In Shah v. Becamon, the plaintiff was injured when the defendant accidentally pressed her car’s accelerator pedal in a shopping centre parking lot, causing the car to lurch forward and strike the plaintiff. The defendant held only a G-1 licence. The Highway Traffic Act prohibited her from driving unless accompanied by a driver holding a G-2 licence. At the time of the accident, the defendant was alone in her car. She had driven to the shopping centre from her home to pick up some groceries.
Her insurer, Wawanesa, denied coverage, arguing that the defendant had breached a condition of the policy: she was not “authorized by law” to operate the car. The insured moved for a declaration that Wawanesa had been wrong to deny coverage (in part, because the parking lot was not a “highway” within the meaning of the Highway Traffic Act). In the alternative, the defendant asked the court to find that Wawanesa owed her a duty to defend the plaintiff’s claim.
Both motions were dismissed by Madam Justice Harriet Sachs. She said that “Wawanesa has raised two issues that are genuine and should be determined by a trial judge – first, whether the parking lot in question was a ‘highway’ and second, whether ‘not authorized by law to operate the car’ should be interpreted as applying only to the moment of the accident or whether the insured’s conduct should be looked at as one continuous transaction”.
On the second issue, whether Wawanesa had a duty to defend its insured despite its off-coverage position, Justice Sachs ruled that it did not. She referred to the leading case of Longo v. Maciorowski. There, the Court of Appeal advocated a “flexible” approach: “rather than establishing an immutable legal principle, I would suggest that the question should be determined upon consideration of the circumstances of each case, including the relative strength of the positions asserted by the insurer and the insured and the necessity and urgency to furnish the insured with a separate defence.”
The problem with “flexible approaches” is that they make it very difficult to predict what a court will do in a given case. In Longo, the Court of Appeal refused to order the insurer to defend. It relied on the fact that the insurer had “made allegations of clear and uncontested breaches of condition” by the insured, that the insured had put forward no material to support a claim for estoppel or relief from forfeiture and that the insurer had had itself added as a statutory third party under the Insurance Act.
In today’s Shah decision, Justice Sachs followed the “flexible approach” in coming to a similar conclusion. Where the Court of Appeal in Longo had been influenced by the fact that the policy breaches were uncontested, Justice Sachs was driven to the same conclusion by the fact that the breaches were contested. She also observed that the insured had not alleged estoppel and was not entitled to relief from forfeiture and, as in Longo, the insurer had had itself added as a statutory third party.
Unfortunately, this sort of approach to the question appears to require the court to assess, in advance of the actual adjudication of the coverage issue, the merits of the insurer’s denial. Also, the criteria that might impel a court to exercise the “flexible approach” in one direction or another have not been laid down by the courts (as can be seen from the persuasiveness of the “uncontested” breaches in Longo and the “contested” breaches in Shah). The result is that it will be very difficult to advise either an insurer or an insured which way a court would rule in a future case.