The June 19 decision in HTM v. Gore by Arbitrator Bialkowski affirms two important priority rules that determine whether a driver is a named insured on a policy. First, regular use of a vehicle is defined as being habitual, normal or recurring. Second, vehicles can be considered provided by a corporation or “other entity” if it is used mostly for the purpose of earning livelihood. Of evidentiary importance is how the vehicle is treated for tax purposes. If fuel, maintenance and repair are claimed as business expenses, arbitrators may be inclined to deem the vehicle provided by a corporation or other entity. The evidentiary record can outweigh whether the vehicle was insured for “personal use”.
The Claimant, John Krolczyk (“Claimant”), was injured a motor vehicle accident on October 11, 2020. The Claimant was driving a 2004 Chevrolet Silverado, which was owned by the Claimant’s mother, Zofia, and insured by Gore Mutual Insurance Company. The Claimant was a listed driver on the Gore policy. The Claimant applied to Hamilton Township Mutual Insurance Company (HTM) for statutory accident benefits. HTM insured a 2016 Nissan Murano and a 2006 Chrysler Sebring, both owned by the Claimant and his wife, Debora. HTM commenced a priority dispute with Gore Mutual to determine which insurer must pay statutory accident benefits to the Claimant.
The issues are whether the claimant had regular use of the Chevrolet Silverado and whether the car was provided by a “corporation or entity” and not an “individual”. If proven, the Claimant would be a “named insured” under the Gore policy under section 3(7)(f) of the SABS. S.3(7)(f)(i) of the SABS states that an individual who is living in Ontario is deemed to be the named insured under a policy insuring an automobile if the insured automobile is being made available for the individuals regular use by a corporation or other entity. Therefore, following s.268 of the Insurance Act, Gore would be the priority insurer. If the arbitrator determines the use of the car was not regular or provided by a corporation or other entity, HTM will have priority.
The Claimant at all material times was the co-owner of two farms. One located in Baltimore Ontario, along with his mother and wife and the other in Coburg along with his wife. The Claimant held an office as Director, General Manager and Vice-President of “Korel Farms (the Baltimore farm) and was the registered owner of the Commercial vehicle license plate AM87341 attached to the Silverado since June 8, 2017.
The Chevrolet Silverado
Evidence suggested that the Claimant was the sole driver of the vehicle, and that he had used it daily. The underwriting file stated the Chevrolet Silverado was insured as a “pleasure or commute not more than 5km” vehicle. The underwriting file contained email correspondence between representatives at the broker, Insurance Protection Group (IPG) and Gore concerning a request that Gore reissue the insurance policy for the Silverado. The rep for IPG characterized the Silverado in the email as being used for “pleasure only”, stating that it “really just sits most of the time”. The VIN history contradicted the IPG rep’s characterization of the vehicle’s use, showing significant kilometers were put on the vehicle. Gore reissued the policy.
In 2015, the Claimant told the broker that the Silverado would be used as a backup truck for transporting materials between the two farms. During examination, the Claimant stated that he and his mother were directors, officers and shareholders of Korel Farms, and therefore the vehicle was made available for the purpose of business operations. However, the Claimant also stated that the vehicle was mostly for personal use, namely taking his mother to appointments, running errands or bringing supplies between farms.
HTM’s position was that the Chevy was provided by the Claimant’s mother in the capacity of officer and owner of Korel Farms. Alternatively, HTM claims that the vehicle was provided to the claimant by “any other entity” or a “family unit or joint venture”, whose purpose was to earn income from the farming business. Gore claims that the car was provided by the Claimant’s mother for his personal use.
The Arbitrator was satisfied that the Claimant’s use of the Silverado was regular. The Arbitrator followed Dominion of Canada Insurance Company v. Federation Insurance Company of Canada, where the arbitrator considered the meaning of “regular use” in the case law. In the Dominion v. Federation decision, “regular use” was determined to mean “habitual, normal and recurring uniformly according to a predictable time and manner”. The Arbitrator was satisfied that the Silverado was used by the Claimant to commute to and from the two farms on a daily basis as part of his job as Manager of Korel Farms Inc.
The arbitrator was convinced that the Silverado was made available by a corporation or entity. It was used to transport hay from farm-to-farm for Korel’s beef cattle. The arbitrator found that the transportation of hay was a clear business use that was periodic and routine. The Claimant did state it was his mother, and not Korel, that made the Silverado available. However, the totality of evidence must be considered. Although insured for pleasure, the evidence was clear this was a business vehicle. The Silverado was made available by the Claimant himself as VP and GM of Korel. The Claimant had full control over who used the Silverado and how it would be used. The annual kilometer usage is inconsistent with the characterization that it was being for used for errands and to take the mother to appointments.
Most significant was how the vehicle was treated for tax purposes. The expenses for fuel, maintenance and repair were claimed as business expenses. The Claimant stated at examination that he mostly used his Sebring and Murano for his personal activities.
Although the Arbitrator was satisfied that the Silverado was provided in a corporate capacity, he went on to suggest that the Silverado was alternatively provided by an “other entity”, specifically a family unit or joint venture. The Silverado was used to earn income for the farming joint venture between the Claimant, his mother and wife. Notably, the manner in which the insurer was advised of its use, or indeed its registration was not germane to the priority analysis. This decision suggests a broader inquiry of ‘regular use’ beyond just ‘who uses it’ and ‘when’. The question of its business use may delve into the profitability of any business venture, which runs a lot farther afield than common perceptions of ‘regular use’.
Noah Beiles is a summer student at ZTGH and author of this blog. You can reach Noah at firstname.lastname@example.org or if you have a question about a similar file, you can contact Bill Sproull at email@example.com.