Top court sides with insurer in unidentified vehicle coverage dispute

A Supreme Court of Canada decision released today means Wawanesa Mutual Insurance Company does not have to cover a claimant who says he drove off the road to avoid an oncoming vehicle.

Andrew Funk was injured after he drove his jeep into a ditch in Edmonton after dark on May 20, 2008. Funk said he swerved right to avoid a vehicle coming at him from the opposite direction. There was no contact between the two vehicles.

The other vehicle was never identified. Funk got $200,000 from the Motor Vehicle Accident Claims Fund and sought additional coverage from Wawanesa, his accident benefits insurer, under the Family Protection Endorsement. That endorsement provides coverage if an unidentified automobile causes injury to the insured “arising out of physical contact” with the unidentified automobile.

Wawanesa denied the claim because the unidentified vehicle did not actually hit Funk’s vehicle.

Funk took Wawanesa to court and initially won. In  Funk v Wawanesa Mutual Insurance Company, released May 8, 2017, Justice Eldon Simpson of the Alberta Court of Queen’s Bench ruled that applying the policy the way it is worded leads to an unreasonable outcome.

But the lower court ruling was reversed on appeal, in a divided Court of Appeal for Alberta ruling released May 25, 2018.

Funk applied this past August for leave to appeal to the Supreme Court of Canada. Canada’s highest court will not hear Funk’s appeal. The court denied Funk leave to appeal, with costs, in a decision released Mar. 14, 2019. The Supreme Court of Canada does not provide reasons for dismissing leave to appeal.

The policy wording produces a strange result, Justice Simpson wrote in his 2017 ruling in favour of Funk. At the time, Simpson did not order Wawanesa to pay out on a claim, but did order that a trial be held to determine the credibility of Funk’s evidence.

“Including the requirement of ‘physical contact’ – between the unidentified automobile and the insured who avoided contact – leaves the insured with no opportunity to access coverage, as intended by the insuring agreement, even though the insured can produce the otherwise required corroborating evidence supporting his allegations. This seems to encourage or facilitate conduct contrary to public policy: i.e. a collision provides coverage, but avoiding a collision does not,” wrote Justice Simpson.

But it is not reasonable for a client to expect coverage which is clearly excluded by the policy wording, Justices Frans Slatter and Patricia Rowbotham of the Alberta Court of Appeal countered. The third judge hearing the appeal (Ronald Berger) would have upheld the lower court decision against Wawanesa.

“The approach of stepping around the terms of an insurance policy on the basis of ‘unjust or unreasonable’ terms, ‘public policy’, or ‘relief from forfeiture’ runs the risk of throwing any semblance of certainty out the window. While these concepts are recognized in law, they must be applied with caution with respect to standard form, statutorily mandated insurance policies. There is the danger that the wording of insurance policies would become meaningless,” the majority wrote in Funk.

“Insurance policies would come down to providing the kind of coverage that some future court found to be ‘fair’, even though the insured never contracted for that coverage, and the insurer never priced the risk accordingly.”