The Continental Casualty Company, 2022 ONSC 7415
COURT FILE NO.: CV-19-71039
DATE: 20220804
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Belair Direct Insurance Company
Sean T. Miller, for the Applicant
Applicant
- and -
The Continental Casualty Company
Brigette A. Morrison, for the Respondent
Respondent
HEARD: 18 MAY 2022
DECISION ON APPLICATION
The Honourable Justice J. Krawchenko
Background
[1] In July of 2015, George Sarantakos (“Mr. Sarantakos”) was driving a rented 2015 Lincoln SUV owned by WTH Car Rental. He rear-ended a 2004 Acura MDX driven by Laura Johnson. The Lincoln SUV was insured under an Ontario fleet automobile policy issued by Continental.
[2] Ms. Johnson and her husband commenced an action against Mr. Sarantakos as driver and WTH Car Rental as owner of the Lincoln SUV.
[3] Continental defended WTH, but not Mr. Sarantakos.
[4] Belair initially defended Mr. Sarantakos on the erroneous belief that he was covered under a policy of automobile insurance it issued to his mother, Cheryl Sarantakos.
[5] In the course of reviewing their files, Belair erroneously came to believe that Mr. Sarantakos was in fact insured by them at the time of the motor vehicle accident with Ms. Johnson, having mistaken an entry for a subsequently acquired motor vehicle as evidence of such. Belair acted on this mistaken belief concluding that they would be the priority insurer in this case. This mistaken belief was evident in their communications with the Continental and with Plaintiffs’ counsel. Belair even made efforts to have WTH released from the action, however, the Plaintiffs did not agree and accordingly both Belair and Continental remained involved on the file.
[6] Before discoveries were conducted, Belair advised Continental that coverage was not available under the Belair Policy and asked Continental to assume the defence of its insured. Continental refused despite its admission Mr. Sarantakos was covered under its policy, and that it had been involved in the action from the outset.
[7] The Applicant, Belair Direct Insurance Company (“Belair”), seeks a declaration that the Respondent, the Continental Casualty Company (“Continental”) has a duty to defend Mr. Sarantakos with respect to an action commenced by Laura and Wayne Johnson as the priority insurer under s. 277(1.1) of the Insurance Act.
[8] The Respondent seeks a declaration that Belair is not permitted to resile from what it considers its “agreement” with Continental to accept priority of insurance pursuant to section 277(1.1) of the Insurance Act.
[9] This application raises three issues:
a. Was Mr. Sarantakos an insured under the Belair Policy at the time of the accident?
b. If not, did Belair enter into a binding agreement with Continental to abandon any priority dispute pursuant to section 277(1.1) of the Insurance Act? And if not, is Belair estopped from denying coverage and/or has Belair waived its right to deny coverage?
c. If not, is Continental required to defend its insured, Mr. Sarantakos?
[10] Counsel for Continental suggested that this matter could be decided using an analogous body of jurisprudence founded in accident benefit priority cases. I do not agree with this proposition. The Respondent’s reliance on jurisprudence addressing Ontario Regulation 283/95 (the “Dispute Regulation”) within the context of statutory accident benefits is inapplicable to a tort case and draws a false analogy. No such regulation governs priority disputes between tort insurers.
Issue #1 Was Mr. Sarantakos an insured under the Belair Policy at the time of the accident?
[11] No.
[12] Mr. Sarantakos was not a named insured on the Belair Policy at the time of the accident with Ms. Johnson, nor was he the spouse of the named insured. Section 2.2.4 of the OAP-1 therefore does not provide coverage for him when he drove the rented Lincoln SUV.
Issue #2 (a) Did Belair enter into a binding agreement with Continental to abandon any priority dispute pursuant to section 277(1.1) of the Insurance Act?
[13] I find that Belair did not enter into a “binding agreement” with Continental to “abandon” any priority dispute pursuant to section 277(1.1) of the Insurance Act. Belair was mistaken as to the facts surrounding Mr. Sarantakos’ status as an insured under his mother’s policy and based only upon this mistaken belief, took up the initial defence of the action and even made attempts to streamline the proceedings. These initial activities were consistent with that mistaken belief and not evidence of an agreement to abandon priority. These actions taken by Belair did not change the litigation landscape nor did they rise to the status of an abandonment of the priority scheme set out in the Insurance Act.
Issue #2 (b) Is Belair estopped from denying coverage and/or has Belair waived its right to deny coverage?
[14] No.
[15] In Trial Lawyers Association of British Columbia v. Royal and Sun Alliance Insurance Company of Canada, 2021 SCC 47 the Supreme Court of Canada reviewed the doctrine of promissory estoppel and set out the following three requirements for making out this equitable defence, being that (1) the parties be in a legal relationship at the time of the promise or assurance; (2) the promise or assurance be intended to affect that relationship and to be acted on; and (3) the other party in fact relied on the promise or assurance. The court went on to add that it was implicit that such reliance be to the promisee's detriment.
[16] In our case, Belair admits the first two elements of the doctrine are satisfied but denies that there was any detrimental reliance i.e., the final hurdle.
[17] In Trial Lawyers, the Supreme Court of Canada offered helpful guidance relating to this final hurdle, affirming that detrimental reliance by the promisee must be shown to assert promissory estoppel.
[18] At paragraph 51 of Trial Lawyers, the Court stated that
“…Detrimental reliance has, however, always been a requirement for asserting promissory estoppel, or for that matter any form of estoppel. This is because, being an equitable doctrine, its goal is to address unconscionable, unjust, or unfair conduct (Ryan, at paras. 68 and 74; Cowper-Smith v. Morgan, 2017 SCC 61, [2017]2 S.C.R. 754, at paras. 20 and 28). And what makes it unconscionable, unjust, or unfair to resile from a promise or assurance is that the promisor has, by intention and effect, induced the promisee to change its position in reliance thereon, to its detriment. For that reason, asserting promissory estoppel requires evidence of prejudice, inequity, unfairness or injustice before courts will give hold a promisor to its promise or assurance.”
[19] In our case, I can find no real prejudice, inequity, unfairness or injustice. What is found is mere inconvenience. Continental did not change its position to its detriment as a result of its belief that Belair was required to defend Mr. Sarantakos. By the time Belair discovered its error, damages productions had not yet been received rendering the prospect of early settlement discussions unviable. A Jury Notice was filed, no cross-claims were made, and discoveries had not yet taken place. These are early days, relatively speaking.
Issue #3 Is Continental required to defend its insured, Mr. Sarantakos?
[20] Yes.
[21] For reasons noted above, Continental does have a duty to defend George Sarantakos in the Action and is the priority insurer under s 277(1.1) of the Insurance Act.
Costs
[22] Both sides seek costs from the other. While Belair has succeeded in this Application, the only reason it had to be brought was because of their initial error. As for Continental, costs of the Application could have been avoided by simply accepting that they were the priority insurer. As for a suggestion that there were “costs thrown away” Continental has had and continues to have a duty to defend and accordingly would be incurring costs in any event.
[23] In the circumstances, both sides shall bear their own costs.
Krawchenko J.
Released: August 4, 2022
The Continental Casualty Company, 2022 ONSC 7415
COURT FILE NO.: CV-19-71039
DATE: 20220804
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Belair Direct Insurance Company
Applicant
- and –
The Continental Casualty Company
Respondent
DECISION ON APPLICATION
Released: August 4, 2022