Macrae et al. v. Liberty International Underwriters, a Division of the Liberty Mutual Insurance Company et al., 2017 ONSC 4522

COURT FILE NO.: 8924/12

DATE: 20170725

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Murray Thomas Macrae and Gail Ann Delaney, Plaintiffs

AND:

Liberty International Underwriters, a Division of the Liberty Mutual Insurance Company and Unifund Assurance Company, Defendants

BEFORE: Justice A. K. Mitchell

COUNSEL: S. Atkinson, for the Defendant, Liberty International Underwriters, a Division of the Liberty Mutual Insurance Company

C. Godden, for the Defendant, Unifund Assurance Company

HEARD: July 19, 2017

ENDORSEMENT

Overview

[1] Originally, the defendant, Liberty International Underwriters, a division of the Liberty Mutual Insurance Company (“Liberty”), sought summary judgment dismissing the plaintiffs’ claim on the basis Liberty does not respond to the plaintiffs’ claims or, alternatively, if it is found that Liberty does respond – a declaration as to the priority of its coverage and the amount payable to the plaintiffs relative to the priority of and amount payable by the defendant, Unifund Assurance Company (“Unifund”), under its policy of insurance.

[2] Since the motion was first returnable, all claims of the plaintiffs have been settled. The only issue to be determined on this motion is whether the Liberty policy responds to the plaintiffs’ claims. If it is found that the Liberty policy does respond to the plaintiffs’ claims, the defendants agree that Unifund and Liberty are responsible for payment to the plaintiffs of one-third and two-thirds of the settlement amount, respectively.

[3] The plaintiffs take no position on the motion.

[4] Both Liberty and Unifund consent to a determination of the issues by way of motion. On this motion, the facts are not in dispute. A determination of the issues requires only the interpretation of the standard automobile policy wording.

Background

The Accident

[5] On January 3, 2011, the plaintiff, Thomas Macrae was operating a motor vehicle he had rented from Enterprise Rent-a-Car (“Enterprise”) in El Paso, Texas (the “Texas automobile”). His then spouse, the plaintiff, Gail Delaney, was in the passenger seat. While stopped at a red light, the Texas automobile was hit from behind by a vehicle operated by Frida Palencia.

[6] Ms. Palencia was an inadequately insured motorist. Under her policy of insurance, she had only $30,000 in coverage to satisfy the damage claims of the plaintiffs.

[7] At the time of the accident, the Texas automobile was insured by Enterprise pursuant to the laws of Texas. Texas laws did not require Enterprise to provide for underinsured motorist or uninsured motorist coverage. The insurance policy provided by Enterprise did not provide for underinsured motorist or uninsured motorist coverage.

The Liberty Policy

[8] Liberty issued an automobile policy to Technical Standards and Safety Authority (“TSSA”), Macrae’s employer (the “Liberty Policy”). TSSA was the named insured. As required by Ontario laws, the Liberty Policy was issued in accordance with the form set out in the OAP 1. In addition to the standard coverage, the Liberty Policy also contained an OPCF 44R family protection endorsement that provided underinsured motorist coverage. The Liberty Policy also included, among others, an OPCF 5 endorsement. The Liberty Policy insured, among other automobiles, a 2006 Chevrolet Impala automobile (the “Impala”).

[9] The Liberty Policy extended automobile insurance coverage to Macrae, as an employee of TSSA and to Delaney as his spouse. The Liberty Policy was in effect on the date of the accident.

The Unifund Policy

[10] Unifund issued an automobile policy to Ms. Delaney, as named insured (the “Unifund Policy”). Ads required by Ontario laws, the Unifund Policy was issued in accordance with the form set out in the OAP 1. In addition to the standard coverage, the Unifund Policy also contained an OPCF 44R family protection endorsement that provided underinsured motorist coverage. The Unifund Policy also included, among others, an OPCF 27 endorsement. The Unifund Policy insured a 2009 Dodge Challenger automobile.

[11] The Unifund Policy extended automobile insurance coverage to Macrae, as Delaney’s spouse. The Unifund Policy was in effect on the date of the accident.

Analysis

OPCF 44R – Family Protection Coverage Endorsement

[12] We start the analysis by considering s. 18 of OPCF 44R which addresses priority disputes between two (or more) insurers where both policies of insurance contain family protection coverage. Both the Liberty Policy and the Unifund Policy provide for family protection coverage.

[13] Section 18 provides:

18. The following rules apply where an eligible claimant is entitled to payment under family protection coverage under more than one policy:

(a) (i) if he or she is an occupant of an automobile, such insurance on the automobile in which the eligible claimant is an occupant is first loss insurance and any other such insurance is excess;

(ii) if he or she is not an occupant of an automobile, such insurance in any policy in the name of the eligible claimant is first loss insurance and any other such insurance is excess.

(b) all applicable first loss family protection coverage shall be apportioned on a pro rata basis, but in no event shall the aggregate payment under all suchinsurances exceed the highest limit of coverage provided by any one of such first loss insurances.

(c) the applicable first loss insurance shall be exhausted before recourse is made to excess insurances.

(d) all applicable excess family protection coverage shall be similarly apportioned on a pro rata basis, but in no event shall the aggregate payment under all such insurances exceed the highest limits of coverage as defined in section 5 of this change form, which is provided by any one of such access insurances. (emphasis added)

[14] The parties concede that the priority scheme provided for in s. 18 governs the issue for determination on this motion. That is, both Liberty and Unifund concede that Macrae is “an eligible claimant … entitled to payment under family protection coverage under more than one policy”, namely, the Liberty Policy and the Unifund Policy.[^1]

[15] Liberty submits that it cannot be first loss insurance under s. 18, because under the Liberty Policy the Texas automobile in which Macrae was an occupant is not covered by the Liberty Policy. That is, the Liberty Policy does not provide insurance on the Texas automobile.

[16] To support its position, Liberty directed me to s. 2 of OAP 1. Section 2 of the OAP describes what automobiles, in addition to the Impala, are covered under the Liberty Policy. Section 2.2.3 addresses which vehicles qualify as “other automobiles” and provides:

“Automobiles, other than the described automobile, are also covered when driven by you, or driven by your spouse who lives with you.”

[17] “You” refers to TSSA, the named insured. “Described automobile” refers to the Impala.

[18] Section 2.2.3 provides that certain conditions must be met for “other automobiles” to be covered. Special Condition No. 6 is applicable. Section 2.2.3, special condition No. 6, bullet point 5 reads:

Special conditions: For other automobiles to be covered, the following conditions apply:

6. If you are a corporation, unincorporated association, partnership, sole proprietorship, business or other entity, the employee or partner for whose regular use a described automobile is supplied, and their spouse who lives with that person, will be covered when they drive the other automobile, under the following conditions:

• Except as provided under subsection 2.2.4, this policy doesn’t cover the employee or partner or their spouse if they own, lease or rent any automobile and it is insured as the law requires… (emphasis added)

[19] A plain reading of this provision supports a finding that the Texas automobile was not covered by the Liberty Policy because:

(a) The Liberty Policy was issued in the name of TSSA, a corporation;

(b) The Texas automobile was an automobile rented by Macrae, an employee of TSSA; and

(c) The Texas automobile was insured under both the Unifund Policy and the Enterprise policy as the law required.

[20] Unifund argues that it is improper and unprecedented to inform my determination of priorities pursuant to s. 18 of the OPCF 44R by reference to OAP 1. Unifund submits that had that been the intention of the drafters of OPCF 44R, specific reference to OAP 1 (the policy) would have been made, as has been done in both OPCF 5 and OPCF 27, by way of two examples.

[21] Unifund further argues that OPCF 44R is a complete code to coverage with respect to underinsured motorists and points out that s. 2 of OAP 1 deals only with qualifying other automobiles for purposes of mandatory insurance coverage i.e., liability, accident benefits, uninsured automobiles and direct compensation – property damage, with respect to “other automobiles”. That is, s. 2 of OAP 1 does not address what constitutes an “other automobile” for purposes of underinsured coverage.

[22] I disagree with Unifund’s position. OAP 1 is the parent document – it is the policy of insurance. OPCF 44R does not exist independent of OAP 1. Surely Unifund cannot be suggesting Liberty is required to provide underinsured coverage on the Texas automobile but not any mandatory coverage on that same automobile? The drafters of OAP 1 clearly intended to carve out insurance coverage in respect of an automobile rented by an employee of a named corporate insured.

[23] Macrae is neither a named insured under the Liberty Policy nor the Unifund policy. However, s. 2.2.3 of OAP 1, special condition 6, bullet point 5, applies only with respect to the Liberty Policy. This provision (or any similar provision) has no application with respect to Macrae’s coverage under the Unifund Policy. To give meaning to this provision, the phrase “such insurance on the automobile in which the eligible claimant is an occupant” must be interpreted first having regard to whether there is insurance on the Texas automobile under the Liberty Policy. TSSA, a corporation, is Macrae’s employer and thus the Texas automobile is carved out of coverage under the Liberty Policy. This (or a similar) “carve out” is not available to Unifund under the Unifund Policy.

[24] While Macrae is an eligible claimant under OPCF 44R because he meets the criteria of “eligible claimant” provided for therein, the Texas automobile in which he was an occupant at the time of the accident is not one for which Liberty is required to provide coverage of any kind under the Liberty Policy. This is as a result of Macrae being an occupant in a rented automobile at the time of the accident and being an employee of the named corporate insured rather than a spouse of the named insured, as he is under the Unifund Policy. Regrettably for Unifund, in this priority dispute this distinction permits Liberty to escape having to respond to the plaintiffs’ claims.

[25] Accordingly, the action is dismissed as against Liberty. Unifund must respond as first (and only) insurance under s. 18 of OPCF 44R.

Costs

[26] As the successful party, Liberty is presumptively entitled to its costs of this motion. Liberty seeks its costs of the motion on a partial indemnity basis in the amount of $15,905.34 (actual costs total $24,469.75). By way of comparison, Unifund submitted a bill of costs in the event it had been successful on this motion claiming $4,613.62 in partial indemnity costs (substantial indemnity costs total $6, 911.37).

[27] There are no offers to settle to consider. Liberty’s lawyers spent a total of 64 hours at an average hourly rate of $375. Unifund’s lawyers spent a total of 37 hours at an average hourly rate of $169.

[28] The primary guiding principle is whether the costs are fair and reasonable in the circumstances: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A).

[29] Having regard to the factors enumerated in Rule 57.01, I find that $7,500 inclusive of disbursements and HST is a fair and reasonable award of costs on this motion. In arriving at this amount, I considered the much lower comparison costs of Unifund (30% of the amount claimed by Liberty). Also, no facts were in dispute and, therefore, cross-examinations were not required nor was an extensive evidentiary record required. The evidence consisted largely of copies of the subject policies and related endorsements. In addition and most importantly, I considered that this same issue had been argued previously in the context of an arbitration proceeding regarding priority of payment of accident benefits by Liberty and Unifund under their respective policies. Arbitrator Densem in his decision dated June 15, 2015 awarded Liberty, as the successful party, costs of the arbitration.

[30] Unifund shall pay to Liberty its costs of this motion in the amount of $7,500 inclusive of disbursements and HST.

Justice A. K. Mitchell

Justice A. K. Mitchell

Date: July 25, 2017

[^1]: As earlier noted, the Enterprise policy did not provide for family protection coverage.