In a unanimous decision released May 10, 2017, the Ontario Court of Appeal found that an excluded driver endorsement is in effect even if the exact form approved by the Superintendent of Financial Services was not used (Royal & Sun Alliance Insurance Company of Canada v. Intact Insurance Company, 2017 ONCA 381).
This case originates from a motor vehicle accident on June 6, 2006 in which Rita and Cathy MacLeod were injured. They commenced an action against Diane Wilson who was driving a vehicle that she owned, and was insured by Intact.
The Intact policy for Diane Wilson’s vehicle named her as an excluded driver. Her license was suspended due to unpaid fines. The excluded driver endorsements was put in place with the intention of allowing her to maintain coverage so her husband could drive her vehicle. While Wilson’s license was reinstated at the time of the accident with the MacLeods the exclusion was still in place. No factual issue existed as to the existence of this excluded driver endorsement, as Ms. Wilson readily accepted this condition of maintaining insurance on the vehicle.
RSA was MacLeods’ uninsured motor vehicle carrier.
RSA argued, unsuccessfully, that the form excluding Wilson as an excluded driver was not valid as it was not the preapproved form by the Superintendent of Financial Services and did not strictly comply with s. 227(1) of the Insurance Act. This section of the Insurance Act 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 the initial decision, Justice Harrison Arrell of the Ontario Superior Court of Justice ruled that Intact’s endorsement excluding Diane Wilson was in force at the time of the accident and that Intact had no duty to defend or indemnify Wilson in respect of the accident. Significantly, Justice Arrell’s findings included that Wilson executed the Excluded Driver Endorsement, that it was unambiguous, that Wilson was given a pink slip certificate that clearly identified the vehicle, and that Wilson understood, at the time, that she was excluded from driving the vehicle even if her licence were to be reinstated. These facts were largely unchallenged on appeal.
The Court of Appeal agreed with Justice Arrell and specifically rejected RSA’s argument that the court must consider that the Excluded Driver Endorsement was necessarily voided by s. 227(1) because of its alleged deviation from the pre-approved form.
Justice Juriansz, writing for the Court of Appeal, reviewed the objectives of the regulatory automobile insurance regime including the consumer protection objectives of the Insurance Act. He framed the issue as whether, as a consumer of insurance, Wilson “should be protected from her insurer’s use of an unapproved form”. Through this framework, he went on to find that 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. In fulfilling this function, the court may well consider an alleged deviation from a pre-approved form to the extent that is relevant to its enforceability in contract.
While not addressing another case decided by the Court of Appeal, it is notable in Stranges v Allstate Insurance Company of Canada (2010 ONCA 457) that the Court of Appeal also made clear that form should not be slavishly followed over substance. This decision seems to be keeping with that approach. Here the Court of Appeal has applied some flexibility where compliance with s. 227(1) of the Insurance Act is less than 100%. While perfection may not be required, insurers should proceed with some level of caution, as the consumer protection intention of s. 227 (1) remains significant. Perhaps if the effect of the non compliance would have adversely impacted on innocent accident victims, as opposed to the uninsured motorist carrier, the Court may have been less lenient. Regardless, those seeking to rely on this decision will still have to ensure that the substance of the pre-approved form is largely met, the meaning unambiguous and that the insured understands the implications of the form.