Middleton et al. v. Pankhurst et al.; Aviva Canada Inc.,Third Party

[Indexed as: Middleton v. Pankhurst]

Ontario Reports

Ontario Superior Court of Justice,

Matheson J.

May 17, 2016

131 O.R. (3d) 249 | 2016 ONSC 3157

Case Summary

Insurance — Automobile insurance — Interpretation and construction — "Authorized by law to drive" — P driving snowmobile after drinking to rescue friend who was lost on frozen lake — P having valid driver's licence at that time and complying with its terms but breaching condition in probation order that he not drive with alcohol in his blood — Phrase "authorized by law to drive" in statutory condition 4 in standard automobile insurance policy referring to possession of and compliance with valid driver's licence and not extending to court orders or legislative prohibitions — P's breach of probation order addressed in s. 118 of Insurance Act — P "authorized by law to drive" at relevant time — Insurance Act, R.S.O. 1990, c. I.8, s. 118.

After consuming alcohol, P drove a snowmobile to rescue his friend M, who was lost on a frozen lake on a very cold night without adequate clothing. P had a valid driver's licence at the time and complied with the terms of that licence, but was in breach of a condition in a probation order that he not drive with alcohol in his blood. P found M and drove him to shore. He lost control of the snowmobile after reaching the shore. M was thrown from the snowmobile and was seriously injured. M's personal injury action against P was settled, and the trial proceeded as a trial of an issue regarding insurance coverage. P's automobile insurer denied him a defence based upon statutory condition 4 in the standard automobile insurance policy, taking the position that P was not "authorized by law to drive" at the time of the accident.

Held, the action should be allowed.

The phrase "authorized by law to drive" in statutory condition 4 refers to the possession of and compliance with a valid driver's licence, and does not extend to court orders or legislative prohibitions. P's breach of probation was addressed in [page250] s. 118 of the Insurance Act, which provides that unless the contract otherwise provides, a contravention of any criminal or other law does not render unenforceable a claim for indemnity under a contract of insurance except where the contravention was committed with intent to bring about loss or damage. P was authorized by law to drive at the time of the accident.

If statutory condition 4 had been breached, this would not be an appropriate case in which to grant relief from forfeiture under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Cases referred to

Kereluik v. Jevco Insurance Co. (2012), 111 O.R. (3d) 395, [2012] O.J. No. 2226, 2012 ONCA 338, 292 O.A.C. 197, 349 D.L.R. (4th) 384, 34 M.V.R. (6th) 63, 215 A.C.W.S. (3d) 201; Kozel v. Personal Insurance Co. (2014), 119 O.R. (3d) 55, [2014] O.J. No. 753, 2014 ONCA 130, [2014] I.L.R. I-5636, 31 C.C.L.I. (5th) 171, 372 D.L.R. (4th) 265, 315 O.A.C. 378, 61 M.V.R. (6th) 1, 237 A.C.W.S. (3d) 479, consd

Other cases referred to

Blatter v. Insurance Corp. of British Columbia, 1984 CanLII 560 (BC SC), [1984] B.C.J. No. 3004, 13 D.L.R. (4th) 156, 55 B.C.L.R. 398, 7 C.C.L.I. 61, 27 A.C.W.S. (2d) 116 (S.C.); Certas Direct Insurance v. Strifler, [2005] O.J. No. 4293, [2005] O.T.C. 888, 25 M.V.R. (5th) 150, 143 A.C.W.S. (3d) 159 (S.C.J.); Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778, [1989] S.C.J. No. 97, 62 D.L.R. (4th) 236, 99 N.R. 228, [1990] 1 W.W.R. 29, J.E. 89-1362, 80 Sask. R. 22, 39 C.C.L.I. 161, 35 C.L.R. 225, [1989] I.L.R. Â1-2506 at 9709, 17 A.C.W.S. (3d) 700; Manitoba Public Insurance Corp. v. Brandt, 1991 CanLII 11856 (MB KB), [1991] M.J. No. 102, 72 Man. R. (2d) 137, 48 C.C.L.I. 187, 25 A.C.W.S. (3d) 1124 (Q.B.); Moore v. Cooperative Fire and Casualty Co., [1979] N.J. No. 139, 22 Nfld. & P.E.I.R. 268, 58 A.P.R. 268 (C.A.); Northover v. Regier, 2000 CanLII 50964 (ON SC), [2000] O.J. No. 3660, [2000] O.T.C. 703, 23 C.C.L.I. (3d) 124, [2001] I.L.R. I-3889, 100 A.C.W.S. (3d) 142 (S.C.J.); Ontario (Attorney General) v. 8477 Darlington Crescent, [2011] O.J. No. 2122, 2011 ONCA 363, 279 O.A.C. 268, 269 C.C.C. (3d) 159, 333 D.L.R. (4th) 326, 95 W.C.B. (2d) 520, 202 A.C.W.S. (3d) 505; State Farm Mutual Automobile Insurance Co. v. Aviva Canada Inc. (2015), 128 O.R. (3d) 321, [2015] O.J. No. 6852, 2015 ONCA 920, [2016] I.L.R. I-5837, 345 O.A.C. 349, 396 D.L.R. (4th) 477, 93 M.V.R. (6th) 49, 261 A.C.W.S. (3d) 184; Van Dehwal v. State Farm Mutual Automobile Insurance Co. (1994), 1994 CanLII 10575 (ON CA), 20 O.R. (3d) 401, [1994] O.J. No. 4421 (Div. Ct.); Williams v. York Fire & Casualty Insurance Co. (2007), 86 O.R. (3d) 241, [2007] O.J. No. 2517, 2007 ONCA 479, 225 O.A.C. 157, 51 C.C.L.I. (4th) 177, [2007] I.L.R. I-4613, 158 A.C.W.S. (3d) 820

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98 [as am.]

Criminal Code, R.S.C. 1985, c. C-46 [as am.] ss. 145(5.1), 503(2.1) [as am.], 515 [as am.]

Family Law Act, R.S.O. 1990, c. F.3 [as am.]

Highway Traffic Act, R.S.O. 1990, c. H.8, ss. 31 [as am.], 128 [as am.]

Insurance Act, R.S.O. 1970, c. 224 [rep.], s. 205

Insurance Act, R.S.O. 1990, c. I.8, ss. 1 [as am.], 118 [as am.], 121(1)15.1 [as am.], 129, 234 [as am.]

Motorized Snow Vehicles Act, R.S.O. 1990, c. M.44, s. 9(1)

Provincial Offences Act, R.S.O. 1990, c. P.33, s. 75

Rules and regulations referred to

Statutory Conditions — Automobile Insurance, O. Reg. 777/93 [as am.], s. 1(1), (2), condition 4(1) [page251]

TRIAL of an issue concerning insurance coverage.

John F. Graham and Elizabeth Belansky, for defendant Unifund Assurance Company.

Patrick J. Monaghan, Christine J. Matthews and Michelle Fan, for third party Aviva Canada Inc.

[1] MATHESON J.: — This action began as a personal injury claim arising out of a snowmobile accident on January 24, 2009, near Lake Simcoe, Ontario. The plaintiff Tyler Middleton was a passenger on the snowmobile and the defendant Cal Pankhurst was the driver. The second plaintiff, Susan Middleton, Tyler's mother, advanced a Family Law Act, R.S.O. 1990, c. F.3 claim.

[2] The plaintiffs' claims have since been settled. This trial proceeded as a trial of an issue regarding insurance coverage. Aviva insured the driver, Mr. Pankhurst. It denied him a defence based upon statutory condition 4, part of the standard automobile insurance provisions. It took the position that Mr. Pankhurst was not "authorized by law" to drive due to the terms of a probation order arising from a prior conviction for careless driving.

[3] The defendant Unifund was Susan Middleton's insurer, and was added as a party in respect of coverage for under or uninsured claims. Unifund's position is that Mr. Pankhurst was authorized to drive as the holder of a valid unrestricted driver's licence, and Aviva therefore cannot rely on statutory condition 4. Alternatively, Unifund requests relief from forfeiture because Mr. Pankhurst only drove in order to rescue his friend, Mr. Middleton, who was on foot and was lost on the ice on Lake Simcoe on a very cold winter night.

Trial of an Issue

[4] In connection with the settlement with the plaintiffs, Justice David M. Brown, as he then was, made an order dated July 26, 2013 regarding the determination of the coverage issue. Under that order, the settlement funds were paid in full to the plaintiffs, 50 per cent by each insurer, with provision to have the successful insurer repaid by the unsuccessful insurer after the coverage issue was determined.

[5] Justice Brown's order set out the issue to be tried, as follows:

Whether or not Cal Pankhurst is entitled to coverage under the policy of insurance issued to him by Aviva as Policy No. A 20832328, beyond the minimum limits established by s. 251. (1) of the Insurance Act, for the claims advanced by the Middletons in this action against Cal Pankhurst. [page252]

[6] There is no dispute in this case regarding the payment of the statutory minimum referred to in the above issue. Aviva paid that $200,000. The amount in dispute is an additional $700,000 payable to the plaintiffs under the terms of the settlement. The Aviva policy provided up to $1 million of insurance coverage and it is Unifund's position that Aviva should cover the full amount paid to the plaintiffs in the settlement.

[7] Justice Brown ordered that at the trial of the issue, Unifund would stand in the shoes of the plaintiffs and would also have all other rights in law that are available to it as though the plaintiffs had succeeded in their action against Mr. Pankhurst.

Events Giving Rise to Claim

[8] On the morning of January 24, 2009, Mr. Pankhurst received a phone call from his friend, the plaintiff, Tyler Middleton. Mr. Middleton invited him to go ice fishing on Lake Simcoe. Some of their friends had ice huts out on the lake. Mr. Pankhurst was working and said he would meet Mr. Middleton on the lake after work. While Mr. Pankhurst did not know exactly where the huts were, he planned to go out with a friend who did know where those ice huts had been placed. They would go out by snowmobile.

[9] Mr. Pankhurst had experience both driving and being a passenger on snowmobiles from an early age. At the time of the accident, he was 22. He had previously owned snowmobiles and as of that time had recently purchased a 1999 Ski-Doo. There is no issue that this Ski-Doo was covered under Mr. Pankhurst's Aviva automobile insurance Policy No. A 20832328 as a newly acquired vehicle.

[10] Mr. Pankhurst kept his snowmobile at a friend's house near the lake. That friend, Ryan Taylor, lived near Willow Beach, toward the south end of Lake Simcoe. After Mr. Pankhurst finished work mid-afternoon, he went to Mr. Taylor's house. They each put on their snowmobile gear and each drove their own snowmobile out to meet their other friends at their ice huts. Mr. Taylor knew where they were. As it turned out, those ice huts were in a remote location, about five miles out onto the lake, north west of Georgina Island. Mr. Pankhurst arrived late afternoon. Mr. Middleton was already there, among others.

[11] At the time, Mr. Pankhurst was subject to terms of a probation order arising from a guilty plea to careless driving in the fall of 2008. The terms of his probation prohibited him, for a period of six months, from operating a motor vehicle between 7:00 p.m. and 5:00 a.m. and required that when operating a motor vehicle he have no alcohol in his blood. Drinking alcohol is [page253] a common pastime while ice fishing. On January 24, 2009, since he was going to drink, Mr. Middleton was going to try and get a ride back to shore or stay overnight in one of the ice huts, which were heated. He had stayed overnight before.

[12] In the early evening, most of the people at the ice huts began heading back to shore. Mr. Middleton left at that time. There is no issue that by then Mr. Middleton had consumed alcohol. A blood test at 1:00 a.m. the next day showed blood alcohol of 0.15.

[13] Mr. Middleton was wearing snowmobile pants, boots, a hat and gloves, and layers of sweatshirts or fleeces, but no snowmobile or other jacket.

[14] Mr. Pankhurst and a few others remained behind. Ryan Taylor was still there. Jamie Manthough was there. Mr. Manthough's girlfriend, Aisha Gordon, was there. She had not been drinking and planned to drive her boyfriend back to shore.

[15] At about 10:45 p.m., Mr. Middleton called Mr. Pankhurst on his cellphone. He said that he was lost and disoriented and did not know how to get to shore. He asked Mr. Pankhurst to come and get him. Mr. Pankhurst tried to point him in the right direction by discussing what he could see, such as tree lines, and also asked him to exhaust other options given Mr. Pankhurst's driving situation.

[16] Mr. Middleton called his girlfriend, Crystal Sherman, who was in Newmarket visiting a friend. That call was at around 11:00 p.m. She testified that he sounded distraught and scared. He sounded like he was crying and he was not making sense to her on the telephone. She could also hear the effect of alcohol in his voice. He told her he was going to call Mr. Pankhurst and ask him to help him.

[17] The group remaining in the ice hut discussed Mr. Middleton's situation. Mr. Pankhurst testified that he asked the others if they would get Mr. Middleton because he could not be the one to go. He does not recall how clear he was about his driving restrictions but believed everyone in the hut knew his situation. He testified that others said that Mr. Middleton did this all the time and should figure it out himself.

[18] Ms. Gordon also testified about the discussion in the ice hut. She agreed that there was a discussion about Mr. Middleton being lost and asking for someone to come and get him. She did not recall Mr. Pankhurst talking about his driving restrictions or specifically asking her to help, though she did not say that those things did not occur. Although she initially said that if asked, she guessed that she would have helped, later in her evidence she testified that she was not able to go out and look for [page254] Mr. Pankhurst by herself. She testified that she would get lost and would then be in her own dangerous situation. Ms. Gordon planned to, and did, drive her boyfriend back to shore since he had been drinking.

[19] Having heard from these two witnesses, I find that the people still at the ice hut knew that Mr. Middleton was calling asking for help because he was lost on the ice. I find that they discussed the situation and no one else either volunteered or agreed to go and get Mr. Middleton. I further find on the evidence that they all knew Mr. Pankhurst had been drinking and that he did not want to drive, even if they did not know the details of his probation order.

[20] Mr. Middleton called Mr. Pankhurst a few more times at around 11:00 p.m. He said he needed Mr. Pankhurst to come and get him and he sounded like he was starting to panic and could not get anyone else to come.

[21] Mr. Pankhurst thought Mr. Middleton was in some danger from freezing because he was not properly dressed. Mr. Pankhurst did not think Mr. Middleton would make it back to shore on his own. His assessment of his friend's perilous situation was proved correct at trial, through expert evidence.

[22] Mr. Pankhurst was focused on the risk from the cold, but at trial the possibility of other hazards was also established, such as pressure cracks in the ice and the risk of patches of open water caused by pressure cracks.

[23] That night, Mr. Pankhurst decided that Mr. Middleton's problem was more important than his own. He went out on his Ski-Doo looking for him. After about ten minutes he called Mr. Middleton because he had not found him. Shortly after that call, Mr. Pankhurst found him because Mr. Middleton ran out in front of his snowmobile, at which point Mr. Pankhurst could see him. Otherwise, he would have driven right by him.

[24] Mr. Middleton was cold and happy to see Mr. Pankhurst. He got on the back of the snowmobile and they proceeded to shore. Mr. Middleton had only one helmet and he therefore did not have a helmet for Mr. Middleton.

[25] It took about ten minutes to drive to shore. From there, Mr. Pankhurst proceeded to drive eastbound along the shoulder of Lake Drive, planning to take Mr. Middleton home. The shoulder was better terrain for a snowmobile than the pavement. Despite some suggestion that Mr. Middleton was urging Mr. Pankhurst to drive faster, he was not exceeding the speed limit. However, at a bend in the road, Mr. Pankhurst lost control of the snowmobile. It slid on the pavement, slid across the road and overturned. Both Mr. Pankhurst and Mr. Middleton were [page255] ejected from the snowmobile. By very bad happenstance, there was a telephone pole at that spot, which Mr. Middleton hit with his head. He suffered significant injuries.

[26] As a result of the injuries he sustained, Mr. Middleton has no recollection of the accident, and did not testify at trial.

[27] Mr. Pankhurst landed in a ditch. He immediately went to his friend and found him by the telephone pole in distress. Mr. Pankhurst called 911. Shortly thereafter the police arrived, and then an ambulance and Mr. Middleton was taken to hospital.

[28] Mr. Middleton's injuries included extensive right subdural hemorrhage, widespread bilateral parenchymal brain contusions, left temporal bone fracture, basil skull fracture, fractures of the left transverse processes and vertebrae, bilateral pneumothoraces, multiple rib fractures and a comminuted fracture of the left scapula.

[29] One of the police officers on the scene administered a roadside alcohol test on Mr. Pankhurst, which he failed. After 2:00 a.m., Mr. Pankhurst had two further tests for alcohol at the police station. The actual results were 89 mg and 88 mg, but the certified results were "80 mg" and "80 mg" because the York Regional police had a practice of rounding those test results down. The reasons for that practice were not explained at trial.

[30] Mr. Pankhurst ultimately pled guilty to careless driving, for which he received a penalty that included intermittent jail time and the loss of his driver's licence for a period of time.

[31] At trial, Mr. Pankhurst was questioned about alternatives that were open to him that night. He testified that he did not call 911 from the ice hut because at the time he thought that would be blowing things out of proportion. However, there was evidence that if 911 had been called, the fire department would have been staffed and had an air boat that could be used to undergo a search on the ice, though it could have taken several hours and is not clear that such a search would have been successful. Although today a combination of a cellphone and GPS would simplify matters, the evidence did not establish that capability back in 2009. Other options were also mentioned in the trial evidence, including a helicopter, but the evidence did not establish that any of the options likely would have deployed in time to successfully complete a search for Mr. Middleton that night, in the dark, out on the ice in a remote location.

[32] Mr. Pankhurst was also cross-examined about alternatives open to him after he found Mr. Middleton, rather than driving him home. I accept his evidence that it was not reasonable for the two of them go back to the ice huts. It was late at night, dark, very cold and difficult to find that location. However, [page256] Mr. Pankhurst frankly agreed that once they got to shore there were things he could have done, such as calling for assistance at that point or going to one of the cottages along the shore for help, among other options. This questioning was obviously difficult and emotional for Mr. Pankhurst, yet he fairly agreed that there were alternatives once they got to shore. He testified that he had chosen his course of action -- to find Mr. Middleton and take him to his nearby home.

[33] I found Mr. Pankhurst to be a credible witness. He was responsive and admitted to what he did and did not know. He testified frankly and without embellishment. He weathered a very difficult cross-examination, fairly admitting to his own mistakes. His evidence was mostly uncontradicted. I accept his evidence about what transpired that evening, leading up to and including the accident itself.

Expert Evidence

[34] Unifund called two expert witnesses. Aviva accepted their expertise without objection.

[35] Dr. Michael Morassutti is an expert in climatology among other related areas. He provided his opinion on the weather at relevant times on January 24, 2009 and January 25, 2009, in the area west of Georgina Island on Lake Simcoe where Mr. Pankhurst found Mr. Middleton. He obtained weather data from a number of weather stations around Lake Simcoe. There were no weather stations out in the lake, at the place in question. Using this and other data, he provided his opinion on the weather conditions, hour to hour.

[36] I accept Dr. Morassutti's opinion about the air temperature, wind speed and wind chill at the relevant times. He opined that the air temperature from about 8:00 p.m. to 11:00 p.m. on January 24 began at about -15.7C, rising a bit to -13.4C, with winds less than 20 km an hour with some gusting. Wind chill began at about -25C, rising a bit to -22C. This evidence is consistent with the testimony of the trial witnesses who were out on the lake that night.

[37] Dr. Morassutti also testified that the data did not show any snow during that period, yet both Mr. Pankhurst and Ms. Gordon testified that it was snowing out on the lake at around the time Mr. Middleton was calling for help. Given their first-hand evidence, and Dr. Morassutti's qualification that he did not have data from out on the lake itself, I accept their evidence that it was snowing out on the lake at that time. However, on shore, by the time of the accident, it was not snowing. [page257]

[38] Unifund's second expert witness was Dr. Stephen Sau-Shing Cheung, a Canada Research Chair and professor at Brock University, with extensive background and expertise in environmental physiology, human temperature regulation and hypothermia, among other related areas. Dr. Cheung was asked to opine on what might have been the effect of the weather conditions on Mr. Middleton when he was out on the lake that night, trying to walk to shore.

[39] Dr. Cheung assumed that Mr. Middleton left to walk to shore at about 8:00 p.m., which was a reasonable assumption. Ms. Gordon testified that he left in early evening. For the weather conditions, Dr. Cheung relied on Dr. Morassutti's report but used conservative figures, assuming an air temperature of about -12C, 10 km winds and wind chill of about -21C or -22C. He further assumed a high blood alcohol level, which was confirmed at trial. He was also provided with Mr. Middleton's height and weight, and made reasonable assumptions regarding his clothing.

[40] All of Dr. Cheung's assumptions were proved on the trial evidence or shown to be conservative based on the facts proved at trial. Given that the necessary factual foundation was proved, and given his very substantial expertise, I accept his opinion.

[41] Dr. Cheung considered individual and situational factors. He identified the main factors for hypothermia for Mr. Middleton, in addition to the cold temperature itself, as wind, clothing, fatigue, energy depletion, hypoglycemia and alcohol use. Alcohol accelerates heat loss. It depresses the shivering response, which is one of the body's most effective ways of adding heat. Clothing was also a significant factor, since Mr. Middleton was not wearing a wind resistant jacket.

[42] Dr. Cheung found that Mr. Middleton's heat balance was strongly negative, with heat steadily dropping. He opined that Mr. Middleton was already in a state of hypothermia when he was calling for help.

[43] In Dr. Cheung's opinion, considering all factors, Mr. Middleton most likely would not have survived the night without being rescued. And he was no longer capable of self-rescue.

Driver's Licence Evidence

[44] As of the time of the accident, Mr. Pankhurst had a valid, class G driver's licence. In other words, he had a regular driver's licence, the terms of which did not require no alcohol or no night driving. As of January 24, 2009, his licence had no restrictions on the records of the Ministry of Transportation for Ontario. He had a period of suspension of his driver's licence in early 2008, [page258] but it ended in June 2008. His licence was also suspended as of the day after the accident, on January 25, 2009, because he failed the roadside blood alcohol test. The records also show a number of driving infractions and one other suspension.

[45] The evidence therefore demonstrated that Mr. Pankhurst had a valid G driver's licence at the time of the accident, which was in good standing and was unrestricted on its terms.

Analysis

[46] The overarching issue for trial has been stated as follows:

Whether or not Cal Pankhurst is entitled to coverage under the policy of insurance issued to him by Aviva as Policy No. A 20832328, beyond the minimum limits established by s. 251. (1) of the Insurance Act, for the claims advanced by the Middletons in this action against Cal Pankhurst.

[47] The payment of the minimum limits referred to in the above issue was not at dispute in this case. As of trial, the above issue gave rise to two sub-issues, as follows:

whether Mr. Pankhurst was "authorized by law" to drive within the meaning of statutory condition 4(1) of O. Reg. 777/93; and

if not, whether there should be relief from forfeiture given the circumstances giving rise to Mr. Pankhurst's breach of the terms of his probation order.

Statutory Condition 4

[48] Statutory condition 4(1) forms part of the conditions that apply to all Ontario automobile insurance contracts: Insurance Act, R.S.O. 1990, c. I.8, ss. 121(1)15.1, 234 and O. Reg. 777/93, s. 1(1) and (2). It therefore forms part of what is known as OAP 1, and in turn forms part of the Aviva policy at issue in this case.

[49] Statutory condition 4(1) provides as follows:

4(1) The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.

(Emphasis added)

[50] In this regime, "automobile" includes self-propelled vehicles: Insurance Act, s. 1 "automobile". There is no issue between the parties that this statutory condition applies to snowmobiles.

[51] There are two types of licences that may authorize a person to drive a snowmobile along a road such as Lake Drive, specifically a driver's licence or a motorized snow vehicle operator's licence: Motorized Snow Vehicles Act, R.S.O. 1990, c. M.44, s. 9(1). The appropriate licence depends on age. People under [page259] age 16 may have a motorized snow vehicle licence but as of age 16, a driver's licence is required.

[52] It is the Ministry of Transportation that has legislative authority to authorize people to drive: Highway Traffic Act, R.S.O. 1990, c. H.8, s. 31; Kereluik v. Jevco Insurance Co. (2012), 111 O.R. (3d) 395, [2012] O.J. No. 2226, 2012 ONCA 338, at para. 13.

[53] Unifund takes the position that "authorized by law" in statutory condition 4 requires that the insured driver, Mr. Pankhurst, hold a valid Ontario driver's licence issued by the Ministry of Transportation and comply with its terms. Mr. Pankhurst had such a licence and complied with its terms at the relevant time.

[54] Aviva takes the position that the phrase "authorized by law" captures not only the Ministry of Transportation licensing, which includes restrictions and suspensions, but also the terms of Mr. Pankhurst's probation order. Aviva submits that "law" in statutory condition 4 includes that court order. However, Aviva stops there, submitting that "law" does not include legislation, such as any driving offences under the Highway Traffic Act or the Criminal Code, R.S.C. 1985, c. C-46. In its submission, "law" in statutory condition 4 includes only the Ministry of Transportation licence status and court orders, but not any other laws. In argument, it was apparent that this position was taken to attempt to avoid some of the problematic consequences of such a broad reading of "law" in the Insurance Act context, as discussed below.

[55] The interpretation of the words "authorized by law" in statutory condition 4(1) was recently addressed by the Court of Appeal, on somewhat different facts, in Kereluik. Many of the same arguments made in Kereluik were made in front of me. I therefore discuss the Kereluik case in some detail.

[56] In Kereluik, the insured had given a personal undertaking to a police officer as a condition of release from custody on an impaired driving charge. He undertook to abstain from the possession and consumption of any alcoholic beverages. A breach of the undertaking constituted a criminal offence: Criminal Code, ss. 145(5.1) and 503(2.1). Later that year, the insured was involved in another motor vehicle accident and was driving while impaired. He was convicted of both impaired driving and breach of his undertaking.

[57] In the personal injury action arising from Mr. Kereluik's second accident, his insurer denied him a defence when it learned of the undertaking, relying on statutory condition 4. Although Mr. Kereluik had a valid Ontario driver's licence with no conditions attached to it, his insurer took the position that he was not "authorized by law" to drive because he breached the undertaking. [page260]

[58] The Court of Appeal rejected the insurer's approach to statutory condition 4. It noted that there was "considerable jurisprudential support" for the proposition that the phrase "authorized by law" as used in statutory condition 4 "is concerned with the validity and terms of an insured's licence to drive at the time of the relevant motor vehicle accident": at para. 13. The court found as follows [at paras. 14 and 15]:

In this case, the respondent held a valid driver's licence, issued by the appropriate Ontario licensing authority, at the time of the second accident. His licence was unconditional. In particular, it contained no term regarding the possession or consumption of alcohol similar to the prohibition contained in the Undertaking.

In my view, nothing in the language or legislative history of Condition Four suggests that the phrase "authorized by law", as used in Condition Four, is intended to apply to breaches of the law not directly connected with violations of driving licence conditions.

(Emphasis added)

[59] In reaching this conclusion, the Court of Appeal considered the insurer's position that driving conditions imposed under either the Highway Traffic Act or the Criminal Code came within the phrase "authorized by law". The court disagreed with this position, noting the far-reaching impact of such an interpretation [at para. 17]:

I would not accede to this argument. If Jevco's urged interpretation of Condition Four was to be accepted, the breach of any driving-related prohibition or restriction imposed under any law, including the criminal law, would result in the forfeiture of automobile insurance coverage because the breach would render an insured unauthorized at law to drive or operate a vehicle within the meaning of Condition Four. For example, on Jevco's interpretation of Condition Four, if terms of bail applicable to an insured who has been charged with impaired driving included the imposition of a curfew, the breach of the curfew terms -- even a minor or technical breach -- could trigger the loss of the insured's automobile insurance. Such a sweeping interpretive result should not be countenanced absent a clear expression of such intention by the legislature.

(Emphasis added)

[60] The court further found the insurer's proposed interpretation inconsistent with s. 118 of the Insurance Act, which provides as follows:

188. Unless the contract otherwise provides, a contravention of any criminal or other law in force in Ontario or elsewhere does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured, or by another person with the consent of the insured, with intent to bring about loss or damage[.]

(Emphasis added) [page261]

[61] The court held that s. 118 signalled a clear legislative intent to allow for the possibility of compensation for innocent tort victims even though the losses may have been caused by the commission of an offence, except where there was an intent to cause harm. This stood "in stark contrast" to former versions of the standard automobile insurance policies, which expressly prohibited driving while incapable due to alcohol: e.g., former statutory condition 2(1)(a), Insurance Act, R.S.O. 1970, c. 224, s. 205; Kereluik, at paras. 19-20.

[62] The court further rejected a proposed analogy between the position of Mr. Kereluik and that of a novice driver. Novice drivers have either a G1 or G2 licence, both of which prohibit the driver from consuming any alcohol and driving. However, as noted by the court, that prohibition forms an express part of the licence conditions for novice drivers: at para. 24. That was not the case with Mr. Kereluik's driver's licence.

[63] The court further rejected the insurer's argument that the breach of a driving-related undertaking, specific to the insured, and given to a law-enforcement official as a condition of release from custody on a driving-related offence, constituted a condition precedent to the insured's lawful authority to drive: Kereluik, at paras. 22-23.

[64] The court concluded that statutory condition 4 depended on the insured's possession of a valid driver's licence and compliance with its terms: at para. 23.

[65] The same interpretation was made in Moore v. Cooperative Fire and Casualty Co., [1979] N.J. No. 139, 58 A.P.R. 268 (C.A.), at para. 26.

[66] There are some points of distinction between the facts of Kereluik, and those before me. To begin with, here there will be insurance coverage even if Aviva is successful in denying the driver the coverage at issue. That is the case because Mr. Middleton's mother happened to have a family protection endorsement in her insurance policy that provided coverage for under and uninsured claims. It cannot be assumed that this will always or even often be the case. The issue of compensation for innocent tort victims therefore remains a relevant consideration in interpreting the statutory condition, as it was in Kereluik.

[67] Aviva places significant emphasis on the difference between the undertaking given in Kereluik, and the terms of probation here. Aviva submits the undertaking might be more significant if it were specific to driving. However, in that the undertaking encompassed driving, I find this to be a distinction without a difference. [page262]

[68] Aviva further relies on the distinction between the undertaking and a court order, in that the probation terms formed part of a court order. However, the undertaking had the force of law -- it was a criminal offence to breach it: Criminal Code, ss. 145(5.1) and 503(2.1). The Court of Appeal expressly raised bail conditions as an example of why statutory condition 4 ought not to be interpreted as suggested by the insurer: Kereluik, at para. 17. Bail conditions are imposed by court order: Criminal Code, s. 515.

[69] There is a common and important characteristic to all of these regimes -- it is an offence to breach undertakings, bail conditions and probation orders: for probation orders, see Provincial Offences Act, R.S.O. 1990, c. P.33, s. 75. The legislative regime under the Insurance Act has addressed offences under s. 118, which limits their impact on coverage to cases where the offence was intentionally committed to bring about the harm or damage.

[70] Further, if "authorized by law" goes beyond the Ministry of Transportation licence status, I find no principled reason to extend it only to court orders and not to legislative prohibitions, as Aviva suggests. There are many laws found in legislation that curtail the conduct of drivers. One need only look at the Highway Traffic Act, which is replete with provisions that circumscribe the conduct of drivers out of an interest for public safety. One example of widespread relevance is s. 128, which prohibits speeding. It provides that "no person shall drive a motor vehicle at a rate of speed greater than" certain speeds, depending on the type of roadway and other factors. This prohibition is just as much a "law" prohibiting certain conduct by drivers as are the terms of Mr. Pankhurst's probation order. Yet, if these legislative prohibitions are caught by statutory condition 4, Unifund properly raises a concern that all manner of driving infractions, large and small, could cause a major loss of insurance coverage.

[71] Obviously, driving at high speed can and does cause accidents and injuries. If the breach of the prohibition in s. 128 of the Highway Traffic Act was a breach of statutory condition 4, there would be a major and negative impact on the compensation available to innocent tort victims. Indeed, even driving a fraction over the speed limit would negate the insurance coverage. That approach is not only contrary to the policy considerations highlighted in Kereluik, but it fails to respect the words of statutory condition 4 and its interpretation having regard for s. 118 of the Insurance Act. The words of statutory condition 4 must be read in their grammatical and ordinary sense, in context, and in harmony with the legislative framework in which [page263] they are found: State Farm Mutual Automobile Insurance Co. v. Aviva Canada Inc. (2015), 128 O.R. (3d) 321, [2015] O.J. No. 6852, 2015 ONCA 920, at para. 47.

[72] The word "law" in statutory condition 4 is not alone. The words are "authorized by law to drive". The word "authorized" means to give official permission to do something. Its use in statutory condition 4 speaks to the giving of authority to drive. It is the Ministry of Transportation that has jurisdiction to authorize people to drive. Within its authority, it determines licence terms and grants, suspends and terminates driver's licences.

[73] As a matter of statutory interpretation, as found in Kereluik, the phrase "authorized by law" to drive in statutory condition 4 depends on the insured's possession of a valid driver's licence and compliance with its terms. Here, Mr. Pankhurst had a valid G licence and complied with its terms, even though he was in breach of his probation order.

[74] This does not detract from the seriousness of Mr. Pankhurst's breach of the terms of his probation. He had to answer for his conduct under the criminal regime. However, from an automobile insurance standpoint, the breach of the probation order is addressed in s. 118 of the Insurance Act. Under that section, unless the insurance contract provides otherwise, a contravention of any criminal or other law does not eliminate coverage except if committed "with intent to bring about loss or damage". There was certainly no such intent here. Mr. Pankhurst was trying to rescue his friend, and put himself in jeopardy to do so.

[75] The terms of the standard policy also support this interpretation. There are no terms in the liability portion of the Aviva standard automobile policy that impose any exclusions where an offence has been committed. In contrast, the optional property damage section of the policy contains a number of exclusions arising from the commission of offences while driving. These exclusions only affect the insured, making a property damage claim, and not innocent third parties.

[76] Aviva also sought to analogize the terms of Mr. Pankhurst's probation order with the terms of licences for novice drivers. This argument was advanced unsuccessfully by the insurer in Kereluik. As found in that case, the additional conditions that apply to holders of G1 and G2 licences are terms of those licences as determined by the Minister of Transportation. That was not the case with Mr. Pankhurst's terms of probation.

[77] Aviva put forward a number of cases where the terms of the licence itself were breached by novice drivers for examples: Van Dehwal v. State Farm Mutual Automobile Insurance Co. (1994), 1994 CanLII 10575 (ON CA), 20 O.R. (3d) 401, [1994] O.J. No. 4421 (Div. Ct.); [page264] Certas Direct Insurance v. Strifler, [2005] O.J. No. 4293, 25 M.V.R. (5th) 150 (S.C.J.); Northover v. Regier, 2000 CanLII 50964 (ON SC), [2000] O.J. No. 3660, 23 C.C.L.I. (3d) 124 (S.C.J.); Blatter v. Insurance Corp. of British Columbia, 1984 CanLII 560 (BC SC), [1984] B.C.J. No. 3004, 55 B.C.L.R. 398 (S.C.); Manitoba Public Insurance Corp. v. Brandt, 1991 CanLII 11856 (MB KB), [1991] M.J. No. 102, 72 Man. R. (2d) 137 (Q.B.). These cases are consistent with the interpretation that the phrase "authorized by law" focuses on the terms of the licence itself.

[78] I conclude that Mr. Pankhurst is entitled to full coverage under the policy of insurance issued to him by Aviva as Policy No. A 20832328 for the claims advanced by the Middletons in this action against him.

Relief from Forfeiture

[79] In the alternative, Unifund sought relief from forfeiture, which I will still address in that it was a significant focus of the trial evidence. Obviously, this analysis would only be relevant if there had been a breach of statutory condition 4, which I have not found.

[80] Relief from forfeiture is available under both s. 129 of the Insurance Act and s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43. These provisions were recently construed in the insurance context in Kozel v. Personal Insurance Co. (2014), 119 O.R. (3d) 55, [2014] O.J. No. 753, 2014 ONCA 130.

[81] Section 129 of the Insurance Act does not apply in the circumstances of this case. The court's power under s. 129 "is a narrow one pertaining only to those policy conditions -- statutory or contractual -- that relate to proof of loss. It does not apply generally to all policy conditions": Kozel, at para. 35, citing Williams v. York Fire & Casualty Insurance Co. (2007), 86 O.R. (3d) 241, [2007] O.J. No. 2517, 2007 ONCA 479, at paras. 33 and 35.

[82] Relief may still be available under s. 98 of the Courts of Justice Act despite the existence of the specific relief against forfeiture provision in s. 129 of the Insurance Act: Ontario (Attorney General) v. 8477 Darlington Crescent, [2011] O.J. No. 2122, 2011 ONCA 363, 333 D.L.R. (4th) 326, at paras. 86-97; Kozel, at para. 58.

[83] Section 98 of the Courts of Justice Act provides as follows:

98. A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

[84] Ordinarily, relief from forfeiture would be sought by the insured -- that is, Mr. Pankhurst. The remedy is predicated on the existence of circumstances where enforcing the contract [page265] "visits an inequitable consequence on the party that breached the contract": Kozel, at para. 29, quoting 8477 Darlington Crescent, at paras. 86-87. Mr. Pankhurst is the party who breached the insurance contract in this alternative scenario. He has not claimed relief from forfeiture. It is not clear to me how Unifund is entitled to claim relief from forfeiture either on its own behalf or standing in the shoes of the plaintiffs. However, no objection was raised before me on this basis. In that I would not grant the relief in this case in any event, I put that issue to one side.

[85] Relief from forfeiture is equitable in nature and purely discretionary. It should be granted sparingly and the party seeking the relief bears the onus of making the case for it: Kozel, at para. 29.

[86] In insurance cases, the purpose of the remedy "is to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer": Kozel, at para. 30, quoting Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778, [1989] S.C.J. No. 97, at p. 783 S.C.R.

[87] As a threshold matter, relief from forfeiture can be granted for imperfect compliance but not for non-compliance. There is non-compliance where there is a breach of a fundamental term or condition precedent of a contract: Kozel, at paras. 34, 41. Further, there is non-compliance only where the breach of the condition precedent was serious and prejudices the insurer: Kozel, at para. 50.

[88] Statutory condition 4 is neither a condition precedent nor a fundamental term: Kozel, at para. 47. Further, in the case before me, assuming the breach was serious because it involved significant alcohol and a probation order, there is no evidence of prejudice to the insurer. The insured paid his premiums. The premiums were based on normal risks, which included the risk of driving at night and impaired. The snowmobile was covered by a newly acquired vehicle clause, a clause that was also already part of the policy for which premiums were being paid.

[89] I therefore conclude that the threshold for access to this remedy would be crossed if statutory condition 4 had been breached. However, I would not exercise my discretion to grant the relief in the circumstances of this case.

[90] Three factors must be considered, as set out in Kozel, at para. 31:

-- the conduct of the insured;

-- the gravity of the breach; and [page266]

the disparity between the value of the property forfeited and the damage caused by the breach.

[91] The first factor "requires an examination of the reasonableness of the breaching party's conduct as it relates to all facets of the contractual relationship, including the breach in issue and the aftermath of the breach": Kozel, at para. 61, quoting 8477 Darlington Crescent, at para. 89.

[92] I readily conclude that the insured was acting reasonably in his decision to attempt to rescue Mr. Middleton. He correctly concluded that Mr. Middleton would not survive the night without a rescue. No one else at the ice huts was prepared to go. As far as Mr. Pankhurst knew, Mr. Middleton had explored other options, although we now know he only called his girlfriend. In hindsight, 911 was an option, but some reluctance to call 911 in this situation was not unreasonable. On the evidence, I find that Mr. Pankhurst's decision to breach his probation terms in favour of rescuing his friend probably saved Mr. Middleton's life.

[93] However, the circumstances materially changed once they were on shore. The need for rescue no longer existed. There is ample evidence of other options readily available at that point. They both had cellphones. Mr. Pankhurst could have called friends or family to come and pick them up. On the trial evidence, they could also have called a taxi. They could have gone to one of the nearby cottages for assistance. The evidence was that there would likely have been people there. I accept that Mr. Pankhurst was motivated by good intentions, and had put his own interests aside, but he ought to have reconsidered the situation once they reached shore.

[94] The second factor, gravity of the breach, looks at the nature of the breach itself and its impact on the contractual rights of the other party: Kozel, at para. 67. Assuming for the purpose of this alternative claim for relief that the breach of the probation order had been caught by statutory condition 4, it was a serious breach. Mr. Pankhurst failed the roadside alcohol test, and alcohol may have played a role in the events giving rise to the accident. However, no prejudice to Aviva was established at trial.

[95] On the last factor, disparity between the value of the property forfeited and the damages caused by the breach, Mr. Pankhurst would have forfeited substantial insurance coverage from Aviva. However, that ought not to be considered in isolation. In this case, Mr. Pankhurst is not seeking relief from forfeiture, and given Unifund's insurance, he has not been called on to pay the settlement amount. As a practical matter, he has [page267] no loss. If, however, Unifund is permitted to seek relief from forfeiture standing in the plaintiffs' shoes, the plaintiffs have not forfeited any property. They have the benefit of the under or uninsured coverage and do not need recourse to Mr. Pankhurst's policy in this case. And if it is Unifund itself that should be the focus, it also has not forfeited property. It provided Susan Middleton with insurance coverage that included under- and uninsured claims and would be meeting a risk that was part of the coverage she contracted for.

[96] Bearing all factors in mind, I would not be prepared to exercise my discretion to grant this unusual remedy if statutory condition 4 had been breached.

Judgment

[97] In accordance with the order of Justice Brown dated July 26, 2013, Aviva shall pay Unifund $350,000, being the 50 per cent payment Unifund made to the plaintiffs, together with interest thereon at the rate of 1.3 per cent per annum.

[98] If the parties are unable to agree on costs, Unifund shall make its submissions by delivering brief written submissions together with a costs outline by June 3, 2016. Aviva may respond by delivering brief written submissions and any other material by June 24, 2016. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by June 24, 2016.

Action allowed.

End of Document