TD General Insurance Company v. Aviva Insurance Company

Arbitrator Novick’s reasoning in a recent priority dispute offers food for thought for insurers dealing with OAP 4 Garage Policies.

This dispute involves a priority dispute between a personal vehicle insurer, TD, and an automotive garage insurer, Aviva. A customer brought his vehicle to one business, Integrity Car Care (Integrity), for maintenance.  The owner of Integrity then brought the vehicle to the neighbouring garage, a Mister Transmission location (Mister), for repairs.  Staff at Mister proceeded to diagnose and repair the issues with the vehicle. During this process, an employee of Mister (the Claimant) took the car for a road test and was rear-ended. The Claimant then brought a claim under his own personal vehicle insurer, TD. TD argued that Aviva was the proper insurer from which to seek benefits as the insurer for the garage.

The Claimant alleged he conducted road tests 2-15 times a week while the owner of Mister testified that he conducted the majority of the road tests (30-50/week) and the Claimant would only conduct about three road tests a week. It was agreed that regardless of the true number, the Claimant did conduct road tests and that these road tests required 5-10 minutes each. The owner of Mister also testified Integrity would bring vehicles to Mister infrequently, estimating it occurred about ten times in six years and this practice was common within the industry.

The Arbitrator addressed two questions:

·         Does OAP 4 Garage Policy provide coverage for employees operating customer vehicles?

·         What qualifies as regular use to be deemed a named insured under such a policy pursuant to section 3(7) of the SABS?

The second question is of much greater interest than the first, but we shall address each in turn.

An OAP 4 Garage Policy is required by automotive garages to insure against losses arising from incidents involving automotive garage owned or leased vehicles. The Arbitrator was asked to determine whether the policy would extend to customer vehicles brought in for repairs. The short answer is yes. In the Arbitrator’s view, the requirement that garages carry automotive insurance in the form of the OAP 4 Garage Policy, regardless of whether the garage in question owns and/or operates any company vehicles was determinative as to whether coverage would extend to employees operating customer vehicles.

The Arbitrator then turned to the more interesting question of what constituted regular use. The Arbitrator noted that ‘regular use’ is not a term defined in the SABS. The Arbitrator relied on the test of Justice Brown in Zurich Insurance Company v. Personal Insurance Company [2009] O.J. No 2157. In that case, Justice Brown described the test for regular use to be use that is “habitual, normal, and that recurred uniformly according to a predictable time and manner.”  

In applying this test to the subject dispute, the Arbitrator was unmoved by the arguments of TD and instead found the arguments of Aviva to be persuasive. TD posed that the Claimant’s weekly road tests rose to the level of regular use and were a part of his habitual, normal, and regularly recurring duties deeming the Claimant as a named insured under the policy.  

Aviva argued that two key factors prevented the Claimant from being deemed a named insured. First, the Arbitrator opined that ‘being made available’ required more than mere consent for someone to drive the vehicle; there must be a choice to make a vehicle available to an individual. Aviva argued the vehicle in question was not made available directly to the Claimant or even to Mister, but rather to Integrity. It was then made available to Mister and finally the Claimant. There was no indication that this was done with any knowledge on the part of the vehicle owner. The Arbitrator found this chain of control of the vehicle to be too long to infer that the customer had chosen to make it available to the Claimant.

Second, the Claimant would only perform road tests when instructed to do so by the owner of Mister and road tests would make up only 30 minutes of his 40 hour work week at most. Further, while the deposit of customer vehicles from Integrity was not an unusual occurrence, it was rare enough to not be considered habitual, normal, or predictable. The Arbitrator found this pattern of behavior did not rise to the level of regular use.

Interestingly, the Arbitrator failed to give any insight into what pattern of events would fulfil the ‘regular use’ requirement. Had the owner who regularly conducted road tests and for whom road tests made up a substantial part of his work week been the claimant, would the result have been different? Or had Integrity provided cars to Mister on a more regular basis such as monthly, would that been sufficient to create exposure for Aviva?

Given that such business arrangements are not unusual in the automotive industry, the result in this case and the reasoning of the Arbitrator should provide pause for insurers when confronted with OAP 4 Garage Policies. As is often the case in these priority disputes, the facts of the particular case tend to dictate the result more than any sweeping policy statement.

Jonathan Wong is the author of this blog. Nathalie Rosenthall is the lawyer handling this file. If you have a question about this blog, or a similar file, please contact Nathalie at 416.777.7388.