Ontario auto liability policies responsible for paying accident benefits, even if policy terms suggest otherwise: Ontario court

An Ontario motor vehicle liability policy is responsible for paying accident benefits even if the language of the policy makes no premium allowance for AB benefits, and makes no reference to AB benefits coverage being available to the lessee of a vehicle, the Ontario Superior Court has ruled.
In Ontario (Finance) v. Daimler Chrysler Insurance Company, Richard Goodridge leased a 2003 Mercedes-Benz S500V. The lease agreement was assigned to Daimler Chrysler Services Canada Inc. (DCSC).
Under the lease agreement, Goodridge was required to obtain insurance for the vehicle that included, as a minimum, a single occurrence bodily injury limit of Cdn$1 million.
Goodridge obtained such coverage through Optimum Insurance Company. DCSC was then named a lessor and an additional insured under the policy.
In 2003, the vehicle leased by Goodridge struck a pedestrian in Toronto. Prior to that, Optimum had cancelled its coverage for non-payment.
The Motor Vehicle Accident Claims Fund of Ontario, a public body that acts as a “payor of last resort,” paid for the pedestrian’s accident benefits. It then sought recovery from DCSC.
DCSC argued in court that its policy precluded such AB payments, based on the language contained in the policy.
Specifically, DCSC said its policy does not cover a lessee; that the premiums collected under its policy did not include premiums collected for accident benefits; and that the policy provides coverage only for any loss or damage “as a direct result of the lessee’s failure to effect or maintain the automobile insurance required by the lease contract.”
As DCSC told the court, “a policy that insures against ‘liability arising out of bodily injury or death of a person or loss of damages to property caused by an automobile’ is decidedly different from a policy that insures against ‘loss or damage incurred by the insured as a direct result of a lessee’s failure to effect or maintain automobile insurance.'”
Essentially, the insurer argued, since the policy did not cover AB benefits, it was not a motor vehicle policy as defined by the Insurance Act.
On the contrary, the court found. Although the policy terms contained within the insurance contract may be valid for determining disputed coverage issues, the court said, the terms did not make the insurance contract any less of a motor vehicle policy under which accident benefits must be paid.
Citing case authority, the court said every contract of automobile insurance “shall be deemed to provide for…statutory accident benefits.”
This is true whether or not the contract terms specifically allow for AB premiums to be collected.
“Whether the insurer is bound to pay accident benefits is not a function of whether the insurer specifies premiums for such coverage,” the court said. “It is deemed by law to be an attribute of a certain class of policies.”
As for the policy terms themselves, quoting from an initial arbitrator’s decision (which it upheld), the court ruled: “Once an insurer issues a contract of automobile insurance it must comply with the appropriate scheme of insurance that applies to all automobiles. In this province, it must comply with the provisions of the Insurance Act and that Statutory Accident Benefits Schedule (SABS).
“All the coverages come into play once a policy of automobile liability insurance is established, which in this case was the cancellation of Mr. Goodridge’s insurance.”