Non-approved Ontario auto forms do not always render insurance contracts void: Court of Appeal

If an Ontario auto insurer uses a form that is not approved by the province’s Superintendent of Financial Services, this does not necessarily render the contract of insurance void, the province’s appeal court suggested in a ruling released Wednesday.

On June 6, 2012, Rita and Cathy MacLeod were injured in a motor vehicle accident. They commenced a personal injury action against Diane Wilson, who was driving a vehicle that she owned.

Wilson’s vehicle was insured by Intact Insurance Company. In February, 2012 Intact issued a policy that named her as an excluded driver, in order to allow her to maintain coverage so her husband could drive her vehicle. Court documents indicate that Wilson’s license had been suspended due to unpaid fines but had been reinstated by the time of the accident involving the MacLeods.

Royal & Sun Alliance Insurance Company wrote the MacLeods’ endorsement covering uninsured motorists. RSA argued, unsuccessfully, that the form excluding Wilson as an insured driver was not valid. RSA argued that the form Intact used did not comply with section 227 (1) of the Ontario Insurance Act — which prohibits an insurer from using either an application for insurance, a policy, endorsement or renewal, a claims form or a continuation certificate unless the form has been approved by the Superintendent of Financial Services.

In an order released Sept. 20, 2016, Justice Harrison Arrell of the Ontario Superior Court of Justice ruled that Intact’s endorsement excluding Diane Wilson “was in full force and effect at the time of the accident and that Intact had no duty to defend or indemnify Wilson in respect of the accident.”

That ruling was upheld in a unanimous decision released May 10, 2017.

The Ontario Legislature “did not intend for the courts, while engaged in adjudicating a contractual dispute, to consider a contractual provision void merely because its form fails to strictly comply with” section 227 (1) of the Insurance Act, wrote Justice Russell Juriansz of the Court of Appeal for Ontario in its unanimous ruling.

Concurring were Justice David Brown and Bradley Miller.

An Ontario court “may well consider an alleged deviation from a pre-approved form to the extent that is relevant to its enforceability in contract,” Justice Juriansz added.

But Justice Juriansz noted that section 240 of the Insurance Act creates an “excluded driver” exception to an auto liability policy, if the contract of insurance names an excluded driver.

The question in Royal & Sun Alliance Insurance Company of Canada v. Intact Insurance Company is whether, as a consumer of insurance, Wilson “should be protected from her insurer’s use of an unapproved form,” Justice Juriansz wrote.

“The victims requiring compensation in this case are the MacLeods,” Justice Juriansz added. “No matter the outcome of the case, they can claim compensation from one of the two insurers involved in the dispute.”

Ontario Regulation 7/00 includes – in its definition of unfair or deceptive acts or practice on the part of an insurance provider – the use of document “in place of a form approved for use by the Superintendent, unless none of the deviations in the document from the approved form affects the substance or is calculated to mislead.”

Ontario auto insurance law gives the Superintendent of Financial Services “the power to deal with the consequences of a deviation” from the regulations governing unfair or deceptive acts Justice Juriansz added.

“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,” Justice Juriansz wrote, adding that s. 441(2) of the Insurance Act “gives the Superintendent the power to order a person to cease or refrain from an unfair or deceptive act, to perform acts to remedy the situation, and even to cease engaging in the business of insurance or any aspect of the business of insurance.”