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Rental Car Coverage: Were the words dull and hypothetical?

 Jul 30, 2018 9:00 AM
by Kevin Mitchell

In the June 5, 2018 Divisional Court ruling in Enterprise Rent-A-Car v. Intact, 2018 ONSC 3517, Enterprise appealed the judgment of Justice Morgan of the Superior Court concerning the hierarchy of coverage provisions of s. 277(1.1) of the Insurance Act applying to the use or operation of a leased vehicle. It reads much like the overlaid simplicity of Tragically Hip lyrics belying their depth.

Arising from a June 29, 2013 accident, the driver of the rental vehicle, also listed upon her father’s policy with Intact, became a defendant in the injured plaintiff’s tort action. Enterprise ultimately contributed to settlement of that action and sought recovery from Intact by way of court application. His Honour dismissed the application finding that s. 277(1.1) did not apply.

On appeal, the Divisional Court decided the standard of review as either correctness or palpable and overriding error. Neither standard was breached presumably, as the panel of three unanimously upheld the finding of the lower court without further comment upon it. The hierarchy of priority of coverage is: lessee (which is defined in subsection (4)), followed by the driver and then the owner of the rental vehicle. Enterprise could only have excess coverage if Intact fell within the first two tiers. The panel confirmed Court of Appeal authority requiring the coverage to be ‘available’ in denying it extended to only a driver listed upon the Intact policy. It was felt clear from Intact’s OAP 1, although the language is a bit tortured, that coverage would extend to a vehicle only when rented by the named insured (the father) or his spouse and driven by either of them. Enterprise argued paramountcy of the statute over the contract of insurance believing there to be a discrepancy in paragraph 2 of the statutory provision. The panel rejected any discrepancy and found the converse was the proper interpretation in that the statute can’t create coverage; it first has to founded under the terms of the policy before the statute is engaged. Since paragraphs 1 and 2 of the statute were not triggered, coverage fell to Enterprise’s insurer considering Enterprise as owner of the vehicle. Costs were fixed and payable to Intact.

Know your coverage. Don’t let the constellations reveal themselves one star at a time when you drive back to town this morning.

Kevin is a Partner of Samis+Company. Throughout his career, he has practiced almost exclusively in the area of accident benefit and bodily injury matters arising from motor vehicle accidents. He has also defended various non-motor vehicle bodily injury claims. Kevin carries on a robust practice involving privately arbitrated disputes between insurers in both priority and loss transfer matters. 

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Production of Transcripts From Prior Actions

 Jul 26, 2018 2:00 PM
by Dan Inkpen

In the Superior Court matter of Cormack-Terrelonge v. Fahmy Estate, the plaintiff was involved in a motor vehicle accident. At examinations for discovery, the plaintiff testified that she had been involved in three motor vehicle accidents prior to the subject accident. The plaintiff testified that she had sustained injuries in all three preceding accidents and had commenced litigation in relation to each accident.

The defendant requested the transcripts from the prior examinations for discovery. However, the plaintiff refused the request. The defendant argued that the transcripts were necessary to assess the extent to which the plaintiff’s current complaints overlap with her injury complaints prior to the subject accident. It was noted that there was no credible evidence to suggest that the injuries sustained in the prior accidents had resolved before the subject accident. 

Justice Sosna agreed that although the prior transcripts were captured by the deemed undertaking rule set out at Rule 30.1.01(3), the exception to the undertaking rule applied in this case as the interest of justice outweighed any prejudice that would result to a party who disclosed the evidence. Justice Sosna concluded that the production of relevant and necessary documents was required to ensure that the case was ultimately and fairly adjudicated at trial.


Dan's practice areas of interest include accident benefit and bodily injury litigation, loss transfer and priority dispute arbitrations and subrogation litigation.

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It's About Permanence (or not)

 Jul 11, 2018 11:00 PM
by Neil Reeves

A recent Superior Court decision allowed an appeal from an arbitrator’s award in a priority dispute dealing with financial dependency, on the basis that the decision was not reasonable. In State Farm v. R, the arbitrator determined that two claimants were not financially dependent on State Farm’s insured, leaving the Motor Vehicle Accident Claims Fund as the payor of both claims.

The underlying factual matrix was complex, involving two claimants and a multi-generational extended family. There were a number of family members who had recently moved to Canada and were residing in different family residences. Essentially, the claimants had lived with one family member for a period of 3 months before moving into the residence of another family member for the 3 months prior to the accident. One claimant was in receipt of ODSP and on this basis, no dependency was found regardless of the time frame used. That decision was upheld on appeal as being reasonable.

For the other claimant, who had no means of support other than from the person with whom she was residing, the arbitrator used a 6 month time frame to analyze financial dependency.  The critical aspect of the case which informed the Court’s ruling was the arbitrator’s determination that the 3 month period prior to the accident was not the appropriate time frame because it lacked an element of permanency. In the case of Intact v. Allstate, the Court of Appeal ruled that importing a permanency test into the process of determining the appropriate time frame to analyze dependency was inconsistent with applicable legal principles. This was the nub of the determination in Intact v. Allstate.

Therefore, the decision as it pertained to that particular claimant was overturned. In spite of only residing with the State Farm insured for a 3 month time period, with no indication that this was circumstance was permanent, the claimant was found to be a dependent of the State Farm insured.

Establishing the appropriate time frame to analyze dependency is a fundamental and critical part of any dependency analysis. This is an issue that is determined case by case and ultimately depends on finding the time frame that reflects the circumstances of the parties at the time of the accident. The decision in State Farm v R.  can be found here.



Wrinkles in Risk Shifting

 Jul 9, 2018 9:00 PM
by Neil Reeves

Ontario’s Court of Appeal has again addressed issues relating to commercial tenancies and the impact of lease provisions which obligate one party or the other to obtain insurance for the benefit of another. In CLLC Inc. v. 20 Eglinton , the tenant was obligated to obtain insurance throughout the period of their possession of the premises, and for the entire term, with the landlord named as an insured.  The tenant did not obtain the insurance as required. Water leaks in the premises resulted in loss and damage to the tenant who brought an action against the landlord. Summary judgment dismissing the action against the landlord was granted and the tenant appealed. The Court of Appeal set aside the summary judgment, noting that the motion judge had not adequately considered and resolved factual disputes in finding that there was no genuine issue for trial.

Although not technically a subrogated claim (because no insurance was obtained so no insurance claim was advanced), the principles and arguments that were in play are relevant to subrogated claims.

One particular point of interest was the issue of when the leaks caused damage and the resulting question of whether the premises were even insurable given that the water leaks may have been pre-existing. The defendant conceded that if the premises were not insurable for whatever reason, the tenant would not be bound by the covenant to insured.

As a result the Court of Appeal set aside the summary judgment motion given that there were genuine issues in play that required a trial. This case underscores a point made in prior blogs on this site and others – read the lease  or whatever underlying agreement is in play carefully and understand how the obligations of the parties fit within the factual matrix. It will be different in every case.




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