Last Friday, the Court of Appeal ruled that the statutory conditions in a standard automobile policy do not apply to the uninsured automobile coverage that is mandated by s. 265 of the Insurance Act.
In Bruinsma v. Cresswell, the plaintiff was injured when the car that he was driving was in a collision with an uninsured automobile. He claimed under the uninsured coverage against the insurer of the vehicle that he had been driving.
The plaintiff’s driver’s licence had been suspended at the time of the accident. In fact, the car that he was driving belonged to his girlfriend, but he had previously owned it himself and had transferred it to her after his licence had been suspended.
The girlfriend’s insurer, CAA, denied coverage on the basis that the plaintiff had breached the provisions of statutory condition 4(1) by driving while not authorized to do so. (The girlfriend knew that he was unlicensed so if the statutory condition had applied to her, she would also have been in breach of it.)
However, the Court of Appeal held that the statutory conditions in the auto policy do not apply to uninsured coverage, “except as otherwise provided in the contract” and that there was nothing in the contract that extended the reach of the conditions to that coverage. In making this finding, it relied upon s. 234(3) of the Insurance Act, which provides as follows:
Except as otherwise provided in the contract, the statutory conditions referred to in subsection (1) do not apply to the insurance required by section 265 or 268.
Section 265 of the Act requires that every contract evidenced by a motor vehicle liability policy must include uninsured automobile coverage. (Section 268 deals with statutory accident benefits.)
The Court noted that until January 1, 1994, (the effective date of Bill 164), the Act had not said that the statutory conditions do not apply to uninsured automobile coverage.
CAA also relied on s. 1.4.5 of the policy (“O.A.P. 1″) itself. It says:
You agree not to drive or operate the automobile, or allow anyone else to drive or operate the automobile, when not authorized by law.
Justice Hoy, writing for the Court, said that this provision is essentially the same as statutory condition 4(1) and in her view, both were to be considered “statutory conditions”.
The judge who had heard the motion from which this appeal was taken thought that there was “an irreconcilable conflict” between s. 243(3) of the Act and s. 10 of the Uninsured Automobile Coverage Schedule set out in Reg. 676. That section says:
In so far as applicable, the general provisions, definitions, exclusions and statutory conditions as contained in a motor vehicle liability policy also apply to payments under the contract under subsection 265(1) of the Act.
However, the Court of Appeal did not agree that a conflict exists between this provision and s. 234(3) of the Act, because of the opening words: “in so far as applicable”. Justice Hoy was of the view that by enacting s. 234(3), the legislature had “signified that the statutory conditions are not applicable to uninsured automobile coverage unless the contract itself explicitly provides otherwise”.
The Court also rejected the argument, that ss. 5.1.1 and 5.9.1 of the policy itself brought the statutory conditions into the uninsured coverage. Those section read as follows:
5.1.1 This Section of the policy describes the terms and conditions of the coverage set out in the Uninsured Automobile Coverage Schedule under the Insurance Act (Ontario). If there is a difference between the interpretation of the wording of this Section and the interpretation of the wording in the Schedule, the Schedule prevails. However, 5.3.3 in this Section is an addition to the coverage provided by the Schedule.
5.9.1 No person has a right to sue us for compensation under this Section for injury or damage caused by an accident involving an uninsured or unidentified automobile, unless the conditions in this Section of your policy (Uninsured Automobile Coverage) have been met.
The Court felt that this language did not indicate a legislative intention to override the effect of s. 234(3), which excepted the uninsured automobile coverage from the effect of the statutory conditions.
Finally, s. 234(3) itself does say, “except as otherwise provided in the contract”, but the Court of Appeal saw nothing in O.A.P. 1 that could be considered to have “otherwise provided”.
In a second part to the decision, the Court of Appeal ruled that a crossclaim against CAA by the Motor Vehicle Accident Claims Fund on behalf of the uninsured motorist, had been brought after the expiry of the applicable limitation period. However, it declined to enforce the limitation defence.