CITATION: Royal & Sun Alliance v. American Commercial Insurance Co., 2015 ONSC 3518
COURT FILE NO.: CV-14-510103
DATE: 20150603
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Royal & Sun Alliance Insurance Company of Canada, Applicant
– AND –
American Commercial Insurance Company of Canada, Respondent
– AND –
Usman Ahmed, Intervener
BEFORE: Justice E.M. Morgan
COUNSEL: Frank Costontini, for the Applicant
Patrick Monaghan, for the Respondent
Sandi Smith, for the Intervener
HEARD: March 20, 2015
ENDORSEMENT
I. Nature of the application
[1] The Applicant seeks a declaration regarding priority of insurance coverage as between itself and the Respondent. The coverage relates to injuries suffered by Usman Ahmed in a motor vehicle accident that occurred on Highway 401 near Belleville, Ontario on October 11, 2007. The Application is brought under Rules 14 and 21 of the Rules of Civil Procedure for a determination of a question of law.
[2] The Applicant is Mr. Ahmed’s insurer and the Respondent is Mr. Ahmed’s employer’s insurer. Mr. Ahmed himself is a not a party to the Application, although he participated as an intervener in the proceedings through his counsel, who made both oral and written submissions on his behalf.
[3] Mr. Ahmed has brought separate claims against the Applicant and the Respondent. By order of Whitaker J. dated March 16, 2015, the two actions have been ordered to be tried together. A trial is scheduled for September 2015. It is the Applicant’s view that a determination of the priority question as between the two competing insurance companies will be an efficient way to resolve one of the issues of contention prior to the trial commencing.
[4] The Respondent submits that there are material facts in dispute which bar the Applicant from proceeding in this way. It contends that in order to decide the case as framed by the Applicant, the court will be required to make a series of substantive determinations as to the conduct of the parties, and for that reason the Application is not an appropriate one. It submits that the matters in issue here will be directly before the trial judge, and it is best to leave them for the trial to be determined within the context of the trial judge’s findings of fact.
[5] Mr. Ahmed supports the Respondent’s position that this is not the proper procedure for making the determination sought by the Applicant. He submits that the declaration sought by the Applicant will impact substantively on his rights in the upcoming trial, and that it is not appropriate for the court to make a determination of his rights in a proceeding like the present one, where he is not a full party.
II. Factual background
[6] The facts in the record before me are somewhat sparse, for the most part based on pleadings in Mr. Ahmed’s actions against the Applicant and the Respondent. As indicated, those actions have not yet gone to trial and there are no actual findings of fact. Accordingly, any facts that I rely upon are necessarily of a tentative nature. My setting them out here reflects the submissions of counsel before me rather than a factual determination by me.
[7] This priority dispute relates to a motor vehicle accident in which Mr. Ahmed was apparently struck by an unidentified truck on the side of the highway. The unidentified motorist did not stop and has never been located.
[8] According to the pleadings in Mr. Ahmed’s action against the Applicant, immediately prior to the accident Mr. Ahmed had been driving a truck owned by his employer, Armbro Transport Inc. (“Armbro”). His record of employment, which he produced during the discovery process in the action against the Applicant, states that he was indeed employed by Armbro as a truck driver. Mr. Ahmed claims that he was struck outside of Armbro’s truck, at a time when he had pulled over and was walking around the vehicle to check the tires.
[9] Mr. Ahmed was at all relevant times insured by the Applicant under a policy which included uninsured, unidentified and underinsured motorist coverage. Armbro was at all relevant times insured by the Respondent, likewise under a policy which included uninsured, unidentified, and underinsured motorist coverage.
[10] The priority dispute as framed by the Applicant raises the question of which of these two insurers is responsible for coverage of Mr. Ahmed’s claim. In the ordinary course, this would be the type of issue arising between two insurance companies that could be determined as a matter of law and contract interpretation in a Rule 14 application. There would be no practical impact on the insured, who would be a not be a party in the application. Only the bare facts of the insured’s claim such as those set out above would need to be explained to the court.
III. Timing of the proceedings
[11] In the present case, however, things have not proceeded in the ordinary course. The timing of the Applicant’s questioning of priority has raised a limitations and/or estoppel issue which adds a layer of complexity to the question that goes beyond the straightforward priority dispute as presented in the Application.
[12] Several months after the accident, on December 11, 2007, Mr. Ahmed provided a statement to the Applicant’s adjuster, who in turn issued a report dated December 13, 2007 based on his investigations, including Mr. Ahmed’s statement. Section 6(5) of Ontario Reg. 676 under the Insurance Act, RSO 1990, c. I.8, requires a claimant to provide his or her insurer with details of any other insurance policy that might apply. Mr. Ahmed never did this with respect to the Respondent, and the Applicant never asked him about the Respondent or its coverage at any point until six years had passed.
[13] The reason for the delay in this regard is unclear. It is not, however, because there was nothing to alert the Applicant to the issue. In his December 2007 statement to the adjuster, Mr. Ahmed made it clear that he was struck by the unidentified vehicle during the course of the work day, that he worked for Armbro and that it was Armbro’s vehicle that he was operating and whose tires he was inspecting when he was injured. Mr. Ahmed did not know the name of Armbro’s insurer, although he indicated that he thought he was listed as a driver under Armbro’s auto policy.
[14] The Applicant paid the first party statutory accident benefits claim submitted by Mr. Ahmed as a result of the accident. It is apparent that the Applicant never contended that Mr. Ahmed’s statutory accident benefits claim was the responsibility of the Respondent.
[15] Mr. Ahmed issued a Statement of Claim against the Applicant on October 6, 2009 seeking compensation under his unidentified motorist coverage. This was issued just days before expiry of the two year limitation period. The Applicant served a Statement of Defense in that action on January 26, 2010. In its pleading, the Applicant admitted that Mr. Ahmed is covered under its automobile insurance contract, which contains the statutorily required unidentified motorist coverage. The Applicant’s Statement of Defense did not dispute priority for coverage, nor did it state that the Respondent or any other insurer stood in priority to it. The Applicant brought no Third Party Claim in Mr. Ahmed’s action, and the Respondent was never made a party to that action.
[16] At some point late in the discovery process – apparently in the latter half of 2013 – the Applicant suggested that it was not the correct insurer in the context of Mr. Ahmed’s accident, and that Mr. Ahmed was in fact an operator of Armbro’s vehicle and not a pedestrian at the time of the accident. As a result of this position taken by the Applicant, Mr. Ahmed issued a Statement of Claim against the Respondent on December 23, 2013 seeking unidentified motorist coverage under Armbro’s policy with the Respondent. Mr. Ahmed’s pleading specifically states that the action is brought due to the recent suggestion by the Applicant that it is not responsible for the unidentified motorist coverage that he seeks.
[17] It is the Respondent’s position that the Applicant has estopped itself from raising an issue of priority for payment of Mr. Ahmed’s unidentified motorist claim. Counsel for the Respondent states in his factum that this issue was never raised by the Applicant until late 2013, after pleadings had closed, productions had been exchanged, discoveries had been conducted, the mandatory mediation completed and the matter set down for trial. Respondent’s counsel submits that this unexplained passage of six years since the date of the accident and since the facts were all known or potentially known by the Applicant gives rise to the equitable doctrines of estoppel and laches, and that the priority claim by the Applicant must therefore be dismissed.
[18] It is Mr. Ahmed’s position that the Applicant’s late denial of priority for payment of his unidentified motorist claim required him to bring an action against the Respondent in December 2013, after six years had passed from when his cause of action arguably arose. His counsel submits that a determination of the priorities issue posed by the Applicant may impact on his substantive rights, since s. 265 of the Insurance Act and s. 8(3) of Ontario Regulation 676 under that Act require that a claim be brought within two years. Thus, if the Applicant’s priority claim is successful, Mr. Ahmed may find himself without any insurance claim arising out of the October 2007 accident.
[19] Counsel for Mr. Ahmed therefore asks that no ruling be made in the present Application that could potentially prejudice Mr. Ahmed. She submits that there are numerous facts that are in issue and that would have to be determined in order to ascertain whether estoppel or laches applies as argued by the Respondent. She states that, under the circumstances, the priority issue is far from a discreet pre-trial issue, and that it should not be made in the absence of a full trial record.
IV. The priority battle and the trial
[20] Applicant’s counsel submits that the issue at stake is strictly one of law – i.e. priority among two insurers based on a proper reading of the Insurance Act and regulations thereunder – and that it entails no determination of any material fact. For that reason, he says that this matter can be decided in advance of trial under either Rule 14 or Rule 21.
[21] Counsel for the Applicant also submits that the only real issue is whether Mr. Ahmed was a pedestrian or an operator of his employer’s vehicle at the time of the collision. He says that the limitations and estoppel arguments put forward by the Respondent are distractions from the real question, which revolves around Mr. Ahmed’s specific circumstances at the time of the accident.
[22] With respect, it seems evident when the Applicant’s two statements are put back-to-back, the Applicant’s position is internally inconsistent. Priority may be a question of law, but ‘pedestrian vs. operator’ is certainly a question of fact. Counsel for the Applicant argues that the facts can be filled in by reference to the pleadings, but as counsel for the Respondent points out, the pleadings do not exactly establish the clear facts that the Applicant needs to make his point.
[23] In the Applicant’s defense to Mr. Ahmed’s claim, there is no statement that Mr. Ahmed was an operator of his employer’s vehicle and that therefore Armbro’s insurer takes priority over the claim. Ironically, the Applicant points to statements in Mr. Ahmed’s Statement of Claim that support its position that it is the Respondent that has priority and is responsible for the unidentified motorist coverage under the circumstances, while the Respondent points to statements in the Applicant’s Statement of Defense that support its position that it is the Applicant that has first priority and is responsible for this claim.
[24] In other words, the pleadings do not tell a sufficiently coherent story for a judgment to issue on that basis. There is a need for an evidentiary record in order to make the determination that the Applicant calls for, and that evidentiary record will be established at trial in September.
[25] Of equal importance is the Respondent’s position that the Applicant has some explaining to do with respect to its delay in bringing a claim. As counsel for the Respondent points out, the Applicant learned that Mr. Ahmed was driving his employer’s truck when as early as December 2007. The Applicant nevertheless covered Mr. Ahmed’s statutory benefits without asserting that the Respondent has prior responsibility. Respondent’s counsel states that this approach by the Applicant, in turn, caused Mr. Ahmed to prejudice himself with respect to any claim he may have against the Respondent by failing to put the Respondent on notice until very late in the day.
[26] The Ontario Court of Appeal indicated in McArdle v Bugler (2007), 2007 ONCA 659, 87 OR (3d) 433, at para 8, that if an insured is entitled to statutory accident benefits, he is also entitled to uninsured and unidentified motorist coverage. This may still leave open the question of whether both coverages must necessarily come from the same insurer. However, and without reaching any binding determination of the issue, I would observe that in order to succeed the Applicant must establish the counter-intuitive proposition that insurer ‘B’ can be made to step in at the later stage once insurer ‘A’ has covered the statutory benefits.
[27] Mr. Ahmed issued his claim against the Applicant in October 2009 and the Applicant defended the claim in November 2009 without asserting that the Respondent has any responsibility and without bringing the Respondent into the claim. The Applicant and Mr. Ahmed went all through the discovery process, giving the Applicant every opportunity to learn all of the detailed circumstances surrounding the accident and the claim; nevertheless, the Applicant never took the position that the Respondent is in any way responsible.
[28] For the Applicant to suddenly assert at the end of the discovery process that it has a new position vis-à-vis responsibility for the unidentified motorist coverage raises a serious question. As indicated, the Respondent contends that estoppel or laches applies. Having seen the litigation between Mr. Ahmed and the Applicant proceed without the Applicant ever bringing the Respondent in by way of Third Party Claim or indicating in any other way that it held the Respondent responsible, the Respondent understood that any potential liability to Mr. Ahmed could long ago be taken off its books.
[29] There may, of course, be some explanation that justifies the Applicant’s delay in this regard, but I do not think that the Applicant would like the court to make this decision on the basis of the record before me. The Applicant has put forward no evidence as to why it held out this long in asserting the priority issue. It will be for the parties at trial to establish a sufficient record in this regard.
[30] Finally, neither the pedestrian vs. operator issue nor the estoppel/laches issue can be properly addressed without the full participation of Mr. Ahmed. As counsel for Mr. Ahmed points out, this is not a case where the insured has been paid and now there is an ex post facto dispute among insurers; rather, here the Applicant requests a ruling that will determine whether it has to pay Mr. Ahmed at all. In effect, the Applicant is seeking to pre-empt the upcoming trial.
[31] If the Applicant were successful on the merits of this Application, the Respondent would have priority in terms of responsibility to pay his claim and Mr. Ahmed’s claim against the Applicant would necessarily fail. Likewise, if the Respondent were successful on the merits of this Application, the Applicant would have priority in terms of paying his claim and Mr. Ahmed’s claim against the Respondent would be rendered superfluous. In either case, there would be no point to the order of March 16, 2015 requiring that the two claims be tried together.
[32] In order for a court to weigh the equities of the Applicant’s late-in-the-day position regarding the Respondent’s priority, the trial court will have to assess evidence as to what has transpired to justify the delay. It will also require an evidentiary record to determine what, if any, prejudice the delay has engendered.
[33] Likewise, in order for a court to evaluate whether Mr. Ahmed was a pedestrian or operator of a vehicle at the moment of the accident, the trial court will have to go beyond the pleadings. An evidentiary record will necessarily be compiled at trial with respect to what transpired on the highway in October 2007.
[34] As the court put it in Chahine v Grybas, 2014 ONSC 4698, at para 40, this kind of dispute “requires an examination of all relevant facts and would be a matter for the trial judge.” A trial of all of the issues is required.
V. Disposition
[35] The Application is dismissed, without prejudice to its being revisited before the trial judge.
[36] Costs of the Application are reserved to the trial judge.
Morgan J.
Date: June 3, 2015