Background

1Wawanesa Insurance brought this motion to compel CAA Insurance (CAA) to produce documents. The context is a personal injury claim arising for a motor vehicle accident on November 4, 2009.

2The Plaintiff alleges injuries arising from an accident due to the negligence of the Defendant Torres, who was driving the Defendant Rivera’s vehicle.

3The Defendant Torres was an 18-year-old high school student with a G2 licence, which required him to be accompanied by a licenced driver when operating a motor vehicle. His parents did not allow him to drive the car alone. On the day of the accident, his parents were out of the country, he was late for class and he decided to take the car.

4Consent to drive the vehicle is an acknowledged issue in the litigation of the plaintiff’s claim. If explicit consent is found to be the case, or is implied, despite the Defendant Rivera’s’ denial, then Mr. Rivera is vicariously liable for the negligence of his son, Mr. Torres (pursuant to s. 192(2) of the Highway Traffic Act, R.S.O. 1990, c. H.8).

Insurance Issues

5The Rivera/Torres vehicle had been insured with CAA. The Plaintiff was insured for uninsured and underinsured claims with Wawanesa.

6CAA denied coverage to the Defendant driver, Mr. Torres, on the basis that he had no consent to drive the vehicle.

7CAA also denied coverage to the Defendant owner, Mr. Rivera, on the basis of a material misrepresentation, that he did not advise the insurer of another licenced driver living in the same household, a material change in risk.

8Wawanesa, as the uninsured/underinsured insurance carrier for the Plaintiff, was sued as a defendant along with the Defendant owner/driver, Rivera/Torres, in light of CAA’s off-coverage position.

9CAA insurance added itself as a statutory third party pursuant to s.258(14) of the Insurance Act, R.S.O. 1990, c.I.8 (Insurance Act).

10Wawanesa cross-claimed against the Defendants Rivera/Torres for subrogated claims. CAA cross-claimed against the Defendants Rivera/Torres for potential subrogated claims pursuant to s. 258 of the Insurance Act.

11The statements given by Rivera/Torres to CAA were produced in the litigation. Privilege was waived in regards to the statements.

12Counsel for CAA deposed that Rivera/Torres were adverse in interest to CAA in the context of this litigation, presumably on the issue of consent and possibly on the issue of material change in risk.

13The Defendants Rivera/Torres, though served with this motion, did not file materials or appear at the hearing. The Defendant Rivera has not sued CAA on the denial of coverage.

14In the event that there is no consent, explicit or implied, Wawanesa would be called upon to pay the Plaintiff’s claim and pursue its subrogated interest against Mr. Torres personally.

15If there is consent, CAA would be obliged to honour the Plaintiff’s claim up to the minimum limits of $200,000 but would deny their insured, Mr. Rivera, any additional coverage in light of its position that he failed to disclose a material change in risk.

16In that event, Wawanesa would be called upon to pay the Plaintiff’s claim in excess of the $200,000 statutory minimum.

17There is no privity of contract or legal nexus between Wawanesa and CAA, each which issued separate insurance policies to separate policyholders.

18Wawanesa seeks production of documents relevant to CAA denial of coverage to Mr. Rivera and Mr. Torres.

Documents Relevant to Consent

19Wawanesa seeks information on the issue of consent by asking whether there is a broker’s file and whether the accident was reported to the broker. Mr. Rivera was uncertain whether he dealt with a broker or directly with CAA.

20CAA did not provide any responding evidence on this issue.

21In light of all the parties’ recognition that consent is an issue in this litigation, and CAA had previously produced the statements of the Defendants Rivera/Torres, I consider the initial reporting to CAA of the accident to be relevant and producible under Rule 30. CAA is to provide that portion of the Broker’s file, if there is one, on the initial reporting of the accident by Rivera/Torres.

22Pursuant to Rule 30.10(3), if on review of the file, CAA determines there is an issue in regards to privilege, they may seek further direction of the court to inspect the document to determine the issue.

Documents Relevant to Material Change in Risk

23Wawanesa seeks production of documents relevant to CAA’s denial of coverage to Mr. Rivera, regarding the material misrepresentation of failing to report a licenced driver in the household.

Position of the Parties

24Wawanesa seeks production of Mr. Rivera’s application for auto insurance; it seeks the broker’s file regarding any information as to whether he was told to report the addition of a G2 driver in the household; it seeks the insurer’s notes from issuing and cancelling the policy; it seeks correspondence between CAA and Rivera/Torres regarding the policy and its cancellation; it seeks CAA’s underwriting rules regarding the addition of occasional drivers without formal notification and how that is handled.

25Wawanesa’s position is that the broker’s file may clarify whether CAA told Mr. Rivera to report an added G2 driver to the household. The underwriting rules may speak to an occasional driver being covered without formal notice. The correspondence between CAA and Rivera/Torres may speak to discussion about adding G2 drivers. The application and cancellation documents similarly may contain relevant information about how CAA provides coverage for family members.

26There is no affidavit or evidence on these issues from CAA, only an affidavit by their counsel, which reviews the proceedings.

27Such documents would be considered relevant and producible from CAA if the relief was sought by its insured, Mr. Rivera.

28Wawanesa seeks the documents as Mr. Rivera has not taken any action against his insurer CAA.

29CAA objects to the documents being sought by Wawanesa, a defendant who is not privy to the contract.

30CAA’s position is that coverage issues are to be dealt with and litigated separately in a different proceeding by the court and., therefore, opposes producing these documents in the context of this litigation.

31CAA submits that its position as a statutory third party, pursuant to s. 258(14) of the Insurance Act, is not intended to be used to determine coverage or indemnity issues. (Lica v. Dhaliwal, 2015 ONSC 3888, [2015] O.J. No. 4007, at para. 21) (Lica).

32The Plaintiff cannot claim against the Defendant Wawanesa for underinsurance claims without proving that the tortfeasor’s insurer CAA has properly reduced their limits ‘by operation of law’. Section 254(14) does not stand as a shield for the insurer.

33Wawanesa is challenging the allegation made by CAA that there is no coverage for Rivera/Torres. Reasonably, it needs to know whether CAA’s liability limits are properly ‘reduced by operation of law’. If they are, then Wawanesa’s policy responds to the Plaintiff’s claims.

Law and Analysis

34The Court of Appeal addressed the steps a plaintiff should take to make claims on the underinsured policy when the tortfeasor’s policy was ‘reduced by operation of law’. See Maccaroni v. Kelly, 2011 ONCA 411, 106 O.R. (3d) 116 (Maccaroni). The Court stated that the Plaintiffs could not rely on the mere “say so” of the tortfeasors’ insurers when they indicated that their policy limits were reduced. According to the Court in Maccaroni, “the words ‘by operation of law’ must have some meaning beyond a liability insurer merely taking an off-coverage position…” (at para 19).

35In Maccaroni, the Plaintiff had simply accepted the tortfeasor’s position that their limits were reduced and so settled for the minimum limits and then sought their additional damages as against their own underinsurer.

36The Court of Appeal held that the Plaintiff had to prove their entitlement to recover from the underinsurer. The Plaintiff would have to prove the tortfeasor’s off-coverage position to do so. The Plaintiff would have to call the representatives of the tortfeasor’s insurer as witnesses to establish that the tortfeasors were in breach of their policy provisions and hence that the off-coverage position taken by the tortfeasor’s insurer was correct. In this way, they would demonstrate their entitlement to recover from the defendant underinsurer (Maccaroni, at para. 23).

37I find that in this case, both the Plaintiff and the Defendant Wawanesa require the productions sought, to determine whether the tortfeasor insurer CAA’s off-coverage position is supported.

38The fact that CAA has added itself as a statutory third party does not prevent it from being subject to various relevant disclosures. In fact, a representative of CAA was examined for discovery and gave productions. The productions requested in this motion were not requested at the time of the discovery, but there remains a continuing obligation to provide relevant documents.

39As noted by Justice Price of this court, relevant information is available to be disclosed from a non-party, even if that information is not admissible at trial. (Lica, at para. 49 ).

40On the issue at hand, I see CAA in some ways as simply a non-party with relevant documents that would assist in some issues in this litigation.

41Personal injury claims resulting from motor vehicle accidents are predominantly settled and resolved outside the province’s courts. When not settled, they require lengthy trial times involving doctors, lay witnesses and other experts to satisfy the plaintiff’s evidentiary burden of proving threshold, causation and damages. Multiple counsel may be required to defend accident benefit claims, underinsurance claims and statutory third party insurance positions. The interrelationship of all claims is complex and costly.

42Personal injury claims settle often because the surprises have been removed by the Rules of Civil Procedure, which favour disclosure of all documents relevant to an issue in the action.

43Justice Pazaratz in Izyuk v. Bilousov, 2015 ONSC 3684, [2015] W.D.F.L. 3860, referred to the courts’ required “shift in culture”, as set out by the Supreme Court of Canada (at para. 61):

In Hyrniak v Mauldin 2014 SCC 7 the Supreme Court of Canada clearly identified that a shift in culture is required in our court system. Although that case specifically dealt with summary judgement, it foreshadows new realities we’re all going to have to face: a. Judicial resources are not limitless. b. Protracted and expensive litigation is in nobody’s best interest if a just result can be achieved more quickly and efficiently….

44Wawanesa has been sued on the basis that the CAA policy is ‘reduced by operation of law’. Documents relevant to that issue are producible.

Conclusion

45Accordingly, I order CAA to produce the following materials:

(a) That portion of the broker’s file, if there is one, on the initial report of the accident by Rivera/Torres,

(b) Mr. Rivera’s application for auto insurance,

(c) the insurer’s notes on issuing and cancelling the policy,

(d) correspondence between CAA and Rivera/Torres regarding the policy and its cancellation; and,

(e) CAA’s underwriting rules regarding how it handles occasional drivers without CAA receiving formal notification.

Costs

46Counsel provided their cost outlines at the conclusion of the motion. The Defendant Wawanesa was the successful party on the motion and should be awarded their costs. Their partial indemnity costs of $4,780.72 are reasonable in this complex case.

47Counsel for CAA claim their costs thrown away of $2,073.98. These costs are for the dispute over whether Mr. Schwartzman could conduct the cross-examination of Wawanesa’s representative, when Mr. Schwartzman provided the responding affidavit in this motion. The initial scheduled cross-examination was aborted with some disbursements to be thrown away and counsel for CAA prepared an affidavit to support this cost claim. They claim 8.9 hours on this issue. They spent one hour on the aborted attendance. The cross-examination ultimately took place with Mr. Schwartzman examining.

48I consider that there were some costs thrown away, including $423.98 in disbursements, but I question the need for spending over four hours on an affidavit to support this cost claim. Reasonably, Wawanesa would expect to pay $1,000 plus the disbursements of $423.98.

49I order a credit on the costs owed by CAA to Wawanesa in the amount of $1,423.98.

M. J. Donohue, J.