



COURT OF APPEAL FOR ONTARIO

CITATION: Ontario Corporation Number 1009329 (Enterprise
    Rent-A-Car) v. Intact Insurance Company, 2019 ONCA 916

DATE: 20191121

DOCKET: C66164

Rouleau, Huscroft and Nordheimer JJ.A.

BETWEEN

Ontario Corporation Number 1009329 c.o.b. as
    Enterprise Rent-A-Car and/or Enterprise Rent-A-Car

Applicant/Appellant (Appellant)

and

Intact Insurance Company

Respondent/Respondent (Respondent)

Robert Love and Taha Hassan, for the appellant

Jonathan Heeney and Sean Cheskes, for the respondent

Brigette A. Morrison, for the intervenors Aviscar Inc.,
    Budgetcar Inc. and ACCRO Rental Systems, Inc. o/a ACCRO Services

Reine Reynolds for the intervenors Hertz Canada Limited
    and Dollar Thrifty Automotive Group

Alexander B. Paul for the intervenor New Horizons Car
    & Truck Rental Ltd. o/a Discount Car & Truck Rentals Ltd.

Heard: October 15, 2019

On appeal from the order of the Divisional Court (Regional
    Senior Justice Geoffrey B. Morawetz, Regional Senior Justice Robbie D. Gordon
    and Justice Barbara A. Conway, dated June 5, 2018, with reasons reported at 2018
    ONSC 3517, 27 M.V.R. (7th) 59, affirming the decision of Justice Edward M.
    Morgan, dated December 14, 2017, with reasons reported at 2017 ONSC 7515, 140
    O.R. (3d) 396.

REASONS FOR DECISION

[1]

Adi Perets was involved in a car accident while driving a rental car owned
    by the appellant Enterprise Rental Car (Enterprise). At the time, she was
    living with her parents and was a listed driver under a standard Ontario
    Automobile Policy (OAP1) issued to her father by the respondent, Intact
    Insurance (Intact). The policy covered two vehicles that she drove regularly.
    She was not a named insured on her fathers policy.

[2]

Ms. Perets was named as a defendant in the action arising from the 2013
    accident. There was a priority dispute as to whether Enterprises insurer or
    Intact was the first loss insurer. Enterprise and Intact entered into a reservation
    of rights agreement pursuant to which Enterprise agreed to defend Ms. Perets in
    the action until the priority dispute was resolved. In October 2017 the action
    settled and Enterprise paid $30,000 towards the settlement on behalf of Ms.
    Perets. Enterprise then sought $30,000 plus $17,483 in legal fees from Intact,
    resuming its claim that Intact was the first loss insurer.

[3]

The application judge dismissed Enterprises claim on the basis that
    coverage under the OAP1 issued by Intact was not available to Ms. Perets for a
    rental car and that the priority provision in the
Insurance Act
,
    R.S.O. 1990, c. I.8 did not apply as a result. Hence, liability fell to
    Enterprises insurer, not Intact, as the first loss insurer.
The
Divisional Court upheld the decision on appeal.

[4]

The appeal is dismissed for the reasons that follow.

[5]

This appeal concerns the interpretation of the
Insurance Act
and the provisions of a standard form contract of insurance. The standard of
    review is correctness:
Ledcor Construction Ltd. v. Northbridge Indemnity
    Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23.

[6]

The thrust of Enterprises argument, supported by the interveners, is
    that the OAP1 is in conflict with the
Insurance Act
. They argue that
    the OAP1, unlike s. 277(1.1)(2) of the
Insurance Act
, provides no
    coverage for a listed driver when driving a rental car and that the
Insurance
    Act

prevails as a result.

[7]

This argument was rejected by the application judge and the Divisional
    Court. We see no error in their analysis.

[8]

There is no doubt that the purpose of the amendments to the
Insurance
    Act
,

introduced in
    2005 by Bill 18,
Budget Measures Act
, 2005 (No. 2), S.O. 2005, c. 31, was
    to reduce the financial exposure of car rental companies by making the car rental
    companys insurance the policy of last resort on the priority ladder. But the
    short answer to this appeal is that priorities under the
Insurance Act
depend on the existence of coverage under the policy of insurance, and in this
    case no coverage is available to Ms. Perets under the Intact policy.

[9]

Section 277(1.1) of the
Insurance Act
provides as follows:

(1.1) Despite subsection (1), if an automobile is
    leased, the following rules apply to determine the order in which the third
    party liability provisions of any available motor vehicle liability policies
    shall respond in respect of liability arising from or occurring in connection
    with the ownership or, directly or indirectly, with the use or operation of the
    automobile on or after the day this subsection comes into force:

1. Firstly,
insurance available under a
    contract
evidenced by a motor vehicle liability policy
under which the
    lessee of the automobile is entitled to indemnity
as an insured named in
    the contract.

2. Secondly,
insurance available under a
    contract
evidenced by a motor vehicle liability policy
under which the
    driver of the automobile is entitled to indemnity
, either as an insured
    named in the contract, as the spouse of an insured named in the contract who
    resides with that insured or as a driver named in the contract, is excess to
    the insurance referred to in paragraph 1.

3. Thirdly,
insurance available under a
    contract
evidenced by a motor vehicle liability policy
under which the
    owner of the automobile is entitled to indemnity
as an insured named in the
    contract is excess to the insurance referred to in paragraphs 1 and 2. 
    2005, c. 31, Sched. 12, s. 6 (1). [Emphasis added.]

[10]

As the highlighted terms emphasize, although s. 277(1.1) establishes
    priorities amongst insurers, it does not create insurance coverage where none
    is available. The operation of s. 277(1.1) depends on insurance being
available
    under a contract: Enterprise Rent-a-Car Canada Ltd. v. MelocheMonnex Financial
    Services Inc.
,
2010
    ONCA 277
, 102 O.R.
    (3d) 87,
at para. 20.
Put another
    way, the priorities of insurance coverage established in s. 277(1.1) do not
    come into play unless there is insurance coverage, and that is a matter that
    must be determined in accordance with the terms of the insurance contract.

[11]

Whether insurance is available to Ms. Perets depends on s. 2.2.4 of the
    OAP1. That section provides liability coverage for rental vehicles, but only
    when the vehicle is rented by you  the named insured  or a spouse who lives
    with the named insured. The named insured in this case is Adi Perets father.
    Ms. Perets is neither the named insured nor his spouse, and as a result is not
    covered by the OAP1 when driving rental vehicles.

[12]

In the absence of rental vehicle coverage, it follows that the priority
    rules established in sections 277(1.1)(1) and 277(1.1)(2) have no relevance in
    this case. Consequently, as the application judge and Divisional Court
    concluded, responsibility to provide coverage fell to Enterprises insurer
    under s. 277(1.1)(3).

[13]

This interpretation is confirmed, in our view, by the existence of a
    separate optional endorsement providing rental vehicle coverage, the OPCF 27,
    which was not purchased in this case. This endorsement covers listed drivers
    who drive, rent, or lease other vehicles, and so would have covered Ms. Perets.
    As the application judge concluded, there would be no reason for this
    endorsement if, as Enterprise submits, listed drivers were already covered. It
    would be redundant coverage.

[14]

Accordingly, the appeal is dismissed.

[15]

The respondent is entitled to costs from the appellant fixed in the
    agreed amount of $5,000, inclusive of taxes and disbursements. This amount
    includes costs of the leave application.

[16]

No costs are awarded to or against the interveners.

Paul Rouleau
    J.A.

Grant Huscroft
    J.A.

I.V.B.
    Nordheimer J.A.


