Canadian Underwriter

Insurance lawyer explains how Ontario court ruling affects vehicle owners who ‘hand out their car like candy’

February 4, 2016   by Greg Meckbach, Associate Editor

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Insurance adjusters cannot always rely on legal precedents, now that the Court of Appeal for Ontario has overturned a previous decision by the same court, over the issue of a vehicle owner’s vicarious liability for negligent operation of their vehicle, a lawyer suggested to claims professionals Wednesday.

Litigation lawyer Ian Gold explained the significance of a court ruling, arising from an ATV accident, at the Ontario Insurance Adjusters Association’s Professional Development and Claims Conference

Litigation lawyer Ian Gold, a founding partner of Thomas Gold Pettingill LLP, explained the relevance of several 2015 court decisions during a presentation at the Professional Development and Claims Conference.

In one of those rulings, released Aug. 10, the Court of Appeal for Ontario declined to dismiss a lawsuit against Carlos Almeida, the owner of an all-terrain vehicle. In 2007, Sara Fernandes was injured while riding as a passenger on that ATV, driven by Eliana Araujo near Dundalk, Ont. Fernandes sued both Araujo and Almeida – whose insurer, Allstate Insurance Company of Canada, argued that Araujo was driving the vehicle without Almeida’s consent. Araujo admitted “she did not have express permission to take the ATV off the farm property,” but she did not admit that Almeida had “forbidden her from driving the ATV on the highway, and the motion judge refused to draw that inference,” wrote Mr. Justice Robert Sharpe of the Court of Appeal for Ontario.

In Fernandes v. Araujo, Allstate cited a Court of Appeal for Ontario decision, released in 1952, in Newman vs Terdik. That was when the court found that a vehicle owner was not vicariously liable for a driver’s negligence when the driver had the owner’s permission to drive on the owner’s property, but drove on the highway without the owner’s permission.

But in Fernandes v. Araujo, a five-judge panel of the Court of Appeal for Ontario reversed the same court’s ruling in Newman v. Terdik.

“If you are lending your vehicle to somebody and you are giving them some restrictions, and they don’t follow [those restrictions], at the end of the day, it’s still going to be your insurer that responds,” Gold said Wednesday at the Professional Development and Claims Conference, organized by the Ontario Insurance Adjusters Association and held at the Metro Toronto Convention Centre.

“You guys can’t be sure of anything,” Gold told adjusters attending the event. “You can say, ‘The Court of Appeal said this, so isn’t that a precedent? Don’t we have to do this?’ And we can say, ‘No, because the Court of Appeal can overturn itself,’ which it did in this particular case, and I just find that interesting.”

He added that in Fernandes v. Araujo, the Court of Appeal provided an analysis of the Newman v. Terdik ruling and explained “why it’s not appropriate” to follow that precedent anymore.

In Fernandes v. Araujo, the Court of Appeal for Ontario quoted from Section 192(2) of the Ontario Highway Traffic Act: “The owner of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway, unless the motor vehicle or street car was without the owner’s consent in the possession of some person other than the owner or the owner’s chauffeur.”

Overruling Newman v. Terdik “would enhance rather than undermine the interest of clarity, coherence and predictability in the law,” Justice Sharpe wrote last year, in Fernandes v. Araujo, on behalf of himself, Madam Justice Jean MacFarland, Mr. Justice Paul Rouleau, Mr. Justice Peter Lauwers and Madam Justice Gladys Pardu.

Citing more recent cases, the Court of Appeal for Ontario found that when an owner has given a driver permission to possess his or her vehicle, “even if the vehicle is operated in a manner forbidden by the owner,” the owner can still be liable under the province’s Highway Traffic Act.

“It’s so significant, because people hand out their car like candy,” Gold said Wednesday.

Gold also discussed Keys v. Intact, a dispute over an insurer’s duty to defend individuals sued for defamation.

“Lots of times the fight is over getting an insurance company to step up and agree to defend the insured,” Gold suggested of liability insurance claims disputes. “Indemnity is also important but the first battle is over the duty to defend and the way that traditionally gets determined by reviewing the pleadings and deciding if the allegations fall within the coverage provided by the policy.”

Court records indicate that the Canadian Federation of Students served notice to two individuals of an intended action under the Libel and Slander Act, arising out of a video posted to the Internet.

In 2014, the Ontario Superior Court of Justice declined to declare that Intact must respond to a commercial policy covering the Canadian Alliance of Student Associations (CASA). That policy covers CASA’s volunteer workers and employees, other than executive officers, “only while performing duties related to the conduct of” CASA’s business.

In a ruling released June 5, 2015, the Court of Appeal for Ontario allowed an appeal.

“When the pleadings in the cross-claims and third party claims are included in the consideration with the statement of claim, we have no difficulty concluding it may be reasonably inferred that there is at least the mere possibility that the appellants were employed by CASA and acting in the course of their employment when they made and posted the video on the internet,” the Court of Appeal for Ontario wrote.

The applicants “tried to argue that it arose out of the course and scope of their employment and that it fell within insurance coverage,” Gold said Wednesday.

The significance of Keys v. Intact is that a claimant wanting an insurer to defend it can introduce third-party claims and cross-claims, Gold suggested.

“At the end of the day, what they are saying is, ‘Ultimately, it’s the pleadings that dictate,’ but most importantly, from my perspective in this case, it’s not just the statement of claim, where traditionally it had been,” Gold added.

More coverage of the Professional Development and Claims Conference

Ontario auto claims adjusters need to take heed to Supreme Court ruling against Chubb: OIAA speaker

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