Is the Insurer Always Justified in Denying Coverage On the Basis of a Breach of a Statutory Clause?

Every automobile insurance policy issued in Ontario contains statutory clause 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.

 

Section 32 of Highway Traffic Act requires an operator of a motor vehicle to hold a valid driver’s licence. In Kozel v.Personal Insurance Co. [2013] ONSC 2670 (S.C.J), the applicant was a 77 woman year old woman who was involved in a motor vehicle accident in Florida. Her insurer denied coverage on the basis that she was in breach of the policy at the time of the accident because her driver’s license had expired. The applicant brought this application for a declaration that the insurer owed a duty to indemnify and defend her in a third party action against her.

 

Approximately five months prior to the accident, the applicant received documentation from the Ministry concerning the renewal of her driver’s licence and vehicle plate sticker. Two weeks prior to the renewal date, the applicant gave the package of documentation to her dealership where she took delivery of a new vehicle. She was unaware that this package contained her licence renewal. Until the accident occurred, she was unaware that her licence had not been renewed. She reported the accident in a timely manner and renewed her license immediately upon discovering it was expired.

 

Justice Wood cited the 2011 Court of Appeal decision Tut v. R.B.C. General Insurance Company [2011] ONCA 644 where it was held that if an offence for breaching the regulation was one of strict liability rather than absolute liability, it was open to the insured to argue that he took all reasonable care in the circumstances to see that he was not in breach of the regulation. Were he able to argue this defence successfully it would follow that he remained authorized to drive within the meaning of statutory condition 4(1).

 

Justice Wood held that since an offence of driving with an expired licence is one of strict liability, an argument that the applicant exercised due diligence was available. Justice Wood found that the applicant took active steps to ensure that she met her duty, although mistakenly, she provided a believable explanation for her lack of perfect diligence and her actions were those of a reasonable person acting upon a genuinely mistaken belief.  As such, the court found that the applicant was entitled to a defence under the policy.

 

This case shows that breaches of the insurance policy are not always clear cut and can involve the consideration by the court of many subjective factors.    

Can a Plaintiff Avoid Discovery Due to Medical Reasons?

Can a plaintiff avoid attending discovery or an independent medical examination due to anxiety or an inability to respond to questions appropriately?

In Lalousis v. Roberts, 2013 ONSC 5897 (S.C.J), the plaintiff sought $4 million in two actions relating to two motor vehicle accidents.  She alleged that she could not participate in oral discovery or an IME  due to medical reasons, including that she was not able to respond to questions, had poor communication and attention, and discovery would increase her anxiety and depression.  She sought to avoid the discovery process or have her husband act as a substitute.

Master Muir dismissed the motion.  A party has a prima facie right to a full and complete discovery of an adverse party, which includes oral examination and may include a medical examination.  The threshold to limit a party's right to discovery is a high one and should be ordered only in the rarest of cases.  In the circumstances, an examination for discovery might be unproductive as she may not provide responsive answer, and it could cause anxiety for the plaintiff; however, there was no evidence that it would cause her permanent damage.

In order to permit the defence to fully respond to the claim against it, it makes sense that the threshold for taking away those rights is very high.

Restoring an Action to the Trial List

The Court of Appeal has provided guidance with respect to the test for restoring an action to the trial list.

In Nissar v. Toronto Transit Commission, 2013 ONCA 361 (C.A.), the plaintiff alleged she was injured while a passenger on a bus in 1999. Examinations for discovery took place in 2002, but transcripts were not ordered and the tapes were destroyed in 2010.  Although the matter was set down for trial in 2004, it was struck off the trial list in 2005.  The plaintiff changed counsel three times.  The motion to restore the action to the trial list was not brought until 2011, and not heard until 2012.  The motion judge dismissed the motion, holding there was no explanation as to why it had taken seven years to bring the motion to restore the action to the trial list, and there was prejudice to the defendant as pre-accident OHIP records were not available and the defendant might not remember details of an accident that occurred 13 years previously.

The Court of Appeal dismissed the appeal. The plaintiff bears the onus of demonstrating there is an acceptable explanation for the delay in the litigation and that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice.  In the circumstances, the plaintiff had failed to meet the test.

The Nissar decision was release concurrently with the Faris case, which was the subject of last week's post. They may signal a new emphasis on moving cases swiftly through the system, rather than allowing them to languish for several years.

Dismissal for Delay at Status Hearings

The Court of Appeal has answered a question that arises fairly frequently in civil litigation: under what circumstances should an action be dismissed by the court following a status hearing?

In Faris v. Eftimovski, 2013 ONCA 360 (C.A.), the action was commenced in 2007 alleging damages from real estate transactions in 2003 and 2005.  At the time of the status hearing in 2012, pleadings had not been finalized, no documentary productions had been exchanged, and no examinations for discovery had occurred.  Two of the defendants had died.  The status hearing judge dismissed the action, holding that there were unexplained delays in the action and there was non-compensable prejudice to the defendants since parties had died.

The Court of Appeal dismissed the appeal.  Justice Tulloch distinguished between r. 24, which permits a defendant to take a deliberate procedural step to have the action dismissed, and r. 48, which allows the court to control the pace of litigation. The onus is on the plaintiff to demonstrate there was an acceptable explanation for the delay and that, if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice.

There has been much discussion recently about lengthy delays in trial lists.  Could the Court of Appeal be signalling an attempt to clear out cases that are slowing down the system?

Timing of Summary Judgment Motions

At what point in a lawsuit is it appropriate to bring a summary judgment motion?

In Stever v. Rainbow International Carpet Dyeing & Cleaning Inc., 2013 ONSC 4054 (S.C.J.), the defendant brought a summary judgment motion prior to discoveries, alleging there was no issue requiring a trial as the limitation period had expired.  Justice Morgan held that summary judgment motions typically proceed after discoveries are complete, or with affidavit evidence and cross-examinations that "go a long way to replicating what will be produced at discoveries."  Justice Morgan adjourned the summary judgment until after discoveries had been completed.

Stever is in line with the Court of Appeal's decision in Combined Air, which held:

58     Moreover, the record built through affidavits and cross-examinations at an early stage may offer a less complete picture of the case than the responding party could present at trial. As we point out below, at para. 68, counsel have an obligation to ensure that they are adopting an appropriate litigation strategy. A party faced with a premature or inappropriate summary judgment motion should have the option of moving to stay or dismiss the motion where the most efficient means of developing a record capable of satisfying the full appreciation test is to proceed through the normal route of discovery. This option is available by way of a motion for directions pursuant to rules 1.04(1), (1.1), (2) and 1.05.

In many cases, especially where there is an issue of discoverability, summary judgment is likely not appropriate until discoveries are complete.

Discount Rate

The new discount rates have been posted on the Attorney General's website.  They can be found at:

http://www.attorneygeneral.jus.gov.on.ca/english/courts/civil/pecuniary_damages.asp

For 2014, the discount rate is 0.3% for the first 15 years and 2.5% thereafter.

Bifurcation

Rule 6.1.01 became effective on January 1, 2010.  It provides as follows:

With the consent of the parties, the court may order a separate hearing on one or more issues in a proceeding, including separate hearings on the issues of liability and damages. 

In Soulliere v. Robitaille Estate, 2013 ONSC 5073 (S.C.J.), the issue was whether a court may bifurcate a trial when one party does not consent.  The Court of Appeal held in Kovach (Litigation Guardian of) v. Linn 2010 ONCA 126 (C.A.) that a judge does not have the jurisdiction to bifurcate a jury trial when one party does not consent.  In Soulliere, however, the trial would be heard by judge alone.

Justice Smith held that r. 6.1.01 does not remove the Court's inherent jurisdiction to bifurcate a trial.  In keeping with the Court of Appeal's decision in Elcano Acceptance v. Richmond, Richmond, Stabler and Mills (1989), 55 O.R. (2d) 56 (C.A.), a Court may order bifurcation in the clearest of cases.  In the circumstances, Justice Smith declined to order bifurcation.  The case was not so exceptional as to warrant departure from the normal practice of hearing liability and damages together, and there was potential prejudice to the plaintiff if forced to wait.