2237446 Ontario Inc. v. Intact Insurance, 2016 ONSC 7711

CITATION: 2237446 Ontario Inc. v. Intact Insurance, 2016 ONSC 7711

COURT FILE NO.: CV-16-0700-00

DATE: 2016 12 08

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 2237446 Ontario Inc. o/a 409 Collision Centre (2011)

Applicant

v.

Intact Insurance and Bonnie Brennan

Respondents

BEFORE: Bloom, J.

COUNSEL: Mark A. Klaiman, Counsel for the Applicant

Lisa M. Carr, Counsel for the Respondents

HEARD: December 7, 2016

E N D O R S E M E N T

I. INTRODUCTION

1The Applicant seeks a declaration that an initial certificate issued pursuant to s. 24 of the Repair and Storage Liens Act is null and void. The issue is whether the Respondent insurer under an automobile policy had standing to bring an application under s. 24 (1), in view of the fact that it had not indemnified the insured, Ms. Brennan, for the loss of her automobile; it had been rendered a total loss in an automobile accident.

II. FACTS

2On December 20, 2015 the motor vehicle owned by the Respondent Brennan was rendered a total loss in an automobile accident, and towed to the storage premises operated by the Applicant. On January 6, 2016 Brennan executed a Vehicle Repair and Storage Agreement in which she agreed to pay a storage rate of $85.00 per day. Under her automobile insurance policy with Intact, it was obliged to reimburse her for the storage costs and pay her for the loss of the automobile.

3Intact applied for and received an initial certificate under s. 24 of the RSLA. The certificate was issued on February 9, 2016. As of that date Intact had not yet paid Brennan for the loss of her automobile.

III. APPLICABLE STATUTORY PROVISIONS AND LEGAL PRINCIPLES

4S. 4 (1) and s. 24 of the RSLA provide as follows:

Storer’s lien

4. (1) Subject to subsection (2), a storer has a lien against an article that the storer has stored or stored and repaired for an amount equal to one of the following, and the storer may retain possession of the article until the amount is paid:

5. The amount agreed upon for the storage or storage and repair of the article.

6. Where no such amount has been agreed upon, the fair value of the storage or storage and repair, determined in accordance with any applicable regulations.

7. Where only part of a repair is completed, the fair value of the storage and the part of the repair completed, determined in accordance with any applicable regulations. 2014, c. 9, Sched. 4, s. 3 (1).

Return of article when dispute

24. (1) Where a claimant claims a lien against an article under Part I (Possessory Liens) and refuses to surrender possession of the article to its owner or any other person entitled to it and where one of the circumstances described in subsection (1.2) exists, the owner or other person lawfully entitled to the article may apply to the court in accordance with the procedure set out in this section to have the dispute resolved and the article returned. 2000, c. 26, Sched. B, s. 18 (2).

Same, non-possessory lien

(1.1) Where a claimant claims a lien against an article under Part II (Non-Possessory Liens), where the person who has possession of the article refuses to surrender it to its owner or any other person entitled to it and where one of the circumstances described in subsection (1.2) exists, the owner or other person lawfully entitled to the article may apply to the court in accordance with the procedure set out in this section to have the dispute resolved and the article returned. 2000, c. 26, Sched. B, s. 18 (2).

Dispute

(1.2) Subsection (1) or (1.1) applies if there is,

(a) a dispute concerning the amount of the lien of the lien claimant including any question relating to the quality of the repair, storage or storage and repair;

(b) in the case of a repair, a dispute concerning the amount of work that was authorized to be made to the article; or

(c) a dispute concerning the right of the lien claimant to retain possession of the article. 2000, c. 26, Sched. B, s. 18 (2).

Respondents

(2) The application shall name, as the respondents, the lien claimant and, in the case of a non-possessory lien, the person who has possession of the article. 2000, c. 26, Sched. B, s. 18 (2).

Form

(3) The application shall be in the required form and may include an offer of settlement. 1998, c. 18, Sched. E, s. 266 (1).

Payment into court

(4) The applicant shall pay into court, or deposit security with the court in the amount of, the full amount claimed by the respondent but where the applicant includes an offer of settlement in the application, the applicant shall pay into court the amount offered in settlement and shall pay into court, or deposit security with the court for, the balance of the full amount claimed by the respondent and payments and deposits under this subsection shall be made to the credit of the application. R.S.O. 1990, c. R.25, s. 24 (4).

Initial certificate

(5) Where money is paid into court or a deposit is made with the court under subsection (4), the clerk or registrar of the court shall issue an initial certificate in the required form and under the seal of the court stating that the amount indicated therein, or security therefor, has been paid into or posted with the court to the credit of the application, and where applicable, indicating the portion of that amount that is offered in settlement of the dispute. R.S.O. 1990, c. R.25, s. 24 (5); 1998, c. 18, Sched. E, s. 266 (2).

Release on interim certificate

(6) The applicant shall give the initial certificate to the respondent who, within three days of receiving the initial certificate, shall release the article described therein to the applicant unless, within the three day period, the respondent files with the court a notice of objection in the required form. R.S.O. 1990, c. R.25, s. 24 (6); 1998, c. 18, Sched. E, s. 266 (3).

Final certificate

(7) Where an objection has been filed with the court, the applicant may pay into court or post security with the court, to the credit of the application, the additional amount claimed as owing in the objection, and where the additional amount has been paid into court or the additional security has been posted, the clerk or registrar shall issue a final certificate in the required form and under the seal of the court. R.S.O. 1990, c. R.25, s. 24 (7); 1998, c. 18, Sched. E, s. 266 (4).

Release on final certificate

(8) The applicant shall give the final certificate to the respondent who, upon receiving the final certificate, shall release immediately the article described therein. R.S.O. 1990, c. R.25, s. 24 (8).

Writ of seizure

(9) Where the respondent does not release the article as required, the applicant may obtain from the clerk or registrar of the court, without notice to the respondent, a writ of seizure directing the sheriff or bailiff to seize the article and, upon receipt of the writ, the sheriff or bailiff shall seize the article and return it to the applicant. R.S.O. 1990, c. R.25, s. 24 (9).

Idem

(10) Before obtaining a writ of seizure, the applicant shall file an affidavit with the clerk or registrar of the court confirming that the respondent has not released the article as required. R.S.O. 1990, c. R.25, s. 24 (10).

Payment out of court of settlement

(11) Where the respondent releases the article to the applicant in compliance with an initial or final certificate, or where the article is seized by a sheriff or bailiff under a writ of seizure, the respondent may demand a receipt in the required form to this effect, and upon presentation of the receipt to the clerk or registrar of the court and signing a waiver of further claim in the required form, the respondent shall be paid the portion of the amount paid into court that was offered in settlement of the dispute. R.S.O. 1990, c. R.25, s. 24 (11); 1998, c. 18, Sched. E, s. 266 (5).

Notice to applicant

(12) Where the respondent accepts the amount offered in settlement of the dispute, the clerk or registrar of the court shall notify the applicant and upon request shall return to the applicant the balance of the amount deposited into court and deliver up any security deposited by the applicant for cancellation. R.S.O. 1990, c. R.25, s. 24 (12).

Substitution of security

(13) Where the article is released to the applicant by the respondent or is seized by the sheriff or bailiff under subsection (9), the lien is discharged as a right against the article and becomes instead a charge upon the amount paid into court or the security posted with the court, and where the respondent seeks to recover the full amount claimed by the respondent to be owing, the respondent may commence an action to recover that amount. R.S.O. 1990, c. R.25, s. 24 (13).

Discharge

(14) The charge upon the money paid into court or the security posted with the court is discharged ninety days after the article was returned to the applicant or seized unless, before the end of the ninety days, the respondent has accepted the applicant’s offer of settlement or has commenced an action to recover the amount claimed. R.S.O. 1990, c. R.25, s. 24 (14).

Return of money or security

(15) Upon the expiry of the ninety days referred to in subsection (14), the clerk or registrar of the court may return to the applicant the money paid into court and deliver up for cancellation any security posted with the court if the applicant files with the clerk or registrar an affidavit confirming that the respondent has neither accepted an offer of settlement nor commenced an action to recover the money claimed. R.S.O. 1990, c. R.25, s. 24 (15).

Costs of enforcing writ seizure

(16) The respondent is liable for the costs of enforcing a writ of seizure and these costs shall be set off against the amount paid into court under this section. R.S.O. 1990, c. R.25, s. 24 (16).

5Also important for consideration of the issue before me is s. 278 (1) of the Insurance Act which reads as follows:

Subrogation

278. (1) An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights. R.S.O. 1990, c. I.8, s. 278 (1).

6Further, pursuant to the Insurance Act, the standard automobile policy of insurance must include statutory conditions which codify in statutory condition 6(7) the common law of subrogation to the effect that the salvage or totally destroyed automobile vests in the insurer, only after it has paid to the insured the cash value of the automobile.

IV. ANALYSIS

7The Applicant argues that, based on the need to read s. 278 (1) of the Insurance Act and statutory condition 6 (7) consistently, Intact had no right of subrogation at the time of its application under s. 24 (1) for the initial certificate, because it had not paid Brennan for her loss of the automobile; that, therefore, Intact was not a “person lawfully entitled to” the automobile under s. 24 (1) of the RSLA; and that, hence, the initial certificate ought to be declared null and void.

8The Respondents argue that s. 278 (1) is consistent with, but broader than, statutory condition 6 (7), since s. 278 (1) must apply to forms of insurance other than automobile insurance; that the insured must assist the insurer in minimizing the storage fees which the insurer is obliged to reimburse to the insured under the contract of insurance; that, therefore, Intact “assumed liability” for the storage fees under that contract within the meaning of s. 278 (1); that consequently Intact was “subrogated to all rights of recovery” of Brennan against the Applicant under s. 278 (1); and that Intact was thus a “person lawfully entitled to” the automobile within s. 24 (1) of the RSLA with the right to bring the application for the initial certificate.

9In 121897 Ontario Limited o/a Castle Auto Collision & Mechanical Service v. Certas Insurance, 2016 ONSC 357 at paras 71 to 74 Justice Sanderson sitting in the Divisional Court considered a similar issue to the one before me:

71Counsel for Certas submitted that Certas had issued an Ontario Automobile Policy for the 2000 Mercedes Benz to Kolesnikovs. At the time the s24 Application was brought, Certas had not yet decided whether to provide coverage for the property damage claim that Koleskinovs had submitted. There was an Ontario Automobile Policy in force insuring Kolesnikovs.

72Pursuant to section 278 of the Insurance Act, the right of subrogation arises whenever an insurer makes any payment under a contract of insurance:

Subrogation

278. (1) An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights. R.S.O. 1990, c. 1.8, s. 278 (1).

Conclusion

73Certas brought a s24 Application and made a payment of its own funds to get the vehicle released. In so doing, Certas was protecting the interest of itself and of its insured [whether or not it ultimately decided to provide coverage.]

74An insured is entitled to subrogate in respect of any payment made.

10The Applicant submits that that reasoning misses the point that the payment under s. 24 of the RSLA cannot provide the right retroactively to apply under s. 24 (1). I take comfort from paragraph 73 wherein Her Honour cited the interest of the insurer as being protected by the application under s. 24. I find that an insurer in the position of Intact, within s. 278 (1) of the Insurance Act has “assumed liability” under the contract of insurance for the storage fees, and is subrogated to the rights of its insured pursuant to s. 278 (1). I further find that this right of subrogation allows the insurer to bring an application under s. 24 (1) of the RSLA as a “ person lawfully entitled to” the automobile.

11I am strengthened in that conclusion because it protects the insured’s rights to have the storage fees paid by the insurer pursuant to the insurance contract, the rights of the insurer to contest the quantum of those fees, and the rights of the storage company to have security for those fees.

12I, therefore, dismiss the application at bar.

V. COSTS

13I will receive costs submissions in writing. They will be no more than 3 pages, excluding a bill of costs. The Respondents are to serve and file their submissions within one month from the release of this endorsement. The Applicant is to serve and file its submissions within three weeks of service of the Respondents’ submissions. There shall be no reply.

Bloom, J.