CITATION: The Insurance Corporation of British Columbia v. Lloyds Underwriters, 2017 ONSC 670

COURT FILE NO.: CV-16-550998

DATE: 20170127

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

The Insurance Corporation of British Columbia Applicant

– and –

Lloyds Underwriters Respondent

COUNSEL:

Stephanie Drisdelle for the Applicant

Heather Gray for the respondent

HEARD: January 25, 2017

BEFORE: Penny J.

Overview and Issues

[1] This is an application to determine which of two insurance companies is responsible, under s. 277(1.1) of the Insurance Act, RSO 1990, c. I.8, to respond to a personal injury claim arising out of a car accident in 2012.

[2] The driver of the car in question, Sharon Brindley, was employed by Connect Hearing in Victoria B.C. Connect had a third party liability policy with Lloyds covering loss arising out of the operation of “non-owned vehicles.” Brindley had her personal car insurance through ICBC. While on business for Connect in Toronto, Brindley picked up a rental car and, on her way to a business meeting, got in an accident for which she was eventually sued.

[3] Section 277 determines the order in which the third-party liability provisions of any available car insurance policy must respond to a car accident claim. The car involved in this case was rented from Hertz (which was the owner). Under s. 277(1.1), the order of priority is:

first, any policy under which the lessee of the car is entitled to indemnity;

second, any policy under which the driver of the car is entitled to indemnity; and

third, any policy under which the owner of the car is entitled to indemnity.

[4] ICBC argues the Lloyds policy must respond. Lloyds argues the ICBC policy must respond.

[5] The issue in this case involves the application of section 277(1.1)1. An analysis of s. 277(1.1)1 involves two questions: first, who is the lessee? and second, is there insurance available from a motor vehicle liability policy under which the lessee is entitled, as a named insured, to indemnity. Lloyds also argues that ICBC brought this application out of time.

[6] Thus, there are three issues in this case:

(1) who was the “lessee” of the car – Brindley or Connect?

(2) if Connect was the lessee, does the Lloyds policy provide insurance to indemnify Connect in this case? and

(3) did ICBC commence this application within the two year limitation period?

Who Was The Lessee?

[7] The facts are not in serious dispute. Brindley was employed by Connect. She lived and worked in Victoria. Brindley was issued an AMEX credit card on a Connect corporate account. The credit card bills were sent to and paid by Connect. Connect policy was that employees could only use their corporate credit card for business-related expenses.

[8] Connect had an account with Hertz. Connect policy was that employees who needed to rent a car for business had to rent from Hertz.

[9] Brindley had to go to Toronto on business. A car was reserved for her through Hertz at Pearson Airport. She picked it up, paid using her AMEX corporate credit card, signed the contract and drove to a business meeting. On her way, she was involved in an accident. The accident took place on February 28, 2012.

[10] An unknown person (presumably at Hertz) prepared a Hertz accident report. It is common ground that the Hertz accident report does not mention Connect; it refers only to Brindley.

[11] Upon her return to Victoria, Brindley reported the accident to Connect’s insurance brokers. She provided a written statement to them. Brindley did not report the accident to her personal insurance company. Neither Connect nor its insurer contacted ICBC either.

[12] ICBC was notified of a claim commenced by the driver (Smith) of the other vehicle on February 12, 2014. The statement of claim was not served on Brindley until August 6, 2014. This application was commenced by ICBC against Lloyds on April 15, 2016.

[13] Both parties rely upon the decision of Perell J. in Intact Insurance Co. of Canada v. American Home Assurance Co. of Canada, 2013 ONSC 2372. This appears to be one of the few published cases involving an interpretation of s. 277(1.1). The Intact case, like this one, involved an employee driving a rented car on business. The question was whether the employer or the employee was the lessee of the rented car.

[14] Perell J. held that who the lessee is on a car rental contract turns on basic principles of contract law. Who are the parties to the contract? To whom would the rental company look for payment? He said:

I see no unfairness in a straightforward interpretation of the section, and I see no reason to give s. 277 a reading that would introduce the concept of “de facto lessee” and encourage factual and legal disputes between insurers about how employment law, agency law, corporate law, partnership law, and the law of contract might apply to cast doubt on who is a lessee under s. 277 of the Insurance Act.

Who is the lessee can be tested and determined by asking the following question: Who can the lessor … sue to enforce the car rental contract?

[15] I agree with this approach. The answer to the question ‘who was the lessee of the Hertz rental car?’ is answered by determining who the counterparty was on the Hertz rental contract.

[16] I find, on the facts of this case, that Connect was the contracting party. Connect was liable to pay for the rental car and for any damage to the rental car while it was under rental to Brindley.

[17] My conclusion on the outcome differs from the conclusion reached by Perell J. in Intact. That is simply because the facts in this case are different. The determining facts, as I find them, in this case are:

(i) Brindley had to rent a car to fulfil her employment obligations to Connect;

(ii) Connect had an account with Hertz;

(iii) Brindley was required by company policy to rent from Hertz;

(iv) the car was hired from Hertz on the Connect account;

(v) the rental was paid for with the Connect corporate credit card;

(vi) Brindley was not permitted to use the corporate credit card for personal expenditures (and clearly, in this case, did not);

(vii) the credit card bill with the Hertz rental charge went to Connect and was paid by Connect (in other words, it was not paid by Brindley and later reimbursed by Connect); and

(viii) Hertz was entitled to collect, and did collect, from Connect reimbursement for the cost of repairing accident damage to the rented car.

[18] I do not think the fact that Brindley signed the rental contract is necessarily evidence that she was the lessee. This is because corporations like Connect are legal fictions. While Connect could enter into a contract, it could not sign a contract other than through an authorized representative. Brindley was that authorized representative.

[19] The rental contract itself does not specifically state that it is contract with Connect or that the rental is on a Connect account. However, as discussed below, there is independent evidence that Connect does, in fact, have an account with Hertz. Brindley’s name appears beside “Name” but it appears from the electronic form that it is the driver’s name, not necessarily the lessee’s name, the agent needs to enter in that field on the contract. I say this because the instruction for that field on the electronic form is “Last Name/First Name” which obviously requires the name of an individual, not a corporation. In any event, the corporation’s name appears beside “Address” in the contract and the postal code is the Connect office in Victoria.

[20] I do not think the Hertz accident report is of any evidentiary value in determining the question of who the lessee was. The Hertz accident report was filled out by an unknown person and reflects only the obvious fact that, as the driver, Brindley was the one with first-hand knowledge of the accident. The “lessee” and the “driver” may or may not be the same person in any given situation, which is precisely why s. 277(1.1) makes separate provision for each.

[21] Counsel for Lloyds took issue with the weight to be given to the statement from Connect that in 2012 it “had a corporate account with Hertz.” This objection was on the basis that Connect did not explain what that meant. Connect was Lloyds’ insured. If Lloyds had questions about this, it was at liberty to ask its insured. The statement that Connect “had a corporate account” with Hertz is plain enough. I accept that statement as constituting reliable evidence in this case.

[22] For these reasons, I find that Connect was the lessee of the Hertz vehicle involved in the February 28, 2012 accident. Although Brindley was clearly the driver of that vehicle, s. 277(1.1)1 makes any policy of the lessee liable to respond first.

Was Connect Entitled to Indemnity as an Insured Named in the Lloyds Policy?

[23] In 2012, Connect had a commercial insurance policy with Lloyds. That policy contained a Non-owned Automobile Liability provision referred to as SPF(6). SPF(6) provides, under “Section A – Third Party Liability”:

The Insurer agrees to indemnify the Insured as against all liability imposed by law upon the Insured for loss or damage arising from the use or operation of any automobile not owned in whole or in part by or licensed in the name of the Insured…

[24] Under “Section II - Who Is An Insured”, the policy identifies sole proprietorships, partnerships and other organizations, such as corporations, and goes on to state, “each of the following is also an insured: your employees… for acts within the scope of their employment by you.” “Additional Insureds” also includes an employee who, with the consent of the owner, drives any rented car leased in the name of the Insured.

[25] The plain language of Lloyds SPF 6 makes it clear that the Non-owned Automobile Liability policy provides coverage to Connect (and, by its terms, to Brindley) on the facts of this case. Brindley was an employee acting in the course of her employment with Connect. She drove an automobile not owned by Connect which, it is alleged, caused bodily harm to a third party, Smith. That is covered by the principal language of the policy.

[26] In addition, Brindley was driving a car leased in Connect’s name with the owner’s (Hertz) consent, which also brings Brindley within the protection of the Connect policy.

[27] For these reasons, I find the Lloyds policy is a contract evidenced by a motor vehicle liability policy under which the lessee of the automobile (Connect) is entitled to indemnity within the meaning of s. 277(1.1).

The Limitation Issue

[28] Finally, Lloyds argues that ICBC commenced this application more than two years after the two year limitation period began to run. Lloyds argues that, by February 12, 2014, ICBC had knowledge of the Smith claim and all of the material facts and circumstances which ultimately gave rise to this application. Because the application was not commenced until April 15, 2016, ICBC missed the limitation period by about two months.

[29] A great deal of the argument about the limitation issue turned on the fine points of the contribution and indemnity provision, s. 18, of the Limitations Act. Section 18 provides that for the purposes of the running of the limitation period, a claim by one “alleged wrongdoer” against “another” for contribution and indemnity is the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought. Lloyds argues that s. 18 has no application because Lloyds is not “another wrongdoer.”

[30] Whatever the merit of that argument, it seems to me that the answer to the limitation issue can be found in the prior, more basic language in s. 5 of the Act governing “discovery” of a claim. One of the requisite elements set out in s. 5 of the Act for a claim to be “discovered” is s. 5(1)(a)(iv), “that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek a remedy.”

[31] The uncontroverted evidence in the record before me is that, while ICBC became aware of the Smith claim against Brindley on February 12, 2014, Brindley was not served until August 6, 2014. Thus, assuming that ICBC knew all of the factors embodied in s. 5(1)(a)(i) through(iii) of the Act that might have entitled it to seek a remedy against Lloyds regarding the question of which policy was obliged to respond to the Smith claim first, Brindley was only one of three defendants and had not been served on that date. Having regard to the nature of the “loss” (that is, that ICBC might have to respond first if Lloyds did not), it cannot be said that a “proceeding” would be an appropriate means to seek a remedy. This is because Brindley had not yet been served with any claim, and might never be served with a claim. Until Brindley was served, there was no lis over which ICBC and Lloyds could join issue because, until she was served, there was no obligation for either insurer to respond. To have brought this application before Brindley was served would have been premature.

[32] For these reasons the Application is allowed.

[33] Both parties submitted bills of costs. Applicant’s counsel sought $10,925.76 in partial indemnity costs; respondent’s counsel sought $15,400 in partial indemnity costs (all inclusive). In all the circumstances, it seems to me that a fair award of partial indemnity costs to ICBC is as requested, $10,925.76 inclusive of all fees, disbursements and applicable taxes.

Penny J.

Released: January 27, 2017

COURT FILE NO.: CV-16-550998

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

The Insurance Corporation of British Columbia Applicant

– and –

Lloyds Underwriters Respondent

REASONS FOR JUDGMENT

Penny J.

Released: January 27, 2017