



COURT OF APPEAL FOR ONTARIO

CITATION: Benson v. Walt, 2018 ONCA 172

DATE: 20180222

DOCKET: C64025

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

Bethany Benson and Robert Stenner

Plaintiffs

and

Paul Robert Walt
, Mary La Chapelle-Stenner,

Azhar
    Warraich, Ideal Logistics Group and/or

Ideal
    Logistics Group Fleet 002, 2107622 Ontario Inc.

and/or
    2107622 Ontario Inc. o/a Ideal Logistics Group and/or

2107622
    Ontario Inc. o/a Ideal Logistics Group Fleet 002 and

6305393
    Canada Inc. and/or 6305393 Canada Inc.

o/a
    Ideal Logistics Group Fleet 002

Defendants

(
Appellant
by
    policy of insurance issued by Economical Insurance)

(
Respondent
by
    policy of insurance issued by State Farm)

D. Zuber and D. Fiorita, for the appellant, Paul Robert
    Walt, by policy of insurance issued by Economical Insurance

J. Schrieder and L. Furukawa, for the respondent, Paul
    Robert Walt, by policy of insurance issued by State Farm

Heard: January 29, 2018

On appeal from the order of Justice
J.
    Bryan Shaughnessy
of the Superior Court of Justice, dated June 12, 2017,
    with reasons reported at 2017 ONSC 3612.

Sharpe J.A.:

[1]

The issue on this appeal is the priority as
    between three insurance policies covering the driver of a motor vehicle
    involved in an accident.

[2]

The driver, the defendant Paul Robert Walt, was
    driving the car involved in the accident with the consent of the owner, the
    defendant Mary La Chapelle-Stenner. The car was insured under a State Farm Automobile
    Insurance Policy issued to the owner (policy limit $300,000).The owner was also
    insured under a State Farm Personal Liability Umbrella Policy (PLUP) (policy
    limit $1 million). Walt had his own Economical Insurance Automobile Insurance
    Policy, with a policy limit of $1 million.

[3]

On a Rule 21 motion to determine the priority in
    which these policies would respond to the plaintiffs claim, the motion judge
    ruled that they would respond as follows: first the owners State Farm Auto
    Policy, then the drivers Economical Insurance Auto Policy, and then the State
    Farm PLUP.

[4]

Economical appeals that order, arguing that:

(1)

pursuant to ss.
    277(1) of the
Insurance Act,
R.S.O. 1990, c. I.8, the State Farm PLUP
    is an owners first loss insurance that should respond before the Economical
    Insurance Auto Policy which is excess insurance and should respond only after
    the limits of the other two policies have been exhausted; and

(2)

in the alternative,
    the Economical policy and State Farm PLUP policy are both excess insurance and
    that, pursuant to ss. 277(2), those policies are only required to respond for
    their rateable proportion of any liability exceeding the State Farm Auto Policy
    limits.

[5]

For the following reasons, I would dismiss the
    appeal.

Analysis

(1)

Is the State Farm PLUP an owners first loss
    policy?

[6]

The State Farm and Economical Auto Policies are
    standard form OAP 1 policies covering listed vehicles and other automobiles
    driven by the insured. The defendant Walt was covered as the driver of the
    owners vehicle under the State Farm Auto Policy and as the driver of another
    vehicle under his own Economical Auto Policy. Both the State Farm and the
    Economical Auto policies are primary policies. Liability attaches under both
    policies immediately upon the occurrence of the insured event.

[7]

The State Farm PLUP provides a very different
    form of coverage. It covers general personal liability for personal injury or
    property damage exceeding the coverage provided by the required underlying
    insurance or losses not covered by the underlying policies. The required underlying
    policies include automobile, recreational motor vehicle, comprehensive personal
    liability and watercraft liability policies. In the case of a loss arising from
    an automobile accident, liability under a PLUP attaches only after the coverage
    provided by the required underlying automobile policy has been exhausted.

[8]

The difference between the nature of coverage
    provided by a primary policy and an umbrella policy was explained by Charron
    J.A. in
Trenton Cold Storage Ltd. v. St. Paul Fire and Marine Insurance Co
.
(2001),

[2001]
    O.J. No. 183, 199 D.L.R. (4
th
) 654 at paras. 21-22 (C.A.) and relied
    upon by MacFarland J.A. in
McKenzie v. Dominion of Canada General
    Insurance Company
, 2007 ONCA 480, 86 O.R. (3d) 419, leave
    to appeal refused, [2007] S.C.C.A. No. 471, at para. 39. A primary policy
clearly provides for an obligation to pay and a duty to defend upon
    the happening of a specified occurrence without any reference to, or
    requirement that there be, underlying insurance. An umbrella policy, on the
    other hand, provides coverage with respect to certain risks but limits the
    insurers liability to the loss in excess to that which may be collected by
    the insured under any underlying insurance and the limits of the underlying
    policies  operate as a kind of deductible. Umbrella polices also provide
    drop-down coverage where there is no underlying insurance.

[9]

Subsection 277(1) of the
Insurance Act
provides:

Subject to section 255, insurance under
    a contract evidenced by a valid owners policy of the kind mentioned in the
    definition of owners policy in section 1 is, in respect of liability arising
    from or occurring in connection with the ownership, or directly or indirectly
    with the use or operation of an automobile owned by the insured named in the
    contract and within the description or definition thereof in the policy, a
    first loss insurance, and insurance attaching under any other valid motor
    vehicle liability policy is excess insurance only.

[10]

It is not disputed that, pursuant to ss. 277(1),
    the first policy to respond is the State Farm Auto Policy insuring the owner of
    the vehicle involved in the accident.

[11]

Economical submits that the State Farm PLUP is
    also an owners first loss policy as defined by ss. 277(1).

[12]

In my view, the motion judge correctly rejected this submission.
    While the State Farm PLUP would provide some coverage to the owner or operator
    of a motor vehicle in some circumstances, it is not, within the meaning of ss.
    277(1), an owners policy of the kind mentioned in the definition of owners
    policy in section 1. That definition reads as follows:

owners policy means a motor vehicle
    liability policy insuring a person
in respect of the ownership, use or
    operation of an automobile owned by that person
and within the description
    or definition thereof in the policy and, if the contract so provides, in
    respect of the use or operation of any other automobile [Emphasis added.]

[13]

The State Farm PLUP does not, by its terms,
    provide primary insurance for liability arising from the use of an automobile.
    The State Farm PLUP, like the umbrella policy at issue in
Keelty v.
    Bernique
(2002), 57 O.R. (3d) 803, [2002] O.J. No. 83 (C.A.), does not
    fall within what the court described, at para. 25, as Ontarios highly regulated
    scheme of motor vehicle insurance. It only responds after the limits of the
    required underlying policy are exhausted, or if the underlying insurance does
    not provide coverage for the loss. Subsection 277(1) deals with the priorities
    as between primary motor vehicle insurance policies and its reach does not
    extend to any and every other type of policy that might have to respond once
    the policy limits of applicable motor vehicle policies are exhausted.

[14]

In support of its submission that the State Farm
    PLUP is primary automobile insurance, Economical relies heavily on the decision
    of this court in
Avis Rent A Car System, Inc. v. Certas Direct Insurance
    Co.
(2005), 75 O.R. (3d) 421, [2005] O.J. No. 1951 (C.A.), leave to appeal
    refused, [2005] S.C.C.A. No. 343. That case involved a commercial umbrella
    insurance policy issued to Avis to provide coverage in excess of two other
    automobile insurance policies. The court held that on the facts of that case,
    the umbrella policy was an owners policy within the meaning of ss. 277(1)
    and therefore responded as first loss insurance.

[15]

In my view, the
Avis
decision is
    readily distinguishable from the case at bar. The umbrella policy at issue in
Avis
was issued in the United States by an American insurer. This courts decision
    that it was an owners policy turned on the fact that the American insurer
    had filed an undertaking pursuant to s. 226.1 of the
Insurance Act
agreeing
    to provide the minimum statutory coverage required by Ontarios automobile
    insurance scheme. The effect of the undertaking was to supercede the language
    of the policy and the coverage it provided and to replace it with the mandated
    terms of the standard Ontario automobile policy. That meant that when it came
    to determine how the policy responded in relation to other policies, the
    wording of the umbrella policy did not govern and the policy had to be treated
    as if it were an owners policy within the meaning of the Ontario automobile
    insurance scheme.

[16]

Economical also relies on
ING Insurance Company
    of Canada v. Lombard General Insurance Company

of Canada
(2009), 94 O.R. (3d) 669 (S.C.), affd 2009 ONCA 570, 98 O.R. (3d)
    522, leave to appeal refused, [2009] S.C.C.A. No. 384. That case involved an
    umbrella policy that incorporated a Standard Excess Automobile Policy SPF No. 7
    endorsement, which provided coverage for excess loss related to the specific
    automobiles covered in the required underlying automobile insurance policies. The
    motion judge found that the endorsement brought the umbrella policy within the
    definition of an owners first loss policy under ss. 277(1). The case at bar is
    distinguishable as it does not involve a Standard Excess Automobile Policy SPF
    No. 7 endorsement that alters the nature of the coverage provided by an
    umbrella policy.

[17]

Accordingly, I would dismiss the appeal from the
    motion judges order that the Economical Auto Policy must respond before the
    State Farm PLUP Policy.

(2)

Are the Economical Auto Policy and the State
    Farm PLUP both excess policies that, pursuant to ss. 277(2), are only required
    to respond for their rateable proportion of any liability exceeding the State
    Farm Auto Policy limits?

[18]

In the alternative, Economical submits that by
    the language of ss. 277(1), the Economical Auto Policy and the State Farm PLUP
    are both excess insurance. Therefore, by virtue of ss. 277(2), Economical should
    respond only for its rateable proportion of any liability exceeding the State
    Farm Auto Policy.

[19]

Subsection 277(2) provides as follows:

Subject to sections 255 and 268 and to
    subsection (1) of this section,
if the insured named in a contract has or
    places any
other
valid insurance
, whether against liability
    for the ownership, use or operation of or against loss of or damage to an
    automobile or otherwise, of the insureds interest in the subject-matter of the
    contract or any part thereof,
the insurer is liable only for its rateable
    proportion of any liability, expense, loss or damage
. [Emphasis
    added.]

[20]

In my view, ss. 277(2) does not apply to the
    Economical Auto Policy. Subsection 277(2) addresses the situation where there
    are overlapping non-primary policies. It does not refer to excess insurance
    in the sense of that term in ss. 277(1) but rather applies to any
other
valid insurance the insured named in a contract has or places. Even though the
    Economical Auto Policy is excess insurance in relation to the State Farm Auto
    Policy by virtue of ss. 277(1), it remains primary first loss insurance and
    does not fall within ss. 277(2). In my view, any
other
valid
    insurance must refer to insurance
other
than that described in ss.
    277(1). The language of ss. 277(2)  any other valid insurance, whether
    against liability for  or damage to an automobile or otherwise  is
    distinguished from the language of ss. 277(1) which uses the term any other
    valid motor vehicle liability policy when determining the priority in which
    those primary policies are to respond.

[21]

As the motion judge correctly held, liability of
    the insurers turns on the wording of the policies as well as on the provisions
    of the Act. The Economical Auto Policy remains, by its terms, primary insurance
    even though ss. 277(1) makes it excess in relation to the State Farm Auto
    Policy. The State Farm PLUP only provides coverage after any other valid and
    collectible first loss insurance has responded in the priority established by
    ss. 277(1). The two policies provide very different coverage and they are not
    required to respond rateably as if they provided the same type of coverage.

[22]

Accordingly, I would not give effect to the
    argument that Economical is only required to respond rateably with the State
    Farm PLUP for any liability exceeding the limits of the State Farm Auto Policy.

Disposition

[23]

For these reasons, I would dismiss the appeal
    with costs to the respondent State Farm in the amount agreed to by the parties,
    namely $15,000 inclusive of disbursements and HST for both the appeal and the
    motion.

Robert J. Sharpe
    J.A.

I agree H.S. LaForme
    J.A.

I agree K. van
    Rensburg J.A.

Released: February 22, 2018


