



COURT OF APPEAL FOR ONTARIO

CITATION: Royal & Sun Alliance Insurance Company of
    Canada v. Intact Insurance Company, 2017 ONCA 381

DATE: 20170510

DOCKET: C62842

Juriansz, Brown and Miller JJ.A.

BETWEEN

Royal & Sun Alliance Insurance Company of
    Canada

Applicant (Appellant)

and

Intact Insurance Company
,
Diane Wilson, Rita MacLeod and Cathy MacLeod

Respondents (
Respondent
)

Christopher P. Klinowski, for the appellant

Jason P. Mangano and Jennifer A. ODell, for the
    respondent

Heard: March 2, 2017

On appeal from the order of Justice Harrison S. Arrell

of the Superior Court of Justice, dated September 20, 2016.

Juriansz J.A.:

A.

Overview

[1]

The main question in this appeal is whether an endorsement of an
    automobile insurance policy that excludes coverage for a named driver is valid
    even though its form is not that pre-approved by the Superintendent of Financial
    Services, as required by s.
227(1) of the
Insurance Act
,
    R.S.O. 1990, c. 1.8
.

[2]

For the reasons that follow, I conclude that the use of an
    unapproved form, as is alleged here, does not necessarily invalidate an
    agreement between the parties about exclusion from insurance coverage. I also
    reject the appellants other arguments, and would dismiss the appeal.

B.

Background

[3]

Diane Wilson and her husband met with her insurance broker on February
    29, 2012 because her drivers licence had been suspended for unpaid fines and
    the insurance on the 2004 Impala she owned was being cancelled. She wished to
    maintain insurance coverage on the car so her husband could drive it. Insurance
    was arranged with the respondent, Intact Insurance Company, on the basis that Wilson
    would be an excluded driver. Wilson executed an Excluded Driver Endorsement.

[4]

The trial judge found that when Wilson completed the form the broker
    explained to her and she clearly understood that, even if the licence were to
    be reinstated, Intact still would not insure her and the Excluded Driver Endorsement
    would continue to apply.

[5]

Wilsons licence was reinstated, she drove the vehicle, and had an
    accident in which Rita and Cathy MacLeod were injured. The MacLeods commenced a
    personal injury action against Wilson.

[6]

The MacLeods uninsured motor vehicle carrier, Royal & Sun Alliance Insurance
    Company of Canada, is the appellant. Royal brought an application for a
    declaration Wilson was fully insured by Intact. Intact, relying on the Excluded
    Driver Endorsement, took the position there was no coverage and Wilson was
    uninsured.

[7]

The application judge found the Excluded Driver Endorsement was in full
    force and effect at the time of the accident and that Intact had no duty to
    defend or indemnify Wilson in respect of the accident. Royal appeals from that
    decision.

C.

Analysis

(1)

The use of an unapproved form does not necessarily invalidate an
    excluded driver endorsement

[8]

Royals main argument on appeal is that the Excluded Driver Endorsement
    that Wilson executed is not in the form pre-approved by the Superintendent and
    is void because it did not strictly comply with s. 227(1) of the
Insurance
    Act
.

[9]

Section 227(1) provides:

227.(1) An insurer
shall not
    use a form
of any of the following documents in respect of automobile
    insurance unless the form has been approved by the Superintendent:

1. An application for insurance.

2. A policy,
endorsement
or renewal.

3. A claims form.

4. A continuation certificate. [Emphasis added.]

[10]

FSCOs Bulletin No. A-03/05 circulated FSCO pre-approved standard forms.
    Paragraph 2 of the pre-approved Excluded Driver Endorsement form and the boxes
    that follow it are reproduced below:


[11]

On the form that Wilson executed these boxes were not filled out. Rather, the words "See your Certificate of Automobile Insurance for which automobile(s) this change applies to." are written in across these boxes. The Certificate of Insurance set out these identifying details of the vehicle.

[12]

Assuming for the sake of argument that the Excluded Driver Endorsement
    was not in the pre-approved form, the question is whether s. 227(1) renders
    void an unapproved form. The section, itself, is silent on the effect of using
    a form that has not been pre-approved. The question is one this court has never
    squarely addressed.

[13]

It is necessary to interpret s. 227 in the context of the Act, its
    purposes and the regulatory scheme as a whole to determine the legislative
    intent. Doing so leads
me to conclude the legislature
    intended that a lack of compliance with s. 227(1) is a matter for the
    Superintendent. It is not the role of the courts, while applying the law of
    contract, to read into s. 227 that a non-compliant form is necessarily void as
    a matter of contract law.

(a)

The objectives of the regulatory automobile insurance regime

[14]

No doubt one of the main objectives of the regulatory automobile
    insurance regime in Ontario is consumer protection and guaranteed compensation
    of victims:
Smith v. Co-Operators General Insurance Co.
, 2002 SCC 30,
    [2002] 2 S.C.R. 129, at para. 11;
Peixeiro v. Haberman
, [1997] 3 S.C.R.
    549, at paras. 22-24. This court in
Abarca v. Vargas
, 2015 ONCA 4, 123
    O.R. (3d) 561, at paras. 36-37, recognized that automobile insurance policies
    are more than commercial contracts and form part of an integral social safety
    net.

[15]

Only the consumer protection objective is at play in this case. The
    question is whether Wilson, as a consumer of insurance, should be protected
    from her insurers use of an unapproved form. The victims requiring
    compensation in this case are the MacLeods. No matter the outcome of the case,
    they can claim compensation from one of the two insurers involved in the
    dispute.

[16]

The
Smith
case provides additional guidance. It involved the
    validity of an insurers notice under s. 71 of the
Statutory Accident
    Benefits Schedule
advising the insured of the termination of her statutory benefits.
    After noting the important consumer protection purpose of the insurance scheme,
    the court went on to caution, at para. 14,

that it is not the role of this Court to set out the specific
    content of insurance refusal forms. This task is better left to the
    legislature. However, it is appropriate for this Court to interpret in general
    terms what the legislature intended the insurer to convey under s. 71.

Thus, in furthering the consumer purpose of the Act,
    courts should limit their role to implementing the insurance regime as designed
    by the legislature.

(b)

The statutory setting of s. 227 of the
Insurance Act

[17]

Section 239(1) of the
Insurance Act
provides that every contract
    evidenced by an owners policy insures the person named therein. Section 240
    creates an excluded driver exception as follows:

If a contract evidenced by a motor vehicle liability policy
    names an excluded driver, the insurer is not liable to any person under the
    contract
or under this
    Act or the regulations
for any loss or damage that occurs while
    the excluded driver is driving an automobile insured under the contract, except
    as provided by the
Statutory Accident Benefits Schedule.


[18]

An excluded driver is defined at s. 224(1) of the Act as a person named
    as an excluded driver in an endorsement under section 249. Section 249
    provides that an insured may stipulate by endorsement to a contract evidenced
    by a motor vehicle liability policy that any person named in the endorsement is
    an excluded driver under the contract. In this context, s. 227(1) provides
    that an insurer shall not use a form for an endorsement unless the form is
    approved by the Superintendent.

[19]

I note all of these provisions refer to the contract between the
    insured and the insurer.

(c)

The Superintendents regulatory powers

[20]

The Superintendent appointed under the
Financial
    Services Commission of Ontario Act, 1997
, S.O. 1997, c. 28, has the general function of
administering and
    enforcing the
Insurance Act
.

[21]

Especially pertinent is the Superintendents powers in relation to
    unfair acts and deceptive practices.
Section 439
    of the Act provides that [n]o person shall engage in any unfair or deceptive
    act or practice.
Unfair or deceptive
    acts or practices are prescribed by
O. Reg. 7/00. Item 12 of
O. Reg. 7/00 prescribes as an unfair or deceptive act or
    practice [t]he use of a document in place of a form approved for use by the
    Superintendent,
unless none of the deviations in
    the document from the approved form affects the substance or is calculated to
    mislead
 (emphasis added).


[22]

Ultimately, s. 441(2) of the Act gives the Superintendent the power to
    order a person to cease or refrain from an unfair or deceptive act, to perform
    acts to remedy the situation, and even to cease engaging in the business of
    insurance or any aspect of the business of insurance.

[23]

The regulatory scheme focuses directly on the use of a document in
    place of a form approved for use by the Superintendent and gives the
    Superintendent the power to deal with the consequences of a deviation. I draw
    from reading s. 227(1) in this context that the legislature did not intend for
    the courts, while engaged in adjudicating a contractual dispute, to consider a
    contractual provision void merely because its form fails to strictly comply
    with s. 227(1) of the
Insurance Act
. The courts function is to
    determine the contractual dispute, and any alleged breach of s. 227(1) is a
    matter for the Superintendent. In fulfilling its function, the court may well consider
    an alleged deviation from a pre-approved form to the extent that is relevant to
    its enforceability in contract.

[24]

In my view, s. 126 of the Act seems to confirm that this is the correct
    approach. Section 126 and its applicability was not put before the court by
    either counsel. However, on its own, it may be dispositive. Section 126(1)
    forbids an insurer from making a contract of insurance inconsistent with the
    Act. Significantly, s. 126(2) then provides that a contract is not void or
    voidable as against an insured, or a beneficiary or other person to whom
    insurance money is payable under the contract,
by reason
    of a failure of the insurer to comply with a provision of this Act
 (emphasis
    added). This seems to me to indicate that the role of the courts is to determine
    the validity of contracts of insurance as a matter of contract law and the
    consequence of a failure to comply with a provision of the Act is to be
    determined as specifically set out by the Act and its regulations.

[25]

I reject Royals argument that the court, in determining whether there
    was coverage in this case, must consider the Excluded Driver Endorsement
    necessarily voided by s. 227(1) because of its alleged deviation from the
    pre-approved form.

(2)

Other arguments on appeal

[26]

Royal pointed out that Intact bore the onus of proof that an exclusion
    applied and submitted that Intact could not meet that onus without explaining
    why it initially provided coverage to Wilson and only later took the position
    she was an excluded driver. In my view, Intacts subsequent coverage decisions
    have no bearing on the contractual validity of the Excluded Driver Endorsement
    when it was executed and the application judge did not err in failing to
    comment on them.

[27]

There is no merit to Royal's additional arguments attacking the application
    judge's factual findings. Nor is there merit in Royal's argument that the
    conflicting evidence required a trial. There was little conflict as to the
    material facts and there was no good reason to order a trial. The application
    judges findings that Wilson executed the Excluded Driver Endorsement, that it
    was unambiguous, that Wilson was given a pink slip certificate that clearly
    identified the vehicle, and that Wilson understood, at the time, that she was
    excluded from driving the vehicle even if her licence were to be reinstated,
    were all supported by the record.

[28]

The application judge was correct in finding that the Excluded Driver
    Endorsement on the Intact policy insuring Wilsons vehicle was in full force
    and effect on June 6, 2012 when Wilson was involved in an accident with the MacLeods.

D.

Disposition

[29]

I would dismiss the appeal.

[30]

Intact is entitled to costs of the appeal fixed at $15,000, inclusive of
    taxes and disbursements, as agreed by counsel.

Released: May 10, 2017 (RGJ)

Russell Juriansz J.A.

I agree. David Brown J.A.

I agree. B.W. Miller J.A.


