CITATION: Kowaluk v. Western Assurance Company, 2017 ONSC 6077

NEWMARKET COURT FILE NO.: CV-15-124367-00

DATE: 20171011

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANNA KOWALUK

Plaintiff

– and –

WESTERN ASSURANCE COMPANY

Defendant, (Moving Party)

E. Goldentuler, for the Plaintiff

T. Letourneau, for the Defendant

HEARD: October 4, 2017

REASONS FOR DECISION

DiTOMASO J.

INTRODUCTION

[1] The Defendant Western Assurance Company (“Western”) brings a motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure.

[2] Western seeks a declaration that the Plaintiff Anna Kowaluk (“Anna”) is not entitled to coverage under the policy for property damage arising out of an October 21, 2014 motor vehicle accident, pursuant to s. 7.2.2 of the Ontario Automobile Policy – 1 (“OAP-1”).

[3] Western seeks summary judgment dismissing the action and costs of the motion and action.

OVERVIEW

[4] The factual context is largely undisputed.

[5] On October 21, 2014, Anna permitted her boyfriend, Chase Drew (“Mr. Drew”) to drive her vehicle, a 2008 Pontiac Solstice bearing licence plate number XANNAX (“the vehicle”), during which time Mr. Drew was involved in an accident that rendered the vehicle a total loss.

[6] Anna was a front seat passenger in the vehicle at the time of the accident.

[7] Mr. Drew was convicted of the following offences as a result of the accident:

(i) No driver’s licence or improper class of licence – Highway Traffic Act, s. 32(1);

(ii) Impaired driving causing bodily harm – Criminal Code, s. 253(1); and

(iii) Fail to remain at accident – bodily harm – Criminal Code s. 252(1.2).

[8] At all material times, Mr. Drew was not authorized by law to drive.

[9] The Crown Brief Synopsis indicates that Mr. Drew was an unlicensed driver for at least four years.

[10] The fact that Mr. Drew was intoxicated immediately following the accident was apparent to investigating police officers and civilian witnesses.

[11] Investigating police officers found two unopened beer bottles in the foot-well of the driver’s side of the vehicle.

[12] Investigating police officers found a beer cap from a Carling beer bottle in Mr. Drew’s front right pocket.

[13] The duty notes of arresting officer, P.C. McEachern, indicate that Mr. Drew carried a heavy smell of alcohol and was very unstable on his feet. Mr. Drew is further described in the duty notes as “heavily intoxicated”.

[14] The duty notes or arresting/investigation/statement officer P.C. Devlin indicated that when a beer cap was found in Mr. Drew’s pocket, Mr. Drew said he had lots more.

[15] Investigating police officers noted at the scene of the accident that Mr. Drew reeked of alcohol, was slurring his words heavily, was swaying and had very poor balance.

[16] Anna refused to cooperate with police. She did not respond to repeated requests to provide a witness statement.

[17] By way of additional facts, a driver’s licence search showed that Mr. Drew did have a driver’s licence number D7365-12168-80705, and that licence expired July 16, 2014, approximately three months before the collision.

[18] In addition to the affidavit of Trevor J. Tynan and attached exhibits filed on behalf of the moving party (moving party’s Motion Record), I also had before me the Motion Record filed on behalf of Anna.

[19] Anna’s Motion Record contained her affidavit and the affidavit of her friend Priya Ashta. The facts deposed to in those two affidavits are not agreed to by the moving party and are controversial.

[20] In her affidavit, Anna addresses Mr. Drew’s alcohol consumption to the effect that she did not smell any alcohol on him, did not know if he had consumed any alcohol during the day before he was picked up by her and did not see any evidence that he was intoxicated. Further, her affidavit addressed the question of Mr. Drew’s driver’s licence to the effect that she was unaware on the date of the collision that Mr. Drew did not have a driver’s licence. She later learned that his driver’s licence had expired on July 16, 2014, approximately three months before the collision. In her affidavit, she goes on to state that if she had suspected that Mr. Drew had consumed alcohol or any other substance that would have impaired his ability to drive, she would not have allowed him to drive her vehicle. Further, she was not aware that Mr. Drew’s driver’s licence had expired, otherwise she would not have allowed him to drive her vehicle on the night of the collision.

[21] As for the affidavit of Priya Ashta, she asserts that she did not drink or serve any alcohol at the time that Anna and Mr. Drew attended her place around 7:30 p.m. on the evening of October 21, 2014. She deposes that she did not see Anna or Mr. Drew consume any alcohol that evening. Anna and Mr. Drew attended her place around 7:30 p.m. that evening and left at around 9:30 p.m. Although she was not close to Mr. Drew, she deposes that she did not smell alcohol and deposes he did not act intoxicated

[22] As a result of the collision, Anna’s vehicle was rendered at total loss. She submitted a claim in respect of property damage to the vehicle to Western. Western denied Anna’s claim for property damage to her vehicle, on the basis that the loss or damage claimed by her was not covered by the Policy, pursuant to s. 7.2.2 of the OAP-1.

[23] On October 21, 2015 Anna issued the Statement of Claim in this action alleging that Western is in breach of contract, causing her damages totalling the amount of the replacement value of her vehicle. The claim is in the amount of $28,000.

ISSUE

[24] The issue to be determined is whether there is a genuine issue requiring a trial. Underlying the determination of this primary issue is the interpretation of s. 7.2.2 of the OAP-1.

POSITIONS OF THE PARTIES

Position of the Moving Party Western Assurance Company

[25] Western submits that there is no issue that Mr. Drew drove the vehicle with Anna’s permission. Further, it is submitted that Mr. Drew drove the vehicle under a number of prohibited conditions described in s. 7.2.2 of the Policy (the “Illegal Uses”).

[26] Western submits that on a plain reading of s. 7.2.2 of the OAP-1, coverage is excluded if Western establishes that:

(a) Another person drives or operates the automobile with the insured’s (Anna) permission; and

(b) That other person commits an illegal use.

[27] It is submitted that the insurer is not required to show that the insured person (Anna) specifically permitted the other person (Mr. Drew) to commit an Illegal Use.

[28] Western submits that coverage in this case was excluded by virtue of s. 7.2.1 and that summary judgment should be granted and the action dismissed.

Position of the Plaintiff Anna Kowaluk

[29] It is submitted that Western denied coverage for the damage to Anna’s vehicle based on Western’s position that Anna breached the policy of insurance by permitting Mr. Drew to drive her vehicle. Anna takes the position that she did not know that Mr. Drew was intoxicated, nor that he failed to renew his driver’s licence. It is submitted that in order to deny coverage, Western needs to prove that Anna was aware that Mr. Drew was intoxicated when she gave him permission to drive her vehicle. Further, in order to deny coverage, Western needs to prove that Anna was aware that Mr. Drew had an expired driver’s licence when she gave him permission to drive her vehicle.

[30] It is submitted that the wording of s. 7.2.2 and the wording of statutory condition s. 4(1) considered in Tut v. RBC General Insurance Company, 2011 ONCA 644 (Ontario Court of Appeal) and s. 7.2.2 of the OAP-1 are fundamentally the same wording and intention. Under either version the offence would be one of strict liability and therefore the test in Tut is applicable to this action.

[31] It is submitted that Western must prove knowledge on the part of Anna of Mr. Drew’s intoxication and of his failure to renew his driver’s licence.

[32] It is submitted that these questions cannot be determined on a motion for summary judgment, that the motion should be dismissed with costs and that the action proceed to trial.

[33] To round out the positions of the parties, Western takes the position that it is not required to establish that in order to deny coverage Western is required to prove that Anna was aware that Mr. Drew was intoxicated and/or had an expired driver’s licence when she permitted him to drive her vehicle on October 21, 2014.

ANALYSIS

[34] There is no dispute that this motion for judgment is appropriately brought pursuant to the Rule 20 of the Rules of Civil Procedure and pursuant to the principles set out in Hyrniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7.

[35] Summary judgment motions must be granted whenever there is no genuine issue requiring a trial, in that the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process:

(1) Allows the judge to make the necessary findings of fact;

(2) Allows the judge to apply the law to the facts; and

(3) Is a proportionate, more expeditious and less expensive means to achieve a just result.

[36] In the case at bar, the critical question to be determined is what is the proper interpretation of s. 7.2.2 of OAP-1.

[37] OAP-1 can be found in Western’s Motion Record as Exhibit B attached to the affidavit of Trevor J. Tynan at Tab 2.

[38] Section 7 deals with loss or damage coverages to an automobile. Section 7.1.1. provides coverage for loss of or damage to the insured’s automobile as follows:

We agree to pay for direct and accidental loss of, or damage to, a described automobile and its equipment caused by a peril such as fire, theft, or collision if the automobile is insured against these perils…

[39] At s. 7.1.2 the Policy speaks to four types of protection and coverage options. The Policy notes that all of the following coverages are subject to 7.2. Section 7.2 of the policy bears the heading Loss or Damage We Won’t Cover.

[40] Specifically, s. 7.2.2 deals with Illegal Use. Section 7.2.2. provides the following:

We won’t pay for loss or damage caused in an accident:

• if you are unable to maintain proper control of the automobile because you are driving or operating the automobile while under the influence of intoxicating substances;

• if you are convicted of one of the following offences under the Criminal Code of Canada relating to the operation, care or control of the automobile, or committed by means of an automobile, or any similar offence under any law in Canada or the United States:

o causing bodily harm by criminal negligence

o dangerous operation of motor vehicles

o failure to stop at the scene of an accident

o operation of motor vehicle when impaired or with more than 80 mg of alcohol in the blood

o refusal to comply with demand for breath sample

o causing bodily harm during operation of vehicle while impaired or over 80 mg of alcohol in the blood, or

o operating a motor vehicle while disqualified from doing so;

• if you use or permit the automobile to be used in a race or speed test, or for illegal activity;

• if you drive the automobile while not authorized by law; and

• if another person, with your permission, drives or operates the automobile under any of these conditions.

[41] Western submits that loss or damage to Anna’s motor vehicle is excluded if it can establish that another person (Mr. Drew) drove or operated her vehicle with her permission and Mr. Drew committed an Illegal Use.

[42] In respect of operating her vehicle with her permission, in her Statement of Claim, (found in the Motion Record at Tab 3 at paragraph 5, Anna pleads that on or about October 21, 2014 she had allowed her friend Chase Drew to drive her home in her vehicle. She was in the passenger seat at the time and as Mr. Drew was driving her vehicle he was involved in an accident rendering her vehicle a total loss.

[43] Counsel advised the court that while s. 7.2.2 has been interpreted in factual scenarios where the insured was also the operator of the vehicle, the difference in the case at bar is that the insured was a passenger with another person operating the vehicle. Under these circumstances, an interpretation of this section is sought.

[44] On behalf of Anna it is submitted that in order for Western to rely upon the exclusion set out in s. 7.2.2, Western must establish that Anna was aware that Mr. Drew was intoxicated and/or had an expired driver’s licence when she gave him permission to drive her vehicle on October 21, 2014.

[45] On my interpretation of s. 7.2.2, respectfully I disagree.

[46] To interpret s. 7.2.2 as requiring Anna to specifically permit the Illegal Use makes no sense. It would effectively make the exclusion meaningless. If the interpretation advanced on behalf of Anna was correct, an insured person could always take the following position, for example:

I permitted the other person to operate my automobile, but I did not permit him or her to be convicted of failure to stop at the scene of the accident.

[47] Such an interpretation runs counter to common sense as people do not grant other people specific permission to be convicted of criminal offences.

[48] I find that the Tut framework for statutory condition 4(1) does not apply when interpreting s. 7.2.2 in that under statutory condition 4(1) the other person is already not authorized by law to drive at the time the permission is granted by the insured person. The granting of permission and the prohibited condition are contemporaneous.

[49] However, under s. 7.2.2, the Illegal Uses have not yet occurred when the insured person grants permission for the other person to operate her vehicle. The Illegal Uses occur subsequent to the granting of permission. The granting of permission and the Illegal Uses are not contemporaneously.

[50] Under s.7.2.2, the insured person has no control over how that person uses the vehicle once permission to drive is granted. She has no means of knowing with absolute certainty when permission is granted, whether the other person will commit one of the Illegal Uses.

[51] I find the Tut framework for statutory condition 4(1) does not apply when interpreting s. 7.2.2 as the insured person under the statutory condition 4(1) scenario has the means to control to whom her automobile is given, she does not have that same means to control the use of that motor vehicle by the other person.

[52] I find that the parties did not intend that the words “with your permission” attach to the Illegal Uses of the automobile. Rather, the parties intended “with your permission” attached to the operation of the motor vehicle by another person.

[53] I agree that Western needs only to establish that another person (Mr. Drew) operated the automobile with Anna’s permission. I find that this has been admitted by Anna in her Statement of Claim and on the evidence before me, her permission for Mr. Drew to operate the motor vehicle has been established. I find that Western has established the other essential element in the interpretation of s. 7.2.2 exclusion being that Mr. Drew operated Anna’s vehicle under one of the Illegal Uses.

[54] In this regard, I refer back to the following language of s. 7.2.2:

• if you use or permit the automobile to be used in a race or speed test, or for illegal activities;

• if another person, with your permission, drives or operates the automobile under any of these conditions.

[55] The conditions referred to are enumerated in that section.

[56] I find that Mr. Drew operated Anna’s motor vehicle under the following Illegal Uses:

• If you are unable to maintain proper control of the automobile because you are driving or operating the automobile while under the influence of intoxicating substances;

• If you are convicted of one of the following offences under the Criminal Code of Canada relating to the operation, care or control of the automobile, or committed by means of an automobile, or any similar offence under any law in Canada or the United States;

o failure to stop at the scene of the accident

o causing bodily harm during operation of vehicle while impaired or over 80 mg of alcohol in the blood, or

o operating a motor vehicle while disqualified from doing so;

• if you drive the automobile while not authorized by law;

[57] The evidence establishes that Mr. Drew operated Anna’s vehicle under those Illegal Uses and there is no dispute that he was convicted of the three offences that I have enumerated.

[58] I find that whether Anna knew or ought to have known that Mr. Drew was intoxicated or whether she knew or ought to have known that he was an unlicensed driver does not apply.

[59] Rather, I find that Western has established that Anna permitted Mr. Drew to drive her automobile and that he drove that automobile under several of the illegal uses.

[60] Therefore, I find that coverage is excluded by virtue of s. 7.2.2 of the OAP-1.

[61] I find that there are no genuine issues requiring trial having determined the interpretation of s. 7.2.2 of the OAP-1 on this motion for summary judgment.

[62] Accordingly, the following relief is granted in favour of Western:

(a) A declaration that the Plaintiff Anna Kowaluk is not entitled to coverage under the Policy for property damage arising out of the October 21, 2014 motor vehicle accident pursuant to s. 7.2.2 of the OAP-1.

(b) Summary judgment dismissing the action.

(c) Costs of this motion and the action.

[63] As for costs, I heard submissions from the parties. Western as the successful party claims costs of the action and motion combined on a partial indemnity scale in the amount of $9,111.45. The position taken on behalf of Anna is that these costs claimed on a partial indemnity scale are not unreasonable. However, on behalf of Anna, it is submitted that a more reasonable figure should be $7,500 all inclusive. Costs are discretionary. I find that Western as the successful party is entitled to its partial indemnity costs. In fixing costs, I am guided by the overarching principles of fairness, reasonableness, and proportionality. In this regard, I fix costs in the amount of $8,000 all inclusive of fees, disbursements and HST payable by the Plaintiff Anna Kowaluk to the Defendant Western Assurance Company within the next thirty days, from the release date of this decision.

G.P. DiTomaso J.

Released: October 11, 2017