



COURT OF APPEAL FOR ONTARIO

CITATION:
    Kahlon v. ACE INA Insurance, 2019 ONCA 774

DATE:
    20191001

DOCKET:
    C64997

Lauwers,
    Huscroft and Trotter JJ.A.

BETWEEN

Kulwinder
    Singh Kahlon

Plaintiff
    (Respondent)

and

ACE INA
    Insurance

Defendant
    (Respondent)

and

AllState
    Insurance Company of Canada

Defendant (Appellant)

Sheldon A. Gilbert, Q.C., for the
    appellant

John Adair and Joseph A. Cescon, for
    the respondent, Kulwinder Singh Kahlon

Patrick J. Monaghan, for the
    respondent, ACE INA Insurance

Heard: November 2, 2018 and June 26,
    2019

On appeal from the
    judgment of Justice Whitten of the Superior Court of Justice, with reasons
    reported at 2018 ONSC 784, 141 O.R. (3d) 384.

Lauwers J.A.:

A.

The Context

[1]

Mr. Kahlons corporation, Kohuja Transport Inc.,
    owned and leased a tractor to Bell City Transport Systems Incorporated. Mr.
    Kahlon operated it as an independent contractor for Bell City Transport under
    fleet insurance provided by ACE INA Insurance.

[2]

On May 24, 2011, Mr.
    Kahlon was in Florida operating the tractor with a trailer. He stepped out of
    the tractor when it was stopped in a line-up to determine the cause of the
    delay. A Florida-based domestic vehicle operated by a member of the MacDonald
    family struck Mr. Kahlon and he suffered serious injuries, including a
    traumatic brain injury. The insurance coverage available on the MacDonald
    vehicle was only $20,000; this was insufficient to cover the damages flowing
    from Mr. Kahlons injuries, which go beyond pain and suffering to include
    future care, household care, and numerous economic losses including the loss of
    future income and the loss of economic opportunity. The motion judge identified
    the situation as one of underinsurance. ACE INA has been paying Mr. Kahlons
    statutory accident benefits, which are not in issue.

[3]

Mr. Kahlon had
    automobile insurance on his personal automobile through AllState Insurance
    Company of Canada.

[4]

Both the AllState
    policy and the ACE INA fleet policy had attached OPCF 44R Family Protection
    Coverage endorsements (the endorsement), which provide insureds with coverage
    for a collision with an underinsured vehicle. If the endorsement applies, the
    insured persons coverage for injury from a collision with an underinsured
    automobile is the amount that he or she is legally entitled to recover  as
    compensatory damages in respect of bodily injury  or death  arising directly
    or indirectly from the use or operation of [the] automobile: the endorsement,
    at s. 3. Recovery is limited to the amount by which the limit of family
    protection coverage exceeds the limit of the underinsured motorists motor
    vehicle liability insurance: the endorsement, at s. 4.

[5]

In a nutshell, this
    appeal considers whether truck drivers like Mr. Kahlon who are injured in motor
    vehicle accidents while on the job are able to access underinsured coverage
    under the insurance policies on their personal domestic automobiles.

B.

The Judgment under Appeal

[6]

The motion judge heard
    three motions under r. 21.01(1)(a) of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194. The parties sought a determination as to whether either
    of AllState or ACE INA were obliged to provide underinsured coverage to Mr.
    Kahlon under the endorsement in their respective policies.

[7]

The motion judge
    granted summary judgment to Mr. Kahlon and declared that AllState was obliged
    to respond to his underinsured coverage claim. The motion judge declared that
    ACE INA was not obliged to respond.

[8]

AllState appeals. Mr.
    Kahlon cross-appeals with respect to underinsured coverage under the ACE INA
    policy.

[9]

I would allow
    AllStates appeal and dismiss Mr. Khalons cross-appeal, for the reasons that
    follow.

C.

The Positions of the Parties

[10]

ACE INAs position is
    that any obligation it might have to provide underinsured coverage to Mr.
    Kahlon would flow from endorsement 11 attached to its fleet policy. But the
    endorsement contains an exclusion for commercial vehicles like the one Mr.
    Kahlon was driving when he was injured. Mr. Kahlon therefore does not have
    underinsured coverage under ACE INAs policy.

[11]

AllStates position is
    that truck drivers like Mr. Kahlon do not have underinsured coverage under
    their personal automobile policies for injuries they sustain on the job as
    drivers of their trucks. AllState argues that this conclusion follows inescapably
    from a proper reading of the combination of the provincially prescribed Ontario
    Automobile Policy, also known as OAP1 (the policy), for Mr. Kahlons domestic
    automobile, in particular, s. 2.2.3, and the provincially prescribed language
    of its endorsement, in particular s. 22.

[12]

If AllStates argument
    is valid, it appears that the class excluded from underinsured coverage could
    include: people like Mr. Kahlon who operate an automobile with the gross
    automobile weight rating of more than 4500 kg (policy, s. 2.2.3, Special
    Condition 1); those who operate an automobile in connection with the business
    of selling, repairing, maintaining, storing, servicing, or parking automobiles
    (Special Condition 3); those who operate an automobile to carry paying
    passengers (Special Condition 4); and those who use an automobile to make
    commercial deliveries (Special Condition 4).

[13]

Because the broad
    practical reach of AllStates argument could exclude many from underinsured
    coverage, the panel advised the parties that it needed more evidence about how
    Ontario-based truck drivers and other drivers of commercial vehicles obtain
    underinsured coverage, if in fact they do, and whether the interpretation urged
    by AllState would have a surprising impact on Ontarios insureds: Reasons released
    November 9, 2018, and reported at 2018 ONCA 906, 144 O.R. (3d) 141. The panel
    reconvened to consider the evidence tendered by the parties and to hear further
    argument.

Fleet
    Insurance

[14]

The parties filed
    supplementary affidavit evidence from three experts. Jason Foroglou is the
    director of Ivantage Insurance Brokers Inc., which is an AllState owned
    company. John Alaimo, whose evidence was presented by ACE INA, works in
    personal and commercial underwriting, recently specializing in long haul
    transportation. Ed Knoblauch, whose evidence was also presented by ACE INA, is
    a claims consultant with experience in handling and supervising claims
    involving heavy vehicles and their operators. All three experts were
    cross-examined.

[15]

Several contextual
    facts emerged from the supplementary evidence. First, the provision of
    insurance to commercial truck fleets is highly specialized and there are only a
    handful of insurers providing such coverage. AllState does not insure
    commercial vehicles.

[16]

Second, until about 15
    years ago commercial truck fleet insurers offered underinsured coverage under
    the predecessor to OPCF 44R. They no longer do so because of the increased risk
    posed by truck fleets travelling into the United States. Because underinsured
    coverage is not mandatory, the fleet insurers decided not to offer it.
    Consequently, the insurance market no longer provides underinsured coverage for
    truck fleets or their drivers.

[17]

Third, claims under the
    endorsment are relatively rare but are obviously significant to those who make
    them. The total premium for the risk being assumed by the insurer in respect of
    underinsured coverage ranges from $20 to $40. The risk is not underwritten,
    which means that it is not actually based on a risk assessment.

[18]

Fourth, none of the
    experts were able to specify the class of persons who would be adversely
    affected by a decision of the court, apart from truckers. The list would
    capture many people who operate automobiles in their work. However, the panel
    has no evidence on how the insurance market addresses the needs of this class
    of persons for underinsured coverage.

D.

The Issues

[19]

There are two issues.
    The first is whether the motion judge correctly held that ACE INA is not
    obliged to provide underinsured coverage to Mr. Kahlon. The second is whether
    the motion judge correctly held that AllState is obliged to provide
    underinsured coverage to Mr. Kahlon. I address each issue in turn, after
    describing the nature of insurance coverage for underinsurance in Ontario.

E.

Analysis

[20]

It is common ground
    that Mr. Kahlon has underinsurance coverage under both the ACE INA and the
    AllState policies.

[21]

Ontario law draws a
    distinction between the situation in which an insured person is injured in a
    collision with an
uninsured
automobile, on the one hand, and the
    situation in which an insured person is injured in a collision with an
underinsured
automobile, on the other. The motion judge was right to advert to this
    distinction. He relied on decisions of this court in
Chomos v. Economical
    Mutual Insurance
(2002), 61 O.R. (3d) 28, at para. 35 and
Pilot
    Insurance Co. v. Sutherland
, 2007 ONCA 492, 86 O.R. (3d) 789, at para. 30.

[22]

The first situation 
    in which the collision is with an
uninsured
automobile  is addressed by
    s. 265 of the
Insurance Act
, R.S.O. 1990, c. I.8, and by the policy.
    Coverage for collision with an uninsured automobile is a
mandatory
component of automobile insurance. The insured persons coverage for injury
    from a collision with an uninsured automobile includes payment of all sums
    that he or she is legally entitled to recover from the owner or driver of
    [the] uninsured automobile  as damages for bodily injuries resulting from
    [the] accident:
Insurance Act
, s. 265(1)(a). See also the policy, s.
    5.2.1.

[23]

The second situation 
    in which the collision is with an
underinsured
automobile  is addressed
    by the endorsement. This is
optional
insurance coverage, not mandatory,
    and can be purchased by the insured person along with coverage under the
    policy. As noted earlier, the insured persons Family Protection Coverage for
    injury from a collision with an underinsured automobile is a calculated amount
    that reflects the difference between the underinsured vehicles limit of
    coverage and the insureds own limit under the policy.

[24]

With that background, I
    turn to the issues after a brief reference to the standard of review.

The Standard of Review

[25]

Courts should strive to
    ensure that similar insurance policies are construed consistently:
Progressive Homes Ltd. v. Lombard General
    Insurance Co. of Canada
,
    2010 SCC 33, [2010] 2 S.C.R. 245
, at para. 23.
The
    interpretation of a standard form contract has precedential value, so that its
    interpretation is better characterized as a question of law subject to
    correctness:
Ledcor Construction Ltd. v. Northbridge Indemnity Insurance
    Co.,
2016 SCC 37, [2016] 2 S.C.R. 23, at para. 46. The standard of review
    applied to a motion judges interpretation of a standard form insurance
    contract is therefore correctness. See also:
MacDonald v. Chicago Title
    Insurance Co. of Canada
, 2015 ONCA 842, 127 O.R. (3d) 663.

Issue One: Is ACE
    INA obliged to provide underinsured coverage to Mr. Kahlon?

[26]

Any obligation on ACE
    INAs part to provide underinsurance coverage to Mr. Kahlon would flow from the
    endorsement 11 attached to the truck fleet policy for Bell City Transport.

[27]

ACE INA submits that
    its endorsement only applies to certain vehicles in the Bell City Transport
    fleet, which are identified in para. 22 of endorsement 11 as PP/LC. The
    motion judge found, at para. 8, that this designation refers to passenger
    vehicles and light commercial vehicles. In addition, endorsement 11A to the ACE
    INA policy limits the underinsured coverage and specifically excludes that
    coverage for heavy commercial vehicles of the type Mr. Kahlon was operating
    when the accident occurred:

Amendment to OPCF
    44R  Family Protection Coverage

In consideration
    of the premium charge, it is hereby understood and agreed that the coverage
    provided by endorsement OPCF 44R  family protection coverage is applicable
    only to private passenger and light commercial vehicles and is subject to a
    maximum limit per occurrence of $1,000,000.

It is further
    understood and agreed that there is no coverage provided by endorsement OPCF
    44R  family protection coverage for any automobile or trailer whose Gross
    Vehicle Weight exceeds 4,500 kilograms.

[28]

Mr. Kahlon argued that
    ACE INAs endorsement 11A is not enforceable because the Superintendent of
    Financial Services had not approved the form under s. 227 of the
Insurance
    Act
.

[29]

The motion judge
    disagreed. He noted, at para. 76: The overall impression is that there is a
    certain fuzziness or ambiguity as to what is excluded, especially in light of
    the general introductory definition of automobile. In that context he found,
    at para. 78, that endorsement 11A does definitely focus the OPCF 44R
    endorsement. In his view: It clears up any ambiguity and does not run afoul
    of any previous terms in the fleet policy. He concluded that from an
    interpretation of contract point of view, the 11A endorsement is not ambiguous
    and survives notwithstanding lack of approval by the Superintendent.

[30]

In reaching this
    decision the motion judge relied on the proposition that the use of an
    unapproved insurance form does not necessarily render the form unenforceable.
    He cited this courts decision in
Royal & Sun Alliance Insurance Company
    of Canada v. Intact Insurance Company
, 2017 ONCA 381, 138 O.R. (3d) 539. In
    that case, the
question was whether an endorsement that excluded coverage for a named driver
    was valid even though the form had not been pre-approved by the Superintendent
    as required by s. 227(1) of the
Insurance Act.
This court held, at
    paras. 23-25, that the exclusion was enforceable, despite its deviation from
    the approved form, in light of s. 126(2) of the
Insurance

Act
,
    which provides that
a
n insurance 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." Juriansz J.A.
    explained, at para. 24: 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.

[31]

I agree with the motion
    judges conclusion that ACE INA is not obliged to provide underinsured coverage
    to Mr. Kahlon. He properly applied this courts reasoning in
Royal & Sun
    Alliance
. An insurer is not legally required to provide underinsured
    coverage and there is no reason in principle why an insurer could not precisely
    tailor its offering of underinsured coverage, as ACE INA did in its fleet
    insurance policy.

[32]

The motion judge did
    not err in holding that endorsement 11A in the ACE INA fleet policy was
    enforceable. ACE INA is not obliged to provide underinsured coverage to Mr.
    Kahlon for the Florida accident. I would therefore dismiss Mr. Kahlons
    cross-appeal. But I add that I would have reached the same conclusion even
    without endorsement 11A based on my interpretation of the policy and the
    endorsement, as I explain in the next section of these reasons.

Issue Two: Is
    AllState obliged to provide underinsured coverage to Mr. Kahlon?

[33]

As noted, Mr. Kahlon
    had insurance on his personal automobile through AllState that included the
    endorsement for underinsured coverage, which he now seeks to access in respect
    of the Florida accident.

[34]

AllState accepts that,
    as a driver/occupant injured in a collision, Mr. Kahlon would ordinarily be
    entitled to underinsured coverage under the endorsement to his AllState policy.
    However, AllState asserts that Mr. Kahlons entitlement is expressly made
    subject to the applicable conditions and exclusions that are contained in his
    domestic automobile insurance policy, particularly the provision that excludes
    coverage for heavy commercial vehicles.

[35]

The motion judge
    disagreed. In his view, the exclusions in the policy do not apply to the
    endorsement for underinsurance. Accordingly, he found that AllState was liable
    to Mr. Kahlon for underinsured coverage in respect of the injuries he suffered
    in the Florida accident.

[36]

In this section of the
    reasons I address the governing principles, then set out the text of the
    relevant insurance provisions. I next outline the motion judges reasoning and
    then apply the governing principles.

(1)

The Governing
    Principles for Interpreting Insurance Policies

[37]

The burden of proof
    rests on the insured to establish a right to recover under the terms of the
    policy, and, once that is done, the onus shifts to the insurer to show that
    coverage is precluded:
Progressive Homes,
at para. 51;
Shakur v.
    Pilot Insurance Co.
(1990), 74 O.R. (2d) 673, 1990 CarswellOnt 623, at
    para. 30.

[38]

The governing
    principles for the interpretation of insurance policies are found in
Progressive
    Homes
, at paras. 22-24, per Rothstein J., whom I quote and paraphrase: W
here the language of the policy is
    unambiguous, the court gives effect to clear language, reading the contract as
    a whole. However, where the language is ambiguous, the court applies general
    rules of contract construction. The interpretation of the language should be
    consistent with the reasonable expectations of the parties, so long as the
    interpretation can be supported by the text of the policy.
The c
ourt avoids interpretations that would give rise to an
    unrealistic result, or that would not have been in the contemplation of the parties
    when they entered into insurance contract.

[39]

The rules of
    construction are to be applied in order to resolve ambiguity, not to create
    ambiguity where there is none.

When the application of the
    rules of construction fails to resolve an actual ambiguity, courts will
    construe the policy
contra proferentem
 against the insurer. The
    corollary is that coverage provisions are interpreted broadly, and exclusion
    clauses narrowly
.

(a)

Automobile
    Insurance Policies

[40]

This court has said
    that one of the main objectives of the regulatory automobile insurance scheme
    in Ontario is consumer protection and guaranteed compensation of victims:
Royal
    & Sun Alliance
,

at para. 14.
This court
    has also recognized that automobile insurance policies are more than commercial
    contracts and form part of an integral social safety net:
Abarca v. Vargas
,
    2015 ONCA 4, 123 O.R. (3d) 561, at para. 37.

[41]

Laskin J.A. provided
    guidance on the interpretation of the standard language of the policy and the
    endorsement: Unquestionably, if a provision of the S.E.F. 44 endorsement [a
    predecessor to the OPCF 44R endorsement] is ambiguous, the ambiguity should be
    construed against the insurer:
Chilton v. Cooperators General Insurance Co.
(1997), 32 O.R. (3d) 161, 1997 CarswellOnt 360, at para. 25. He explained
    why:

Although the
    wording of Ontario's automobile insurance policy and optional endorsements must
    be approved by the Commissioner of Insurance (
Insurance Act
, s. 227(1)),
    in practice the insurance industry drafts these standard forms and is responsible
    for their wording. Ontario insureds, the driving public, have no bargaining
    power over the provisions of the standard policy or the endorsements. They can
    either accept or reject the coverage offered by insurers but they can neither
    modify nor extend the terms of coverage. Often insureds do not even receive
    their policy until after they have purchased their insurance.

[42]

Automobile insurance
    policies are understood to be contracts of adhesion:
Somersall v. Friedman
,
    2002 SCC 59, [2002] 3 S.C.R. 109, at para. 47. Laskin J.A. added in
Chilton
,

at para. 25: These considerations support the principle of construing
    ambiguities in the policy against the insurer. Consequently, he noted that
    because the drafter could have avoided the ambiguous language, of the two
    parties, the drafter should bear the adverse construction:
Chilton
, at
    para. 24. Even so, the principles of interpretation should not lead a court to
    strain to create an ambiguity where none exists:
Chilton
, at para 26.

(b)

The Relationship of the Policy to the
    Endorsement

[43]

The endorsement is not
    a standalone insurance policy. It is is linked to the automobile policy to
    which it is attached and with which it is purchased:
Pilot Insurance Co. v.
    Sutherland
(2007), 2007 ONCA 492, 86 O.R. (3d) 789. In
Pilot
, Lang
    J.A. observed, at para. 21:

In any event, in
    my view, an endorsement is generally not understood to be a self-contained
    policy. As I have noted, the title of the Endorsement describes it as a
    "change form". An endorsement changes or varies or amends the
    underlying policy. While it may be comprehensive on the subject of the
    particular coverage provided in the endorsement, it is built on the foundation
    of the policy and does not have an independent existence. In any event, the
    Endorsement in this case is clearly not a stand-alone policy because it
    specifically provides that the policy terms remain in full force and effect,
    unless its terms are changed by the Endorsement.

And see, to similar effect,
Cardinal v. Alberta
    Motor Insurance Co
., 2018 ABCA 69, 66 Alta. L.R. (6th) 15, at para. 13, leave
    to appeal refused, [2018] S.C.C.A. No. 129.

[44]

There are important
    differences between the policy and the endorsement to be taken into account in
    interpreting them. First, the coverage in the policy is
mandatory
for
    insureds and insurers, while underinsured coverage under the endorsement is
optional
for both insureds and insurers; an insured is not obliged to purchase
    underinsured coverage, nor is an insurer obliged to offer it.

[45]

Second, while the
    policy covers automobiles, as does the endorsement, the endorsement has a
    mobility element. In
Schneider v. Maahs Estate
(2001), 56 O.R. (3d) 321,
    at para. 26, Laskin J.A. observed: t
he current form of coverage for named insureds and their families is
    portable, following them as passengers of other cars and as pedestrians.
This flows from the definition of insured
    person in the endorsement. Since the underinsurance coverage is personal, it
    applies regardless of which vehicle the insured is driving, subject to any
    applicable exclusions:

Olchowy v. ING Insurance Company of Canada
, 2011 ABQB 463, 100 C.C.L.I. (4th) 165.

(c)

The Text of the Policy and the
    Endorsement

[46]

The arguments in this
    appeal are deeply textual, which obliges me to lay out the text at some length.

[47]

Mr. Kalons claim to
    underinsured coverage from AllState rests on the endorsement, which provides,
    in s. 3:

the insurer shall
    indemnify an eligible claimant for the amount that he or she is legally
    entitled to recover from an inadequately insured motorist as compensatory
    damages in respect of bodily injury to or death of an
insured person
arising directly or indirectly from the use or operation of an automobile.
    [Emphasis added.]

[48]

The endorsement defines
    "insured person":

"insured
    person"

means

(a)     the

named

insured

and

his

or

her

spouse

and

any

dependent

relative

of the name

insured

and

his

or

her

spouse,

while

(i)      an

occupant

of

the

described

automobile,

a

newly

acquired

automobile

or

a temporary

substitute

automobile
as
defined

in

the

Policy;

(ii)


an

occupant

of

any

other

automobile

except

where

the

person

leases

the other

automobile

for

a period

in

excess

of

30
    days

or

owns

the

other

automobile, unless

family

protection

coverage

is

in

force

in

respect

of

the

other

automobile;

or

(iii)     not

an

occupant

of

an

automobile

who is

struck

by

an

automobile;

and[Emphasis added.]

[49]

The critical link
    between the AllStates policy and the endorsement is s. 22 of the endorsement
    form. It provides:

Except as
    otherwise provided in this change form, all limits, terms, conditions, provisions,
    definitions and exclusions of the policy shall have full force and effect.

[50]

What are the relevant
    limits, terms, conditions, provisions, definitions and exclusions of the
    policy to which full force and effect must be given under s. 22 of the
    endorsement form? The answer requires careful reading of the policy and the
    endorsement.

[51]

AllStates policy
    provides certain coverages in s. 2.1 for the described automobile, which is
    Mr. Kahlons domestic vehicle.
Section
    2.1 provides:

2.1 Described Automobile

A described
    automobile is any automobile or trailer specifically shown on your Certificate
    of Automobile Insurance.

Your Certificate
    of Automobile Insurance shows which coverages you have purchased for each
    described automobile. The coverages could include:

Liability,

Accident
    Benefits,

Uninsured
    Automobile,

Direct
    Compensation - Property Damage, and

Loss or Damage.

Underinsured Automobile is not listed as a coverage
    included in the policy language, as the motion judge noted.

[52]

The policy extends its
    coverages to Other Automobiles under s. 2.2.3. It is common ground that the
    relevant other automobile is the heavy commercial vehicle Mr. Kahlon was
    operating at the time of the Florida accident. Section 2.2.3 provides:

2.2.3 Other Automobiles

Automobiles, other than a described automobile, are also covered when
    driven by you, or driven by your spouse who lives with you.

The following coverages apply to other automobiles if a premium is
    shown for the coverage on the Certificate of Automobile Insurance for a
    described automobile:

·

Liability,

·

Accident Benefits,

·

Uninsured Automobile,
    and

·

Direct Compensation -
    Property Damage.

[53]

However, s. 2.2.3 of
    the policy then lists several Special Conditions that impose limits on the
    extension of the coverages to other automobiles
:

Special
    Conditions: For other automobiles to be covered, the following conditions
    apply:

1.
Both the other automobile and a described automobile must not have
    a manufacturers gross vehicle weight rating of more than 4,500 kilograms.

3. Neither you
    nor your spouse is driving the other automobile in connection with the business
    of selling, repairing, maintaining, storing, servicing or parking automobiles.

4. The other
    automobile is not being used to carry paying passengers or to make commercial
    deliveries at the time of any loss.

There are additional Special Conditions that are not
    relevant to this appeal.

[54]

This appeal proceeded
    on the basis that the first Special Condition has relevance to this appeal. The
    third and fourth catch the other commercial drivers referred to earlier.

(2)

The Motion
    Judges Reasoning

[55]

As noted, the motion
    judge held that the exclusions in the policy do not apply to the endorsement.
    His reasoning is set out in paras. 84-87. He built on Laskin J.A.s holding in
Schneider
that the evolved OPCF 44 endorsement follows the individual insured instead of
    a particular vehicle. The motion judge pointed out that under s. 1.3 of the
    policy, "the automobile" can be "other automobiles driven by
    you": at para. 85.

[56]

The motion judge then
    considered s. 2.1 of AllStates policy, which lists its coverages.
Section 2.2.3 of the policy extends these
    coverages to Other Automobiles, subject to the Special Conditions, which
    prevent the extension of the listed coverages to the listed vehicles caught by
    the Special Conditions.
The
    motion judge
held
that s. 2.2.3 of the policy must be
    interpreted in alignment with the coverages in s. 2.1.
Because s. 2.1 does not expressly refer to or list
    Underinsured Automobile coverage, the motion judge took the view that those
    exclusionary words in 2.2.3 are with respect to uninsured vehicles, not
    underinsured: at para. 87.

[57]

The motion judge
concluded, at para. 88, that the coverage
    for underinsured vehicles provided by Kahlon's AllState policy follows Kahlon
    into his incident in Florida in which he was so profoundly injured.
He held that AllState was liable to provide
    Mr. Kahlon with underinsured coverage because: 
the alleged limitation in [s.] 2.2.3 is inapplicable
    to underinsured coverage.

(3)

The Principles
    Applied

[58]

AllStates liability to
    provide underinsured coverage to Mr. Kahlon turns on whether the first Special
    Condition in s. 2.2.3 of the policy applies to preclude the extension of
    underinsured coverage under the endorsement to Mr. Kahlon because he was
    driving a heavy commercial vehicle when he was injured in the Florida accident.
    Section 22 of the endorsement is the critical link between the AllStates
    policy and the endorsement, which I repeat for convenience:

Except as
    otherwise provided in this change form, all limits, terms, conditions,
    provisions, definitions and exclusions of the policy shall have full force and
    effect.

[59]

Reading the policy and
    the endorsement together, in my view, the relevant limits, terms, conditions,
    provisions, definitions and exclusions of the policy to which full force and
    effect must be given under s. 22 of the of the endorsement form are the
    Special Conditions in s. 2.2.3 of the policy, particularly the first one: 
the other automobile  must not have a
    manufacturers gross vehicle weight rating (GVWR) of more than 4,500 kilograms
. The Special Conditions are a form of an
    exclusion clause, although the language operates by limiting the extension of
    coverage under the policy.
Just as there is no extension of coverage under the policy for liability,
    accident benefits, uninsured automobile, and direct compensation  property
    damage to a vehicle to which the Special Conditions apply, there is no
    extension of coverage to an underinsured automobile.

[60]

The motion judge made
    several errors in his analysis. He held that because the list of coverages in
    s. 2.1 of the policy did not mention Underinsured Automobile, the Special
    Conditions in s. 2.2.3 did not apply to an underinsured automobile. There is a
    simple reason why s. 2.1 of the policy does not mention Underinsured
    Automobile in the list of coverages: The policy does not provide underinsured
    coverage. Underinsured coverage is optional and is only provided by the
    endorsement. Nothing relevant to the resolution of Mr. Kahlons claim can, in
    the context, be drawn from the silence of the policy on the availability of
    underinsured coverage under it.

[61]

On the motion judges interpretation, no
    provision in the policy could limit coverage under the endorsement. In other
    words, s. 22 of the endorsement would be redundant. Such an approach to the
    construction of a contract is contrary to principle. This court held in
Scanlon
    v. Castlepoint Development Corp. et al.
, 11 O.R. (3d) 744, [1992] O.J. No.
    2692, at para. 89, [t]he court should strive to give meaning to the agreement
    and reject an interpretation that would render one of its terms ineffective.

[62]

From another
    perspective, it could be said that the motion judge treated the endorsement as
    a standalone insurance policy essentially independent from the AllState policy.
    As this court noted in
Pilot
, at para. 21, it would be wrong in
    principle to treat the endorsement as though it were a standalone insurance
    policy. The governing principles oblige the court to give effect to the terms
    of the insurance contract read as a whole.

[63]

On the appeal, Mr.
    Kahlons counsel supported the motion judges approach, which he supplemented
    by drilling down deeper into the text. He made three intertwined arguments that
    rely especially on certain words in s. 22 of the endorsement:

Except

as

otherwise

provided

in

this

change

form
,

all
    limits,

terms, conditions,

provisions,

definitions

and

exclusions

of

the

Policy

shall

have

full

force

and

effect.
    [Emphasis added.]

[64]

First, Mr. Kahlons
    counsel submitted that the highlighted words in s. 22 give paramountcy to the
    provisions of the endorsement over the policy, so that the OAP.1

terms

and

conditions

only

apply

to

the
    OPCF-44R

to

the

extent

that

they
    are

not

inconsistent

with

the

terms

of

the

endorsement. He asserted that this
    paramountcy is

particularly

important

in

the

case

of

a

comprehensive
    endorsement

that

actually

creates

coverage.
    Accordingly,

[t]he

Court

must

look

to

the

44R

first

and

determine whether

coverage

is

available,

and

only

apply

the

terms

and

conditions

of OAP.1

where

they

are
    not

inconsistent

with

the

terms

of
    the

44R. He argued that the
    endorsement wording is sufficient to determine liability and cautioned against
    importing terms from the policy, because doing so would elevate OAP 1 policy
    wording above the change form wording, contrary to the concept of paramountcy
    that he urged on the court.

[65]

I agree with counsels
    first argument that s. 22 does give a certain paramountcy to the endorsement
    over the policy. For example, the endorsement extends underinsured coverage
    beyond the policy to pedestrians under s. 1.6(a)(iii) of the definition of
    insured person. I also agree that a reading of the endorsement alone would
    give Mr. Kahlon underinsured coverage as the driver of another automobile, but
    that is the beginning of the analysis, not the end; any reading of the endorsement
    is subject to the application of s. 22 of the endorsement.

[66]

Counsels proposed
    reading of s. 22 goes too far and is inconsistent with the reasoning of Lang
    J.A. in
Pilot
. At issue in that case was whether the policys
    territorial limit applied to the endorsement, which did not have such a limit.
    Lang J.A. noted that the policy prevailed, in language that applies with
    necessary modifications to this case. She said, at paras. 17 and 18, of
Pilot
:

Since the Policy
    explicitly sets out a territorial limitation, and the change form or
    Endorsement does not set out a territorial limitation, it follows that the
    Policy's territorial limitation governs.

Unlike the motion
    judge, I do not see a significant difference between the "[e]xcept as
    otherwise provided" language employed in the Policy in this case and the
    "[s]ubject to all . . . limitation[s]" terminology employed in the
    policy in
Pickford
[
Pickford Black Ltd. v.
    Canadian General Insurance Co
.,
[1977] 1 S.C.R. 261
,
[1976] S.C.J. No. 24
,
64 D.L.R. (3d) 179
.]
    Both clauses adequately express the same goal: the provisions of the Policy
    govern unless the Endorsement provides otherwise or, to put it the other way,
    the provisions of the Endorsement are subject to the limitations in the Policy.
    Thus, the Endorsement, aptly entitled the "Change Form", may change
    the Policy, but only to the extent set out in the Endorsement. Since, in my
    view,
Pickford
's reasoning applies to this case, the territorial
    limitation in the Policy must be read as though it forms part of the
    Endorsement.

[67]

The approach Lang J.A.
    took in
Pilot
flows from the plain language of s. 22: all limits

terms, conditions,

provisions,

definitions

and

exclusions

of

the

Policy

shall

have

full

force

and

effect,
    subject to a qualification: Except

as

otherwise

provided

in

this

change

form. The endorsement is tethered to the
    policy, as s. 22 makes plain.

[68]

Second, Mr. Kahlons
    counsel enlisted the

definition

of "insured

person" in the endorsement, and argued that the definition
    is
especially

important because

the

insurance

is

granted

to

specific

people,

not

specific

vehicles. But this is an incomplete
    description of the definition. The insurance is granted to specific people
    while they are in specific vehicles, as I note below in addressing the third
    argument. Although the underinsured coverage is portable, as Laskin J.A. noted
    in
Schneider
, that portability is limited.

[69]

Third, Mr. Kahlons
    counsel argued that the term other automobile in the endorsement does not
    have the same meaning as the term other automobile in the policy, and that
    the endorsements meaning must prevail. He pointed out that s. 2 of the policy
    refers to four specific types of vehicles to which the policys coverages
    extend: the Described Automobile (s. 2.1); Newly Acquired Automobiles"
    (s. 2.2.1); Temporary Substitute Automobiles" (s. 2.2.2); and Other
    Automobiles" (s. 2.2.3). By contrast with s.1.6(a)(i) of the definition of
    insured person in the endorsement, which provides that the coverage applies
    to an

occupant

of

the

described

automobile,

a

newly

acquired

automobile

or

a temporary

substitute

automobile

as
defined

in

the

Policy
,

    that is not true for other automobile (emphasis added). Counsel argued
    forcefully that

the

44R

does

not

incorporate

the

OA
P.
1

definition

of

Other

Automobile,

in direct

contrast

to

how

the

other
    3

categories of

vehicles [the described

automobile,

a

newly

acquired

automobile,

or

a temporary

substitute

automobile]

within

section

2

are

treated. Because the endorsement
    expressly

incorporates those

definitions

but

not

with

respect

to

Other

Automobiles

in

s.

2.2.3, Mr. Kahlons counsel asked this
    court to infer that the endorsement pointedly does not use the defined term
    Other Automobile from s. 2.3.3 of the policy; this logically entails that the
    Special Conditions in s. 2.2.3 are likewise not applicable.

[70]

The problem with this
    argument is that neither the policy nor the endorsement provides a technical
    definition of other automobile. The term is used in a non-technical and
    generic way. This is shown by unpacking counsels related argument based on the
    text of the endorsement:

Sub-paragraph

(a)(ii)

in

the

definition

of "insured

person" [in the endorsement]

contains

a

specific

limitation

on

what

"other

automobiles"

are

covered by excluding

vehicles

that

the

insured

person

"lease
s
..
.
for

a

period

in

excess

of

30

days

or

owns". That

limitation

is

different

from

the

limitations

on

"Other

Automobiles"

found

via

the

Special
    Conditions

in

s.

2.2.3.

[71]

Section 1.6(a)(ii) of
    the definition of insured person in the endorsement is different from the
    definition of other automobile in the policy with respect to leased
    automobiles, because the endorsement extends underinsured coverage to a leased
    automobile except

where

the

person

leases

the other

automobile

for

a
    period

in

excess

of

30 days. On the other hand, the policy
    provides in Special Condition 5 that the other automobile cannot be an
    automobile that you or anyone living in your dwelling owns or regularly uses.
    The policy then adds an explanatory note: (For the purposes of this paragraph,
    we dont consider use of an automobile rented for 30 or fewer days to be
    regular use.) This shows how the policy and the endorsement dovetail in a
    complementary fashion to provide coverage under the policy and under the
    endorsement if the insured person rents or leases the other automobile for 30
    days or less. (I note that the differences pointed out by counsel are not
    relevant to Mr. Kahlons claim.)

[72]

As I see it, because the
    endorsement does not qualify the use of the term other automobile, the use of
    that term in the policy prevails, including the associated Special Conditions.
    The Special Condition that excluded coverage for heavy commercial vehicles in
    s. 2.2.3 of the policy applies, and it deprives Mr. Kahlon of underinsured
    coverage under the AllState policy with respect to the accident.

[73]

Next, counsel submits
    that to any extent that this court considers the provisions being analyzed to
    be ambiguous, that ambiguity should be resolved in favour of Mr. Kahlon based
    on the doctrine of
contra proferentem
. As noted earlier, in discussing
    the ACE INA policy and endorsement, the motion judge saw a certain fuzziness
    or ambiguity as to what is excluded. As I have explained, there is no
    ambiguity, and counsels attempts to wring ambiguity out of the language fail.

[74]

Mr. Kahlon also asserts
    that he reasonably expected that his AllState policy would provide him with
    underinsured coverage for the Florida accident which he had when he was driving
    a heavy commercial vehicle. Mr. Kahlon clearly wants and needs underinsured
    coverage but that is not a sufficient basis on which to sustain his claim. In
    contractual interpretation, the assessment of reasonable expectations is
    objective, not subjective. It is to be based on the language of the contract under
    consideration and the context:
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 49, 55;
Dumbrell v. The Regional
    Group of Companies Inc.
, 2007 ONCA 59, 85 O.R. (3d) 616, at para. 50.

[75]

Apart from Mr. Kahlons
    reasonable expectations, in the context the court must also take account of
    AllStates reasonable expectations. AllState does not provide insurance
    coverage for commercial vehicles. It would be an incongruous result to find
    AllState liable as the default insurer for underinsurance coverage for all of
    its customers engaged in the various commercial activities referred to earlier
    in this decision while they are on the job, simply because they have an
    AllState policy on their domestic vehicles. This is an unrealistic result
    that the court should not be quick to reach:
Ledcor Construction Ltd. v.
    Northbridge Indemnity Insurance Co.

[76]

I note, finally, that
    Canadian courts have not adopted the American approach to reasonable
    expectations under which judges are able to override contractual language in
    order to reach what they consider to be a just result. See
Chilton
, at
    paras. 28-35.

F.

Disposition

[77]

I would allow
    AllStates appeal, and as noted earlier, I would dismiss Mr. Khalons
    cross-appeal against ACE INA.

[78]

Mr. Kahlons personal
    circumstances are difficult. The refusal of truck fleet insurers to offer
    underinsured coverage under the endorsement leaves truck drivers like Mr.
    Kahlon woefully unprotected, in the words of his appeal counsel. This outcome
    follows from the decision of the provincial government many years ago not to
    make underinsurance coverage mandatory.

[79]

The underinsured
    coverage is not available on the explicit terms of the Policy and the
    Endorsement despite the very tragic consequences:
Pilot
, per Lang
    J.A., at para 39. This result could be described as harsh and unfair, as Laskin
    J.A. noted in
Chilton
, at paras. 21 and 39. However, courts have no
    authority to simply override contractual language in order to force the
    provision of coverage where none is contemplated by the existing language of
    the insurance policy and the endorsement, just because they might consider it good
    public policy to do so. This is the business of the provincial government, not
    the courts.

[80]

Because the parties
    advised the court that they would agree on costs, I would make no costs award.

Released: G.T. October 1, 2019

P.
    Lauwers J.A.

I
    agree. Grant Huscroft J.A.

I
    agree. Gary Trotter J.A.


