


COURT OF APPEAL FOR ONTARIO

CITATION: Middleton v. Pankhurst, 2017 ONCA 835

DATE: 20171102

DOCKET: C62245

Hourigan, Roberts and Nordheimer JJ.A.

BETWEEN

Tyler Middleton and Susan Middleton

Plaintiffs

and

Cal Pankhurst and
Unifund Assurance Company

Defendants

(
Respondent
)

and

Aviva Canada Inc., as
    Statutory Third Party Pursuant to Section 258(14) and (15) of the Insurance
    Act, R.S.O. 1990, C.I.8

Third Party

(Appellant)

Donald H. Rogers, Q.C. and Meryl Rodrigues, for the
    appellant

Mark ODonnell, for the respondent

Heard: September 28, 2017

On appeal from the judgment of Justice Wendy M. Matheson
    of the Superior Court of Justice, dated May 17, 2016 reported at 2016 ONSC 3157.

Hourigan J.A.:

Introduction

[1]

The issue for determination on this appeal is whether the trial judge
    erred in finding that Cal Pankhurst was a person authorized by law to operate
a motor vehicle pursuant to Statutory Condition
    4(1) of O. Reg. 777/93
enacted under
the
Insurance
Act
, R.S.O.
    1990, c. I. 8.

[2]

In my view, the trial judge did not err. She conducted a very thorough
    and careful analysis of the issue, specifically considering and rejecting the
    same arguments advanced by the appellant, Aviva Canada Inc. (Aviva), on this
    appeal.  I am in substantial agreement with both her analysis and conclusion.
    Accordingly, I would dismiss the appeal.

Facts

[3]

The factual background of the dispute is not controversial and may be
    briefly stated as follows.

[4]

On January 24, 2009 Tyler Middleton and Mr. Pankhurst agreed to go ice
    fishing on Lake Simcoe. Later that day, Mr. Pankhurst travelled by snowmobile
    to meet Mr. Middleton at a remote location on the lake where some of their
    friends had ice huts.

[5]

At the time, Mr. Pankhurst had a valid class G drivers licence, which
    was not subject to any restrictions. However, he was subject to a probation
    order arising from a guilty plea to careless driving in the fall of 2008. That
    order prohibited Mr. Pankhurst from driving at night and from driving with
    alcohol in his system.

[6]

Both Mr. Middleton and Mr. Pankhurst consumed alcohol that night. In the
    early evening, Mr. Middleton left the ice huts by foot, while Mr. Pankhurst
    stayed behind. Later that evening, Mr. Middleton called Mr. Pankhursts cell
    phone. He explained that he was lost and disoriented and asked Mr. Pankhurst to
    pick him up. Mr. Pankhurst believed that Mr. Middleton was in danger of
    freezing because he was not properly dressed. He drove his snowmobile on the
    lake, found Mr. Middleton, and they drove to shore. They then proceeded on a
    road along the shore.  While on that road, Mr. Pankhurst lost control of his
    snowmobile and both he and Mr. Middleton were ejected. Mr. Middleton hit a
    telephone pole and suffered significant injuries
.

[7]

Mr. Middleton and his mother, Susan, brought a personal injury claim
    against Mr. Pankhurst. The parties reached a settlement agreement pursuant to
    which Mr. Pankhurst would pay $900,000 to the Middletons. Mr. Pankhurst was
    insured by Aviva, and Ms. Middleton was insured by Unifund Assurance Company
    (Unifund). Ms. Middletons insurance policy provided coverage for under or
    uninsured claims.

[8]

Statutory Condition 4 applies to all Ontario automobile insurance
    contracts, including Mr. Pankhursts policy with Aviva. Statutory Condition 4(1)
    reads:

4(1)
The insured shall not drive or operate or permit
    any other person to drive or operate the automobile unless the insured or other
    person is authorized by law to drive or operate it.

[9]

Aviva took the position that it was not obliged to pay any part of the
    settlement on the basis that Mr. Pankhurst was not authorized by law to drive
    at the time of the accident, because he had been drinking and driving at night,
    in breach of his probation order.

[10]

Justice
    David Brown (as he then was) ordered that the settlement funds be paid in full
    to the Middletons  50% paid by each insurer 
with
    provision to have the successful insurer repaid by the unsuccessful insurer
    after the coverage issue was determined
.
He
    further ordered a trial of an issue, namely, whether Mr. Pankhurst was entitled
    to insurance coverage from Aviva.

Decision of the Trial Judge

[11]

The
    trial judge found that Mr. Pankhurst was authorized by law to drive at the time
    of the accident because he had a valid drivers licence that was not subject to
    any restrictions imposed by the Ministry of Transportation (MTO). She
    rejected Avivas argument that the phrase authorized by law refers to not
    only the provincial licensing scheme operated by the MTO, but also to violations
    of court orders, such as Mr. Pankhursts probation order.

[12]

In
    so ruling, the trial judge relied on this courts decision in
Kereluik v.
    Jevco Insurance Company
, 2012 ONCA 338, 111 O.R. (3d) 395. In that case,
    Cronk J.A. found that the phrase authorized by law was not intended to apply
    to breaches of the law not directly connected with violations of driving
    licence conditions. The trial judge also held that Avivas position was
    inconsistent with s. 118 of the
Insurance Act
.

Analysis

[13]

The
    appellant advances three main arguments on appeal:

(I)

This
    case is distinguishable from
Kereluik
because in the present case, the
    restrictions imposed relate directly to the operation of a motor vehicle;

(II)

Section 118 of the
Insurance Act
,
which is relied
    upon by the trial judge, is not applicable to the facts of this case
; and

(III)

The policy goal of ensuring the
    broadest possible insurance coverage for tort victims should not trump the rule
    of law, specifically, the sanctity of court orders.

[14]

This
    case involves the interpretation of a standard form contract of insurance.
    Accordingly, the standard of review is correctness: see
Ledcor Construction
    Ltd. v. Northbridge Indemnity Insurance Co.
,
    2016 SCC 37, [2016] 2 S.C.R. 23, at para
. 46.

[15]

I
    will deal with each of the arguments advanced by the appellant. In summary,
    despite Mr. Rogers very able submissions, I am not persuaded that the trial
    judge made any error in her analysis.

(i)

Kereluik

[16]

In
Kereluik
, the insured had been released from custody on an impaired
    driving charge. He was required to give a personal undertaking to abstain from
    the possession and consumption of any alcohol. A breach of the undertaking
    would constitute a criminal offence. The insured drove again while impaired and
    was involved in another accident. Mr. Kereluiks insurer denied coverage on the
    basis that he was not authorized by law to drive because he had breached the
    undertaking.

[17]

This
    court rejected that argument. Justice Cronk held, at para. 15, that the phrase authorized
    by law was not intended to apply to breaches of the law not directly
    connected with violations of driving licence conditions. She also noted a
    broad interpretation of the phrase would be inconsistent with s. 118 of the
Insurance
    Act
.
Justice Cronk concluded that compliance with Statutory
    Condition 4 depended only on the insureds possession of a valid drivers
    licence and compliance with
its

terms  not the terms imposed on driving pursuant to any other law.

[18]

The
    appellant submits that
Kereluik
is distinguishable because in that
    case the insured was subject to a broad restriction related to his consumption
    of alcohol that was not limited in scope to his operation of a motor vehicle.
    In contrast, in the case at bar, the restriction is directly related to the
    insureds operation of a motor vehicle. There is, the appellant argues, no
    meaningful distinction between a condition imposed on a licence by the MTO and
    a restriction on driving imposed by a court order.

[19]

I
    would not give effect to this argument for the following reasons.

[20]

First,
    it does not matter that the undertaking in
Kereluik
was broader in
    scope than the probation order in the present case. The focus of the analysis
    is the same for both the undertaking and the probation order, being whether
    they disqualify a driver under Statutory Condition 4. That was what this court
    considered in
Kereluik
. The fact that the undertaking in that case had
    broader application is of no import.

[21]

Second,
    in
Kereluik
at para. 13, after reviewing a number of authorities on
    the point, Cronk J.A. concluded, [t]hese
authorities suggest that the legal authority to drive, at any given time,
    depends on the existence of a valid licence issued by the responsible
    regulatory authority and compliance with the conditions attaching to the
    licence. In other words, the determination of whether an insured is authorized
    to operate a motor vehicle is restricted to a consideration of any restrictions
    imposed by the MTO. That finding was necessary for her analysis in that case,
    and is binding on this court.

[22]

Finally,
    if
Kereluik

is effectively overturned, insurers could
    potentially deny coverage in any number of situations where there has been a
    criminal law violation. In considering this result, regard should be had to the
    historical evolution of Statutory Condition 4. Earlier versions of the
Insurance
    Act
prohibited insured individuals from operating an automobile while
    impaired. This wording was later amended so an innocent third party would not be
    precluded from receiving compensation for the losses caused by an impaired
    driver: see
Comairco Equipment Ltd. v. Breault
, 52 O.R. (2d) 695
    (C.J.), at paras. 27-28.

[23]

In
    my view, such a technical interpretation of Statutory Condition 4 would be
    contrary to the apparent intention of the legislature in making the amendment, such
    that any breach of a court order would result in the loss of insurance
    coverage. As Cronk J.A. stated in
Kereluik
, at para. 17, [s]uch a
    sweeping interpretive result should not be countenanced absent a clear
    expression of such intention by the legislature.

(ii)

Section 118 of the Insurance Act

[24]

As
    noted above, both the trial judge and Cronk J.A. in
Kereluik
relied on
    s. 118 of the
Insurance Act

in support of their conclusion that
    the phrase authorized by law does not include a consideration of whether the
    insured is subject to criminal law prohibitions that impact his or her ability
    to drive. That section provides, in part:

118
. Unless the contract otherwise provides, a
    contravention of any criminal or other law in force in Ontario or elsewhere
    does not, by that fact alone, render unenforceable a claim for indemnity under
    a contract of insurance except where the contravention is committed by the
    insured, or by another person with the consent of the insured, with intent to
    bring about loss or damage []

[25]

In
    the case at bar, the appellant submits that s. 118 is not applicable because
    Mr. Pankhurst violated a court order and not a statute or any other law. It
    submits that it is not arguing that there is no coverage by the fact alone of
    a criminal offence. Rather, that as a result of the violation, the insured is
    not a person authorized by law to operate a motor vehicle pursuant to Statutory
    Condition 4(1).

[26]

I
    would not give effect to these arguments for the following reasons.

[27]

There
    is, in my view, no meaningful distinction between a court order and any
    criminal or other law in force in Ontario in this context. Both can operate to
    restrict the operation of a motor vehicle.

[28]

More
    importantly, however, the appellants interpretation of s. 118 is inconsistent
    with the policy objective to provide insurance protection for negligent
    tortfeasors who do not intend to cause harm, and to their victims. As Cronk
    J.A. stated in
Kereluik
,
at para. 21:

By enacting s.118 of the Act, by repealing former statutory
    conditions under the Act that expressly precluded the operation or use of an
    automobile while under the influence of alcohol (i.e., former Statutory
    Condition 2(1)(a), above-cited), and by not incorporating a coverage exclusion
    in the current standard form automobile insurance policy pertaining to drunk
    drivers, the legislature must be taken as having elected to protect the
    potential of tort compensation for innocent victims of drinking and driving []

[29]

If
    the appellants submission were accepted, the policy underlying s.118 would be
    negated. It would mark a return to a fault based analysis of insurance
    coverage. A tortfeasor who has not broken the law has coverage, whereas a
    tortfeasor who has broken the law has no coverage. The problem with this fault
    based analysis is that it ignores the policy imperative underlying the
    enactment of s. 118 of ensuring that there is coverage available for the claims
    of innocent tort victims.

(iii)

Court Orders

[30]

The
    appellant submits that the public policy of providing insurance coverage for
    innocent tort victims must accede to the need to respect court orders. It is argued
    that Statutory Condition 4 must be interpreted in a manner that gives effect to
    court orders.

[31]

In
    my view, this is a straw man argument. The respondent is not arguing that court
    orders are to be ignored or that a breach should not result in legal
    consequences. There are, of course, legal consequences in the criminal law for
    the breach of a court order.

[32]

There
    is nothing in the trial judges reasons to suggest that court orders should not
    be respected nor is that the consequence of her decision. What is in issue on
    this appeal is whether the breach of such an order should operate to restrict
    the availability of insurance coverage. That analysis does not impact the
    effectiveness of court orders, as there is no conflict between the proper
    interpretation of Statutory Condition 4 and the proper operation of court
    orders.

Disposition

[33]

I
    would dismiss the appeal. I would award Unifund its costs payable by Aviva in
    the agreed upon all-inclusive amount of $15,000.

Released: L.B.R. November 2, 2017

C.W. Hourigan J.A.

I agree. L.B. Roberts J.A.

I agree. I.V.B. Nordheimer J.A.


