Court File and Parties

CITATION: Enterprise Rent-A-Car Canada Limited v Intact Insurance Co., 2017 ONSC 7515

COURT FILE NO.: CV-17-582473

DATE: 2017-12-14

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Enterprise Rent-A-Car Canada Limited, Applicant

– and –

Intact Insurance Co., Defendant

BEFORE: Justice E.M. Morgan

COUNSEL: Jay Silber, for the Applicant Jonathan Heeney, for the Respondent

HEARD: December 14, 2017

REASONS FOR JUDGMENT

[1] This dispute between two insurers raises a question of priority for coverage for a driver who is in a car accident while driving a rental car. The Applicant seeks a declaration that the Respondent is the first loss insurer of the driver in question under section 277(1.1) of the Insurance Act, RSO 1990, c. I.8 (the “Act”)

[2] On June 29, 2013, Adi Perets was in an accident while driving a car that had been rented from the Applicant. The occupants of the other vehicle have brought an action against Ms. Perets (Court File No. CV-15-531103). That raises the question of insurance coverage for any liability incurred by Ms. Perets in that action.

[3] At the time of the accident, Ms. Perets was a listed driver under an automobile insurance policy issued by the Respondent. Her father was the named insured under that policy. The question of priority asks whether it is the Respondent or the Applicant’s insurer that is the first loss insurer.

[4] This question, in turn, raises the proper interpretation of, and interplay between, the terms contained in two instruments: section 2.2.4 of the standard Ontario Automobile Policy 1 (“OAP1”) and section 277(1.1) of the Act.

[5] Section 2.2.4 of the OAP1 provides:

Automobiles, other than a described automobile, are covered as described in this subsection when rented by you, or by your spouse who lives with you, for periods of not more than 30 days, but only with respect to the liability of the person renting the automobile arising from the negligence of the driver of that automobile…

[6] As a further clarification, the word “you” in the first line of this provision is the named insured. This court made that clear in Minister of Finance v Intact Insurance Co., 2013 ONSC 1457, para 38, where it held that, “If coverage under the OAP1 is to be extended to a ‘listed’ driver in these circumstances, that is a matter of the provincial legislature, if indeed that is the legislative purpose…” Thus, for rental cars, OAP1 covers only the named insured person and his or her spouse. It does not provide coverage for a person like the child of a named insured, who is listed as a driver but is not herself a named insured under the policy.

[7] Section 277(1.1) of the Act applies to priorities among available coverages if the automobile is leased, as follows:

(1) Firstly, insurance available under a contract evidenced by a motor vehicle liability policy under which the lessee of the automobile is entitled to indemnity as an insured named in the contact;

(2) Secondly, insurance available under a contract evidenced by a motor vehicle liability policy under which the driver of the automobile is entitled to indemnity, either as an insured named in the contract, as the spouse of an insured named in the contract who resides with that insured or as a driver named in the contract, is excess to the insurance referred to in paragraph 1;

(3) Thirdly, insurance available under a contract evidenced by a motor vehicle liability policy under which the owner of the automobile is entitled to indemnity as an insured named in the contract is excess to the insurance referred to in paragraphs 1 and 2.

[8] Counsel for the Applicant submits that there is a conflict between the applicable provision of the OAP1 and the applicable provision of the Act. In this view, the first loss insurer is the insurer of the person who rents the vehicle where that person is the named insured under their own policy; and if that is not applicable then the loss insurer is the insurer of the driver of the vehicle where that person is either the named insured, the spouse of the named insured, or, like Ms. Perets, a driver listed by the named insured in an insurance policy; and if neither of those is applicable then the loss insurer is the insurer of the rental car company that owns the vehicle.

[9] If counsel for the Applicant is correct, the Act’s provision respecting the second of these possibilities collides with the terms of the standard automobile insurance policy. As indicated, section 2.2.4 provides that there is no coverage for a driver who is a listed driver but not a named insured when it comes to driving a rented vehicle. Applicant’s counsel contends that there is, accordingly, a direct collision between section 2.2.4 of the OAP1 and section 277(1.1)(2) of the Act.

[10] It is the Applicant’s view that the resolution of this conflict is that the Act trumps the standard policy terms. He cites the judgment of Sharpe JA in Ortiz v Dominion of Canada General Insurance Co. (2001), 2001 CanLII 24093 (ON CA), 52 OR (3d) 130 (CA) for the proposition that, “…in the case of conflict or inconsistency, the terms of the legislation must prevail over the terms of the Regulation or the terms of the policy.”

[11] Counsel for the Respondent takes the view that there is no conflict between the Act and the OAP1. He submits that the language of section 277(1.1) emphasizes priorities in the event of multiple available policies, but it does not fill in any extra coverage where that coverage is not available under a given policy. Specifically, section 277(1.1)(2) provides that the first loss insurer is an insurer where coverage is “available under a contract…under which the driver of the automobile is entitled to indemnity…as a driver named in the contract” [emphasis added]. Under the standard OAP1 terms, coverage is not available to a driver such as Ms. Perets for a rental car, as she is not a named insurerd or spouse of a named insured. She is listed as a driver and has coverage available if she is driving her father’s car, but not a rental car.

[12] Respondent’s counsel points out that a listed driver such as Ms. Perets would have coverage available for a rental car if her father, in purchasing the insurance policy, had not only listed her as a driver but had purchased extra coverage under OPCF 27. That endorsement to the policy is entitled “Liability for Damage to Non-Owned Automobile(s), and Other Coverages When Insured Persons Drive, Rent or Lease Other Automobiles”, and it provides insurance coverage for listed drivers in precisely the situation that Ms. Perets finds herself. As its name suggests, this endorsement would make insurance available to her where it is not otherwise available under the terms of OAP1. It is an extra endorsement that is over and above the standard terms of the OAP1.

[13] It is the Respondent’s position that OPCF 27 would not exist if OAP1 already covered liability for damage caused when driving, renting or leasing automobiles that the named insured does not own. It is hard to disagree with this logic. Any other interpretation makes OPCF 27 a redundant endorsement that is inapplicable to all situations.

[14] Counsel for the Applicant says that this is precisely the effect of OPCF 27. He refers to it as a “cash grab” by insurance companies in that it sells to unsuspecting insureds a form of coverage which is superfluous and which they will never need.

[15] In order to agree with the Applicant, I would have to conclude that the Act is inconsistent with (and therefore overrides) the express, standard terms of OAP1, and that OPCF 27, a standard form of endorsement available to insureds, is nonsensical as it can never come into play. This ascribes a great deal of contradiction to the legislature that enacted that Act and to the regulatory authorities that drafted the standard insurance policy and endorsement forms. I would be adopting an interpretation that presumed that legislation and legislative instruments are hopelessly contradictory.

[16] On the other hand, in order to agree with the Respondent I have to see the Act as being consistent with the terms of OAP1, with OPCF 27 being a meaningful endorsement to offer to the public in the event that they want their listed drivers to have increased coverage. This view ascribes logical consistency to the legislature that enacted the Act and to the regulatory authorities that drafted the standard insurance policy and the extra endorsements thereto.

[17] As a general approach to statutory interpretation, every statutory or other legislative provision is presumed to have intelligible meaning: Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (LexisNexis, 2008), at p. 1; R v AA, 2015 ONCA 55, at para 67. Each provision should be read, to the extent possible, “harmoniously with the scheme of the Act”: Regina v Hutchinson, 2014 SCC 19, [2014] 1 SCR 346, at para 16.

[18] The Applicant’s reading of the Act and the OAP1 is that they are hopelessly at variance with each other and internally. For the Applicant, section 277(1.1)(2) of the Act establishes priority for insurance coverage for the insurers of listed drivers even where that coverage is not available under OAP1. Also, in the Applicant’s interpretation the OPCF 27 endorsement makes available extra coverage for listed drivers that they will never need since they are already covered under OAP1 in the same way as named insureds. None of this would make for a sensible or meaningful legislative scheme.

[19] For the Respondent, section 277(1.1) of the Act sets out the priorities among available insurance coverages for a person involved in an accident with a rental car, but does not itself provide any insurance coverage that is not already available to the insured. Thus, for example, the first loss insurer described in section 277(1.1)(2) only applies to listed drivers who are not named insureds but who have purchased extra coverage under endorsement OPCF 27. This amounts to a meaningful legislative scheme whose parts coordinate sensibly with each other.

[20] In my view, section 277(1.1)(2) of the Act is not applicable to a driver in Ms. Perets’ situation. And since Ms. Perets is not a named insured under her father’s insurance policy, section 277(1.1)(1) is also not applicable to her. Section 277(1.1)(3) is the section of the Act that is applicable to Ms. Perets here. Liability coverage falls to the Applicant’s insurer as the loss insurer under section 277(1.1)(3).

[21] The Application is therefore dismissed.

[22] Counsel for the Respondent has provided a Bill of Costs in which he seeks a total of $4,529.15 for the entire Application. That is a modest and reasonable costs request. In fact, it is about half of what the Applicant would request had it been the successful party. It is certainly within the range of the Applicant’s reasonable expectations for costs: see Rule 15.01(1)(0.b) of the Rules of Civil Procedure.

[23] The Applicant shall pay the Respondent $4,529.15 as costs of this Application, inclusive of all fees, disbursements, and HST.

Morgan J.

Date: December 14, 2017