



COURT OF APPEAL FOR ONTARIO

CITATION: Coast Capital Equipment Finance Ltd. v. Old
    Republic Insurance Company of Canada, 2018 ONCA 540

DATE: 20180613

DOCKET: C64713

Rouleau, van Rensburg and Pardu JJ.A.

BETWEEN

Coast Capital Equipment Finance Ltd.

Applicant/Appellant

and

Old Republic Insurance Company of Canada

Respondent/Respondent in Appeal

Caroline Gronke, for the appellant

Patrick Monaghan, for the respondent

Heard: April 27, 2018

On appeal from the judgment of Justice P.J. Monahan of
    the Superior Court of Justice, dated November 7, 2017 with reasons reported at
    2017 ONSC 6694.

Pardu J.A.:

[1]

This appeal concerns a dispute between a lessor
    of a vehicle, Coast Capital Equipment Finance Ltd. (Coast Capital), and an
    insurer as to whether the lessor is insured for third party liability under a
    policy of automobile insurance. The appeal turns on the construction of a
    Certificate of Automobile Insurance and an OPCF 25 Change Form, both issued by
    the respondent, Old Republic Insurance Company of Canada (Old Republic).

[2]

62254641 Canada Inc. (622), a trucking
    company, leased a 2008 Peterbilt tractor from a third party. Old Republic
    issued a Certificate of Automobile Insurance which lists that vehicle (the
    Certificate).
[1]
The Certificate includes a box for describing lessors and lienholders.  It was
    completed as follows:

Lienholders (to whom loss may be
    jointly payable) (if applicable)

Name                                                               Address

AS PER OPCF 23A FORMS

Lessor (if applicable)

Name                                                               
    Address

AS PER OPCF 5 FORMS

[3]

An OPCF 23A endorsement provides for payment to
    a lienholder in the event of damage to the vehicle.

[4]

An OPCF 5 endorsement expressly allows a lessor
    to rent or lease a motor vehicle to a lessee who has completed an Ontario
    Application for Automobile Insurance  Owners Form, and also provides coverage
    to a lessee as if the lessee were the named insured. It is common ground that if
    that endorsement is part of the policy, both the lessor and the lessee benefit
    from third party liability insurance.

[5]

In describing the insurance coverage, the
    Certificate lists various other unrelated endorsements, including: OPCF 19 - LIMITING
    THE AMOUNT PAID FOR LOSS OF DAMAGE COVERAGES; OPCF 27B - BUSINESS OPERATIONS - LIABILITY
    FOR DAMAGE TO NON-OWNED AUTOMOBILES; OPCF 40 - Fire Deductible; PER OCCURRENCE
    DEDUCTIBLE.

[6]

The OPCF 23A endorsement is attached to the
    Certificate as a separate document.  None of the other additional endorsements,
    including the OPCF 5 endorsement, is similarly attached as a separate document.

[7]

On June 15, 2012, 622 leased two more tractors,
    this time from Coast Capital. Coast Capital had informed its insurance broker
    in writing that it wanted third party liability coverage in the minimum amount
    of $2,000,000, and indicated The policy must contain an OPCF #5 Permission to
    Lease or Rent Endorsement. This document was found in Old Republics
    underwriting file, however there is no evidence as to when it received that
    document.

[8]

On July 5, 2012, Old Republic issued an OPCF 25 Change
    Form showing 622 as the insured, and listing the two new Peterbilt tractors. The
    new tractors are identified as automobiles 2 and 4. The policy change that is noted
    on the form indicates Automobile added to policy (Auto No. 2 and 4).

[9]

The OPCF 25 Change Form includes a box in which
    to describe lienholders and lessors and their addresses.  This box was
    completed as follows:



Auto No

Specify
          Lienholder/Lessor- Name

Address



2,4

Coast
          Capital Equipment Finance Co.

[Coast
          Capitals address is specified]



[10]

The OPCF 25 Change Form recites that other terms
    and conditions of the policy remain the same.

[11]

It also lists the other unrelated OPCF
    endorsements mentioned in the original Certificate, but it makes no mention of
    either the OPCF 5 or OPCF 23A endorsements.

[12]

622 also entered into an agreement with First
    Insurance Funding of Canada (First Insurance) in which First Insurance agreed
    to finance the cost of 622s insurance premium.

[13]

On November 8, 2012, after 622 failed to make
    its required payment, First Insurance contacted Old Republic to cancel the
    insurance. On November 12, 2012, one of the 2009 leased Peterbilt tractors was
    involved in a motor vehicle accident.

[14]

It is Old Republics position that it is not
    required to respond to the loss.  Initially it conceded that the Certificate
    insured Coast Capital for liability and the only coverage issue was the effect
    of the cancellation by First Insurance.  Shortly before the hearing of the
    application, Old Republic took the position that Coast Capital had no liability
    coverage.  Old Republic successfully resisted a motion by Coast Capital to
    conduct a further cross-examination on its affidavit once this issue was
    raised.

Application judges reasons

[15]

The application judge concluded that while the
    OPCF 23A endorsement was part of the policy, the OPCF 5 endorsement was not and
    Coast Capital was not entitled to liability coverage.  He stated repeatedly
    that the OPCF 5 endorsement was never part of the Certificate or added by the OPCF
    25 Change Form.  He did not address the significance of the phrase AS PER OPCF
    5 FORMS contained in the Certificate.

Arguments on appeal

[16]

Coast Capital argues that the Certificate
    includes the OPCF 5 endorsement which provides liability insurance to both the
    lessor and the lessee. When the two additional tractors were added to that Certificate
    and Coast Capital was shown as lienholder/lessor, it acquired the benefit of
    that coverage as no change form was completed deleting the OPCF 5 coverage. On
    its face, the Certificate refers to Lessors, if applicable and indicates OPCF
    5 coverage is provided. The face of the Certificate describes $2,000,000
    liability coverage.

[17]

The appellant argues that there would be no
    purpose served by using OPCF 5 to give permission to a lessor to lease a
    vehicle, if a lessor was not intended to be treated as a named insured under
    the policy. The lessee was already a named insured in the policy.

Respondents arguments

[18]

The respondent submits that the OPCF 5 endorsement
    is not part of the Certificate and was not added by the OPCF 25 Change Form. It
    submits that the language AS PER OPCF 5 FORMS is part of its standard form,
    and that no significance should be attached to those words.

Analysis

[19]

The application judge accurately summarized the
    law related to interpretation of insurance contracts at paragraphs 21 and 23 of
    his reasons:

[21]    The courts have recognized that
    insurance contracts are subject to particular rules of interpretation. In
Brissette
    Estate v. Westbury Life Insurance Co.
, Sopinka J.
    identified the following rules of construction in relation to insurance
    contracts:

(1)

The court must search for an interpretation from the whole of the contract
    which promotes the true intent of the parties at the time of entry into the
    contract.

(2)

Where words are capable of two or more meanings, the meaning that is
    more reasonable in promoting the intention of the parties will be selected.

(3)

Ambiguities will be construed against the insurer.

(4)

An interpretation which will result in either a windfall to the
    insurer or an unanticipated recovery to the insured is to be avoided.

[23]    These principles were recently refined
    and clarified in
Ledcor Construction Ltd. v. Northbridge Indemnity
    Insurance Co
. Wagner J. for the majority of the Supreme
    Court noted that the primary interpretive principle governing the
    interpretation of insurance policies is that where the language of the
    insurance policy is unambiguous, reading the contract as a whole, effect should
    be given to that clear language. Where, however, the policys language is
    ambiguous, general rules of contract construction must be employed to resolve
    that ambiguity. These rules include that the interpretation should be
    consistent with the reasonable expectations of the parties and should not give
    rise to results that are unrealistic or that the parties would not have
    contemplated in the commercial atmosphere in which the policy was contracted.
    Only if ambiguity still remains after the above principles are applied should
    the
contra proferentem
rule be employed to
    construe the policy against the insurer.

[20]

A Certificate of Automobile Insurance defines
    the coverage provided by the policy.

[21]

Sections 232(3), (5) and (5.1) of the
Insurance
    Act
require the insurer to send a copy of the policy and every endorsement
    to the insured. If an insurer adopts a standard policy it may, instead of
    issuing the policy, issue a certificate in a form approved by the Superintendent.
    Section 5.1 provides that a certificate issued under subsection (5) is of the
    same force and effect as if it were the standard policy, subject to the limits
and coverages
shown by the insurer
on the certificate

and
any
    endorsements issued with or subsequently to the certificate. [Emphasis added]

[22]

Following the hearing, the panel requested that
    the parties provide copies of the forms approved for use at the relevant times.

[23]

The material submitted following the hearing demonstrates
    that the Superintendent approved a form of Certificate of Automobile Insurance
    for the relevant time, and has also approved a custom form of Certificate of Automobile
    Insurance submitted for approval by Old Republic (the Approved Certificate).

[24]

The Approved Certificate does not contain the
    phrase AS PER OPCF 5 FORMS. This phrase must have been added to the
    Certificate by Old Republic. If added for this particular transaction, it leads
    readily to the inference that the Certificate was intended to provide coverage
    to both the lessor and the lessee. If Old Republic added this language to its
    Approved Certificate as a standard form for use in its business, this still
    leads to the inference that its usual practice was to insure both lessors and
    lessees for liability. At the very least, if ambiguity is created by Old
    Republics use of an unapproved altered standard form, it should bear the
    consequences of that use.

[25]

No deference is owed to the application judges
    decision as he did not address this additional language in the Certificate upon
    which this appeal turns. It may be that that issue was not identified for him
    with the same clarity as on this appeal.

[26]

I would attach no significance to Old Republics
    failure to attach a physically separate copy of the OPCF 5 endorsement to the
    Certificate. As mentioned, none of the other unrelated endorsements listed in
    the Certificate were attached.

[27]

I conclude that the OPCF 5 endorsement is part
    of the Certificate; the insurer intended to provide liability coverage to both
    the lessor and lessee. The OPCF 25 Change Form did not delete that coverage,
    but added new vehicles. Absent deletion of the OPCF 5 coverage, I conclude that
    Coast Capital is entitled to the benefit of that coverage. Old Republics
    insertion of the OPCF 5 language into the Certificate accords with the
    commercial reality of the transaction. Old Republic was providing automobile
    insurance to a trucking companys fleet. The trucking company leased multiple
    vehicles, to the knowledge of the insurer. It makes commercial sense for the
    lessors who were financing the purchase of the vehicles to protect themselves from
    liability as the owners of those vehicles when they would have no control over
    the trucking company operations.

[28]

There is nothing in the Certificate that
    suggests that the liability coverage described in the policy is solely for the
    benefit of the lessee.

[29]

I would accordingly allow the appeal and set
    aside the decision of the application judge dismissing the application by Coast
    Capital. The OPCF 5 endorsement is part of the Certificate covering the
    vehicles leased by Coast Capital. Costs of the appeal are awarded to Coast Capital
    in the agreed amount of $14,750 inclusive of disbursements and taxes.

[30]

This application is returned to the Superior
    Court for hearing of the remaining issues, relating to the effect of the
    cancellation of the policy by First Insurance, and the claims for defence costs
    and indemnity by Coast Capital, and costs of the application, bearing in mind
    the success of the appellant on the issue before this court.

G. Pardu J.A.

I agree Paul Rouleau
    J.A.

I agree K. van Rensburg
    J.A.

Released: June 12, 2018





[1]

6445641 Canada Inc. is described on the Certificate as the
    named insured. On the lessees application for insurance for the 2008 Peterbilt
    tractor, 6445641 Canada Inc. is crossed out and 622 is substituted. This
    difference does not seem to have made its way into the Certificate; neither
    party made any issue of this difference and I presume it is immaterial.


