Court File and Parties

Court File No.: CV-16-559147 Date: 2017-06-21 Ontario Superior Court of Justice

Between: Intact Insurance Company, Applicant – and – Aviva Insurance Company of Canada, Respondent

Counsel: Michael Ahmadi, for the Applicant Christopher Prince, for the Respondent

Heard: December 22, 2016

Before: Stewart J.

Nature of the Application

[1] On November 1, 2013, Charlie Youssef (“Charlie”) was involved in an accident while driving a car owned by his father, Michael Youssef (“Michael”).

[2] Charlie and Michael are being sued by Lloyd and Gail Grondin. The Grondins allege they were injured in the accident and claim damages against both.

[3] Aviva Insurance Company of Canada (“Aviva”) insured Michael under an owner’s automobile insurance policy. Aviva has denied coverage to Michael on the basis that Michael added his car to his policy after the accident occurred.

[4] The question raised on this application is whether such a denial allows Aviva to escape the effect of the statutory mandate of section 258 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”) which provides that a denial of coverage does not allow an insurer to escape liability for the first $200,000.00 in damages found to be owing.

[5] Aviva denies that the Applicant is entitled to the relief it seeks. It says that Michael’s conduct voids his policy which means that neither Michael’s car nor Charlie were insured by Aviva at the time of the accident.

Background Facts

[6] Intact and Aviva are both insurance companies licensed to carry on the business of insurers, including the underwriting of automobile insurance policies. They are regulated under the Act.

[7] Charlie resides in the City of Windsor and was insured under an automobile policy of insurance issued by Intact.

[8] Charlie’s policy with Intact provided him with liability coverage when he drove his automobile insured under that policy, a 2004 Land Rover. The Intact policy also provided Charlie with liability coverage when he drove certain other automobiles. Charlie had Michael’s consent to drive his car.

[9] Michael was insured under an automobile policy of insurance issued by Aviva. The action commenced by the Grondins arises out of a motor vehicle accident in Windsor on November 1, 2013.

[10] On November 27, 2014 the Grondins issued a Statement of Claim against Charlie for his role as driver of the purported at-fault vehicle and Michael for his role as owner of the purported at-fault vehicle for injuries sustained by them as a result of the accident.

[11] On June 18, 2015 the Grondins amended their Statement of Claim to add RBC General Insurance Company, their OPCF 44R insurer.

[12] On its face, Michael’s Aviva policy was effective as of November 1, 2013, the date of the accident.

[13] Intact submits that the Act provides that the insurance company (Aviva) that issued the insurance policy to the owner of the alleged at fault vehicle (Michael) must defend both the owner (Michael) and the driver (Charlie) of that vehicle against all lawsuits arising out of the operation of that vehicle.

[14] Section 277(1) of the Act holds that the insurance of the alleged at fault vehicle’s owner is first loss insurance and that all other insurance is excess insurance.

[15] On December 19 2014, Intact wrote to Aviva requesting that Aviva respond to the lawsuit against Charlie.

[16] On March 12, 2015, Aviva took the position that Michael had provided false information regarding the ownership of the car and had failed to disclose that it had been in an accident. Aviva asserted that this is a breach of the Act and a material misrepresentation. As a result, the Aviva policy is void ab initio.

[17] Aviva asserts that Michael added his Chrysler to his Aviva policy after knowing the accident had occurred and this conduct thus voided the policy. Aviva therefore takes the position that its policy has not been triggered.

Issue and Discussion

[18] Aviva argues that Intact has mischaracterized the central issue in this dispute as being denial of coverage. Instead, Aviva says its position is that there was no contract and policy of insurance in place at the time of the accident in which the vehicle involved.

[19] Aviva asserts that Intact’s application is predicated on the mistaken belief that the vehicle was an insured vehicle under the Aviva policy at the time of the accident.

[20] Aviva maintains that, unless otherwise provided, no policy is effective until it is issued. Therefore, if the policy is not issued until after the commencement of the period named, the policy will not cover losses happening before its issue, even if it is antedated. Aviva relies on a decision of the Alberta Court of Queen’s Bench for this proposition, Brochu (next friend of) v. Vachon, [2003] A.J. No. 1312, affirmed 2003 ABCA 367 (ABCA)).

[21] I agree with Intact’s submission that the decision in Brochu v. Vachon does not stand for the proposition advanced by Aviva and does not serve to displace the relevant provisions of the Act.

[22] Intact submits that, even if it were to be conceded that Aviva is correct in its statement of fact, the Act nevertheless operates to require Aviva to respond to this action and defend Charlie and Michael.

[23] Intact candidly admits that, at first blush, its position appears unfair. However, it submits that Aviva’s position is not legally correct. Had the “shoe been on the other foot”, as it sometimes is, Intact would be the insurer required to defend. This is simply how the system is designed and intended to work under the Act.

[24] It should also be noted that Aviva bears the burden of proving that there is no coverage.

[25] Sections 251 and 258 of the Insurance Act deal with insurers’ obligations towards plaintiffs when those insurers have denied coverage to their own insureds. Section 258 of the Act is often referred to as the “absolute liability provision” because it deems insurers responsible for up to $200,000 in damages regardless of any actions by their insureds that may have resulted in forfeiture of coverage. However, a rightful denial of coverage does negate that same insurer’s liability for any damages above $200,000.00.

[26] These legislative provisions dictate that Aviva’s coverage denial means only that its exposure towards the Grondins is potentially capped at $200,000.00.

[27] As the insurer of the owner’s vehicle, Aviva’s exposure is therefore “first loss”. This means that Aviva must pay any damages to which the Grondins are entitled, up to $200,000.00.

[28] As a result, Intact submits that policy is excess insurance only in accordance with s. 277 of the Act. Intact’s exposure is triggered once Aviva has paid $200,000.00 towards the Grondins’ damages.

[29] The accident is said to have occurred at around 4:10 p.m. on November 1, 2013, according to the Police Accident Reports. Aviva alleges that Michael Youssef contacted Aviva and placed coverage on the Michael Youssef Chrysler after the accident.

[30] The preponderance of the evidence indicates that coverage under the Aviva policy began on November 1, 2013, the day of the accident, despite Aviva’s assertion that coverage did not begin until the next day.

[31] The fact that the policy was effective on November 1, 2013 is reflected in multiple places in the available documentation, including the Policy Change Notice, the Certificate of Automobile Insurance, and the liability cards.

[32] The coverage period for an insurance policy is reflected in the Certificate of Insurance. The Certificate of Insurance corresponding to the Michael’s car indicates that coverage began on November 1, 2013.

[33] Aviva was free to put a specific start time on the certificate of insurance but did not do so. As such, coverage is presumed to start from the very first minute of November 1, 2013. The law does not recognize fractions of days (see: Larizza v. Commercial Union Assurance, 1990 CarswellOnt 32 (Ont. C.A.)).

[34] Aviva was also free to particularize the time of day coverage became effective. In the absence of such particularization, coverage is presumed to begin at 12:01 a.m. on November 1, 2013.

[35] Additionally, Aviva charged a premium for the entire day. If Aviva obtained the benefit of charging a whole day's premium, it follows that it should not incur the obligations that follow from providing a whole day's coverage. As was observed by the Court of Appeal for Ontario in Larizza v. Commercial Union Assurance, 1990 CarswellOnt 32 (Ont.C.A.), it must follow that the insured is entitled to coverage for the full day.

[36] To address Aviva’s alternative argument, the Court of Appeal for Ontario has confirmed that a voidance of the policy, even if based on a material misrepresentation at time of issuance, does not allow an insurer to escape the provisions of section 258 of the Insurance Act (see: Campanero v. Kim, 1998 CarswellOnt 3499 (Ont. C.A.)).

[37] Aviva's position in this regard was considered and rejected in Laurentian Casualty Co. of Canada v. State Farm Mutual Automobile Insurance Co., (1998), 40 O.R. (3d) 690 (Ont. C.A.). In that case, coverage had been obtained after the accident but was backdated and made effective to three hours before the accident. The Court of Appeal for Ontario held that, although a misrepresentation had been made, it was nevertheless one which did not allow the insurer to escape liability under s. 258 of the Act, even if the insurer might successfully deny coverage otherwise.

[38] I therefore agree with Intact’s position as stated. As a result of the operation of the Act, it is Aviva’s responsibility to pay for the first $200,000.00 of the Grondins’ damages. Aviva’s obligation flows from section 258 of the Act which provides that a denial of coverage by an insurer simply caps the insurer’s liability capped at $200,000.00.

[39] Automobile insurance is tightly regulated in Ontario. The Ontario legislature has enacted a statute that holds insurers liable to some extent even when the policy involved may be found to be void. Had the situation been reversed, as it frequently may be, Intact would be in Aviva’s position. The interpretation and application of the relevant provisions of the Act advocated by Intact are in keeping with the purpose and intent of the legislation which include the protection of motor vehicle operators, passengers and users of the roads.

Conclusion

[40] For these reasons, Intact is entitled to a declaration that Aviva Policy No. A13338652PLA is triggered by the allegations made against Charlie in an action brought against Charlie in the Ontario Superior Court of Justice by the Grondins. Aviva must either defend and indemnify Charlie in the underlying action. Alternatively, Aviva is responsible for the first $200,00.00 in any judgment awarded against Charlie in the underlying action or any settlement made by Charlie in it.

Costs

[41] If the subject of costs cannot be agreed upon by the parties written submissions may be delivered by Intact within 20 days and by Aviva within 15 days thereafter.

Stewart J.

Released: June 21, 2017

COURT FILE NO.: CV-16-559147 DATE: 20170621 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Intact Insurance Company Applicant – and – Aviva Insurance Company of Canada Respondent

REASONS FOR DECISION Stewart J. Released: June 21, 2017