FURTHER UPDATE–We understand that the appeal from this decision was heard by the Court of Appeal on October 31, 2007. We’ll report on the appeal decision as soon as it becomes available.
UPDATED–Since the original post, some additional discussion of the implications of this decision has been added at the end.
In the hectic days leading up to Christmas, we overlooked Mr. Justice Roydon Kealey’s decision in Adams v. Pineland Amusements Ltd. Fortunately, Master Robert Beaudoin is always ready to point out our oversights and he drew this decision to our attention. Justice Kealey ruled that an auto insurer was obliged to defend one of its insureds who had been sued as a result of driving a go-kart on a private track. The case has some interesting implications. We understand that it is under appeal.
A father and son were go-karting at the Pineland track in Ottawa. The son was injured in an accident and, in ensuing litigation, the father was named as a defendant. The father had an auto policy with Kingsway General Insurance and he brought a third party action against Kingsway, seeking indemnity and a defence to his son’s claim.
Kingsway moved under Rule 21 before Kealey J., seeking an order dismissing the action. Justice Kealey dismissed the motion and found that Kingsway was required to defend and indemnify its insured.
Central to the decision was whether a go-kart could be considered an “automobile”, as the Kingsway policy provided coverage for automobiles other than the described vehicle, while driven by the named insured.
His Honour undertook a comprehensive review of the caselaw that has interpreted the meaning of the word, “automobile”, in various contexts. He distilled from the cases the following three-step methodology in determining whether a particular vehicle is an “automobile”:
1) Is the vehicle an “automobile” in “ordinary parlance”?
2) If not, is the vehicle defined as an “automobile” in the wording of the insurance policy?
3) If not, is the vehicle an “automobile” within the enlarged definition of automobile in any relevant statute?
Justice Kealey concluded that the first two criteria did not apply here, so he turned to several statutes, including the Insurance Act, the Highway Traffic Act and the Compulsory Automobile Insurance Act (“CAIA”) in order to apply the third criterion.
Part VI of the Insurance Act defines “automobile” to include “a motor vehicle required under any Act to be insured under a motor vehicle liability policy”.
The CAIA incorporates the Highway Traffic Act’s definition of “motor vehicle”, which is as follows:
“motor vehicle” includes an automobile, motorcycle, motor assisted bicycle unless otherwise indicated in this Act, and any other vehicle propelled or driven otherwise than by muscular power, but does not include a street car, or other motor vehicles running only upon rails, or a motorized snow vehicle, traction engine, farm tractor, self-propelled implement of husbandry or road-building machine within the meaning of this Act. [Emphasis added by Kealey J.]
Subsection 2(1) of the CAIA says:
2.(1) Subject to the regulations, no owner or lessee of a motor vehicle shall,
(a) operate the motor vehichle; or
(b) cause or permit the motor vehicle to be operated,
on a highway unless the motor vehicle is insured and under a contract of automobile insurance.
Putting these three statutes together, His Honour thought it obvious, that a go-kart fell within the definition of “motor vehicle” in the Highway Traffic Act. He then reasoned that because a go-kart could be driven on a highway, s. 2(1) of the CAIA would require it to be insured under a contract of automobile insurance. This, in turn, would mean that a go-kart was an “automobile” under Part VI of the Insurance Act and therefore, covered under an auto policy.
His Honour said that whether or not it would be lawful to operate a go-kart on a highway was not relevant to the analysis. As bloggers like to say, this is the “money quote”:
It cannot be disputed that a go-kart is a motor vehicle, which is capable of being operated on a highway. The question of whether it is lawful to do so is irrelevant. If operated on a highway, being a motor vehicle, a go-kart would require insurance under section 2(1) of the CAIA. Therefore, it is an automobile in my opinion.
If we consider the implications of this decision, it is apparent that it is potentially far-reaching. The same analysis could apply to all sorts of “vehicles”: a tractor-mower, a Segway or an airplane. All of them are “vehicles propelled or driven otherwise than by muscular power” and all are capable of being driven on a highway. If it is indeed irrelevant, as Justice Kealey felt, whether it would be lawful to operate these vehicles on a highway, then liability claims made against the operators of such vehicles would trigger automobile insurance coverage.
It is important to note that, for such coverage to exist, it would not be necessary that the incident giving rise to the claim have taken place on a highway. The go-kart accident in Adams occurred on a private track. If Justice Kealey’s analysis is correct, all that would have to be shown would be the possibility that the “vehicle” could be driven on a highway. Once that has been established, then it seems that there would be coverage for a event happening anywhere and giving rise to a liability claim.
One problem with the decision, it seems to us, is the interaction of the Insurance Act and the CAIA. The Insurance Act definition of “automobile” includes “a motor vehicle required under any Act to be insured under a motor vehicle liability policy”. Section 2(1) of the CAIA says only that a motor vehicle cannot be operated on a highway unless it is insured under a motor vehicle liability policy. So, it would seem to us that if it can be said that s. 2(1) of the CAIA imposes any obligation to insure, it is a conditional one, arising only if the vehicle is being operated on a highway. Even if Justice Kealey is correct in his conclusion that it is irrelevant whether it is lawful to operate a particular motor vehicle on a highway (and this is another interesting issue), we would have thought that any automobile insurance coverage could only be triggered if the vehicle was being operated on a highway.
As a result of further discussion about this case, other issues have been raised. If the go-kart is an “automobile” under Part VI of the Insurance Act, then the owner of the go-kart (Pineland) would be a “protected defendant” under s. 267 of the Insurance Act. The threshold, deductibles, etc. would all apply in favour of both Pineland and the plaintiff’s father, the driver of the go-kart. We don’t know anything about the severity of the plaintiff’s injuries in this case, but if they do not meet the Insurance Act threshold, it might actually turn out to be advantageous for Pineland to have its go-kart characterized as an “automobile”.
The vicarious liability provisions of s. 192 of the Insurance Act, which make the owner of a motor vehicle vicariously liable “loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle”, would not apply because that section is only effective where the motor vehicle is being operated on a highway.
Since Pineland would not be vicariously liable for the negligence of the father, their positions in the lawsuit would conflict and they would be entitled to crossclaim against each other, for contribution or indemnity under the Negligence Act.
Presumably, Pineland’s defence is being undertaken pursuant to a CGL insurance policy. Those policies typically exclude liability arising out of the ownership, use or operation of an automobile. It is possible that the characterization of its go-kart as an “automobile” might give rise to some unexpected coverage issues with the CGL carrier.
Pineland’s CGL carrier would gain the benefit of its insured having “protected defendant” status.
OHIP would not be able to maintain a subrogated claim against the father, as he has been found to be “insured under a motor vehicle liability policy issued in Ontario” and so, s. 30(5) of the Health Insurance Act would protect him from such a claim.
The plaintiff in this case would probably be an “insured person” for purposes of Statutory Accident Benefits coverage. In all likelihood, no application for SABS was ever made in this case. The accident happened in 1998, so the plaintiff might now face some problems in applying for SABS so long after the event, because of the time limits in Part X of the SABS. Nevertheless, both defendants (Pineland and the plaintiff’s father) would be entitled to have the plaintiff’s damages reduced for any collateral benefits that were “available” to the plaintiff.
It will be interesting to see what the Court of Appeal has to say about this decision. If Justice Kealey’s analysis is correct, the scope of coverage of automobile policies in this province may be considerably broader than insurers suspect.