brought an application to determine whether he could access TCCI's insurance through L via the lease L entered into with TCCI. Before the accident, the provincial government introduced Bill 18, which amended s. 267.12 of the Insurance Act to limit the liability of automobile lessors, in certain circumstances, to $1 million. After the accident, the Superintendent of Financial Services approved the OEF 110 endorsement to the Standard Excess Policy Form No. 7. The OEF 110 states that the lessor's policy restricts coverage of the lessee or driver of the leased vehicle to $1 million, where necessary. The applicant argued that it was not until the enactment of the OEF 110 that it was expressly stated that no coverage was available to lessees under lessors' insurance. It was the applicant's position that in the interim, a gap existed whereby lessors were protected from exposure to claims over $1 million pursuant to s. 267.12, but lessees did not enjoy the same protection, and were therefore insured under lessors' policies.

Held, the application should be dismissed.

Section 267.12 of the Act clearly precludes a lessee from coverage under a lessor's insurance policy beyond the $1 million cap. The legislative intent behind Bill 18 was to protect lessors by reducing their exposure in personal injury lawsuits. If the applicant's argument was accepted and lessors' insurers were exposed to judgments over $1 million via lessees as unnamed insureds, the effect of the legislation would be nullified. Moreover, the presumption of coherence provides that the provisions of legislation are meant to work together as part of a functioning whole. The applicant's argument, if accepted, would create an apparent inconsistency between ss. 239, 244 and 267.12 of the Act. Interpreting ss. 239 and 240 to allow a lessee to access a lessor's policy for amounts greater than $1 million clearly conflicts with s. 267.12. On the other hand, the interpretation [page588] that s. 267.12 caps liability for lessors to $1 million does not necessarily have a contradictory effect on the operation of ss. 239 and 244.

Avis Rent A Car System, Inc. v. Certas Direct Insurance Co. (2005), 2005 16075 (ON CA), 75 O.R. (3d) 421, [2005] O.J. No. 1951, 197 O.A.C. 214, 22 C.C.L.I. (4th) 159, [2005] I.L.R. I-4413, 18 M.V.R. (5th) 61, 139 A.C.W.S. (3d) 359 (C.A.); Guardian Insurance Co. of Canada v. York Fire & Casualty Insurance Co., [1992] O.J. No. 3199 (C.A.); ING Insurance Co. of Canada v. Lombard General Insurance Co. (2009), 98 O.R. (3d) 522, [2009] O.J. No. 3021, 2009 ONCA 570, 77 C.C.L.I. (4th) 46, 82 M.V.R. (5th) 147, 179 A.C.W.S. (3d) 195; 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.), consd

Other cases referred to

Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 2002 SCC 42, 212 D.L.R. (4th) 1, 287 N.R. 248, [2002] 5 W.W.R. 1, J.E. 2002-775, 166 B.C.A.C. 1, 100 B.C.L.R. (3d) 1, 18 C.P.R. (4th) 289, 93 C.R.R. (2d) 189, REJB 2002-30904, 113 A.C.W.S. (3d) 52; Rizzo & Rizzo Shoes Ltd. (Re) (1998), 1998 837 (SCC), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, 154 D.L.R. (4th) 193, 221 N.R. 241, J.E. 98-201, 106 O.A.C. 1, 50 C.B.R. (3d) 163, 33 C.C.E.L. (2d) 173, 98 CLLC Â210-006, 76 A.C.W.S. (3d) 894

Statutes referred to

Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25 [as am.]

Highway Traffic Act, R.S.O. 1990, c. H.8 [as am.], s. 192(3)

Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 1 [as am.], Part VI [as am.], ss. 227(2), 239 [as am.], (1), 240, 244, 267.12 [as am.], (1), 277, (1.1)

Legislation Act, 2006, S.O. 2006, c. 21, s. 64(1)

Authorities referred to

Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983)

Ontario, Legislative Assembly, Official Reports of Debates (Hansard), 38th Parl., 2nd Sess. (November 22, 2005) at 1033 (Wayne Arthurs)

Sullivan, Ruth, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis, 2008)

APPLICATION for a determination of a question of law.

David F. MacDonald and Michael Bennett, for applicants.

Paul Tushinski and Eric J. Adams, for respondents.

MCEWEN J.: —

Overview

[1] On June 20, 2006, the applicant Jie (Jay) Xu ("Xu") was a passenger in a motor vehicle leased and operated by Jianhua Lu ("Lu"). They collided with a motor vehicle operated by Josephine Tui ("Tui"). Lu leased the vehicle from its owner, Toyota Credit Canada Inc. ("TCCI"). [page589]

[2] Xu sustained physical injuries as a result of the accident. Xu and the other applicants have commenced an action in the Superior Court of Justice bearing court file no. 06-CV-32489-PD1 against Lu, TCCI and Tui.

[3] Lu and Tui's insurers have each offered to admit liability for the accident of at least 1 per cent, and have each offered to tender their policy limits of $1 million. The issue on this application is whether the applicants can access TCCI's insurance through Lu via the lease he entered into with TCCI. The respondents are TCCI's insurers. On the parties' consent, the applicants brought this motion to determine a question of law on a special case based on an agreed statement of facts ("ASF") contained in the motion record. It should be noted that the respondents did not agree to para. 17 of the ASF.

[4] On March 1, 2006, prior to the date of the motor vehicle accident, the provincial government introduced Bill 18, Budget Measures Act, 2005 (No. 2). It provided for, amongst other things, amendments to the Insurance Act, R.S.O. 1990, c. I.8 and the Highway Traffic Act, R.S.O. 1990, c. H.8. Specifically, s. 267.12 of the Insurance Act was amended to limit the liability of automobile lessors, in certain circumstances, to $1 million. The section does not mention the liability of lessees.

[5] Subsequent to the motor vehicle accident, specifically on January 1, 2008, the Superintendent of Financial Services (the "superintendent") approved the OEF 110 endorsement, Reduced Coverage for Lessees or Drivers of Leased Vehicles ("OEF 110"). It is to be attached to the Standard Excess Policy Form ("SPF") No. 7. The OEF 110 states that the lessor's policy restricts coverage of the lessee or driver of the leased vehicle to $1 million, where necessary.

[6] The applicants submit that between the implementation of Bill 18 and the approval of the OEF 110, a "legislative gap" existed with respect to lessees. The applicants contend that the plain wording of s. 267.12 did not extend protection to lessees. They argue that it was not until the enactment of the OEF 110 that it was expressly stated that no coverage is available to lessees under lessors' insurance. It is the applicants' position that in the interim, a gap existed whereby lessors were protected from exposure to claims over $1 million pursuant to the provisions of s. 267.12, but lessees did not enjoy the same protection, and were therefore insured under lessors' policies. As a result, the applicants argue that the respondents, as the insurers of TCCI, are obligated to provide coverage to Lu as an unnamed insured up to the full amounts of TCCI's insurance. Of note, the applicants concede that if the accident had occurred after the OEF 110 was approved, Lu would have no insurance available to him through TCCI. [page590]

[7] The respondents, on the other hand, submit that s. 267.12 of the Insurance Act completely limited the exposure of lessors' insurers to $1 million, whether claims were brought against lessors, lessees or drivers. They submit that the OEF 110 only clarified the legislative regime already in place by stating that lessors' policies provide no coverage for the lessee or driver. The respondents further submit that there was no coverage under the relevant insurance policies in any event, given the terms of the policies and the relevant provisions of the Insurance Act.

Bill 18

[8] Bill 18 provided for an array of legislative amendments to the Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25, the Highway Traffic Act and the Insurance Act.

[9] Section 192(3) of the Highway Traffic Act was amended to extend vicarious liability for the negligence of lessees. Section 192(3) states as follows:

192(3) A lessee of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway, unless the motor vehicle or street car was without the lessee's consent in the possession of some person other than the lessee or the lessee's chauffeur.

[10] Significant amendments were made to the Insurance Act. First, s. 267.12 was enacted, limiting the liability of lessors to $1 million. Further, s. 277(1.1) was enacted, altering the order of priority in which lessees' and lessors' policies are to respond. Previously, the lessor's policy was first loss insurance. This was changed so that the lessee's policy (and driver's policy, if any) would respond first, with the lessor's policy responding thereafter.

[11] Sections 267.12 and 277(1.1) read as follows:

Liability of Lessors

267.12(1) Despite any other provision in this Part, except subsections (4) and (5), in an action in Ontario for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of a motor vehicle that is leased, 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 is the amount determined under subsection (3) less any amounts,

(a) that are recovered for loss or damage from bodily injury or death under the third party liability provisions of contracts evidenced by motor vehicle liability policies issued to persons other than a lessor;

(b) that are in respect of the use or operation of the motor vehicle; and

(c) that are in respect of the same incident. [page591]

Same

(2) For the purposes of subsection (1), the amounts referred to in clauses (1)(a), (b) and (c) include only amounts recovered under the coverages referred to in subsections 239(1) and (3) and section 241 and exclude,

(a) any sum referred to in subsection 265(1);

(b) any amount payable as damages by the Motor Vehicle Accident Claims Fund under the Motor Vehicle Accident Claims Act; and

(c) any other amounts determined in the manner prescribed by the regulations.

Maximum amount

(3) The maximum amount for the purposes of sub-section (1) is the greatest of,

(a) $1,000,000[.]

Order in which Policies are to Respond

277(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.

[The remainder of the judgment continues verbatim in the same structure through paragraph [70], concluding with:]

[69] For the reasons above, the stated question is to be answered in the negative and the respondents are not required to indemnify Lu in 06-CV-324289-PD1. The application is dismissed.

[70] The respondents are to receive their costs in the amount of $50,000, which amount was not objected to by the applicants.

Application dismissed.

End of Document